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SUPREME COURT

Manila
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," 1 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." 2 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." 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 land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform
Code, had already been enacted by the Congress of the Philippines on August 8,
1963, in line with the above-stated principles. This was substantially superseded
almost a decade later by P.D. No. 27, which was promulgated on October 21,
1972, along with martial law, to provide for the compulsory acquisition of private
lands for distribution among tenant-farmers and to specify maximum retention
limits for landowners.
The people power revolution of 1986 did not change and indeed even energized
the thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C.
Aquino issued E.O. No. 228, declaring full land ownership in favor of the
beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued lands
covered by the decree as well as the manner of their payment. This was followed
on July 22, 1987 by Presidential Proclamation No. 131, instituting a
comprehensive agrarian reform program (CARP), and E.O. No. 229, providing
the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started its own
deliberations, including extensive public hearings, on the improvement of the
interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This law,
while considerably changing the earlier mentioned enactments, nevertheless
gives them suppletory effect insofar as they are not inconsistent with its
provisions. 4
The above-captioned cases have been consolidated because they involve
common legal questions, including serious challenges to the constitutionality of
the several measures mentioned above. They will be the subject of one common
discussion and resolution, The different antecedents of each case will require
separate treatment, however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos.
228 and 229, and R.A. No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and
owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland
worked by four tenants and owned by petitioner Augustin Hermano, Jr. The
tenants were declared full owners of these lands by E.O. No. 228 as qualified
farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on
grounds inter alia of separation of powers, due process, equal protection and the
constitutional limitation that no private property shall be taken for public use
without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of Article
XIII, Section 4, of the Constitution, for failure to provide for retention limits for
small landowners. Moreover, it does not conform to Article VI, Section 25(4) and
the other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue
that the same may be made only by a court of justice and not by the President of
the Philippines. They invoke the recent cases of EPZA v. Dulay 5 andManotok v.
National Food Authority. 6 Moreover, the just compensation contemplated by the
Bill of Rights is payable in money or in cash and not in the form of bonds or other
things of value.
In considering the rentals as advance payment on the land, the executive order
also deprives the petitioners of their property rights as protected by due process.
The equal protection clause is also violated because the order places the burden
of solving the agrarian problems on the owners only of agricultural lands. No
similar obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27
to be the owners of the lands occupied by them, E.O. No. 228 ignored judicial
prerogatives and so violated due process. Worse, the measure would not solve
the agrarian problem because even the small farmers are deprived of their lands
and the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been
upheld in the earlier cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and
Association of Rice and Corn Producers of the Philippines, Inc. v. The National
Land Reform Council. 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is
at best initial or preliminary only. It does not foreclose judicial intervention
whenever sought or warranted. At any rate, the challenge to the order is
premature because no valuation of their property has as yet been made by the
Department of Agrarian Reform. The petitioners are also not proper parties

because the lands owned by them do not exceed the maximum retention limit of
7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does
not provide for retention limits on tenanted lands and that in any event their
petition is a class suit brought in behalf of landowners with landholdings below 24
hectares. They maintain that the determination of just compensation by the
administrative authorities is a final ascertainment. As for the cases invoked by
the public respondent, the constitutionality of P.D. No. 27 was merely assumed
in Chavez, while what was decided in Gonzales was the validity of the imposition
of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No.
27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly
repealed by R.A. No. 6657. Nevertheless, this statute should itself also be
declared unconstitutional because it suffers from substantially the same
infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente
Cruz, owner of a 1. 83- hectare land, who complained that the DAR was insisting
on the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic
amended petition that the above- mentioned enactments have been impliedly
repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is
an organization composed of 1,400 planter-members. This petition seeks to
prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not the
President. Although they agree that the President could exercise legislative
power until the Congress was convened, she could do so only to enact
emergency measures during the transition period. At that, even assuming that
the interim legislative power of the President was properly exercised, Proc. No.
131 and E.O. No. 229 would still have to be annulled for violating the
constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:

Agrarian Reform Fund.-There is hereby created a special fund, to be known as


the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive
Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts of
sale of ill-gotten wealth received through the Presidential Commission on Good
Government and such other sources as government may deem appropriate. The
amounts collected and accruing to this special fund shall be considered
automatically appropriated for the purpose authorized in this Proclamation the
amount appropriated is in futuro, not in esse. The money needed to cover the
cost of the contemplated expropriation has yet to be raised and cannot be
appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just
compensation as it is traditionally understood, i.e., with money and in full, but no
such payment is contemplated in Section 5 of the E.O. No. 229. On the contrary,
Section 6, thereof provides that the Land Bank of the Philippines "shall
compensate the landowner in an amount to be established by the government,
which shall be based on the owner's declaration of current fair market value as
provided in Section 4 hereof, but subject to certain controls to be defined and
promulgated by the Presidential Agrarian Reform Council." This compensation
may not be paid fully in money but in any of several modes that may consist of
part cash and part bond, with interest, maturing periodically, or direct payment in
cash or bond as may be mutually agreed upon by the beneficiary and the
landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort
was made to make a careful study of the sugar planters' situation. There is no
tenancy problem in the sugar areas that can justify the application of the CARP
to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with problems
exclusively their own, their right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation
of Sugarcane Planters (NASP) which claims a membership of at least 20,000
individual sugar planters all over the country. On September 10, 1987, another
motion for intervention was filed, this time by Manuel Barcelona, et al.,
representing coconut and riceland owners. Both motions were granted by the
Court.
NASP alleges that President Aquino had no authority to fund the Agrarian
Reform Program and that, in any event, the appropriation is invalid because of
uncertainty in the amount appropriated. Section 2 of Proc. No. 131 and Sections
20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty billion pesos
and thus specifies the minimum rather than the maximum authorized amount.

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

(4) The appropriation of a P50 billion special fund from the National
Treasury did not originate from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform,
in violation of due process and the requirement for just compensation, placed his
landholding under the coverage of Operation Land Transfer. Certificates of Land
Transfer were subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his
small landholding under Operation Land transfer and asked for the recall and
cancellation of the Certificates of Land Transfer in the name of the private
respondents. He claims that on December 24, 1986, his petition was denied
without hearing. On February 17, 1987, he filed a motion for reconsideration,
which had not been acted upon when E.O. Nos. 228 and 229 were issued. These
orders rendered his motion moot and academic because they directly effected
the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of
the Philippines.
(2) The said executive orders are violative of the constitutional
provision that no private property shall be taken without due
process or just compensation.
(3) The petitioner is denied the right of maximum retention provided
for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the
Transitory Provisions refers only to emergency measures that may be
promulgated in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without
due process of law and to the retention of his small parcels of riceholding as
guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues
that, besides denying him just compensation for his land, the provisions of E.O.
No. 228 declaring that:

Lease rentals paid to the landowner by the farmer-beneficiary after


October 21, 1972 shall be considered as advance payment for the
land.
is an unconstitutional taking of a vested property right. It is also his contention
that the inclusion of even small landowners in the program along with other
landowners with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian Reform
is still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229,
he argues that they were enacted pursuant to Section 6, Article XVIII of the
Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the
first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was
deemed the owner of the land he was tilling. The leasehold rentals paid after that
date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he
filed was resolved on December 14, 1987. An appeal to the Office of the
President would be useless with the promulgation of E.O. Nos. 228 and 229,
which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to
owners of rice and corn lands not exceeding seven hectares as long as they are
cultivating or intend to cultivate the same. Their respective lands do not exceed
the statutory limit but are occupied by tenants who are actually cultivating such
lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No.
27:
No tenant-farmer in agricultural lands primarily devoted to rice and
corn shall be ejected or removed from his farmholding until such
time as the respective rights of the tenant- farmers and the
landowner shall have been determined in accordance with the rules
and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy
their right of retention because the Department of Agrarian Reform has so far not

issued the implementing rules required under the above-quoted decree. They
therefore ask the Court for a writ of mandamus to compel the respondent to issue
the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who own
other agricultural lands of more than 7 hectares in aggregate area or lands used
for residential, commercial, industrial or other purposes from which they derive
adequate income for their family. And even assuming that the petitioners do not
fall under its terms, the regulations implementing P.D. No. 27 have already been
issued, to wit, the Memorandum dated July 10, 1975 (Interim Guidelines on
Retention by Small Landowners, with an accompanying Retention Guide Table),
Memorandum Circular No. 11 dated April 21, 1978, (Implementation Guidelines
of LOI No. 474), Memorandum Circular No. 18-81 dated December 29,1981
(Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small
Landowners), and DAR Administrative Order No. 1, series of 1985 (Providing for
a Cut-off Date for Landowners to Apply for Retention and/or to Protest the
Coverage of their Landholdings under Operation Land Transfer pursuant to P.D.
No. 27). For failure to file the corresponding applications for retention under
these measures, the petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the President
of the Philippines. Moreover, the issuance of the implementing rules, assuming
this has not yet been done, involves the exercise of discretion which cannot be
controlled through the writ of mandamus. This is especially true if this function is
entrusted, as in this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended to
cover them also, the said measures are nevertheless not in force because they
have not been published as required by law and the ruling of this Court
in Tanada v. Tuvera. 10 As for LOI 474, the same is ineffective for the additional
reason that a mere letter of instruction could not have repealed the presidential
decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the
three departments of the government, the judiciary is nonetheless vested with the
power to annul the acts of either the legislative or the executive or of both when
not conformable to the fundamental law. This is the reason for what some
quarters call the doctrine of judicial supremacy. Even so, this power is not lightly
assumed or readily exercised. The doctrine of separation of powers imposes
upon the courts a proper restraint, born of the nature of their functions and of

their respect for the other departments, in striking down the acts of the legislative
and the executive as unconstitutional. The policy, indeed, is a blend of courtesy
and caution. To doubt is to sustain. The theory is that before the act was done or
the law was enacted, earnest studies were made by Congress or the President,
or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration
of unconstitutionality, requiring therefor the concurrence of a majority of the
members of the Supreme Court who took part in the deliberations and voted on
the issue during their session en banc. 11 And as established by judge made
doctrine, the Court will assume jurisdiction over a constitutional question only if it
is shown that the essential requisites of a judicial inquiry into such a question are
first satisfied. Thus, there must be an actual case or controversy involving a
conflict of legal rights susceptible of judicial determination, the constitutional
question must have been opportunely raised by the proper party, and the
resolution of the question is unavoidably necessary to the decision of the case
itself. 12
With particular regard to the requirement of proper party as applied in the cases
before us, we hold that the same is satisfied by the petitioners and intervenors
because each of them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the impediment
to its addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental importance to
the public of these cases demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure." We have since then
applied this exception in many other cases. 15
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. 17 Indeed, some portions of the said measures,
like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and
Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in the
CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground that it does
not conform to the requirements of a valid appropriation as specified in the
Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure
even if it does provide for the creation of said fund, for that is not its principal
purpose. An appropriation law is one the primary and specific purpose of which is
to authorize the release of public funds from the treasury. 19 The creation of the
fund is only incidental to the main objective of the proclamation, which is agrarian
reform.
It should follow that the specific constitutional provisions invoked, to wit, Section
24 and Section 25(4) of Article VI, are not applicable. With particular reference to
Section 24, this obviously could not have been complied with for the simple
reason that the House of Representatives, which now has the exclusive power to
initiate appropriation measures, had not yet been convened when the
proclamation was issued. The legislative power was then solely vested in the
President of the Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for retention limits as required
by Article XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657
does provide for such limits now in Section 6 of the law, which in fact is one of its
most controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no
person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors
governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder,
but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that he is at
least fifteen (15) years of age; and (2) that he is actually tilling the
land or directly managing the farm; Provided, That landowners
whose lands have been covered by Presidential Decree No. 27
shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of

the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill
shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue of its
contents and will suffice if the matters embodied in the text are relevant to each
other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law
because it came from President Marcos. Such are the ways of despots. Hence, it
is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not
have repealed P.D. No. 27 because the former was only a letter of instruction.
The important thing is that it was issued by President Marcos, whose word was
law during that time.
But for all their peremptoriness, these issuances from the President Marcos still
had to comply with the requirement for publication as this Court held in Tanada v.
Tuvera. 21 Hence, unless published in the Official Gazette in accordance with
Article 2 of the Civil Code, they could not have any force and effect if they were
among those enactments successfully challenged in that case. LOI 474 was
published, though, in the Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that
the writ of mandamus cannot issue to compel the performance of a discretionary
act, especially by a specific department of the government. That is true as a
general proposition but is subject to one important qualification. Correctly and
categorically stated, the rule is that mandamus will lie to compel the discharge of
the discretionary duty itself but not to control the discretion to be exercised. In
other words, mandamus can issue to require action only but not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of such duty
occurs, if it is a clear duty imposed by law, the courts will intervene
by the extraordinary legal remedy of mandamus to compel action. If
the duty is purely ministerial, the courts will require specific action.
If the duty is purely discretionary, the courts by mandamus will
require action only. For example, if an inferior court, public official,
or board should, for an unreasonable length of time, fail to decide a
particular question to the great detriment of all parties concerned,
or a court should refuse to take jurisdiction of a cause when the law
clearly gave it jurisdiction mandamus will issue, in the first case to
require a decision, and in the second to require that jurisdiction be
taken of the cause. 22

And while it is true that as a rule the writ will not be proper as long as there is still
a plain, speedy and adequate remedy available from the administrative
authorities, resort to the courts may still be permitted if the issue raised is a
question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the
same time on the same subject. In the case of City of Baguio v. NAWASA, 24for
example, where a law required the transfer of all municipal waterworks systems
to the NAWASA in exchange for its assets of equivalent value, the Court held
that the power being exercised was eminent domain because the property
involved was wholesome and intended for a public use. Property condemned
under the police power is noxious or intended for a noxious purpose, such as a
building on the verge of collapse, which should be demolished for the public
safety, or obscene materials, which should be destroyed in the interest of public
morals. The confiscation of such property is not compensable, unlike the taking
of property under the power of expropriation, which requires the payment of just
compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the
limits of the police power in a famous aphorism: "The general rule at least is that
while property may be regulated to a certain extent, if regulation goes too far it
will be recognized as a taking." The regulation that went "too far" was a law
prohibiting mining which might cause the subsidence of structures for human
habitation constructed on the land surface. This was resisted by a coal company
which had earlier granted a deed to the land over its mine but reserved all mining
rights thereunder, with the grantee assuming all risks and waiving any damage
claim. The Court held the law could not be sustained without compensating the
grantor. Justice Brandeis filed a lone dissent in which he argued that there was a
valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the exercise
of the police power deprives the owner of some right theretofore
enjoyed, and is, in that sense, an abridgment by the State of rights
in property without making compensation. But restriction imposed
to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely
the prohibition of a noxious use. The property so restricted remains
in the possession of its owner. The state does not appropriate it or
make any use of it. The state merely prevents the owner from
making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious as it may
because of further changes in local or social conditions the

restriction will have to be removed and the owner will again be free
to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as an
implement of the former like the power of taxation. The employment of the taxing
power to achieve a police purpose has long been accepted. 26 As for the power
of expropriation, Prof. John J. Costonis of the University of Illinois College of Law
(referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which
sustained a zoning law under the police power) makes the following significant
remarks:
Euclid, moreover, was decided in an era when judges located the
Police and eminent domain powers on different planets. Generally
speaking, they viewed eminent domain as encompassing public
acquisition of private property for improvements that would be
available for public use," literally construed. To the police power, on
the other hand, they assigned the less intrusive task of preventing
harmful externalities a point reflected in the Euclid opinion's
reliance on an analogy to nuisance law to bolster its support of
zoning. So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the pertinent
measure need have afforded no compensation whatever. With the
progressive growth of government's involvement in land use, the
distance between the two powers has contracted considerably.
Today government often employs eminent domain interchangeably
with or as a useful complement to the police power-- a trend
expressly approved in the Supreme Court's 1954 decision in
Berman v. Parker, which broadened the reach of eminent domain's
"public use" test to match that of the police power's standard of
"public purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police
power. On the role of eminent domain in the attainment of this purpose, Justice
Douglas declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary, there is
nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to
realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end. 28

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in
1978, the U.S Supreme Court sustained the respondent's Landmarks
Preservation Law under which the owners of the Grand Central Terminal had not
been allowed to construct a multi-story office building over the Terminal, which
had been designated a historic landmark. Preservation of the landmark was held
to be a valid objective of the police power. The problem, however, was that the
owners of the Terminal would be deprived of the right to use the airspace above
it although other landowners in the area could do so over their respective
properties. While insisting that there was here no taking, the Court nonetheless
recognized certain compensatory rights accruing to Grand Central Terminal
which it said would "undoubtedly mitigate" the loss caused by the regulation. This
"fair compensation," as he called it, was explained by Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn
Central was authorized to transfer to neighboring properties the authorized but
unused rights accruing to the site prior to the Terminal's designation as a
landmark the rights which would have been exhausted by the 59-story building
that the city refused to countenance atop the Terminal. Prevailing bulk
restrictions on neighboring sites were proportionately relaxed, theoretically
enabling Penn Central to recoup its losses at the Terminal site by constructing or
selling to others the right to construct larger, hence more profitable buildings on
the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under
challenge merely prescribe retention limits for landowners, there is an exercise of
the police power for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, it becomes necessary to
deprive such owners of whatever lands they may own in excess of the maximum
area allowed, there is definitely a taking under the power of eminent domain for
which payment of just compensation is imperative. The taking contemplated is
not a mere limitation of the use of the land. What is required is the surrender of
the title to and the physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer-beneficiary. This is definitely an
exercise not of the police power but of the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain,
the several measures before us are challenged as violative of the due process
and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no
retention limits are prescribed has already been discussed and dismissed. It is
noted that although they excited many bitter exchanges during the deliberation of
the CARP Law in Congress, the retention limits finally agreed upon are, curiously
enough, not being questioned in these petitions. We therefore do not discuss
them here. The Court will come to the other claimed violations of due process in

connection with our examination of the adequacy of just compensation as


required under the power of expropriation.
The argument of the small farmers that they have been denied equal protection
because of the absence of retention limits has also become academic under
Section 6 of R.A. No. 6657. Significantly, they too have not questioned the area
of such limits. There is also the complaint that they should not be made to share
the burden of agrarian reform, an objection also made by the sugar planters on
the ground that they belong to a particular class with particular interests of their
own. However, no evidence has been submitted to the Court that the requisites
of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to
each other in certain particulars and different from each other in these same
particulars. 31 To be valid, it must conform to the following requirements: (1) it
must be based on substantial distinctions; (2) it must be germane to the
purposes of the law; (3) it must not be limited to existing conditions only; and (4)
it must apply equally to all the members of the class. 32 The Court finds that all
these requisites have been met by the measures here challenged as arbitrary
and discriminatory.
Equal protection simply means that all persons or things similarly situated must
be treated alike both as to the rights conferred and the liabilities imposed. 33 The
petitioners have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of
other properties must be made to share the burden of implementing land reform
must be rejected. There is a substantial distinction between these two classes of
owners that is clearly visible except to those who will not see. There is no need to
elaborate on this matter. In any event, the Congress is allowed a wide leeway in
providing for a valid classification. Its decision is accorded recognition and
respect by the courts of justice except only where its discretion is abused to the
detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished from
those of a particular class require the interference of the State and, no less
important, the means employed are reasonably necessary for the attainment of
the purpose sought to be achieved and not unduly oppressive upon
individuals. 34 As the subject and purpose of agrarian reform have been laid
down by the Constitution itself, we may say that the first requirement has been
satisfied. What remains to be examined is the validity of the method employed to
achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of
the individual are concerned, the end does not justify the means. It is not enough

that there be a valid objective; it is also necessary that the means employed to
pursue it be in keeping with the Constitution. Mere expediency will not excuse
constitutional shortcuts. There is no question that not even the strongest moral
conviction or the most urgent public need, subject only to a few notable
exceptions, will excuse the bypassing of an individual's rights. It is no
exaggeration to say that a, person invoking a right guaranteed under Article III of
the Constitution is a majority of one even as against the rest of the nation who
would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the
added protection of Section 9, which reaffirms the familiar rule that private
property shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to
forcibly acquire private lands intended for public use upon payment
of just compensation to the owner. Obviously, there is no need to
expropriate where the owner is willing to sell under terms also
acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35 It is only where the owner is
unwilling to sell, or cannot accept the price or other conditions
offered by the vendee, that the power of eminent domain will come
into play to assert the paramount authority of the State over the
interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored
justification, as in the case of the police power, that the welfare of
the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that "private property shall not be taken for public use
without just compensation" and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a proper
exercise of the power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310
that the State should first distribute public agricultural lands in the pursuit of
agrarian reform instead of immediately disturbing property rights by forcibly
acquiring private agricultural lands. Parenthetically, it is not correct to say that
only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the decision
to redistribute private agricultural lands in the manner prescribed by the CARP

was made by the legislative and executive departments in the exercise of their
discretion. We are not justified in reviewing that discretion in the absence of a
clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As
explained by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in ordinary
parlance, namely, a question of policy. It refers to "those questions
which, under the Constitution, are to be decided by the people in
their sovereign capacity; or in regard to which full discretionary
authority has been delegated to the legislative or executive branch
of the government." It is concerned with issues dependent upon the
wisdom, not legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts "to
determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government." 37 Even so, this should not be construed as a license for us to
reverse the other departments simply because their views may not coincide with
ours.
The legislature and the executive have been seen fit, in their wisdom, to include
in the CARP the redistribution of private landholdings (even as the distribution of
public agricultural lands is first provided for, while also continuing apace under
the Public Land Act and other cognate laws). The Court sees no justification to
interpose its authority, which we may assert only if we believe that the political
decision is not unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March 3,1909
that the entire St. Mary's river between the American bank and the
international line, as well as all of the upland north of the present
ship canal, throughout its entire length, was "necessary for the
purpose of navigation of said waters, and the waters connected
therewith," that determination is conclusive in condemnation
proceedings instituted by the United States under that Act, and
there is no room for judicial review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled for
us by the Constitution itself No less than the 1987 Charter calls for agrarian
reform, which is the reason why private agricultural lands are to be taken from
their owners, subject to the prescribed maximum retention limits. The purposes

specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary
measures "to encourage and undertake the just distribution of all agricultural
lands to enable farmers who are landless to own directly or collectively the lands
they till." That public use, as pronounced by the fundamental law itself, must be
binding on us.
The second requirement, i.e., the payment of just compensation, needs a longer
and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator.39 It has been repeatedly stressed by this
Court that the measure is not the taker's gain but the owner's loss. 40 The word
"just" is used to intensify the meaning of the word "compensation" to convey the
idea that the equivalent to be rendered for the property to be taken shall be real,
substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate
more than a mere regulation of the use of private lands under the police power.
We deal here with an actual taking of private agricultural lands that has
dispossessed the owners of their property and deprived them of all its beneficial
use and enjoyment, to entitle them to the just compensation mandated by the
Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking
when the following conditions concur: (1) the expropriator must enter a private
property; (2) the entry must be for more than a momentary period; (3) the entry
must be under warrant or color of legal authority; (4) the property must be
devoted to public use or otherwise informally appropriated or injuriously affected;
and (5) the utilization of the property for public use must be in such a way as to
oust the owner and deprive him of beneficial enjoyment of the property. All these
requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a
deposit upon its taking possession of the condemned property, as "the
compensation is a public charge, the good faith of the public is pledged for its
payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment or, in
case of rejection or no response from the landowner, upon the
deposit with an accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance with this Act,
the DAR shall take immediate possession of the land and shall
request the proper Register of Deeds to issue a Transfer Certificate
of Title (TCT) in the name of the Republic of the Philippines. The

DAR shall thereafter proceed with the redistribution of the land to


the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation,
which it is claimed is entrusted to the administrative authorities in violation of
judicial prerogatives. Specific reference is made to Section 16(d), which provides
that in case of the rejection or disregard by the owner of the offer of the
government to buy his land... the DAR shall conduct summary administrative proceedings to
determine the compensation for the land by requiring the
landowner, the LBP and other interested parties to submit evidence
as to the just compensation for the land, within fifteen (15) days
from the receipt of the notice. After the expiration of the above
period, the matter is deemed submitted for decision. The DAR shall
decide the case within thirty (30) days after it is submitted for
decision.
To be sure, the determination of just compensation is a function addressed to the
courts of justice and may not be usurped by any other branch or official of the
government. EPZA v. Dulay 44 resolved a challenge to several decrees
promulgated by President Marcos providing that the just compensation for
property under expropriation should be either the assessment of the property by
the government or the sworn valuation thereof by the owner, whichever was
lower. In declaring these decrees unconstitutional, the Court held through Mr.
Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited
decrees constitutes impermissible encroachment on judicial
prerogatives. It tends to render this Court inutile in a matter which
under this Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically
would still have the power to determine the just compensation for
the property, following the applicable decrees, its task would be
relegated to simply stating the lower value of the property as
declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint
commissioners under Rule 67 of the Rules of Court. Moreover, the
need to satisfy the due process clause in the taking of private
property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the
strict application of the decrees during the proceedings would be
nothing short of a mere formality or charade as the court has only
to choose between the valuation of the owner and that of the
assessor, and its choice is always limited to the lower of the two.

The court cannot exercise its discretion or independence in


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

The second and more serious objection to the provisions on just compensation is
not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP shall
compensate the landowner in such amount as may be agreed upon
by the landowner and the DAR and the LBP, in accordance with the
criteria provided for in Sections 16 and 17, and other pertinent
provisions hereof, or as may be finally determined by the court, as
the just compensation for the land.
The compensation shall be paid in one of the following modes, at
the option of the landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50) hectares,
insofar as the excess hectarage is
concerned Twenty-five percent (25%)
cash, the balance to be paid in
government financial instruments
negotiable at any time.
(b) For lands above twenty-four (24)
hectares and up to fifty (50) hectares
Thirty percent (30%) cash, the balance
to be paid in government financial
instruments negotiable at any time.
(c) For lands twenty-four (24) hectares
and below Thirty-five percent (35%)
cash, the balance to be paid in
government financial instruments
negotiable at any time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by the
PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 91day treasury bill rates. Ten percent
(10%) of the face value of the bonds
shall mature every year from the date of
issuance until the tenth (10th) year:
Provided, That should the landowner
choose to forego the cash portion,
whether in full or in part, he shall be paid
correspondingly in LBP bonds;
(b) Transferability and negotiability.
Such LBP bonds may be used by the
landowner, his successors-in- interest or
his assigns, up to the amount of their
face value, for any of the following:
(i) Acquisition of land or other real
properties of the government, including
assets under the Asset Privatization
Program and other assets foreclosed by
government financial institutions in the
same province or region where the
lands for which the bonds were paid are
situated;
(ii) Acquisition of shares of stock of
government-owned or controlled
corporations or shares of stock owned
by the government in private
corporations;
(iii) Substitution for surety or bail bonds
for the provisional release of accused
persons, or for performance bonds;
(iv) Security for loans with any
government financial institution,
provided the proceeds of the loans shall
be invested in an economic enterprise,
preferably in a small and medium- scale
industry, in the same province or region
as the land for which the bonds are
paid;
(v) Payment for various taxes and fees
to government: Provided, That the use

of these bonds for these purposes will


be limited to a certain percentage of the
outstanding balance of the financial
instruments; Provided, further, That the
PARC shall determine the percentages
mentioned above;
(vi) Payment for tuition fees of the
immediate family of the original
bondholder in government universities,
colleges, trade schools, and other
institutions;
(vii) Payment for fees of the immediate
family of the original bondholder in
government hospitals; and
(viii) Such other uses as the PARC may
from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is
unconstitutional insofar as it requires the owners of the expropriated properties to
accept just compensation therefor in less than money, which is the only medium
of payment allowed. In support of this contention, they cite jurisprudence holding
that:
The fundamental rule in expropriation matters is that the owner of
the property expropriated is entitled to a just compensation, which
should be neither more nor less, whenever it is possible to make
the assessment, than the money equivalent of said property. Just
compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation
. 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for
the value of the property at the time of its taking. Anything beyond
that is more, and anything short of that is less, than just
compensation. It means a fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not whatever
gain would accrue to the expropriating entity. The market value of
the land taken is the just compensation to which the owner of
condemned property is entitled, the market value being that sum of
money which a person desirous, but not compelled to buy, and an

owner, willing, but not compelled to sell, would agree on as a price


to be given and received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been
derived, the weight of authority is also to the effect that just compensation for
property expropriated is payable only in money and not otherwise. Thus
The medium of payment of compensation is ready money or cash.
The condemnor cannot compel the owner to accept anything but
money, nor can the owner compel or require the condemnor to pay
him on any other basis than the value of the property in money at
the time and in the manner prescribed by the Constitution and the
statutes. When the power of eminent domain is resorted to, there
must be a standard medium of payment, binding upon both parties,
and the law has fixed that standard as money in cash. 47 (Emphasis
supplied.)
Part cash and deferred payments are not and cannot, in the nature
of things, be regarded as a reliable and constant standard of
compensation. 48
"Just compensation" for property taken by condemnation means a
fair equivalent in money, which must be paid at least within a
reasonable time after the taking, and it is not within the power of the
Legislature to substitute for such payment future obligations, bonds,
or other valuable advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment
of just compensation is money and no other. And so, conformably, has just
compensation been paid in the past solely in that medium. However, we do not
deal here with the traditional excercise of the power of eminent domain. This is
not an ordinary expropriation where only a specific property of relatively limited
area is sought to be taken by the State from its owner for a specific and perhaps
local purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found
and of whatever kind as long as they are in excess of the maximum retention
limits allowed their owners. This kind of expropriation is intended for the benefit
not only of a particular community or of a small segment of the population but of
the entire Filipino nation, from all levels of our society, from the impoverished
farmer to the land-glutted owner. Its purpose does not cover only the whole
territory of this country but goes beyond in time to the foreseeable future, which it
hopes to secure and edify with the vision and the sacrifice of the present
generation of Filipinos. Generations yet to come are as involved in this program

as we are today, although hopefully only as beneficiaries of a richer and more


fulfilling life we will guarantee to them tomorrow through our thoughtfulness
today. And, finally, let it not be forgotten that it is no less than the Constitution
itself that has ordained this revolution in the farms, calling for "a just distribution"
among the farmers of lands that have heretofore been the prison of their dreams
but can now become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation under
the laws before us, we estimate that hundreds of billions of pesos will be needed,
far more indeed than the amount of P50 billion initially appropriated, which is
already staggering as it is by our present standards. Such amount is in fact not
even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty when
they called for agrarian reform as a top priority project of the government. It is a
part of this assumption that when they envisioned the expropriation that would be
needed, they also intended that the just compensation would have to be paid not
in the orthodox way but a less conventional if more practical method. There can
be no doubt that they were aware of the financial limitations of the government
and had no illusions that there would be enough money to pay in cash and in full
for the lands they wanted to be distributed among the farmers. We may therefore
assume that their intention was to allow such manner of payment as is now
provided for by the CARP Law, particularly the payment of the balance (if the
owner cannot be paid fully with money), or indeed of the entire amount of the just
compensation, with other things of value. We may also suppose that what they
had in mind was a similar scheme of payment as that prescribed in P.D. No. 27,
which was the law in force at the time they deliberated on the new Charter and
with which they presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be given
the concept of just compensation as applied to the comprehensive agrarian
reform program being contemplated. There was the suggestion to "fine tune" the
requirement to suit the demands of the project even as it was also felt that they
should "leave it to Congress" to determine how payment should be made to the
landowner and reimbursement required from the farmer-beneficiaries. Such
innovations as "progressive compensation" and "State-subsidized compensation"
were also proposed. In the end, however, no special definition of the just
compensation for the lands to be expropriated was reached by the
Commission. 50
On the other hand, there is nothing in the records either that militates against the
assumptions we are making of the general sentiments and intention of the
members on the content and manner of the payment to be made to the

landowner in the light of the magnitude of the expenditure and the limitations of
the expropriator.
With these assumptions, the Court hereby declares that the content and manner
of the just compensation provided for in the afore- quoted Section 18 of the
CARP Law is not violative of the Constitution. We do not mind admitting that a
certain degree of pragmatism has influenced our decision on this issue, but after
all this Court is not a cloistered institution removed from the realities and
demands of society or oblivious to the need for its enhancement. The Court is as
acutely anxious as the rest of our people to see the goal of agrarian reform
achieved at last after the frustrations and deprivations of our peasant masses
during all these disappointing decades. We are aware that invalidation of the said
section will result in the nullification of the entire program, killing the farmer's
hopes even as they approach realization and resurrecting the spectre of
discontent and dissent in the restless countryside. That is not in our view the
intention of the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always
required to be made fully in money, we find further that the proportion of cash
payment to the other things of value constituting the total payment, as
determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger
the payment in money, primarily because the small landowner will be needing it
more than the big landowners, who can afford a bigger balance in bonds and
other things of value. No less importantly, the government financial instruments
making up the balance of the payment are "negotiable at any time." The other
modes, which are likewise available to the landowner at his option, are also not
unreasonable because payment is made in shares of stock, LBP bonds, other
properties or assets, tax credits, and other things of value equivalent to the
amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners,
big and small, not a little inconvenience. As already remarked, this cannot be
avoided. Nevertheless, it is devoutly hoped that these countrymen of ours,
conscious as we know they are of the need for their forebearance and even
sacrifice, will not begrudge us their indispensable share in the attainment of the
ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like the
quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No.
229 does not seem to be viable any more as it appears that Section 4 of the said
Order has been superseded by Section 14 of the CARP Law. This repeats the
requisites of registration as embodied in the earlier measure but does not
provide, as the latter did, that in case of failure or refusal to register the land, the
valuation thereof shall be that given by the provincial or city assessor for tax
purposes. On the contrary, the CARP Law says that the just compensation shall

be ascertained on the basis of the factors mentioned in its Section 17 and in the
manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his
property even before actual payment to him in full of just compensation, in
contravention of a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass
from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both here and
in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest
the condemnor until the judgment fixing just compensation is entered and paid,
but the condemnor's title relates back to the date on which the petition under the
Eminent Domain Act, or the commissioner's report under the Local Improvement
Act, is filed. 51
... although the right to appropriate and use land taken for a canal is complete at
the time of entry, title to the property taken remains in the owner until payment is
actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation had
actually been made. In fact, the decisions appear to be uniformly to this effect. As
early as 1838, in Rubottom v. McLure, 54 it was held that "actual payment to the
owner of the condemned property was a condition precedent to the investment of
the title to the property in the State" albeit "not to the appropriation of it to public
use." In Rexford v. Knight, 55 the Court of Appeals of New York said that the
construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and
appropriate the land was complete prior to the payment. Kennedy further said
that "both on principle and authority the rule is ... that the right to enter on and
use the property is complete, as soon as the property is actually appropriated
under the authority of law for a public use, but that the title does not pass from
the owner without his consent, until just compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding
discussion are attentively examined it will be apparent that the
method of expropriation adopted in this jurisdiction is such as to
afford absolute reassurance that no piece of land can be finally and
irrevocably taken from an unwilling owner until compensation is
paid ... . (Emphasis supplied.)

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as


October 21, 1972 and declared that he shall "be deemed the owner" of a portion
of land consisting of a family-sized farm except that "no title to the land owned by
him was to be actually issued to him unless and until he had become a fullfledged member of a duly recognized farmers' cooperative." It was understood,
however, that full payment of the just compensation also had to be made first,
conformably to the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of
October 21, 1972 of the land they acquired by virtue of Presidential
Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the said decree,
after proof of full-fledged membership in the farmers' cooperatives and full
payment of just compensation. Hence, it was also perfectly proper for the Order
to also provide in its Section 2 that the "lease rentals paid to the landowner by
the farmer- beneficiary after October 21, 1972 (pending transfer of ownership
after full payment of just compensation), shall be considered as advance
payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership
of the land to the government on receipt by the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds
with an accessible bank. Until then, title also remains with the landowner. 57 No
outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by
arbitrarily transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer
under P.D. No. 27, as recognized under E.O. No. 228, are retained by him even
now under R.A. No. 6657. This should counter-balance the express provision in
Section 6 of the said law that "the landowners whose lands have been covered
by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval
of this Act shall retain the same areas as long as they continue to cultivate said
homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742
that the appeal filed by the petitioners with the Office of the President has already
been resolved. Although we have said that the doctrine of exhaustion of
administrative remedies need not preclude immediate resort to judicial action,
there are factual issues that have yet to be examined on the administrative level,

especially the claim that the petitioners are not covered by LOI 474 because they
do not own other agricultural lands than the subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that
the petitioners have not yet exercised their retention rights, if any, under P.D. No.
27, the Court holds that they are entitled to the new retention rights provided for
by R.A. No. 6657, which in fact are on the whole more liberal than those granted
by the decree.
V
The CARP Law and the other enactments also involved in these cases have
been the subject of bitter attack from those who point to the shortcomings of
these measures and ask that they be scrapped entirely. To be sure, these
enactments are less than perfect; indeed, they should be continuously reexamined 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, Grio-Aquino, Medialdea and
Regalado, JJ., concur.
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC
G.R. No. 78742 [July 14, 1989]
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, et
al., petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
FACTS
The association of the Small Landowners of the Philippines invokes the right of
retention granted by PD 27 to owners of rice and corn lands not exceeding 7
hectares as long as they are cultivating on intend to cultivate the same. Their
respected lands do not exceed the statutory limits but are occupied by tenants
who re actually cultivating such lands.
Because PD No. 316 provides that no tenant-farmer in agricultural land primarily
devoted to rice and corn shall be ejected or removed from his farm holding until
such time as the respective rights of the tenant-farmers and the land owners
shall have been determined, they petitioned the court for a writ of mandamus to
compel the DAR Secretary to issue the IRR, as they could not eject their tenants
and so are unable to enjoy their right of retention.
ISSUE
Whether or not the assailed statutes are valid exercises of police power.

Whether or not the content and manner of just compensation provided for the
CARP is violative of the Constitution.
Whether or not the CARP and EO 228 contravene a well accepted principle of
eminent domain by divesting the land owner of his property even before actual
payment to him in full of just compensation
HELD
Yes. The subject and purpose of agrarian reform have been laid down by the
Constitution itself, which satisfies the first requirement of the lawful subject.
However, objection is raised to the manner fixing the just compensation, which it
is claimed is judicial prerogatives. However, there is no arbitrariness in the
provision as the determination of just compensation by DAR is only preliminary
unless accepted by all parties concerned. Otherwise, the courts will still have the
right to review with finality the said determination.
No. Although the traditional medium for payment of just compensation is money
and no other, what is being dealt with here is not the traditional exercise of the
power and eminent domain. This is a revolutionary kind of expropriation, which
involves not mere millions of pesos. The initially intended amount of P50B may
not be enough, and is in fact not even fully available at the time. The invalidation
of the said section resulted in the nullification of the entire program.
No. EO 228 categorically stated that all qualified farmer-beneficiaries were
deemed full owners of the land they acquired under PP 27, after proof of full
payment of just compensation. The CARP Law, for its part, conditions the
transfer of possession and ownership of the land to the government on the
receipt by the landowner of the corresponding payment or the deposit of DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then, title
also remains with the landowner.
ASSO. OF SMALL LANDOWNERS VS. SEC. OF DAR [175 SCRA 343; G.R. NO.
L-78742; 14 JUL 1989]
Friday, January 30, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Political Law
Facts: Several

petitions

are

the

root

of

the

case:

a. A petition alleging the constitutionality of PD No. 27, EO 228 and


229 and RA 6657. Subjects of the petition are a 9-hectare and 5
hectare Riceland worked by four tenants. Tenants were declared full
owners by EO 228 as qualified farmers under PD 27. The petitioners
now contend that President Aquino usurped the legislatures power.
b. A petition by landowners and sugarplanters in Victorias Mill Negros
Occidental against Proclamation 131 and EO 229. Proclamation 131 is

the creation of Agrarian Reform Fund with initial fund of P50Billion.


c. A petition by owners of land which was placed by the DAR under the
coverage

of

Operation

Land

Transfer.

d. A petition invoking the right of retention under PD 27 to owners of


rice

and

corn

lands

not

exceeding

seven

hectares.

Issue: Whether or Not the aforementioned EOs, PD, and RA were


constitutional.

Held: The promulgation of PD 27 by President Marcos was valid in


exercise

of

Police

power

and

eminent

domain.

The power of President Aquino to promulgate Proc. 131 and EO 228


and 229 was authorized under Sec. 6 of the Transitory Provisions of
the 1987 Constitution. Therefore it is a valid exercise of Police Power
and

Eminent

Domain.

RA 6657 is likewise valid. The carrying out of the regulation under


CARP becomes necessary to deprive owners of whatever lands they
may own inexcess 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 ofthe land. What is required is the surrender
of

the

title

and

the

physical

possession

of

said excess and

all beneficial rights accruing to the owner in favour of the farmer.


A statute may be sustained under the police power only if there is
concurrence

of

the

lawful

subject

and

the

method.

Subject and purpose of the Agrarian Reform Law is valid, however


what is to be determined is the method employed to achieve it.
N BANC

[G.R. No. 78742. July 14, 1989.]

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC.,


JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIFE 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. APRESTO,
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. ACUA, 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 AVANCEA,
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.

SYLLABUS

1.
CONSTITUTIONAL LAW; SUPREME COURT; ROLE. 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.
2.
ID.; SEPARATION OF POWERS; CONSTRUED. 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.
3.
ID.; SUPREME COURT; POWER TO DECLARE AN ACT OR LAW
UNCONSTITUTIONAL; CONSTITUTIONS. 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.
4.
ID.; ID.; ID.; JUDICIAL INQUIRY; REQUISITES. 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.
5.
REMEDIAL LAW; ACTIONS; PROPER PARTY; CASE AT BAR.
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.
6.
CONSTITUTIONAL LAW; SUPREME COURT; POWER TO
DECLARE AN ACT OR LAW UNCONSTITUTIONAL; TRIBUNAL WITH
WIDE DISCRETION TO WAIVE REQUIREMENT. 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.
7.
ID.; ID.; JUDICIAL SUPREMACY. . . . 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.
8.
ID.; 1973 CONSTITUTION; PRESIDENT; EXERCISE OF
LEGISLATIVE POWER DURING MARTIAL LAW, SUSTAINED. 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.
9.
ID.; 1987 CONSTITUTION; PRESIDENT; LEGISLATIVE POWER,
AUTHORIZED. 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.
10.
ID.; ID.; ID.; MEASURES PROMULGATED REMAINS VALID EVEN
AFTER LOST OF LEGISLATIVE POWER; RATIONALE. 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.
11.
ID.; STATUTES; PROCLAMATION REMAINS VALID EVEN AFTER
LOST OF LEGISLATIVE POWER; RATIONALE. 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.
12.
ID.; ID.; PROCLAMATION NO. 131 AND EXECUTIVE ORDER NO.
229; ABSENCE OF RETENTION LIMIT PROVIDED FOR IN REPUBLIC ACT
NO. 6657. 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 that 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 two (2) qualification
which is now in Section 6 of the law.
13.
ID.; ID.; TITLE OF A BILL NEED NOT BE CATALOGUED. 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.
14.
CIVIL LAW; EFFECT AND APPLICATION OF LAWS; ISSUANCES
FROM THE PRESIDENT REQUIRE PUBLICATION FOR EFFECTIVITY.
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 Taada 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.)
15.
REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; OFFICE.
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 requireaction only but not specific action.
16.
ID.; ID.; ID.; GENERALLY NOT AVAILABLE WHERE THERE IS A
PLAIN, SPEEDY REMEDY; EXCEPTION. 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.
17.
POLITICAL LAW; POLICE POWER AND EMINENT DOMAIN;
TRADITIONAL DISTINCTIONS. 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. 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.
18.
BILL OF RIGHTS; EQUAL PROTECTION CLAUSE;
CLASSIFICATION; DEFINED. 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.
19.
ID.; ID.; ID.; REQUISITES.; EQUAL PROTECTION CLAUSE;
CLASSIFICATION; DEFINED. 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.
20.
ID.; ID.; ID.; MEANING. 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.
21.
POLITICAL LAW; EMINENT DOMAIN; NATURE. 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.
22.
ID.; ID.; WHEN AVAILED OF. 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.
23.
ID.; ID.; REQUIREMENTS. Basically, the requirements for a
proper exercise of the power are: (1) public use and (2) just compensation.
24.
ID.; POLITICAL QUESTION; DEFINED. 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. (Taada
vs. Cuenco, 100 Phil. 1101)
25.
ID.; EMINENT DOMAIN JUST COMPENSATION; DEFINED. Just
compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator.
26.
ID.; ID.; ID.; WORD "JUST", EXPLAINED. 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.
27.
ID.; ID.; ID.; COMPENSABLE TAKING; CONDITIONS. There is
compensable taking when the following conditions concur: (1) the
expropriator must enter a private property; (2) the entry must be for more
than a momentary period; (3) the entry must be under warrant or color of
legal authority; (4) the property must be devoted to public use or otherwise
informally appropriated or injuriously affected; and (5) the utilization of the
property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property.
28.
ID.; ID.; ID.; DEPOSIT NOT NECESSARY WHERE THE
EXPROPRIATOR IS THE ESTATE. 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."

29.
ID.; ID.; ID.; DETERMINATION THEREOF, ADDRESSED TO THE
COURTS OF JUSTICE. 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.
30.
ID.; ID.; ID.; EMINENT DOMAIN UNDER THE COMPREHENSIVE
AGRARIAN REFORM LAW; DETERMINATION MADE BY THE
DEPARTMENT OF AGRARIAN RELATIONS, ONLY PRELIMINARY. 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.
31.
ID.; ID.; ID.; PAYMENT IN MONEY ONLY NOT APPLICABLE IN
REVOLUTIONARY KIND OF EXPROPRIATION. We do not deal here
with the traditional exercise 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. 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. The Court has not
found in the records of the Constitutional Commission any categorial
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. 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.
Therefore, payment of the just compensation is not always required to be
made fully in money.
32.
ID.; ID.; ID.; PRINCIPLE THAT TITLE SHALL PASS ONLY UPON
FULL PAYMENT OF JUST COMPENSATION, NOT APPLICABLE. Title

to the property expropriated shall pass from the owner to the expropriator
only upon full payment of the just compensation. 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.
Hence, that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
33.
ADMINISTRATIVE LAW; EXHAUSTION OF ADMINISTRATIVE
REMEDIES; CASE AT BAR. 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.

FACTS:
These are consolidated cases involving common legal
questions
including
serious
challenges
to
the
constitutionality of R.A. No. 6657 also known as the
"Comprehensive Agrarian Reform Law of 1988"
In G.R. No. 79777, the petitioners are questioning the P.D
No. 27 and E.O Nos. 228 and 229 on the 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.
In G.R. No. 79310, the petitioners in this case claim that
the power to provide for a Comprehensive Agrarian Reform
Program as decreed by the Constitution belongs to the
Congress and not to the President, the also allege that
Proclamation No. 131 and E.O No. 229 should be annulled for
violation
of
the
constitutional
provisions
on
just

compensation, due process and equal protection. They


contended that the taking must be simultaneous with payment
of just compensation which such payment is not contemplated
in Section 5 of the E.O No. 229.
In G.R. No. 79744, the petitioner argues that E.O Nos. 228
and 229 were invalidly issued by the President and that the
said executive orders violate the constitutional provision
that no private property shall be taken without due process
or just compensation which was denied to the petitioners.
In G.R. No 78742 the petitioners claim that 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 of the decree.
They therefore ask the Honorable Court for a writ of
mandamus to compel the respondents to issue the said rules.
ISSUE:
Whether or not the laws being challenged is a
exercise of Police power or Power of Eminent Domain.

valid

RULING:
Police Power through the Power of Eminent Domain, though
there are traditional distinction between the police power
and the power of eminent domain, property condemned under
police power is noxious or intended for noxious purpose,
the compensation for the taking of such property is not
subject to compensation, unlike the taking of the property
in Eminent Domain or the power of expropriation which
requires the payment of just compensation to the owner of
the property expropriated.

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.
Soo Gutierrez Leogardo & Lee and Bienvenido S. Salamanca for petitioner.
Bienvenido S. Salamanca for petitioner.
Delfin B. Samson for DAR.
Michael Dioneda for movants-Intervenors.
SYNOPSIS
Petitioner corporation is the registered owner of Hacienda Palico, Banilad and Caylaway
in Nasugbu, Batangas. Hacienda Caylaway was voluntarily offered for sale to the
government on May 6, 1988 before the effectivity of the CARL. Hacienda Palico and
Banilad were later placed under compulsory acquisition by the DAR in accordance with
the CARL. On August 6, 1992, petitioner informed DAR that it was withdrawing its VOS
of Hacienda Caylaway and applying for conversion of the hacienda from agricultural to
other uses. The Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the
reclassification of Hacienda Caylaway from agricultural to non-agricultural. DAR denied
petitioner's withdrawal of the VOS. Meanwhile on May 4, 1993, petitioner applied with
the DAR for conversion of Haciendas Palico and Banilad from agricultural to nonagricultural lands under the provisions of the CARL. Despite petitioner's application for
conversion, DAR proceeded with the acquisition of the two haciendas. On July 14, 1993,
petitioner reiterated its request to withdraw the VOS over Hacienda Caylaway in light of
the following: (1) Certification of the Department of Agriculture that the subject lands are
not feasible and economically sound for further agricultural development, (2) Resolution
No. 19 of the Sangguniang Bayan of Nasugbu approving the zoning ordinance
reclassifying the lands after consultation with the DAR and other agencies and after
public hearings, (3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas
approving said zoning ordinance; and, (4) Letter dated December 15, 1992 of the
Municipal Planning & Development to Mrs. Alicia P. Logarta advising that the

municipality had no objection to the conversion of the lands to non-agricultural purposes.


On October 30, 1993, Certificates of Land Ownership Awards were distributed to farmer
beneficiaries. Petitioner then instituted Case No. N-0017-96-46 (BA) with the DAR
Adjudication Board for the cancellation of the CLOA's issued to several persons. The
DARAB, in its Resolution, held that the case involved the prejudicial question whether
the property was subject to agrarian reform, hence, the question should be submitted to
the DAR Secretary for determination. Thus, petitioner filed with the Court of Appeals a
petition questioning the expropriation of the properties under the CARL and the denial of
the due process in the acquisition of its landholdings. Meanwhile, petitioner's request for
conversion of the three haciendas was denied by respondent Municipal Agrarian Reform
Officer of Nasugbu, Batangas. The Court of Appeals also dismissed petitioner's petition.
Its motion for reconsideration having been likewise denied, petitioner filed the present
petition. TCSEcI
The Supreme Court found that in the entire acquisition proceedings, respondent DAR
disregarded the basic requirements of administrative due process. Hence, 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. However, respondent DAR's failure to observe due process
in the acquisition of petitioners' landholdings does not ipso facto give the Supreme Court
the power to adjudicate over petitioner's application for conversion of its haciendas from
agricultural to non-agricultural. The power to determine whether Hacienda Palico,
Banilad and Caylaway are non-agricultural, hence, exempts from the coverage of the
CARL lies with the DAR, not with the Supreme Court.
The failure of respondent DAR to comply with the requisites of due process in the
acquisition proceedings does not give the Supreme Court the power to nullify the CLOAs
already issued to the farmer beneficiaries. To assume the power is to short-circuit the
administrative process, which has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the acquisition proceedings. The
Court, therefore, nullified the acquisition proceedings on account of DAR's failure to
observe due process but remanded the case to the DAR for proper acquisition
proceedings and determination of petitioner's application for conversion.
SYLLABUS
1.ADMINISTRATIVE LAW; EXCEPTIONS TO DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES, ENUMERATED. 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. 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.
2.LABOR AND SOCIAL LEGISLATION; COMPREHENSIVE AGRARIAN
REFORM LAW OF 1988; CERTIFICATE OF LAND OWNERSHIP AWARD (CLAO);
EVIDENCE OF OWNERSHIP OF LAND BY A BENEFICIARY; TRANSFER OF
POSSESSION AND OWNERSHIP OF LAND TO GOVERNMENT ARE
CONDITIONED UPON RECEIPT BY LANDOWNER OF COMPENSATION; CASE
AT BAR. 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. HCacTI
3.ID.; ID.; ID.; COMPENSATION TO BE PAID TO LANDOWNER MUST BE ONLY
IN CASH OR LBP BONDS. 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.
4.ID.; ID.; IMPLEMENTATION THEREOF IS AN EXERCISE OF STATE'S POLICE
POWER AND POWER OF EMINENT DOMAIN; CARL WAS NOT INTENDED TO
TAKE AWAY PROPERTY WITHOUT DUE PROCESS OF LAW. 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 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.
5.ID.; ID.; ID.; NOTICE OF ACQUISITION MUST BE SENT TO THE LANDOWNER
BY PERSONAL DELIVERY OR REGISTERED MAIL; IN CASES AGAINST
PRIVATE DOMESTIC CORPORATION, SUMMONSES AND PLEADINGS MUST
BE SENT TO THOSE PERSONS THROUGH WHOM PRIVATE DOMESTIC
CORPORATION OR PARTNERSHIP IS CAPABLE OF ACTION. 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. 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.

6.ID.; ID.; ID.; SERVICE OF PROCESS MUST BE MADE ON A REPRESENTATIVE


SO INTEGRATED WITH THE CORPORATION; CASE AT BAR. 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.
ETIDaH
7.ID.; ID.; ID.; NOTICE OF COVERAGE MUST BE SENT TO LANDOWNER
CONCERNED OR HIS DULY AUTHORIZED REPRESENTATIVE; PERSON WHO
RECEIVED THE NOTICE OF COVERAGE WAS NOT DULY AUTHORIZED BY
PETITIONER TO BIND IT IN CASE AT BAR. 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 letterinvitation, 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."
8.ID.; ID.; LAND SUBJECT TO LAND REFORM MUST BE FIRST IDENTIFIED;
AREAS SUBJECT TO CARP NOT PROPERLY IDENTIFIED BEFORE TAKEN
OVER BY DAR IN CASE AT BAR. Assuming 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. 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 areas in those portions
to be acquired compulsorily.
9.ID.; ID.; RIGHT OF RETENTION PERTAINS TO THE LANDOWNER. The right
of retention and how this right is exercised, is guaranteed in Section 6 of the CARL, viz: .
. .. 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.
10.ID.; ID.; NOTICE REQUIREMENTS; NOTICE TO THE LANDOWNER CANNOT
BE DISPENSED WITH. 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. 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.
11.ID.; ID.; NON-OBSERVANCE OF DUE PROCESS IN ACQUISITION OF
LANDHOLDINGS DOES NOT IPSO FACTO GIVE SUPREME COURT POWER TO
ADJUDICATE OVER APPLICATION FOR LAND USE CONVERSION.
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. ESDcIA
12.ID.; ID.; DETERMINATION OF WHETHER SUBJECT LANDS ARE EXEMPT
FROM COVERAGE THEREOF LIES WITH DAR. 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.
13.ID.; ID.; NON-COMPLIANCE WITH ADMINISTRATIVE DUE PROCESS IN
ACQUISITION PROCEEDINGS DOES NOT GIVE SUPREME COURT POWER TO
NULLIFY CLOA'S ALREADY ISSUED; RESPONDENT DAR MUST BE GIVEN
CHANCE TO CORRECT ITS PROCEDURAL LAPSES IN ACQUISITION
PROCEEDINGS. 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 shortcircuit 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.
MELO, J., concurring and dissenting opinion:
1.LABOR AND SOCIAL LEGISLATION; COMPREHENSIVE AGRARIAN
REFORM LAW OF 1988; PROCLAMATION NO. 1520 WHICH DECLARED
NASUGBU, BATANGAS AS TOURIST ZONE HAS THE FORCE AND EFFECT OF
LAW AND CANNOT BE DISREGARDED BY DAR. 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.
2.ID.; ID.; DETERMINING FACTOR IN THE CLASSIFICATION OF LAND AS
TOURIST ZONE. 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 other function to which it is dedicated
that is the determining factor. Any cultivation is temporary and voluntary.

3.ID.; ID.; DEPARTMENT OF AGRARIAN REFORM; ACTED CONTRARY TO ITS


OWN RULES AND REGULATIONS IN CASE AT BAR. 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 nonagricultural 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.
4.ID.; ID.; CANCELLATION OF IMPROPERLY ISSUED CERTIFICATES OF LAND
OWNERSHIP AWARD (CLOA) WARRANTED IN 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:
1.LABOR AND SOCIAL LEGISLATION; COMPREHENSIVE AGRARIAN
REFORM LAW OF 1988; ILLEGALLY ISSUED CERTIFICATE OF LAND
OWNERSHIP AWARD MUST BE DECLARED NULL AND VOID; WRONG
DECISIONS OF DAR SHOULD BE REVERSED AND SET ASIDE. 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. DIETcH
2.ID.; ID.; DUE PROCESS WAS NOT OBSERVED IN THE TAKING OF
PETITIONER'S PROPERTIES IN CASE AT BAR. 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.
3.ID.; ID.; SHOULD BE STRICTLY CONSTRUED; SERVICE OF NOTICE OF
ACQUISITION TO LANDOWNER BY ORDINARY MAIL CONSIDERED INVALID
AND INEFFECTIVE. 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 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.
4.ID.; ID.; NASUGBU, BATANGAS WAS DECLARED AS TOURIST ZONE. 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. 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, 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. 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 nonagricultural. 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. 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.
5.ID.; ID.; CHARACTER OF LAND IS DETERMINED BY ACTUAL USE WHICH IT
IS CAPABLE OF. 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.
6.ID.; ID.; AGRICULTURAL LANDS ARE ONLY THOSE WHICH ARE ARABLE
AND SUITABLE; AGRICULTURE; DEFINED. 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, R.A. 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."
7.ID.; ID.; FINDINGS OF THE DEPARTMENT OF AGRICULTURE AS TO NONSUITABILITY OF PETITIONER'S LANDHOLDINGS TO AGRICULTURE SHOULD
BE RESPECTED. 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. 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.

8.ID.; ID.; TOURIST ATTRACTIONS ARE NOT LIMITED TO SCENIC


LANDSCAPES AND LUSH GREENERIES. 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."
9.ID.; ID.; VOLUNTARY OFFER TO SELL PETITIONER'S LANDHOLDING
SHOULD NOT BE DEEMED AN ADMISSION THAT THE LAND IS
AGRICULTURAL. The lands subject 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 R.A. 6657, Section 4, affects only public and private agricultural
lands.
10.ID.; ID.; TITLE TO PRIVATE PROPERTY CANNOT BE VALIDLY
TRANSFERRED TO THE GOVERNMENT IN ABSENCE OF VALID PAYMENT OF
JUST COMPENSATION. 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 R.A. 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 R.A. 6657. . . . 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 R.A. 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 DARdesignated 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. ATDHSC
11.ID.; ID.; ISSUANCE OF CLOA CONSIDERED ILLEGAL IN THE ABSENCE OF
VALID PAYMENT OF COMPENSATION. 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 (R.A. 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 (R.A. 6657, Sec. 16[e]).

12.ID.; ID.; LAND BANK RULING (249 SCRA 149, 157 [1995]) APPLICABLE TO
CASE AT BAR. 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.
13.ID.; ID.; CERTIFICATE OF LAND OWNERSHIP AWARDS; DO NOT HAVE
THE NATURE OF TORRENS TITLE; ADMINISTRATIVE CANCELLATION OF
TITLE CONSIDERED SUFFICIENT TO INVALIDATE CLOA. 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. DAR Administrative Order 03, Series of 1996 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.
14.ID.; ID.; IMPROPERLY ISSUED CLOAs MAYBE CANCELLED BY THE
SUPREME COURT. 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.
15.ID.; ID.; NO BASIS FOR ALLEGATION OF CULTIVATION OF DISPUTED
PROPERTY BY FARMERS IN CASE AT BAR. 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. CaDEAT
16.CONSTITUTIONAL LAW; SOCIAL JUSTICE; NOT A LICENSE TO TRAMPLE

ON RIGHTS OF THE RICH IN THE GUISE OF DEFENDING THE POOR. 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.

DECISION

PUNO, J p:
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 1998. prLL
Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three
haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in the
Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in area and is
registered under Transfer Certificate of Title (TCT) No. 985. This land is covered by Tax
Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050
hectares in area, registered under TCT No. 924 and covered by Tax Declaration Nos.
0236, 0237 and 0390. Hacienda Caylaway is 867.4571 hectares in area and is registered
under TCT Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then President Corazon C.
Aquino. In February 1986, President Aquino issued Proclamation No. 3 promulgating a
Provisional Constitution. As head of the provisional government, the President exercised
legislative power "until a legislature is elected and convened under a new Constitution." 1
In the exercise of this legislative power, the President signed on July 22, 1987,
Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and
Executive Order No. 229 providing the mechanisms necessary to initially implement the
program.
On July 27, 1987, the Congress of the Philippines formally convened and took over
legislative power from the President. 2 This Congress passed Republic Act No. 6657, the
Comprehensive Agrarian Reform Law (CARL) of 1988. The Act was signed by the
President on June 10, 1988 and took effect on June 15, 1988.
Before the law's effectivity, on May 6, 1988, petitioner filed with respondent DAR a
voluntary offer to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229.
Haciendas Palico and Banilad were later placed under compulsory acquisition by

respondent DAR in accordance with the CARL.

Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal Agrarian
Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled "Invitation to
Parties" to petitioner. The Invitation was addressed to "Jaime Pimentel, Hda.
Administrator, Hda. Palico." 3 Therein, the MARO invited petitioner to a conference on
October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR
investigation of Hacienda Palico, which was "scheduled for compulsory acquisition this
year under the Comprehensive Agrarian Reform Program." 4
On October 25, 1989, the MARO completed three (3) Investigation Reports after
investigation and ocular inspection of the Hacienda. In the first Report, the MARO found
that 270 hectares under Tax Declaration Nos. 465, 466, 468 and 470 were "flat to
undulating (0-8% slope)" and actually occupied and cultivated by 34 tillers of sugarcane.
5 In the second Report, the MARO identified as "flat to undulating" approximately 339
hectares under Tax Declaration No. 0234 which also had several actual occupants and
tillers of sugarcane; 6 while in the third Report, the MARO found approximately 75
hectares under Tax Declaration No. 0354 as "flat to undulating" with 33 actual occupants
and tillers also of sugarcane. 7
On October 7, 1989, a "Summary Investigation Report" was submitted and signed jointly
by the MARO representatives of the Barangay Agrarian Reform Committee (BARC) and
Land Bank of the Philippines (LBP), and by the Provincial Agrarian Reform Officer
(PARO). The Report recommended that 333.0800 hectares of Hacienda Palico be subject
to compulsory acquisition at a value of P6,807,622.20. 8 The following day, October 28,
1989, two (2) more Summary Investigation Reports were submitted by the same officers
and representatives. They recommended that 270.0876 hectares and 75.3800 hectares be
placed under compulsory acquisition at a compensation of P8,109,739.00 and
P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary Miriam D.
Santiago sent a "Notice of Acquisition" to petitioner. The Notice was addressed as
follows:
"Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila." 10
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were
subject to immediate acquisition and distribution by the government under the CARL;

that based on the DAR's valuation criteria, the government was offering compensation of
P3.4 million for 333.0800 hectares; that whether this offer was to be accepted or rejected,
petitioner was to inform the Bureau of Land Acquisition and Distribution (BLAD) of the
DAR; that in case of petitioner's rejection or failure to reply within thirty days,
respondent DAR shall conduct summary administrative proceedings with notice to
petitioner to determine just compensation for the land; that if petitioner accepts
respondent DAR's offer, or upon deposit of the compensation with an accessible bank if it
rejects the same, the DAR shall take immediate possession of the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director sent to the
LBP Land Valuation Manager three (3) separate Memoranda entitled "Request to Open
Trust Account." Each Memoranda requested that a trust account representing the
valuation of three portions of Hacienda Palico be opened in favor of the petitioner in
view of the latter's rejection on its offered value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion
of Haciendas Palico and Banilad from agricultural to non-agricultural lands under the
provisions of the CARL. 13 On July 14, 1993, petitioner sent a letter to the DAR
Regional Director reiterating its request for conversion of the two haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded with the
acquisition of the two Haciendas. The LBP trust accounts as compensation for Hacienda
Palico were replaced by respondent DAR with cash and LBP bonds. 15 On October 22,
1993, from the mother title of TCT No. 985 of the Hacienda, respondent DAR registered
Certificate of Land Ownership Award (CLOA) No. 6654. On October 30, 1993, CLOA's
were distributed to farmer beneficiaries. 16
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:
"Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas" 17
The MARO informed Pimentel that Hacienda Banilad was subject to compulsory
acquisition under the CARL; that should petitioner wish to avail of the other schemes
such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent DAR was willing
to provide assistance thereto. 18
On September 18, 1989, the MARO sent an "Invitation to Parties" again to Pimentel
inviting the latter to attend a conference on September 21, 1989 at the MARO Office in

Nasugbu to discuss the results of the MARO's investigation over Hacienda Banilad. 19
On September 21, 1989, the same day the conference was held, the MARO submitted
two (2) Reports. In his first Report, he found that approximately 709 hectares of land
under Tax Declaration Nos. 0237 and 0236 were "flat to undulating (0-8% slope)." On
this area were discovered 162 actual occupants and tillers of sugarcane. 20 In the second
Report, it was found that approximately 235 hectares under Tax Declaration No. 0390
were "flat to undulating," on which were 92 actual occupants and tillers of sugarcane. 21
The results of these Reports were discussed at the conference. Present in the conference
were representatives of the prospective farmer beneficiaries, the BARC, the LBP, and
Jaime Pimentel on behalf of the landowner. 22 After the meeting, on the same day,
September 21, 1989, a Summary Investigation Report was submitted jointly by the
MARO, representatives of the BARC, LBP, and the PARO. They recommended that after
ocular inspection of the property, 234.6498 hectares under Tax Declaration No. 0390 be
subject to compulsory acquisition and distribution by CLOA. 23 The following day,
September 22, 1989, a second Summary Investigation was submitted by the same
officers. They recommended that 737.2590 hectares under Tax Declaration Nos. 0236
and 0237 be likewise placed under compulsory acquisition for distribution. 24
On December 12, 1989, respondent DAR, through the Department Secretary, sent to
petitioner two (2) separate "Notices of Acquisition" over Hacienda Banilad. These
Notices were sent on the same day as the Notice of Acquisition over Hacienda Palico.
Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda Banilad
were addressed to: cda
"Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila." 25
Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190
hectares and P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager a "Request to Open Trust Account" in petitioner's name as compensation for
234.6493 hectares of Hacienda Banilad. 27 A second "Request to Open Trust Account"
was sent on November 18, 1991 over 723.4130 hectares of said Hacienda. 28
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and
P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for
petitioner's land in Hacienda Banilad. 29
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad.

Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988
before the effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares
and is covered by four (4) titles TCT Nos. T-44662, T-44663, T-44664 and T-44665.
On January 12, 1989, respondent DAR, through the Regional Director for Region IV,
sent to petitioner two (2) separate Resolutions accepting petitioner's voluntary offer to
sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663. 30 The
Resolutions were addressed to:
"Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M.M." 31
On September 4, 1990, the DAR Regional Director issued two separate Memoranda to
the LBP Regional Manager requesting for the valuation of the land under TCT Nos. T44664 and T-44663. 32 On the same day, respondent DAR, through the Regional
Director, sent to petitioner a "Notice of Acquisition" over 241.6777 hectares under TCT
No. T-44664 and 533.8180 hectares under TCT No. T-44663. 33 Like the Resolutions of
Acceptance, the Notice of Acquisition was addressed to petitioner at its office in Makati,
Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent
a letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway.
The Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the reclassification
of Hacienda Caylaway from agricultural to non-agricultural. As a result, petitioner
informed respondent DAR that it was applying for conversion of Hacienda Caylaway
from agricultural to other uses. 34
In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that
a reclassification of the land would not exempt it from agrarian reform. Respondent
Secretary also denied petitioner's withdrawal of the VOS on the ground that withdrawal
could only be based on specific grounds such as unsuitability of the soil for agriculture,
or if the slope of the land is over 18 degrees and that the land is undeveloped. 35
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993,
petitioner filed its application for conversion of both Haciendas Palico and Banilad. 36
On July 14, 1993, petitioner, through its President, Eduardo Roxas, reiterated its request
to withdraw the VOS over Hacienda Caylaway in light of the following:

"1)Certification issued by Conrado I. Gonzales, Officer-in-Charge,


Department of Agriculture, Region 4, 4th Floor, ATI (BA) Bldg.,
Diliman, Quezon City dated March 1, 1993 stating that the lands subject
of referenced titles "are not feasible and economically sound for further
agricultural development."
2)Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas
approving the Zoning Ordinance reclassifying areas covered by the
referenced titles to non-agricultural which was enacted after extensive
consultation with government agencies, including [the Department of
Agrarian Reform], and the requisite public hearings.
3)Resolution No. 106 of the Sangguniang Panlalawigan of Batangas
dated March 8, 1993 approving the Zoning Ordinance enacted by the
Municipality of Nasugbu.
4)Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the
Municipal Planning & Development, Coordinator and Deputized Zoning
Administrator addressed to Mrs. Alicia P. Logarta advising that the
Municipality of Nasugbu, Batangas has no objection to the conversion of
the lands subject of referenced titles to non-agricultural." 37
On August 24, 1993, petitioner instituted Case No. N-0017-96-46 (BA) with respondent
DAR Adjudication Board (DARAB) praying for the cancellation of the CLOA's issued
by respondent DAR in the name of several persons. Petitioner alleged that the
Municipality of Nasugbu, where the haciendas are located, had been declared a tourist
zone, that the land is not suitable for agricultural production, and that the Sangguniang
Bayan of Nasugbu had reclassified the land to non-agricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case involved
the prejudicial question of whether the property was subject to agrarian reform, hence,
this question should be submitted to the Office of the Secretary of Agrarian Reform for
determination. 38
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484.
It questioned the expropriation of its properties under the CARL and the denial of due
process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three hectares was denied by the MARO on
November 8, 1993.
Petitioner's petition was dismissed by the Court of Appeals on April 28, 1994. 39
Petitioner moved for reconsideration but the motion was denied on January 17, 1997 by
respondent court. 40

Hence, this recourse. Petitioner assigns the following errors:


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

BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41


The assigned errors involve three (3) principal issues: (1) whether this Court can take
cognizance of this petition despite petitioner's failure to exhaust administrative remedies;
(2) whether the acquisition proceedings over the three haciendas were valid and in
accordance with law; and (3) assuming the haciendas may be reclassified from
agricultural to non-agricultural, whether this court has the power to rule on this issue.
I.Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals gravely
erred in finding that petitioner failed to exhaust administrative remedies. As a general
rule, before a party may be allowed to invoke the jurisdiction of the courts of justice, he
is expected to have exhausted all means of administrative redress. This is not absolute,
however. There are instances when judicial action may be resorted to immediately.
Among these exceptions are: (1) when the question raised is purely legal; (2) when the
administrative body is in estoppel; (3) when the act complained of is patently illegal; (4)
when there is urgent need for judicial intervention; (5) when the respondent acted in
disregard of due process; (6) when the respondent is a department secretary whose acts,
as an alter ego of the President, bear the implied or assumed approval of the latter; (7)
when irreparable damage will be suffered; (8) when there is no other plain, speedy and
adequate remedy; (9) when strong public interest is involved; (10) when the subject of the
controversy is private land; and (11) in quo warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation of its
rights and to require it to exhaust administrative remedies before the DAR itself was not a
plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA'S) to farmer
beneficiaries over portions of petitioner's land without just compensation to petitioner. A
Certificate of Land Ownership Award (CLOA) is evidence of ownership of land by a
beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of 1988. 43
Before this may be awarded to a farmer beneficiary, the land must first be acquired by the
State from the landowner and ownership transferred to the former. The transfer of
possession and ownership of the land to the government are conditioned upon the receipt
by the landowner of the corresponding payment or deposit by the DAR of the
compensation with an accessible bank. Until then, title remains with the landowner. 44
There was no receipt by petitioner of any compensation for any of the lands acquired by
the government.
The kind of compensation to be paid the landowner is also specific. The law provides that
the deposit must be made only in "cash" or "LBP bonds." 45 Respondent DAR's opening
of trust account deposits in petitioner's name with the Land Bank of the Philippines does
not constitute payment under the law. Trust account deposits are not cash or LBP bonds.
The replacement of the trust account with cash or LBP bonds did not ipso facto cure the
lack of compensation; for essentially, the determination of this compensation was marred

by lack of due process. In fact, in the entire acquisition proceedings, respondent DAR
disregarded the basic requirements of administrative due process. Under these
circumstances, the issuance of the CLOA's to farmer beneficiaries necessitated immediate
judicial action on the part of the petitioner.
II.The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the acquisition
proceedings themselves. Before we rule on this matter, however, there is need to lay
down the procedure in the acquisition of private lands under the provisions of the law.
A.Modes of Acquisition of Land under R.A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL),
provides for two (2) modes of acquisition of private land: compulsory and voluntary. The
procedure for the compulsory acquisition of private lands is set forth in Section 16 of
R.A. 6657, viz:
"SECTION 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 land acquisition to
hasten the implementation of the Comprehensive Agrarian Reform Program (CARP). 46
Under Section 16 of the CARL, the first step in compulsory acquisition is the

identification of the land, the landowners and the beneficiaries. However, the law is silent
on how the identification process must be made. To fill in this gap, the DAR issued on
July 26, 1989 Administrative Order No. 12, Series of 1989, which set the operating
procedure in the identification of such lands. The procedure is as follows:
"II.OPERATING PROCEDURE
A.The Municipal Agrarian Reform Officer, with the assistance of the
pertinent Barangay Agrarian Reform Committee (BARC), shall:
1.Update the masterlist of all agricultural lands covered under the
CARP in his area of responsibility. The masterlist shall
include such information as required under the attached
CARP Masterlist Form which shall include the name of
the landowner, landholding area, TCT/OCT number, and
tax declaration number.
2.Prepare a Compulsory Acquisition Case Folder (CACF) for
each title (OCT/TCT) or landholding covered under
Phase I and II of the CARP except those for which the
landowners have already filed applications to avail of
other modes of land acquisition. A case folder shall
contain the following duly accomplished forms:
a)CARP CA Form 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). cdll
B.The PARO shall:
1.Ensure that the individual case folders are forwarded to him by
his MAROs.
2.Immediately upon receipt of a case folder, compute the
valuation of the land in accordance with A.O. No. 6,
Series of 1988. 47 The valuation worksheet and the
related CACF valuation forms shall be duly certified
correct by the PARO and all the personnel who
participated in the accomplishment of these forms.
3.In all cases, the PARO may validate the report of the MARO
through ocular inspection and verification of the property.
This ocular inspection and verification shall be
mandatory when the computed value exceeds =500,000
per estate.
4.Upon determination of the valuation, forward the case folder,
together with the duly accomplished valuation forms and
his recommendations, to the Central Office. The LBP
representative and the MARO concerned shall be
furnished a copy each of his report.
C.DAR Central Office, specifically through the Bureau of Land
Acquisition and Distribution (BLAD), shall:
1.Within three days from receipt of the case folder from the
PARO, review, evaluate and determine the final land
valuation of the property covered by the case folder. A
summary review and evaluation report shall be prepared
and duly certified by the BLAD Director and the
personnel directly participating in the review and final

valuation.
2.Prepare, for the signature of the Secretary or her duly
authorized representative, a Notice of Acquisition (CARP
CA Form 8) for the subject property. Serve the Notice to
the landowner personally or through registered mail
within three days from its approval. The Notice shall
include, among others, the area subject of compulsory
acquisition, and the amount of just compensation offered
by DAR.
3.Should the landowner accept the DAR's offered value, the
BLAD shall prepare and submit to the Secretary for
approval the Order of Acquisition. However, in case of
rejection or non-reply, the DAR Adjudication Board
(DARAB) shall conduct a summary administrative
hearing to determine just compensation, in accordance
with the procedures provided under Administrative Order
No. 13, Series of 1989. Immediately upon receipt of the
DARAB's decision on just compensation, the BLAD shall
prepare and submit to the Secretary for approval the
required Order of Acquisition.
4.Upon the landowner's receipt of payment, in case of
acceptance, or upon deposit of payment in the designated
bank, in case of rejection or non-response, the Secretary
shall immediately direct the pertinent Register of Deeds
to issue the corresponding Transfer Certificate of Title
(TCT) in the name of the Republic of the Philippines.
Once the property is transferred, the DAR, through the
PARO, shall take possession of the land for redistribution
to qualified beneficiaries."
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform
Officer (MARO) keep an updated master list of all agricultural lands under the CARP in
his area of responsibility containing all the required information. The MARO prepares a
Compulsory Acquisition Case Folder (CACF) for each title covered by CARP. The
MARO then sends the landowner a "Notice of Coverage" and a "letter of invitation" to a
"conference/meeting" over the land covered by the CACF. He also sends invitations to
the prospective farmer-beneficiaries, the representatives of the Barangay Agrarian
Reform Committee (BARC), the Land Bank of the Philippines (LBP) and other interested
parties to discuss the inputs to the valuation of the property and solicit views,
suggestions, objections or agreements of the parties. At the meeting, the landowner is
asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer

(PARO) who shall complete the valuation of the land. Ocular inspection and verification
of the property by the PARO shall be mandatory when the computed value of the estate
exceeds P500,000.00 Upon determination of the valuation, the PARO shall forward all
papers together with his recommendation to the Central Office of the DAR. The DAR
Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD),
shall review, evaluate and determine the final land valuation of the property. The BLAD
shall prepare, on the signature of the Secretary or his duly authorized representative, a
Notice of Acquisition for the subject property. 48 From this point, the provisions of
Section 16 of R.A. 6657 then apply. 49
For a valid implementation of the CAR Program, two notices are required: (1) the Notice
of Coverage and letter of invitation to a preliminary conference sent to the landowner, the
representatives of the BARC, LBP, farmer beneficiaries and other interested parties
pursuant to DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to
the landowner under Section 16 of the CARL.

The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation
to the conference, and its actual conduct cannot be understated. They are steps designed
to comply with the requirements of administrative due process. The implementation of
the CARL is an exercise of the State's police power and the power of eminent domain. To
the extent that the CARL prescribes retention limits to the landowners, there is an
exercise of police power for the regulation of private property in accordance with the
Constitution. 50 But where, to carry out such regulation, the owners are deprived of lands
they own in excess of the maximum area allowed, there is also a taking under the power
of eminent domain. The taking contemplated is not a mere limitation of the use of the
land. What is required is the surrender of the title to and physical possession of the said
excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary.
51 The Bill of Rights provides that "[n]o person shall be deprived of life, liberty or
property without due process of law." 52 The CARL was not intended to take away
property without due process of law. 53 The exercise of the power of eminent domain
requires that due process be observed in the taking of private property.
DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was
amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1,
Series of 1993. The Notice of Coverage and letter of invitation to the conference meeting
were expanded and amplified in said amendments.
DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition
Pursuant to R.A. 6657," requires that:
"B.MARO
1.Receives the duly accomplished CARP Form Nos. 1 & 1.1

including supporting documents.


2.Gathers basic ownership documents listed under 1.a or 1.b
above and prepares corresponding VOCF/CACF by
landowner/landholding.
3.Notifies/invites the landowner and representatives of the LBP,
DENR, BARC and prospective beneficiaries of the
schedule of ocular inspection of the property at least one
week in advance.
4.MARO/LAND BANK FIELD OFFICE/BARC
a)Identify the land and landowner, and determine the
suitability for agriculture and productivity of the
land and jointly prepare Field Investigation
Report (CARP Form No. 2), including the Land
Use Map of the property.
b)Interview applicants and assist them in the preparation
of the Application For Potential CARP
Beneficiary (CARP Form No. 3).
c)Screen prospective farmer-beneficiaries and for those
found qualified, cause the signing of the
respective Application to Purchase and 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 farmerbeneficiaries, 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/recommendations by all parties concerned.
d)Prepares Summary of Minutes of the conference/public
hearing to be guided by CARP Form No. 7.
e)Forwards the completed VOCF/CACF to the Provincial
Agrarian Reform Office (PARO) using CARP
Form No. 8 (Transmittal Memo to PARO).
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. 54 In both VOS and CA transactions, the MARO prepares the
Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory Acquisition Case
Folder (CACF), as the case may be, over a particular landholding. The MARO notifies
the landowner as well as representatives of the LBP, BARC and prospective beneficiaries
of the date of the ocular inspection of the property at least one week before the scheduled
date and invites them to attend the same. The MARO, LBP or BARC conducts the ocular
inspection and investigation by identifying the land and landowner, determining the
suitability of the land for agriculture and productivity, interviewing and screening
prospective farmer beneficiaries. Based on its investigation, the MARO, LBP or BARC
prepares the Field Investigation Report which shall be signed by all parties concerned. In
addition to the field investigation, a boundary or subdivision survey of the land may also
be conducted by a Survey Party of the Department of Environment and Natural
Resources (DENR) to be assisted by the MARO. 55 This survey shall delineate the areas
covered by Operation Land Transfer (OLT), areas retained by the landowner, areas with
infrastructure, and the areas subject to VOS and CA. After the survey and field
investigation, the MARO sends a "Notice of Coverage" to the landowner or his duly
authorized representative inviting him to a conference or public hearing with the farmer
beneficiaries, representatives of the BARC, LBP, DENR, Department of Agriculture
(DA), non-government organizations, 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.
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:
"StepsResponsibleActivityForms/
Agency/UnitDocument
(Requirements)
A. Identification and
Documentation
xxx xxx xxx
5DARMOIssues Notice of CoverageCARP
to LO by personalForm No.
delivery with proof of2
service, or by 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 NoticeCARP


shall be posted for at leastForm No.
one week on the bulletin17
board of the municipal
and barangay halls where
the property is located.
LGU office concerned
notifies DAR about
compliance with posting
requirement thru return
indorsement on CARP
Form No. 17.

6DARMOSends notice to the LBP,CARP

BARC, DENRForm No.


representatives and3
prospective ARBs of the
schedule of the field
investigation to be
conducted on the subject
property.

7DARMOWith the participation ofCARP


BARCthe LO, representatives ofForm No.
LBPthe LBP, BARC, DENR4
DENRand prospective ARBs,Land Use
Local Officeconducts the investigationMap
on subject property to
identify the landholding,
determines its suitability
and productivity; and
jointly prepares the Field
Investigation Report (FIR)
and Land Use Map.
However, the field
investigation shall proceed
even if the LO, the

representatives of the
DENR and prospective
ARBs are not available
provided, they were given
due notice of the time and
date of the investigation to
be conducted. Similarly, if
the LBP representative is
not available or could not
come on the scheduled
date, the field
investigation shall also be
conducted, after which the
duly accomplished Part I
of CARP Form No. 4 shall
be forwarded to the LBP
representative for
validation. If he agrees to
the ocular inspection
report of DAR, he signs
the FIR (Part I) and
accomplishes Part II
thereof.

In the event that there is a


difference or variance
between the findings of
the DAR and the LBP as
to the propriety of
covering the land under
CARP, whether in whole
or in part, on the issue of
suitability to agriculture,
degree of development or
slope, and on issues
affecting idle lands, the
conflict shall be resolved
by a composite team of
DAR, LBP, DENR and
DA which shall jointly
conduct further
investigation thereon. The
team shall submit its
report of findings which
shall be binding to both
DAR and LBP, pursuant

to Joint Memorandum
Circular of the DAR,
LBP, DENR and DA
dated 27 January 1992.

8DARMOScreens prospective ARBsCARP


BARCand causes the signing ofForm No.
the Application of5
Purchase and Farmers'
Undertaking (APFU).

9DARMOFurnishes a copy of theCARP


duly accomplished FIR toForm No.
the landowner by personal4
delivery with proof of
service or registered mail
with return card and posts
a copy thereof for at least
one week on the bulletin
board of the municipal
and barangay halls where
the property is located. prLL

LGU Office concernedCARP


notifies DAR aboutForm No.
compliance with posting17
requirement thru return

endorsement on CARP
Form No. 17.

B. Land Survey

10DARMOConducts perimeter or Perimeter


And/orsegregation surveyor
DENRdelineating areas coveredSegregation
Local Officeby OLT, "uncarpableSurvey 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.

11DARMOForwards VOCF/CACFCARP
to DARPO.Form No.
6
xxx xxx xxx."
DAR A.O. No. 1, Series of 1993, modified the identification process and increased the
number of government agencies involved in the identification and delineation of the land
subject to acquisition. 56 This time, the Notice of Coverage is sent to the landowner
before the conduct of the field investigation and the sending must comply with specific
requirements. Representatives of the DAR Municipal Office (DARMO) must send the
Notice of Coverage to the landowner by "personal delivery with proof of service, or by
registered mail 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 Investigation Report and Land Use Map, a
copy of which shall be furnished the landowner "by personal delivery with proof of
service or registered mail with return card." Another copy of the Report and Map shall
likewise be posted for at least one week in the municipal or barangay halls where the
property is located.
Clearly then, the notice requirements under the CARL are not confined to the Notice of

Acquisition set forth in Section 16 of the law. They also include the Notice of Coverage
first laid down in DAR A.O. No. 12, Series of 1989 and subsequently amended in DAR
A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993. This Notice of Coverage
does not merely notify the landowner that his property shall be placed under CARP and
that he is entitled to exercise his retention right; it also notifies him, pursuant to DAR
A.O. No. 9, Series of 1990, that a public hearing shall be conducted where he and
representatives of the concerned sectors of society may attend to discuss the results of the
field investigation, the land valuation and other pertinent matters. Under DAR A.O. No.
1, Series of 1993, the Notice of Coverage also informs the landowner that a field
investigation of his landholding shall be conducted where he and the other
representatives may be present.
B.The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano,
sent a letter of invitation entitled "Invitation to Parties" dated September 29, 1989 to
petitioner corporation, through Jaime Pimentel, the administrator of Hacienda Palico. 57
The invitation was received on the same day it was sent as indicated by a signature and
the date received at the bottom left corner of said invitation. With regard to Hacienda
Banilad, respondent DAR claims that Jaime Pimentel, administrator also of Hacienda
Banilad, was notified and sent an invitation to the conference. Pimentel actually attended
the conference on September 21, 1989 and signed the Minutes of the meeting on behalf
of petitioner corporation. 58 The Minutes was also signed by the representatives of the
BARC, the LBP and farmer beneficiaries. 59 No letter of invitation was sent or
conference meeting held with respect to Hacienda Caylaway because it was subject to a
Voluntary Offer to Sell to respondent DAR. 60
When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent
to the various parties the Notice of Coverage and invitation to the conference, DAR A.O.
No. 12, Series of 1989 was already in effect more than a month earlier. The Operating
Procedure in DAR Administrative Order No. 12 does not specify how notices or letters of
invitation shall be sent to the landowner, the representatives of the BARC, the LBP, the
farmer beneficiaries and other interested parties. The procedure in the sending of these
notices is important to comply with the requisites of due process especially when the
owner, as in this case, is a juridical entity. Petitioner is a domestic corporation, 61 and
therefore, has a personality separate and distinct from its shareholders, officers and
employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the
landowner by "personal delivery or registered mail." Whether the landowner be a natural
or juridical person to whose address the Notice may be sent by personal delivery or
registered mail, the law does not distinguish. The DAR Administrative Orders also do
not distinguish. In the proceedings before the DAR, the distinction between natural and
juridical persons in the sending of notices may be found in the Revised Rules of
Procedure of the DAR Adjudication Board (DARAB). Service of pleadings before the
DARAB is governed by Section 6, Rule V of the DARAB Revised Rules of Procedure.

Notices and pleadings are served on private domestic corporations or partnerships in the
following manner:
"SECTION 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:
"SECTION 13.Service upon private domestic corporation or
partnership. If the defendant is a corporation organized under the
laws of the Philippines or a partnership duly registered, service may be
made on the president, manager, secretary, cashier, agent, or any of its
directors."
Summonses, pleadings and notices in cases against a private domestic corporation before
the DARAB and the regular courts are served on the president, manager, secretary,
cashier, agent or any of its directors. These persons are those through whom the private
domestic corporation or partnership is capable of action. 62
Jaime Pimentel is not the president, manager, secretary, cashier or director of petitioner
corporation. Is he, as administrator of the two Haciendas, considered an agent of the
corporation?
The purpose of all rules for service of process on a corporation is to make it reasonably
certain that the corporation will receive prompt and proper notice in an action against it.
63 Service must be made on a representative so integrated with the corporation as to
make it a priori supposable that he will realize his responsibilities and know what he
should do with any legal papers served on him, 64 and bring home to the corporation
notice of the filing of the action. 65 Petitioner's evidence does not show the official duties
of Jaime Pimentel as administrator of petitioner's haciendas. The evidence does not
indicate whether Pimentel's duties is so integrated with the corporation that he would
immediately realize his responsibilities and know what he should do with any legal
papers served on him. At the time the notices were sent and the preliminary conference
conducted, petitioner's principal place of business was listed in respondent DAR's records
as "Soriano Bldg., Plaza Cervantes, Manila," 66 and "7th Flr. Cacho-Gonzales Bldg., 101
Aguirre St., Makati, Metro Manila." 67 Pimentel did not hold office at the principal place
of business of petitioner. Neither did he exercise his functions in Plaza Cervantes, Manila
nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He performed his official functions
and actually resided in the haciendas in Nasugbu, Batangas, a place over two hundred
kilometers away from Metro Manila. cdrep
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. 68
Why respondent DAR chose to notify Pimentel instead of the officers of the corporation
was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the
notices and letters of invitation were validly served on petitioner through him, there is no
showing that Pimentel himself was duly authorized to attend the conference meeting with
the MARO, BARC and LBP representatives and farmer beneficiaries for purposes of
compulsory acquisition of 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 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 proportions 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 areas in those portions to be acquired compulsorily. The right of
retention and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:
"SECTION 6.Retention Limits. . . . .
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That in
case the area selected for retention by the landowner is tenanted, the
tenant shall have the option to choose whether to remain therein or be a
beneficiary in the same or another agricultural land with similar or
comparable features. In case the tenant chooses to remain in the retained
area, he shall be considered a leaseholder and shall lose his right to be a
beneficiary under this Act. In case the tenant chooses to be a beneficiary
in another agricultural land, he loses his right as a leaseholder to the land
retained by the landowner. The tenant must exercise this option within a
period of one (1) year from the time the landowner manifests his choice
of the area for retention.
Under the law, a landowner may retain not more than five hectares out of the total area of
his agricultural land subject to CARP. The right to choose the area to be retained, which
shall be compact or contiguous, pertains to the landowner. If the area chosen for retention
is tenanted, the tenant shall have the option to choose whether to remain on the portion or
be a beneficiary in the same or another agricultural land with similar or comparable
features.
C.The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the
subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made on
May 6, 1988, 72 before the effectivity of R.A. 6657 on June 15, 1988. VOS transactions
were first governed by DAR Administrative Order No. 19, series of 1989, 73 and under
this order, all VOS filed before June 15, 1988 shall be heard and processed in accordance
with the procedure provided for in Executive Order No. 229, thus:
"III.All VOS transactions which are now pending before the DAR and
for which no payment has been made shall be subject to the notice and
hearing requirements provided in Administrative Order No. 12, Series of
1989, dated 26 July 1989, Section II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL,
shall be heard and processed in accordance with the procedure provided
for in Executive Order No. 229.
"xxx xxx xxx."

Section 9 of E.O. 229 provides:


"SECTION 9.Voluntary Offer to Sell. The government shall purchase
all agricultural lands it deems productive and suitable to farmer
cultivation voluntarily offered for sale to it at a valuation determined in
accordance with Section 6. Such transaction shall be exempt from the
payment of capital gains tax and other taxes and fees."
Executive Order 229 does not contain the procedure for the identification of private land
as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O. 229 merely reiterates
the procedure of acquisition in Section 16, R.A. 6657. In other words, the E.O. is silent as
to the procedure for the identification of the land, the notice of coverage and the
preliminary conference with the landowner, representatives of the BARC, the LBP and
farmer beneficiaries. Does this mean that these requirements may be dispensed with
regard to VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land,
landowner and beneficiaries of the land subject to agrarian reform be identified before the
notice of acquisition should be issued. 74 Hacienda Caylaway was voluntarily offered for
sale in 1989. The Hacienda has a total area of 867.4571 hectares and is covered by four
(4) titles. In two separate Resolutions both dated January 12, 1989, respondent DAR,
through the Regional Director, formally accepted the VOS over two of these four titles.
75 The land covered by the two titles has an area of 855.5257 hectares, but only 648.8544
hectares thereof fell within the coverage of R.A. 6657. 76 Petitioner claims it does not
know where these portions are located.
Respondent DAR, on the other hand, avers that surveys on the land covered by the four
titles were conducted in 1989, and that petitioner, as landowner, was not denied
participation therein. The results of the survey and the land valuation summary report,
however, do not indicate whether notices to attend the same were actually sent to and
received by petitioner or its duly authorized representative. 77 To reiterate, Executive
Order No. 229 does not lay down the operating procedure, much less the notice
requirements, before the VOS is accepted by respondent DAR. Notice to the landowner,
however, cannot be dispensed with. It is part of administrative due process and is an
essential requisite to enable the landowner himself to exercise, at the very least, his right
of retention guaranteed under the CARL.
III.The Conversion of the three Haciendas.
It is petitioner's claim that the three haciendas are not subject to agrarian reform because
they have been declared for tourism, not agricultural purposes. 78 In 1975, then President
Marcos issued Proclamation No. 1520 declaring the municipality of Nasugbu, Batangas a
tourist zone. Lands in Nasugbu, including the subject haciendas, were allegedly
reclassified as non-agricultural 13 years before the effectivity of R.A. No. 6657. 79 In
1993, the Regional Director for Region IV of the Department of Agriculture certified that
the haciendas are not feasible and sound for agricultural development. 80 On March 20,

1992, pursuant to Proclamation No. 1520, the Sangguniang Bayan of Nasugbu, Batangas
adopted Resolution No. 19 reclassifying certain areas of Nasugbu as non-agricultural. 81
This Resolution approved Municipal Ordinance No. 19, Series of 1992, the Revised
Zoning Ordinance of Nasugbu 82 which zoning ordinance was based on a Land Use Plan
for Planning Areas for New Development allegedly prepared by the University of the
Philippines. 83 Resolution No. 19 of the Sangguniang Bayan was approved by the
Sangguniang Panlalawigan of Batangas on March 8, 1993. 84
Petitioner claims that Proclamation No. 1520 was also upheld by respondent DAR in
1991 when it approved conversion of 1,827 hectares in Nasugbu into a tourist area known
as the Batulao Resort Complex, and 13.52 hectares in Barangay Caylaway as within the
potential tourist belt. 85 Petitioner presents evidence before us that these areas are
adjacent to the haciendas subject of this petition, hence, the haciendas should likewise be
converted. Petitioner urges this Court to take cognizance of the conversion proceedings
and rule accordingly. 86
We do not agree. Respondent 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 nonagricultural. 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 filed
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. LLjur
"B.Section 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.Section 65 of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, likewise empowers the DAR to
authorize under certain conditions, the conversion of agricultural
lands.
"D.Section 4 of Memorandum Circular No. 54, Series of 1993 of the
Office of the President, provides that "action on applications for
land use conversion on individual landholdings shall remain as
the responsibility of the DAR, which shall utilize as its primary
reference, documents on the comprehensive land use plans and
accompanying ordinances passed upon and approved by the local
government units concerned, together with the National Land
Use Policy, pursuant to R.A. No. 6657 and E.O. No. 129-A." 87
Applications for conversion were initially governed by DAR A.O. No. 1, Series of 1990
entitled "Revised Rules and Regulations Governing Conversion of Private Agricultural
Lands and Non-Agricultural Uses," and DAR A.O. No. 2, Series of 1990 entitled "Rules
of Procedure Governing the Processing and Approval of Applications for Land Use
Conversion." These A.O.'s and other implementing guidelines, including Presidential
issuances and national policies related to land use conversion have been consolidated in
DAR A.O. No. 07, Series of 1997. Under this recent issuance, the guiding principle in
land use conversion is:
"to preserve prime agricultural lands for food production while, at the
same time, recognizing the need of the other sectors of society (housing,
industry and commerce) for land, when coinciding with the objectives of
the Comprehensive Agrarian Reform Law to promote social justice,
industrialization and the optimum use of land as a national resource for
public welfare." 88
"Land Use" refers to the manner of utilization of land, including its allocation,
development and management. "Land Use Conversion" refers to the act or process of
changing the current use of a piece of agricultural land into some other use as approved
by the DAR. 89 The conversion of agricultural land to uses other than agricultural
requires field investigation and conferences with the occupants of the land. They involve
factual findings and highly technical matters within the special training and expertise of
the DAR. DAR A.O. No. 7, Series of 1997 lays down with specificity how the DAR must

go about its task. This time, the field investigation is not conducted by the MARO but by
a special task force, known as the Center for Land Use Policy Planning and
Implementation (CLUPPI-DAR Central Office). The procedure is that once an
application for conversion is filed, the CLUPPI prepares the Notice of Posting. The
MARO only posts the notice and thereafter issues a certificate to the fact of posting. The
CLUPPI conducts the field investigation and dialogues with the applicants and the farmer
beneficiaries to ascertain the information necessary for the processing of the application.
The Chairman of the CLUPPI deliberates on the merits of the investigation report and
recommends the appropriate action. This recommendation is transmitted to the Regional
Director, thru the Undersecretary, or Secretary of Agrarian Reform. Applications
involving more than fifty hectares are approved or disapproved by the Secretary. The
procedure does not end with the Secretary, however. The Order provides that the decision
of the Secretary may be appealed to the Office of the President or the Court of Appeals,
as the case may be, viz:
"Appeal from the decision of the Undersecretary shall be made to the
Secretary, and from the Secretary to the Office of the President or the
Court of Appeals as the case may be. The mode of appeal/motion for
reconsideration, and the appeal fee, from Undersecretary to the Office of
the Secretary shall be the same as that of the Regional Director to the
Office of the Secretary." 90
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself authority to resolve a controversy the jurisdiction over which is initially lodged with
an administrative body of special competence. 91 Respondent DAR is in a better position
to resolve petitioner's application for conversion, being primarily the agency possessing
the necessary expertise on the matter. The power to determine whether Haciendas Palico,
Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of the
CARL lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of due
process in the acquisition proceedings does not give this Court the power to nullify the
CLOA's already issued to the farmer beneficiaries. To assume the power is to shortcircuit the administrative process, which has yet to run its regular course. Respondent
DAR must be given the chance to correct its procedural lapses in the acquisition
proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries
in 1993. 92 Since then until the present, these farmers have been cultivating their lands.
93 It goes against the basic precepts of justice, fairness and equity to deprive these
people, through no fault of their own, of the land they till. Anyhow, the farmer
beneficiaries hold the property in trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over
the three haciendas are nullified for respondent DAR's failure to observe due process
therein. In accordance with the guidelines set forth in this decision and the applicable
administrative procedure, the case is hereby remanded to respondent DAR for proper

acquisition proceedings and determination of petitioner's application for conversion.


SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena, GonzagaReyes and De Leon, Jr., JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of Justice C.Y. Santiago.
Quisumbing, J., I join in the Concurring and Dissenting Opinion of J. Santiago.
Pardo, J., I join in the Concurring and Dissenting Opinion of J. Santiago.
Ynares-Santiago, J., Concurring and Dissenting Opinion.
Separate Opinions
MELO, J., concurring and dissenting:
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. Cdpr
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 other 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:
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 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
RA 6657, is invalid and ineffective. llcd
With more reason, the compulsory acquisition of portion 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 the 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 nonagricultural. 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 nonagricultural when it affirmed the force and effect of Presidential Proclamation 1520. In an
Order dated January 22, 1991, DAR granted the conversion of the adjoining and
contiguous landholdings owned by Group Developer and Financiers, Inc. in Nasugbu
pursuant to the Presidential Proclamation. The property alongside the disputed properties
is now known as "Batulao Resort Complex". As will be shown later, the conversion of
various other properties in Nasugbu has been ordered by DAR, including a property
disputed in this petition, Hacienda Caylaway.
Inspite of all the above, the Court of Appeals concluded that the lands comprising
petitioner's haciendas are agricultural, citing, among other things, petitioner's acts of
voluntarily offering Hacienda Caylaway for sale and applying for conversion its lands
from agricultural to non-agricultural.
Respondents, on the other hand, did not only ignore the administrative and executive
decisions. It also contended that the subject land should be deemed agricultural because it

is neither residential, commercial, industrial or timber. The character of a parcel of land,


however, is not determined merely by a process of elimination. The actual use which the
land is capable of should be the primordial factor.
RA 6657 explicitly limits its coverage thus:
"The Comprehensive Agrarian Reform Law of 1998 shall cover,
regardless of tenurial arrangement and commodity produced, all public
and private agricultural lands as provided in Proclamation No. 131 and
Executive Order No. 229, including other lands of the public domain
suitable for agriculture."
"More specifically, the following lands are covered by the
Comprehensive Agrarian Reform Program:
(a)All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until
Congress, taking into account, ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the
public domain;
(b)All lands of the public domain in excess of the specific limits as
determined by Congress in the preceding paragraph;
(c)All other lands owned by the Government devoted to or suitable for
agriculture; and
(d)All private lands devoted to or suitable for agriculture regardless of
the agricultural products raised or that can be raised thereon." (RA 6657,
Sec. 4; underscoring 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). LLpr
The contention is untenable. Tourist attractions are not limited to scenic landscapes and
lush greeneries. Verily, tourism is enhanced by structures and facilities such as hotels,
resorts, rest houses, sports clubs and golf courses, all of which bind the land and render it
unavailable for cultivation. As aptly described by petitioner:
"The development of resorts, golf courses, and commercial centers is
inconsistent with agricultural development. True, there can be limited
agricultural production within the context of tourism development.
However, such small scale farming activities will be dictated by, and
subordinate to the needs or tourism development. In fact, agricultural
use of land within Nasugbu may cease entirely if deemed necessary by

the Department of Tourism" (Reply, Rollo, p. 400).


The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary offer to
sell Hacienda Caylaway should not be deemed an admission that the land is agricultural.
Rather, the offer was made by petitioner in good faith, believing at the time that the land
could still be developed for agricultural production. Notably, the offer to sell was made as
early as May 6, 1988, before the soil thereon was found by the Department of Agriculture
to be unsuitable for agricultural development (the Certifications were issued on 2
February 1993 and 1 March 1993). Petitioner's withdrawal of its voluntary offer to sell,
therefore, was not borne out of a whimsical or capricious change of heart. Quite simply,
the land turned out to be outside of the coverage of the CARL, which by express
provision of RA 6657, Section 4, affects only public and private agricultural lands. As
earlier stated, only on May 17, 1999, DAR Secretary Horacio Morales, Jr. approved the
application for a lot in Caylaway, also owned by petitioner, and confirmed the seven (7)
documentary evidences proving the Caylaway area to be non-agricultural (DAR Order
dated 17 May 1999, in Case No. A-9999-050-97, Annex "D" Manifestation).
The DAR itself has issued administrative circulars governing lands which are outside of
CARP and may not be subjected to land reform. Administrative Order No. 3, Series of
1996 declares in its policy statement what landholdings are outside the coverage of
CARP. The AO is explicit in providing that such non-covered properties shall be
reconveyed to the original transferors or owners.
These non-covered lands are:
a.Land, or portions thereof, found to be no longer suitable for agriculture
and, therefore, could not be given appropriate valuation by the
Land Bank of the Philippines (LBP);
b.Those were a Conversion Order has already been issued by the DAR
allowing the use of the landholding other than for agricultural
purposes in accordance with Section 65 of R.A. No. 6657 and
Administrative Order No. 12, Series of 1994;
c.Property determined to be exempted from CARP coverage pursuant to
Department of Justice Opinion Nos. 44 and 181; or

d.Where a Presidential Proclamation has been issued declaring the


subject property for certain uses other than agricultural. (Annex
"F", Manifestation dated July 23, 1999)
The properties subject of this Petition are covered by the first, third, and fourth categories
of the Administrative Order. The DAR has disregarded its own issuances which

implement the law.


To make the picture clearer, I would like to summarize the law, regulations, ordinances,
and official acts which show beyond question that the disputed property is nonagricultural, namely:
(a)The Law. Proclamation 1520 dated November 20, 1975 is part of the
law of the land. It declares the area in and around Nasugbu, Batangas, as
a Tourist Zone. It has not been repealed, and has in fact been used by
DAR to justify conversion of other contiguous and nearby properties of
other parties.
(b)Ordinances of Local Governments. Zoning ordinance of the
Sangguniang Bayan of Nasugbu, affirmed by the Sangguniang
Panlalawigan of Batangas, expressly defines the property as tourist, not
agricultural. The power to classify its territory is given by law to the
local governments.
(c)Certification of the Department of Agriculture that the property is not
suitable and viable for agriculture. The factual nature of the land, its
marginal productivity and non-economic feasibility for cultivation, are
described in detail.
(d)Acts of DAR itself which approved conversion of contiguous or
adjacent land into the Batulao Resorts Complex. DAR described at
length the non-agricultural nature of Batulao and of portion of the
disputed property, particularly Hacienda Caylaway.
(e)DAR Circulars and Regulations. DAR Administrative Order No. 6,
Series of 1994 subscribes to the Department of Justice opinion that the
lands classified as non-agricultural before the CARP Law, June 15,
1988, are exempt from CARP. DAR Order dated January 22, 1991 led to
the Batulao Tourist Area. DAR Order in Case No. H-9999-050-97, May
17, 1999, exempted 13.5 hectares of Caylaway, similarly situated and of
the same nature as Batulao, from coverage. DAR Administrative Order
No. 3, Series of 1996, if followed, would clearly exclude subject
property from coverage.
As earlier shown, DAR has, in this case, violated its own circulars, rules and regulations.
In addition to the DAR circulars and orders which DAR itself has not observed, the
petitioner has submitted a municipal map of Nasugbu, Batangas (Annex "E",
Manifestation dated July 23, 1999). The geographical location of Palico, Banilad, and
Caylaway in relation to the GDFI property, now Batulao Tourist Resort, shows that the
properties subject of this case are equally, if not more so, appropriate for conversion as

the GDFI resort.


Petitioner's application for the conversion of its lands from agricultural to nonagricultural 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. cdll
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 can not 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, were 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:
"3.2And, 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 bases 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:


"2.9The 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. cdasia
"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 nonagricultural 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, Banila 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. cda
Footnotes
1.Article II, Section 1, Proclamation No. 3.
2.Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform,
175 SCRA 343, 366 [1989].
3.Annex "2" to Comment, Rollo, p. 309.
4.Id.
5.Annex "3" to Comment, Rollo, pp. 310-314.
6.Annex "4" to Comment, Rollo, pp. 315-315C. Unlike Annexes "3" and "5," the list of
actual occupants was not attached to the MARO Report.

7.Annex "5" to Comment, Rollo, pp. 316-316E.


8.Annex "7" to Comment, Rollo, p. 317.
9.Annexes "7" and "8" to Comment, Rollo, pp. 317, 319.
10.Annex "1" to Comment, Rollo, p. 308.
11.Id.
12.Annexes "9," "10" and "11" to Comment, Rollo, pp. 320-322.
13.Annexes "K" and "N" to Petition, Rollo, pp. 211-212, 215.
14.Petition, p. 20, Rollo, p. 30.
15.Annexes "16, "17," "18," and "19" to Comment, Rollo, pp. 327-330.
16.Annex "20" to Comment, Rollo, p. 331.
17.Annex "30" to Comment, Rollo, p. 360.
18.Id.
19.Annex "29" to Comment, Rollo, p. 359.
20.Annex "23" to Comment, Rollo, pp. 337-344.
21.Annex "24" to Comment, Rollo, pp. 346-354.
22.Minutes of the Conference/Meeting, Annex "27" to Comment, Rollo, p. 357.
23.Annex "26" to Comment, Rollo, p. 356.
24.Annex "25" to Comment, Rollo, p. 355.
25.Annexes "21" and "22" to Comment, Rollo, pp. 332, 333.
26.Id.
27.Annex "34" to Comment, Rollo, p. 364.
28.Annex "35" to Comment, Rollo, p. 365.
29.Annexes "37" and "38" to Comment, Rollo, pp. 367-368.

30.Annexes "42" and "43" to Comment, Rollo, pp. 372-374. In its Comment before this
Court, respondent DAR states that valuation of the land under TCT No. T44662 had not been completed, while the land under TCT No. T-44665 was not
distributed due to errors in the qualifications of the farmer beneficiaries
Comment, p. 16, Rollo, p. 587.
31.Id.
32.Annexes "44" and "45" to Comment, Rollo, pp. 374, 375.
33.Annexes "46" and "47" to Comment, Rollo, pp. 376, 377.
34.Annex "S" to Petition, Rollo, pp. 223-224.
35.Petition, p. 24, Rollo, p. 34.
36Annexes "K" and "N" to Petition, Rollo, pp. 211-212, 215.
37.Annex "V" to Petition, Rollo, pp. 229-230.
38.Petition, p. 27, Rollo, p. 37.
39.The CA decision was penned by Justice Gloria C. Paras and concurred in by Justices
Serafin Guingona and Eubulo Verzola.
40.The Resolution was penned by Justice Paras and concurred in by Justices Jainal
Rasul (vice J. Guingona who retired) and Portia Hormachuelos. Justice Verzola
wrote a dissenting opinion which Justice Delilah Magtolis joined.
41.Petition, pp. 28-99, Rollo, pp. 38-39.
42.Corona v. Court of Appeals, 214 SCRA 378, 393 [1992]; Sunville Timber Products,
Inc. v. Abad, 206 SCRA 482, 487 [1992]; Quisumbing v. Gumban, 193 SCRA
520, 523-524 [1991].
43.Section 24, R.A. 6657.
44.Association of Small Landowners of the Philippines v. DAR Secretary, 175 SCRA
343, 391 [1989].
45.Land Bank of the Philippines v. Court of Appeals, 249 SCRA 149, 157 [1995].
46.Prefatory Statement, DAR Administrative Order No. 12, Series of 1989.
47.Now repealed by Administrative Order No. 17, Series of 1989.

48.Id., at 174-175.
49.Id., at 175-177.
50.Association of Small Landowners in the Philippines v. Secretary of Agrarian
Reform, 175 SCRA 343, 373-374 [1989].
51.Id.
52.Section 1, Article III, 1987 Constitution.
53.Development Bank of the Philippines v. Court of Appeals, 262 SCRA 245, 253
[1996].
54.Prior to DAR A.O. No. 9, Series of 1990, VOS transactions were governed by A.O.
No. 3, Series of 1989 and A.O. No. 19, Series of 1989 while CA transactions
were governed by A.O. No. 12, Series of 1989.
55.The DENR's participation was added by DAR A.O. No. 9, Series of 1990.
56.The Department of Agriculture became part of the field investigation team. Under
A.O. No. 9, Series of 1990, a representative of the DA was merely invited to
attend the conference or public hearing.
57.Annex "2" to Comment, Rollo, p. 309.
58.Id.
59.Annex "27" to Comment, Rollo, p. 357.
60.Comment, p. 16, Rollo, p. 587.
61.Petition, p. 5, Rollo, p. 15.
62.R. Martin, Civil Procedure, p. 461 [1989].
63.Delta Motors Sales Corp. vs. Mangosing, 70 SCRA 598, 603 [1976].
64.Lee v. Court of Appeals, 205 SCRA 752, 765 [1992]; G & G Trading Corp. v. Court
of Appeals, 158 SCRA 466, 468 [1988]; Villa Rey Transit, Inc. v. Far East
Motor Corp., 81 SCRA 298, 303 [1978].
65.Delta Motors Sales Corp. vs. Mangosing, supra, at 603; Rebollido v. Court of
Appeals, 170 SCRA 800, 809-810, [1989].
66.See Notice of Acquisition for Hacienda Palico, Annex "1" to Comment, Rollo, p.

308; see also MARO Investigation Reports, Annexes "3", "4", "5" to
Respondent's Comment, Rollo, pp. 310, 315, 316; Annexes "6", "7", "8" to
Respondent's Comment, Rollo, pp. 317-319.
67.See Notices of Acquisition for Hacienda Banilad, Annexes "21" and "22" to
Comment, Rollo, pp. 332, 333.
68.See Notice of Acquisition for Hacienda Palico, Annex "1" to Comment, Rollo, p.
308; Notices of Acquisition for Hacienda Banilad, Annexes "21" and "22" to
Comment, Rollo, pp. 332, 333.
69.Paragraph 5 (b), Part IV-B, A.O. 9, Series of 1990.
70.Rejoinder of Respondents, pp. 3-4, Rollo, pp. 434-435.
71.Annexes "12" to "15" to Respondents' Comment, Rollo, pp. 361-363; Annexes "31"
to "33" to Respondents' Comment, Rollo, pp. 324-326.
72.Petition, p. 23, Rollo, p. 33.
73.VOS transactions were later governed by A.O. No. 9, Series of 1990, and A.O. No.
1, Series of 1993 both also covering lands subject to Compulsory
Acquisition.
74.Section 5, E.O. 229.
75.Annexes "42" and "43" to Comment, Rollo, pp. 372-374.
76.Sur-rejoinder, p. 3.
77.Annexes "39" and "40" to Comment, Rollo, pp. 369-370.
78.Petition, p. 37, Rollo, p. 47.
79.Petition, pp. 38-39, Rollo, pp. 48-49; Supplemental Manifestation, p. 3.
80.Petition, p. 25, Rollo, p. 35; Annex "U" to the Petition, Rollo, p. 228.
81.Annex "E" to Petition, Rollo, p. 124.
82.Attached to Annex "E," Rollo, pp. 125-200.
83.Id.
84.Annex "F" to Petition, Rollo, p. 201.

85.Manifestation, pp. 3-4; Supplemental Manifestation, p. 4.


86.Manifestation, p. 4; Supplemental Manifestation, p. 5.
87.Part II, DAR A.O. No. 7, Series of 1997.
88.Prefatory Statement, DAR A.O. No. 7, Series of 1997.
89.Part III, E, F, DAR A.O. No. 7, Series of 1997.
90.Par. 3, C. Part VIII; Part XIV, DAR A.O. No. 7, Series of 1997.
91.First Lepanto Ceramics, Inc. v. Court of Appeals, 253 SCRA 552, 558 [1996];
Machete v. Court of Appeals, 250 SCRA 176, 182 [1995]; Vidad v. Regional
Trial Court of Negros Oriental, 227 SCRA 271, 276 [1990].
92.Motion for Intervention, pp. 1-5, Rollo, pp. 452-456.
93.Id.

3. EN BANC
G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,


LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL
BANKING CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM;
ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA,
RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA, Respondents.
DECISION

VELASCO, JR., J.:


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

tenancy.11 While touted as "revolutionary," the scope of the agrarian reform


program PD 27 enunciated covered only tenanted, privately-owned rice and corn
lands.12
Then came the revolutionary government of then President Corazon C. Aquino
and the drafting and eventual ratification of the 1987 Constitution. Its provisions
foreshadowed the establishment of a legal framework for the formulation of an
expansive approach to land reform, affecting all agricultural lands and covering
both tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in the
Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its
title14 indicates, the mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the highest policy-making body
that formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of
1988, also known as CARL or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and distribution. As to be expected, RA
6657 met stiff opposition, its validity or some of its provisions challenged at every
possible turn.Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform 15 stated the observation that the assault was
inevitable, the CARP being an untried and untested project, "an experiment
[even], as all life is an experiment," the Court said, borrowing from Justice
Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and
seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 200634-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as
the implementing Notice of Coverage dated January 2, 2006 (Notice of
Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a
6,443-hectare mixed agricultural-industrial-residential expanse straddling several
municipalities of Tarlac and owned by Compaia General de Tabacos de
Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell

Hacienda Luisita as well as their controlling interest in the sugar mill within the
hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction.
The Tarlac Development Corporation (Tadeco), then owned and/or controlled by
the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco
undertook to pay the purchase price for Hacienda Luisita in pesos, while that for
the controlling interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine government,
through the then Central Bank of the Philippines, assisted the buyer to obtain a
dollar loan from a US bank.20 Also, the Government Service Insurance System
(GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million
loan in favor of Tadeco to pay the peso price component of the sale. One of the
conditions contained in the approving GSIS Resolution No. 3203, as later
amended by Resolution No. 356, Series of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and
whenever conditions should exist warranting such action under the provisions of
the Land Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacaleras interest in CAT.22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state that on May 7, 1980, the
martial law administration filed a suit before the Manila Regional Trial Court
(RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then
Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform
[DAR]) so that the land can be distributed to farmers at cost. Responding,
Tadeco or its owners alleged that Hacienda Luisita does not have tenants,
besides which sugar landsof which the hacienda consistedare not covered
by existing agrarian reform legislations. As perceived then, the government
commenced the case against Tadeco as a political message to the family of the
late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw
the governments case against Tadeco, et al. By Resolution of May 18, 1988, the
CA dismissed the case the Marcos government initially instituted and won
against Tadeco, et al. The dismissal action was, however, made subject to the
obtention by Tadeco of the PARCs approval of a stock distribution plan (SDP)

that must initially be implemented after such approval shall have been
secured.24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x
governmental agencies concerned in moving for the dismissal of the case
subject, however, to the following conditions embodied in the letter dated April 8,
1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for
failure to comply with all the requirements for corporate landowners set
forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails
to initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without
prejudice, and should be revived if any of the conditions as above set forth is not
duly complied with by the TADECO.25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative
to the actual land transfer scheme of CARP, to give qualified beneficiaries the
right to purchase shares of stocks of the corporation under a stock ownership
arrangement and/or land-to-share ratio.
Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of which the
corporate landowner can comply with CARP, but subject to well-defined
conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted
to agricultural activities, bears in relation to the companys total assets,
under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital
stock, equity or participation in favor of their workers or other qualified

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

to qualified and registered beneficiaries of the CARP, and the remaining


250,000,000 to any stockholder of the corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco
contributed to the capital stock of HLI, as appraised and approved by the SEC,
have an aggregate value of PhP 590,554,220, or after deducting the total
liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP
1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of the
proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement
(MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs34 and
attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis
and mechanics of the SDP, which would eventually be submitted to the PARC for
approval. In the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00)
transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that,
under the law, is the proportion of the outstanding capital stock of the
SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with
a par value of P1.00 per share, that has to be distributed to the THIRD
PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof
being P118,391,976.85 or118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the permanent
and seasonal employees, who are regularly or periodically employed by
the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND
PARTY shall arrange with the FIRST PARTY [Tadeco] the acquisition
and distribution to the THIRD PARTY on the basis of number of days
worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY that are presently
owned and held by the FIRST PARTY, until such time as the entire block
of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of
the [SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three (3%)

of the total gross sales from the production of the agricultural land,
whether it be in the form of cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution
will have been acquired from the FIRST PARTY and distributed to the
THIRD PARTY, FIRST PARTY shall execute at the beginning of each
fiscal year an irrevocable proxy, valid and effective for one (1) year, in
favor of the farmworkers appearing as shareholders of the SECOND
PARTY at the start of said year which will empower the THIRD PARTY or
their representative to vote in stockholders and board of directors
meetings of the SECOND PARTY convened during the year the entire
33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of seats
in the board of directors of the SECOND PARTY that the whole 33.296%
of the shares subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time
subdivide and allocate for free and without charge among the qualified
family-beneficiaries residing in the place where the agricultural land is
situated, residential or homelots of not more than 240 sq.m. each, with
each family-beneficiary being assured of receiving and owning a homelot
in the barangay where it actually resides on the date of the execution of
this Agreement.
7. This Agreement is entered into by the parties in the spirit of the
(C.A.R.P.) of the government and with the supervision of the [DAR], with
the end in view of improving the lot of the qualified beneficiaries of the
[SDP] and obtaining for them greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are:
(a) production-sharing equivalent to three percent (3%) of gross sales from the
production of the agricultural land payable to the FWBs in cash dividends or
incentive bonus; and (b) distribution of free homelots of not more than 240
square meters each to family-beneficiaries. The production-sharing, as the SDP
indicated, is payable "irrespective of whether [HLI] makes money or not,"
implying that the benefits do not partake the nature of dividends, as the term is
ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period material, the assigned
value of the agricultural land in the hacienda was PhP 196.63 million, while the
total assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million,
Tadeco/HLI would admit that the ratio of the land-to-shares of stock corresponds
to 33.3% of the outstanding capital stock of the HLI equivalent to 118,391,976.85
shares of stock with a par value of PhP 1/share.

Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock
Distribution under C.A.R.P.,"35which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989,
5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI.36 One
hundred thirty-two (132) chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec.
Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S.
Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be
revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall
ensure that there will be no dilution in the shares of stocks of individual
[FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution
of the percentage shareholdings of the [FWBs], i.e., that the 33%
shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the
[MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for
determining the actual number of seats to be allocated for the [FWBs] in
the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of
homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly
provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both
the SDP and MOA.39 Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989,
approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master
list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:

(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe


benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross
produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500
hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and no
interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657,
providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award,
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR, upon
application of the beneficiary or the landowner, with due notice to the affected
parties, and subject to existing laws, may authorize the reclassification, or
conversion of the land and its disposition: Provided, That the beneficiary shall
have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs,
including respondent Rene Galang, and Jose Julio Suniga, as evidenced by the
Manifesto of Support they signed and which was submitted to the DAR.44After
the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the
application on August 14, 1996, per DAR Conversion Order No. 030601074-764(95), Series of 1996,45 subject to payment of three percent (3%) of the gross
selling price to the FWBs and to HLIs continued compliance with its undertakings
under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares
of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the

converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title


(TCT) No. 28791047 was canceled and TCT No. 29209148 was issued in the
name of Centennary. HLI transferred the remaining 200 hectares covered by
TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate
transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP
250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000
divided into 12,100,000 shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto
G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial
Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the
purpose of developing an industrial complex.52 As a result, Centennarys TCT
No. 292091 was canceled to be replaced by TCT No. 31098653 in the name of
LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for
which two (2) separate titles were issued in the name of LIPCO, specifically: (a)
TCT No. 36580054 and (b) TCT No. 365801,55 covering 180 and four hectares,
respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal
Commercial Banking Corporation (RCBC) by way of dacion en pago in payment
of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled
and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired
by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX)
complex. In absolute terms, 4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both undated,
reached the DAR in the latter part of 2003. In the first, denominated as
Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory
Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI
had failed to give them their dividends and the one percent (1%) share in gross
sales, as well as the thirty-three percent (33%) share in the proceeds of the sale
of the converted 500 hectares of land. They further claimed that their lives have
not improved contrary to the promise and rationale for the adoption of the SDOA.
They also cited violations by HLI of the SDOAs terms.58 They prayed for a
renegotiation of the SDOA, or, in the alternative, its revocation.

Revocation and nullification of the SDOA and the distribution of the lands in the
hacienda were the call in the second petition, styled as Petisyon (Petition).59 The
Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten
name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as
"Sec-Gen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of
AMBALAs members purportedly composing about 80% of the 5,339 FWBs of
Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group. On
the other hand, HLIs answer62 to the AMBALA petition was contained in its letter
dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating
to the SDP of HLI. Among other duties, the Special Task Force was mandated to
review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2
relative to HLIs SDP; evaluate HLIs compliance reports; evaluate the merits of
the petitions for the revocation of the SDP; conduct ocular inspections or field
investigations; and recommend appropriate remedial measures for approval of
the Secretary.63
After investigation and evaluation, the Special Task Force submitted its "Terminal
Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP)
Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not
complied with its obligations under RA 6657 despite the implementation of the
SDP.65 The Terminal Report and the Special Task Forces recommendations
were adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive
Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of
Hacienda Luisita through the compulsory acquisition scheme. Following review,
the PARC Validation Committee favorably endorsed the DAR Secretarys
recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-3201, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY
RESOLVED, to approve and confirm the recommendation of the PARC
Executive Committee adopting in toto the report of the PARC ExCom Validation
Committee affirming the recommendation of the DAR to recall/revoke the SDO
plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO
plan be forthwith placed under the compulsory coverage or mandated land
acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 200569 for certified copies of said
documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day,
the DAR Tarlac provincial office issued the Notice of Coverage71 which HLI
received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration.72 As HLI
later rued, it "can not know from the above-quoted resolution the facts and the
law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a
temporary restraining order,75enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion).77 In it,
Mallari stated that he has broken away from AMBALA with other AMBALA exmembers 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-MallariSupervisory Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
Supervisory Group, represented by Suniga and Andaya; and the United Luisita
Workers Union, represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise Agreement (English and
Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an
amicable settlement, issued a Resolution84 creating a Mediation Panel composed
of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former
CA Justices Hector Hofilea and Teresita Dy-Liacco Flores, as members.
Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010,
were conducted. Despite persevering and painstaking efforts on the part of the
panel, mediation had to be discontinued when no acceptable agreement could be
reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY
PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY
TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION,


POWER AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN
(16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS
IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF
ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST
DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW
AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND
OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER
THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND
1382 x x x ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE
INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR
RESCIND THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND
WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-ININTEREST 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, PETITIONERINTERVENOR RCBC CANNOT BE PREJUDICED BY A
SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.

II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT
AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE
PROCESS AS AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over
certain portions of the converted property, and, hence, would ascribe on PARC
the commission of grave abuse of discretion when it included those portions in
the notice of coverage. And apart from raising issues identical with those of HLI,
such as but not limited to the absence of valid grounds to warrant the rescission
and/or revocation of the SDP, LIPCO would allege that the assailed resolution
and the notice of coverage were issued without affording it the right to due
process as an innocent purchaser for value. The government, LIPCO also
argues, is estopped from recovering properties which have since passed to
innocent parties.
Simply formulated, the principal determinative issues tendered in the main
petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657;
(3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity or
propriety of such recall or revocatory action; and (5) corollary to (4), the validity of
the terms and conditions of the SDP, as embodied in the SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving on
the more serious challenges bearing on the validity of PARCs assailed issuance
and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene
Galang, who filed the revocatory petitions before the DAR. As HLI would have it,
Galang, the self-styled head of AMBALA, gained HLI employment in June 1990
and, thus, could not have been a party to the SDOA executed a year earlier.85 As
regards the Supervisory Group, HLI alleges that supervisors are not regular
farmworkers, but the company nonetheless considered them FWBs under the
SDOA as a mere concession to enable them to enjoy the same benefits given
qualified regular farmworkers. However, if the SDOA would be canceled and land
distribution effected, so HLI claims, citing Fortich v. Corona,86 the supervisors

would be excluded from receiving lands as farmworkers other than the regular
farmworkers who are merely entitled to the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the
farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by
[HLI]."88 Galang, per HLIs own admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the definition of a real party-ininterest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to
be benefited or injured by the judgment in the suit or is the party entitled to the
avails of the suit.
The same holds true with respect to the Supervisory Group whose members
were admittedly employed by HLI and whose names and signatures even
appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP,
Suniga and the other 61 supervisors are certainly parties who would benefit or be
prejudiced by the judgment recalling the SDP or replacing it with some other
modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular
farmworkers, but are in the category of "other farmworkers" mentioned in Sec. 4,
Article XIII of the Constitution,89 thus only entitled to a share of the fruits of the
land, as indeed Fortich teaches, this does not detract from the fact that they are
still identified as being among the "SDP qualified beneficiaries." As such, they
are, thus, entitled to bring an action upon the SDP.90 At any rate, the following
admission made by Atty. Gener Asuncion, counsel of HLI, during the oral
arguments should put to rest any lingering doubt as to the status of protesters
Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the
qualified farmer beneficiaries of Hacienda Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question
refers to the complaints of protest initiated before the DAR and the real party in
interest there be considered as possessed by the farmer beneficiaries who
initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly
allowed to represent themselves, their fellow farmers or their organizations in any
proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
xxxx

Responsible farmer leaders shall be allowed to represent themselves, their


fellow farmers or their organizations in any proceedings before the DAR:
Provided, however, that when there are two or more representatives for any
individual or group, the representatives should choose only one among
themselves to represent such party or group before any DAR proceedings.
(Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are
contextually real parties-in-interest allowed by law to file a petition before the
DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for as
records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry
the usual authorization of the individuals in whose behalf it was supposed to
have been instituted. To date, such authorization document, which would
logically include a list of the names of the authorizing FWBs, has yet to be
submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains
that PARC is without authority to revoke an SDP, for neither RA 6657 nor EO
229 expressly vests PARC with such authority. While, as HLI argued, EO 229
empowers PARC to approve the plan for stock distribution in appropriate cases,
the empowerment only includes the power to disapprove, but not to recall its
previous approval of the SDP after it has been implemented by the parties.93 To
HLI, it is the court which has jurisdiction and authority to order the revocation or
rescission of the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve
the plan for stock distribution of the corporate landowner belongs to PARC.
However, contrary to petitioner HLIs posture, PARC also has the power to
revoke the SDP which it previously approved. It may be, as urged, that RA 6657
or other executive issuances on agrarian reform do not explicitly vest the PARC
with the power to revoke/recall an approved SDP. Such power or authority,
however, is deemed possessed by PARC under the principle of necessary
implication, a basic postulate that what is implied in a statute is as much a part of
it as that which is expressed.94
We have explained that "every statute is understood, by implication, to contain all
such provisions as may be necessary to effectuate its object and purpose, or to
make effective rights, powers, privileges or jurisdiction which it grants, including
all such collateral and subsidiary consequences as may be fairly and logically

inferred from its terms."95 Further, "every statutory grant of power, right or
privilege is deemed to include all incidental power, right or privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited by
the authority to grant the license, from which it is derived in the first place. Thus,
if the FDA grants a license upon its finding that the applicant drug store has
complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA may
revoke the said license. By the same token, having granted the permit upon his
ascertainment that the conditions thereof as applied x x x have been complied
with, it is only for the violation of such conditions that the mayor may revoke the
said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke or
recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power
would reduce it into a toothless agency of CARP, because the very same agency
tasked to ensure compliance by the corporate landowner with the approved SDP
would be without authority to impose sanctions for non-compliance with it.98 With
the view We take of the case, only PARC can effect such revocation. The DAR
Secretary, by his own authority as such, cannot plausibly do so, as the
acceptance and/or approval of the SDP sought to be taken back or undone is the
act of PARC whose official composition includes, no less, the President as chair,
the DAR Secretary as vice-chair, and at least eleven (11) other department
heads.99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP has
been implemented would impair the contractual obligations created under the
SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts
and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the non-impairment
guarantee. There is, in that instance, no impingement of the impairment clause,
the non-impairment protection being applicable only to laws that derogate prior
acts or contracts by enlarging, abridging or in any manner changing the intention

of the parties. Impairment, in fine, obtains if a subsequent law changes the terms
of a contract between the parties, imposes new conditions, dispenses with those
agreed upon or withdraws existing remedies for the enforcement of the rights of
the parties.100 Necessarily, the constitutional proscription would not apply to laws
already in effect at the time of contract execution, as in the case of RA 6657, in
relation to DAO 10, vis--vis HLIs SDOA. As held in Serrano v. Gallant Maritime
Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with
the general principle that laws newly enacted have only a prospective operation,
and cannot affect acts or contracts already perfected; however, as to laws
already in existence, their provisions are read into contracts and deemed a part
thereof. Thus, the non-impairment clause under Section 10, Article II [of the
Constitution] is limited in application to laws about to be enacted that would in
any way derogate from existing acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing that
"[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as
such, a breach of its terms and conditions is not a PARC administrative matter,
but one that gives rise to a cause of action cognizable by regular courts.102 This
contention has little to commend itself. The SDOA is a special contract imbued
with public interest, entered into and crafted pursuant to the provisions of RA
6657. It embodies the SDP, which requires for its validity, or at least its
enforceability, PARCs approval. And the fact that the certificate of
compliance103to be issued by agrarian authorities upon completion of the
distribution of stocksis revocable by the same issuing authority supports the
idea that everything about the implementation of the SDP is, at the first instance,
subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations
and remedies. The Code, it adds, should be the applicable law on the disposition
of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to
the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply with
RA 6657, which the OSG aptly described as the "mother law" of the SDOA and
the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of
CARP by invoking exclusive applicability of the Corporation Code under the
guise of being a corporate entity.

Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the
parties arising from the SDP should not be made to supplant or circumvent the
agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other hand,
RA 6657 is the special law on agrarian reform. As between a general and special
law, the latter shall prevailgeneralia specialibus non derogant.105 Besides, the
present impasse between HLI and the private respondents is not an 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 HLIs compliance with RA 6657. Evidently, RA
6657 should be the applicable law to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita
under the coverage of CARP and the eventual distribution of the land to the
FWBs would amount to a disposition of all or practically all of the corporate
assets of HLI. HLI would add that this contingency, if ever it comes to pass,
requires the applicability of the Corporation Code provisions on corporate
dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would
apply insofar as the winding up of HLIs affairs or liquidation of the assets is
concerned. However, the mere inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the lands eventual distribution to the
FWBs will not, without more, automatically trigger the dissolution of HLI. As
stated in the SDOA itself, the percentage of the value of the agricultural land of
Hacienda Luisita in relation to the total assets transferred and conveyed by
Tadeco to HLI comprises only 33.296%, following this equation: value of the
agricultural lands divided by total corporate assets. By no stretch of imagination
would said percentage amount to a disposition of all or practically all of HLIs
corporate assets should compulsory land acquisition and distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP sixteen
(16) years after its execution pursuant to Sec. 31 of RA 6657 for the reasons set
forth in the Terminal Report of the Special Task Force, as endorsed by PARC
Excom. But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the
corporation, as a mode of CARP compliance, to resort to stock distribution, an

arrangement which, to FARM, impairs the fundamental right of farmers and


farmworkers under Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine, there is
stock certificate ownership of the farmers or farmworkers instead of them owning
the land, as envisaged in the Constitution. For FARM, this modality of distribution
is an anomaly to be annulled for being inconsistent with the basic concept of
agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in this
regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian
reform." The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and
necessarily its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and
pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are first
met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the case.108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed
of a small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time
thereafter and why its members received benefits from the SDP without so much
of a protest. It was only on December 4, 2003 or 14 years after approval of the
SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan
and approving resolution were sought to be revoked, but not, to stress, by FARM
or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA
petition did NOT question the constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the subsequent implementation
of the SDP. Even the public respondents, as represented by the Solicitor
General, did not question the constitutionality of the provision. On the other hand,

FARM, whose 27 members formerly belonged to AMBALA, raised the


constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental
Comment with the Court. Thus, it took FARM some eighteen (18) years from
November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA
6657 which is quite too late in the day. The FARM members slept on their rights
and even accepted benefits from the SDP with nary a complaint on the alleged
unconstitutionality of Sec. 31 upon which the benefits were derived. The Court
cannot now be goaded into resolving a constitutional issue that FARM failed to
assail after the lapse of a long period of time and the occurrence of numerous
events and activities which resulted from the application of an alleged
unconstitutional legal provision.
It has been emphasized in a number of cases that the question of
constitutionality will not be passed upon by the Court unless it is properly raised
and presented in an appropriate case at the first opportunity.109 FARM is,
therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be raised
at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be the
very lis mota of the case does not likewise obtain. The lis mota aspect is not
present, the constitutional issue tendered not being critical to the resolution of the
case. The unyielding rule has been to avoid, whenever plausible, an issue
assailing the constitutionality of a statute or governmental act.110 If some other
grounds exist by which judgment can be made without touching the
constitutionality of a law, such recourse is favored.111 Garcia v. Executive
Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake
judicial review means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed of
on some other ground, such as the application of the statute or the general law.
The petitioner must be able to show that the case cannot be legally resolved
unless the constitutional question raised is determined. This requirement is
based on the rule that every law has in its favor the presumption of
constitutionality; to justify its nullification, there must be a clear and unequivocal
breach of the Constitution, and not one that is doubtful, speculative, or
argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by HLI with the conditions of
the SDP to support a plea for its revocation. And before the Court, the lis mota is
whether or not PARC acted in grave abuse of discretion when it ordered the
recall of the SDP for such non-compliance and the fact that the SDP, as couched
and implemented, offends certain constitutional and statutory provisions. To be

sure, any of these key issues may be resolved without plunging into the
constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the
underlying petitions of AMBALA, et al., it is not the said section per se that is
invalid, but rather it is the alleged application of the said provision in the SDP that
is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec. 7
of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock
distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700
provides: "[T]hat after June 30, 2009, the modes of acquisition shall
be limited to voluntary offer to sell and compulsory acquisition." Thus, for all
intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is
no longer an available option under existing law. The question of whether or not it
is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic114 provided the following requisites
are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved; third,
when the constitutional issue raised requires formulation of controlling principles
to guide the bench, the bar, and the public; fourth, the case is capable of
repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article
XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the
right of the farmers and regular farmworkers, who are landless, to OWN directly
or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress may
prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In determining
retention limits, the State shall respect the right of small landowners. The State
shall further provide incentives for voluntary land-sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular
farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE
LANDS THEY TILL. The basic law allows two (2) modes of land distribution
direct and indirect ownership. Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted. Indirect transfer through

collective ownership of the agricultural land is the alternative to direct ownership


of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY
authorizes collective ownership by farmers. No language can be found in the
1987 Constitution that disqualifies or prohibits corporations or cooperatives of
farmers from being the legal entity through which collective ownership can be
exercised. The word "collective" is defined as "indicating a number of persons or
things considered as constituting one group or aggregate,"115 while "collectively"
is defined as "in a collective sense or manner; in a mass or body."116 By using
the word "collectively," the Constitution allows for indirect ownership of land and
not just outright agricultural land transfer. This is in recognition of the fact that
land reform may become successful even if it is done through the medium of
juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29
allows workers cooperatives or associations to collectively own the land, while
the second paragraph of Sec. 31 allows corporations or associations to own
agricultural land with the farmers becoming stockholders or members. Said
provisions read:
SEC. 29. Farms owned or operated by corporations or other business
associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual workerbeneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall
be owned collectively by the worker beneficiaries who shall form a workers
cooperative or association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are distributed be
reduced. The same principle shall be applied to associations, with respect to their
equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated from

individual farmers, are authorized vehicles for the collective ownership of


agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that
land can be owned COLLECTIVELY by farmers. Even the framers of the l987
Constitution are in unison with respect to the two (2) modes of ownership of
agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the
principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal
ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers
cooperatives, do the farmers own specific areas of land where they only unite in
their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems
involved: the "moshave" type of agriculture and the "kibbutz." So are both
contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng mga
magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila
itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively the
lands they till," is this land for the tillers rather than land for the landless? Before,
we used to hear "land for the landless," but now the slogan is "land for the tillers."
Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig
sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung

saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin
naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid,
katulad ng sitwasyon sa Negros.117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land
"sama-sama" or collectively. Thus, the main requisite for collective ownership of
land is collective or group work by farmers of the agricultural land. Irrespective of
whether the landowner is a cooperative, association or corporation composed of
farmers, as long as concerted group work by the farmers on the land is present,
then it falls within the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on
the part of the State to pursue, by law, an agrarian reform program founded on
the policy of land for the landless, but subject to such priorities as Congress may
prescribe, taking into account such abstract variable as "equity considerations."
The textual reference to a law and Congress necessarily implies that the above
constitutional provision is not self-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 States commitment to farmers and farmworkers to
advance their interests under the policy of social justice. The legislature, thru
Sec. 31 of RA 6657, has chosen a modality for collective ownership by which the
imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.

FARM contends that the farmers in the stock distribution scheme under Sec. 31
do not own the agricultural land but are merely given stock certificates. Thus, the
farmers lose control over the land to the board of directors and executive officials
of the corporation who actually manage the land. They conclude that such
arrangement runs counter to the mandate of the Constitution that any agrarian
reform must preserve the control over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly
own the land, still, the Corporation Code is clear that the FWB becomes a
stockholder who acquires an equitable interest in the assets of the corporation,
which include the agricultural lands. It was explained that the "equitable interest
of the shareholder in the property of the corporation is represented by the term
stock, and the extent of his interest is described by the term shares. The
expression shares of stock when qualified by words indicating number and
ownership expresses the extent of the owners interest in the corporate
property."119 A share of stock typifies an aliquot part of the corporations property,
or the right to share in its proceeds to that extent when distributed according to
law and equity and that its holder is not the owner of any part of the capital of the
corporation.120 However, the FWBs will ultimately own the agricultural lands
owned by the corporation when the corporation is eventually dissolved and
liquidated.
Anent the alleged loss of control of the farmers over the agricultural land
operated and managed by the corporation, a reading of the second paragraph of
Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries
have "the right to purchase such proportion of the capital stock of the corporation
that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets." The wording of the formula in the
computation of the number of shares that can be bought by the farmers does not
mean loss of control on the part of the farmers. It must be remembered that the
determination of the percentage of the capital stock that can be bought by the
farmers depends on the value of the agricultural land and the value of the total
assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657.
The policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR and
PARC to see to it the farmers should always own majority of the common shares
entitled to elect the members of the board of directors to ensure that the farmers
will have a clear majority in the board. Before the SDP is approved, strict scrutiny
of the proposed SDP must always be undertaken by the DAR and PARC, such
that the value of the agricultural land contributed to the corporation must always
be more than 50% of the total assets of the corporation to ensure that the
majority of the members of the board of directors are composed of the farmers.

The PARC composed of the President of the Philippines and cabinet secretaries
must see to it that control over the board of directors rests with the farmers by
rejecting the inclusion of non-agricultural assets which will yield the majority in
the board of directors to non-farmers. Any deviation, however, by PARC or DAR
from the correct application of the formula prescribed by the second paragraph of
Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather,
it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA
6657 does not trench on the constitutional policy of ensuring control by the
farmers.
A view has been advanced that there can be no agrarian reform unless there is
land distribution and that actual land distribution is the essential characteristic of
a constitutional agrarian reform program. On the contrary, there have been so
many instances where, despite actual land distribution, the implementation of
agrarian reform was still unsuccessful. As a matter of fact, this Court may take
judicial notice of cases where FWBs sold the awarded land even to non-qualified
persons and in violation of the prohibition period provided under the law. This
only proves to show that the mere fact that there is land distribution does not
guarantee a successful implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land
ownership where non-human juridical persons, such as corporations, were
prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater disadvantages
and difficulties than those who exercise ownership in a collective manner through
a cooperative or corporation. The former is too often left to his own devices when
faced with failing crops and bad weather, or compelled to obtain usurious loans
in order to purchase costly fertilizers or farming equipment. The experiences
learned from failed land reform activities in various parts of the country are lack
of financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers
of produce, lack of farm-to-market roads, among others. Thus, at the end of the
day, there is still no successful implementation of agrarian reform to speak of in
such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a
better position to secure funding and competently maintain the agri-business
than the individual farmer. While direct singular ownership over farmland does
offer advantages, such as the ability to make quick decisions unhampered by
interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement. Thus,
government must be flexible and creative in its mode of implementation to better
its chances of success. One such option is collective ownership through juridical
persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution, the
requirement that the instant case be capable of repetition yet evading review is

also wanting. It would be speculative for this Court to assume that the legislature
will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that a
law is the product of earnest studies by Congress to ensure that no constitutional
prescription or concept is infringed.121 Corollarily, courts will not pass upon
questions of wisdom, expediency and justice of legislation or its provisions.
Towards this end, all reasonable doubts should be resolved in favor of the
constitutionality of a law and the validity of the acts and processes taken
pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated in such a manner as to
leave no doubt in the mind of the Court. In other words, the grounds for nullity
must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA
6657.
The wisdom of Congress in allowing an SDP through a corporation as an
alternative mode of implementing agrarian reform is not for judicial determination.
Established jurisprudence tells us that it is not within the province of the Court to
inquire into the wisdom of the law, for, indeed, We are bound by words of the
statute.124
II.
The stage is now set for the determination of the propriety under the premises of
the revocation or recall of HLIs SDP. Or to be more precise, the inquiry should
be: whether or not PARC gravely abused its discretion in revoking or recalling the
subject SDP and placing the hacienda under CARPs compulsory acquisition and
distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31
of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives
of the FWBs have hardly improved and the promised increased income
has not materialized;

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
workedor the so-called "man days"is grossly onerous to the FWBs,
as HLI, in the guise of rotation, can unilaterally deny work to anyone. In
elaboration of this ground, PARCs Resolution No. 2006-34-01, denying
HLIs motion for reconsideration of Resolution No. 2005-32-01, stated that
the man days criterion worked to dilute the entitlement of the original
share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross
sales every year as production-sharing benefit on top of the workers
salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on
solid grounds set forth in the Terminal Report, a position shared by AMBALA,
which, in some pleadings, is represented by the same counsel as that appearing
for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of
the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And
training its sight on the resulting dilution of the equity of the FWBs appearing in
HLIs masterlist, FARM would state that the SDP, as couched and implemented,
spawned disparity when there should be none; parity when there should have
been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to
enhance the dignity and improve the quality of lives of the FWBs through greater
productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the

landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural development
and industrialization, and the establishment of owner cultivatorship of economicsized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard
to the rights of landowners to just compensation and to the ecological needs of
the nation, shall be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in
the case of other farm workers, to receive a share of the fruits thereof. To this
end, the State shall encourage the just distribution of all agricultural lands,
subject to the priorities and retention limits set forth in this Act, having taken into
account ecological, developmental, and equity considerations, and subject to the
payment of just compensation. The State shall respect the right of small
landowners and shall provide incentives for voluntary land-sharing. (Emphasis
supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity of agricultural
lands." Of note is the term "opportunity" which is defined as a favorable chance
or opening offered by circumstances.127 Considering this, by no stretch of
imagination can said provision be construed as a guarantee in improving the
lives of the FWBs. At best, it merely provides for a possibility or favorable chance
of uplifting the economic status of the FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA 6657
and DAO 10, a violation of which would justify discarding the stock distribution
option. Nothing in that option agreement, law or department order indicates
otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages
and higher benefits exclusive of free hospital and medical benefits to their
immediate family. And attached as Annex "G" to HLIs Memorandum is the
certified true report of the finance manager of Jose Cojuangco & Sons
Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC.
Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock
Option was Approved by PARC/CARP," detailing what HLI gave their workers
from 1989 to 2005. The sum total, as added up by the Court, yields the following

numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP
2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP
303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the
sale of the 500-hectare converted lands. While not included in the report, HLI
manifests having given the FWBs 3% of the PhP 80 million paid for the 80
hectares of land traversed by the SCTEX.128 On top of these, it is worth
remembering that the shares of stocks were given by HLI to the FWBs for free.
Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI
has not anyway earned profits through the years, it cannot be over-emphasized
that, as a matter of common business sense, no corporation could guarantee a
profitable run all the time. As has been suggested, one of the key features of an
SDP of a corporate landowner is the likelihood of the corporate vehicle not
earning, or, worse still, losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood
that the plan "would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to
have not, as it cannot, actually exact assurance of success on something that is
subject to the will of man, the forces of nature or the inherent risky nature of
business.131 Just like in actual land distribution, an SDP cannot guarantee, as
indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court
can take judicial notice of the fact that there were many instances wherein after a
farmworker beneficiary has been awarded with an agricultural land, he just
subsequently sells it and is eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its SDP
and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based,
infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without
relevance to the issue on the propriety of the assailed order revoking HLIs SDP,
for the paragraph deals with the transfer of agricultural lands to the government,
as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the

Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such


terms and conditions, consistent with this Act, as they may agree, subject to
confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide
as follows:
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted
to agricultural activities, bears in relation to the companys total assets,
under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital
stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the
same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be
void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of RA
6657 refers to as that "proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec.
31 of RA 6657. The stipulation reads:

1. The percentage of the value of the agricultural land of Hacienda Luisita


(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred
and conveyed to the SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that
has to be distributed to the THIRD PARTY under the stock distribution plan, the
said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs
other assets is PhP 393,924,220. The total value of HLIs assets is, therefore,
PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP
196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which
represents the stockholdings of the 6,296 original qualified farmworkerbeneficiaries (FWBs) in HLI. The total number of shares to be distributed to said
qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting
33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI
with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI
shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares.
These shares under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296
FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs
shall be assured of at least one (1) representative in the board of directors or in a
management or executive committee irrespective of the value of the equity of the
FWBs in HLI, the Court finds that the SDOA contained provisions making certain
the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have
been acquired from the FIRST PARTY and distributed to the THIRD PARTY,
FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the farmworkers appearing
as shareholders of the SECOND PARTY at the start of said year which will
empower the THIRD PARTY or their representative to vote in stockholders and
board of directors meetings of the SECOND PARTY convened during the year
the entire 33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of seats in the
board of directors of the SECOND PARTY that the whole 33.296% of the shares
subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of its
books by accountants chosen by the FWBs; hence, the assumption may be
made that there has been no violation of the statutory prescription under subparagraph (a) on the auditing of HLIs accounts.

Public respondents, however, submit that the distribution of the mandatory


minimum ratio of land-to-shares of stock, referring to the 118,391,976.85 shares
with par value of PhP 1 each, should have been made in full within two (2) years
from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said
law.133
Public respondents submission is palpably erroneous. We have closely
examined the last paragraph alluded to, with particular focus on the two-year
period mentioned, and nothing in it remotely supports the public respondents
posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land
of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which
the corporate landowner, to avoid land transfer as a mode of CARP coverage
under RA 6657, is to avail of the stock distribution option or to have the SDP
approved. The HLI secured approval of its SDP in November 1989, well within
the two-year period reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of
RA 6657 as well as the statutory issues, We shall now delve into what PARC and
respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda
Luisita unfragmented is also not among the imperative impositions by the SDP,
RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989
to the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and
the PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too
many words, the Report and the resolution view the conversion as an
infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation
of the corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability."
The PARC is wrong.

In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of
the stated criteria to guide PARC in deciding on whether or not to accept an
SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the
undertaking to keep the farm intact and unfragmented ad infinitum. And there is
logic to HLIs stated observation that the key phrase in the provision of Sec. 5(a)
is "viability of corporate operations": "[w]hat is thus required is not the agricultural
land remaining intact x x x but the viability of the corporate operations with its
agricultural land being intact and unfragmented. Corporate operation may be
viable even if the corporate agricultural land does not remain intact or
[un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisitas
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65
of RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when
the land ceases to be economically feasible and sound for agricultural purposes,
or the locality has become urbanized and the land will have a greater economic
value for residential, commercial or industrial purposes, the DAR upon
application of the beneficiary or landowner with due notice to the affected parties,
and subject to existing laws, may authorize the x x x conversion of the land and
its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the
gross production sales of the hacienda and pay dividends from profit, the entries
in its financial books tend to indicate compliance by HLI of the profit-sharing
equivalent to 3% of the gross sales from the production of the agricultural land on
top of (a) the salaries and wages due FWBs as employees of the company and
(b) the 3% of the gross selling price of the converted land and that portion used
for the SCTEX. A plausible evidence of compliance or non-compliance, as the
case may be, could be the books of account of HLI. Evidently, the cry of some
groups of not having received their share from the gross production sales has not
adequately been validated on the ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when
supported by substantial evidence and are accorded due respect and weight,
especially when they are affirmed by the CA.135 However, such rule is not
absolute. One such exception is when the findings of an administrative agency
are conclusions without citation of specific evidence on which they are
based,136 such as in this particular instance. As culled from its Terminal Report, it

would appear that the Special Task Force rejected HLIs claim of compliance on
the basis of this ratiocination:

The Task Force position: Though, allegedly, the Supervisory Group


receives the 3% gross production share and that others alleged that they
received 30 million pesos still others maintain that they have not received
anything yet. Item No. 4 of the MOA is clear and must be followed. There
is a distinction between the total gross sales from the production of the
land and the proceeds from the sale of the land. The former refers to the
fruits/yield of the agricultural land while the latter is the land itself. The
phrase "the beneficiaries are entitled every year to an amount
approximately equivalent to 3% would only be feasible if the subject is the
produce since there is at least one harvest per year, while such is not the
case in the sale of the agricultural land. This negates then the claim of HLI
that, all that the FWBs can be entitled to, if any, is only 3% of the purchase
price of the converted land.
Besides, the Conversion Order dated 14 August 1996 provides that "the
benefits, wages and the like, presently received by the FWBs shall not in
any way be reduced or adversely affected. Three percent of the gross
selling price of the sale of the converted land shall be awarded to the
beneficiaries of the SDO." The 3% gross production share then is different
from the 3% proceeds of the sale of the converted land and, with more
reason, the 33% share being claimed by the FWBs as part owners of the
Hacienda, should have been given the FWBs, as stockholders, and to
which they could have been entitled if only the land were acquired and
redistributed to them under the CARP.
xxxx

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

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

Despite the foregoing findings, the revocation of the approval of the SDP is not
without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding section
shall be provided with homelots and small farmlots for their family use, to be
taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual workerbeneficiaries.
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 itviolates two (2) provisions of DAO 10. Par. 3
of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
[HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution
to the THIRD PARTY [FWBs] on the basis of number of days worked and at no
cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock
of the SECOND PARTY that are presently owned and held by the FIRST
PARTY, until such time as the entire block of 118,391,976.85 shares shall have
been completely acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to
the FWBs, albeit not entailing a cash out from them, is contingent on the number
of "man days," that is, the number of days that the FWBs have worked during the
year. This formula deviates from Sec. 1 of DAO 10, which decrees the
distribution of equal number of shares to the FWBs as the minimum ratio of
shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in
Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries. This distribution plan in all
cases, shall be at least the minimum ratio for purposes of compliance with
Section 31 of R.A. No. 6657.

On top of the minimum ratio provided under Section 3 of this Implementing


Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter of
sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of stock
to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This
minimum ratio contemplates of that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the companys total assets."139 It is this set of shares of stock
which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the
distribution of an equal number of shares of stock of the same class and value,
with the same rights and features as all other shares, to each of the qualified
beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous
extra grant, meaning that this set or category constitutes an augmentation
share/s that the corporate landowner may give under an additional stock
distribution scheme, taking into account such variables as rank, seniority, salary,
position and like factors which the management, in the exercise of its sound
discretion, may deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved
HLIs SDP, HLI recognized 6,296individuals 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: Thats the only point I want to know x x x. Now, but they chose to
enter SDOA instead of placing the land under CARP. And for that reason those
who would have gotten their shares of the land actually gave up their rights to
this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own
the land because that way the government takes own [sic] the land and distribute
it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI
to the farmers at that time that numbered x x x those who signed five thousand
four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came
in from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your
Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would
be diluted, because the company has chosen to use the shares as reward
system for new workers who come in? It is not that the new workers, in effect,
become just workers of the corporation whose stockholders were already fixed.
The TADECO who has shares there about sixty six percent (66%) and the five

thousand four hundred ninety eight (5,498) farmers at the time of the SDOA?
Explain to me. Why, why will you x x x what right or where did you get that right
to use this shares, to water down the shares of those who should have been
benefited, and to use it as a reward system decided by the company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who
were qualified beneficiaries at the time of the approval of the SDP, suffered from
watering down of shares. As determined earlier, each original FWB is entitled to
18,804.32 HLI shares. The original FWBs got less than the guaranteed
18,804.32 HLI shares per beneficiary, because the acquisition and distribution of
the HLI shares were based on "man days" or "number of days worked" by the
FWB in a years time. As explained by HLI, a beneficiary needs to work for at
least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If
it falls below 37 days, the FWB, unfortunately, does not get any share at year
end. The number of HLI shares distributed varies depending on the number of
days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers
in addition to the original 6,296 FWBs, such that, as indicated in the Compliance
dated August 2, 2010 submitted by HLI to the Court, the total number of
farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which
include the original 6,296 FWBs, were given shares out of the 118,931,976.85
HLI shares representing the 33.296% of the total outstanding capital stock of HLI.
Clearly, the minimum individual allocation of each original FWB of 18,804.32
shares was diluted as a result of the use of "man days" and the hiring of
additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for
a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary
to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution plan within three (3) months
from receipt by the corporate landowner of the approval of the plan by PARC. In
fact, based on the said provision, the transfer of the shares of stock in the names
of the qualified FWBs should be recorded in the stock and transfer books and
must be submitted to the SEC within sixty (60) days from implementation. As
stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution
plan shall be implemented within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the PARC, and the transfer of the
shares of stocks in the names of the qualified beneficiaries shall be recorded in
stock and transfer books and submitted to the Securities and Exchange
Commission (SEC) within sixty (60) days from the said implementation of the
stock distribution plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by

PARC. While neither of the clashing parties has made a compelling case of the
thrust of this provision, the Court is of the view and so holds that the intent is to
compel the corporate landowner to complete, not merely initiate, the transfer
process of shares within that three-month timeframe. Reinforcing this conclusion
is the 60-day stock transfer recording (with the SEC) requirement reckoned from
the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for
the three-month threshold. Remove this timeline and the corporate landowner
can veritably evade compliance with agrarian reform by simply deferring to
absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by
the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To
HLI, said section provides a justifying dimension to its 30-year stock distribution
program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall
be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x
x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what
is involved is stock distribution, it is the corporate landowner who has the
obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which
to pay the cost of the land thus awarded them to make it less cumbersome for
them to pay the government. To be sure, the reason underpinning the 30-year
accommodation does not apply to corporate landowners in distributing shares of
stock to the qualified beneficiaries, as the shares may be issued in a much
shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of
RA 6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10
has the force and effect of law and must be duly complied with.143 The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No.
89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and
voided.

III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for
the exclusion from the coverage of the assailed PARC resolution those portions
of the converted land within Hacienda Luisita which RCBC and LIPCO acquired
by purchase.
Both contend that they are innocent purchasers for value of portions of the
converted farm land. Thus, their plea for the exclusion of that portion from PARC
Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage
dated January 2, 2006, which called for mandatory CARP acquisition coverage of
lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding
the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the
entire three hundred (300) hectares of land from Centennary for the purpose of
developing the land into an industrial complex.144 Accordingly, the TCT in
Centennarys name was canceled and a new one issued in LIPCOs name.
Thereafter, said land was subdivided into two (2) more parcels of land. Later on,
LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by
virtue of which TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered
owner receiving a certificate of title in pursuance of a decree of registration and
every subsequent purchaser of registered land taking a certificate of title for
value and in good faith shall hold the same free from all encumbrances except
those noted on the certificate and enumerated therein."145
It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of such burdens and claims
as are annotated on the title. This principle admits of certain exceptions, such as
when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of sufficient facts to
induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.146 A higher level of care and diligence is of course expected
from banks, their business being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without
notice that some other person has a right to, or interest in, such property at the
time of such purchase, or before he has notice of the claim or interest of some
other persons in the property. Good faith, or the lack of it, is in the final analysis a

question of intention; but in ascertaining the intention by which one is actuated on


a given occasion, we are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with safety, be
determined. Truly, good faith is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged by
actual or fancied tokens or signs. Otherwise stated, good faith x x x refers to the
state of mind which is manifested by the acts of the individual
concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in such
property; and (2) that the purchaser pays a full and fair price for the property at
the time of such purchase or before he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted land
in questionpurchasers in good faith for value entitled to the benefits arising
from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a right to or interest in such
property. In fact, at the time LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the property from agricultural to
industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of
Hacienda Luisita, only the following general annotations appeared on the TCTs
of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate;
the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real
Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the
lots that were previously covered by the SDP. Good faith "consists in the
possessors belief that the person from whom he received it was the owner of the
same and could convey his title. Good faith requires a well-founded belief that
the person from whom title was received was himself the owner of the land, with
the right to convey it. There is good faith where there is an honest intention to
abstain from taking any unconscientious advantage from another."150 It is the
opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR

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

preserved; otherwise, everyone dealing with the property registered under the
system will have to inquire in every instance as to whether the title had been
regularly or irregularly issued, contrary to the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the
property and he is entitled to the protection of the law.152 x x x (Emphasis
supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a
"cloistered institution removed" from the realities on the ground. To note, the
approval and issuances of both the national and local governments showing that
certain portions of Hacienda Luisita have effectively ceased, legally and
physically, to be agricultural and, therefore, no longer CARPable are a matter of
fact which cannot just be ignored by the Court and the DAR. Among the
approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang
Bayan of Tarlac favorably endorsing the 300-hectare industrial estate
project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996
issued in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997,
approving LIPCOs application for a mixed ecozone and proclaiming the
three hundred (300) hectares of the industrial land as a Special Economic
Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan
of Tarlac, approving the Final Development Permit for the Luisita Industrial
Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan of
Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997
issued for the proposed project of building an industrial complex on three
hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued
by the HLURB on the project of Luisita Industrial Park II with an area of
three million (3,000,000) square meters;157

(h) License to Sell No. 0076 dated 26 December 1997 issued by the
HLURB authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain
Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac,
Province of Tarlac, as a Special Economic Zone pursuant to Republic Act
No. 7916," designating the Luisita Industrial Park II consisting of three
hundred hectares (300 has.) of industrial land as a Special Economic
Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by
the PEZA, stating that pursuant to Presidential Proclamation No. 1207
dated 22 April 1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of Luisita Industrial Park II
located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an
economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie
indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074764-(95) issued in 1996 by then DAR Secretary Garilao had effectively converted
500 hectares of hacienda land from agricultural to industrial/commercial use and
authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion
order, both RCBC and LIPCO cannot be considered at fault for believing that
certain portions of Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely
abused its discretion when it placed LIPCOs and RCBCs property which once
formed part of Hacienda Luisita under the CARP compulsory acquisition scheme
via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as part
of the SCTEX, this should also be excluded from the compulsory agrarian reform
coverage considering that the transfer was consistent with the governments
exercise of the power of eminent domain159 and none of the parties actually
questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC
Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to
certain "operative facts" that had occurred in the interim. Pertinently, the
"operative fact" doctrine realizes that, in declaring a law or executive action null
and void, or, by extension, no longer without force and effect, undue harshness
and resulting unfairness must be avoided. This is as it should realistically be,
since rights might have accrued in favor of natural or juridical persons and

obligations justly incurred in the meantime.160 The actual existence of a statute or


executive act is, prior to such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot always be erased
by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to
be given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting
than that in a subsequent litigation regard be had to what has been done while
such legislative or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness
that precisely because the judiciary is the government organ which has the final
say on whether or not a legislative or executive measure is valid, a period of time
may have elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to
such adjudication.
In the language of an American Supreme Court decision: "The actual existence
of a statute, prior to such a determination of [unconstitutionality], is an operative
fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects,
with respect to particular relations, individual and corporate, and particular
conduct, private and official." x x x
Given the above perspective and considering that more than two decades had
passed since the PARCs approval of the HLIs SDP, in conjunction with
numerous activities performed in good faith by HLI, and the reliance by the FWBs
on the legality and validity of the PARC-approved SDP, perforce, certain rights of
the parties, more particularly the FWBs, have to be respected pursuant to the
application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of
minimal or altogether without relevance to the instant case as it applies only in
considering the effects of a declaration of unconstitutionality of a statute, and not
of a declaration of nullity of a contract. This is incorrect, for this view failed to
consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in
the instant case. Rather, it is PARCs approval of the HLIs Proposal for Stock
Distribution under CARP which embodied the SDP that was nullified.

A recall of the antecedent events would show that on May 11, 1989, Tadeco,
HLI, and the qualified FWBs executed the SDOA. This agreement provided the
basis and mechanics of the SDP that was subsequently proposed and submitted
to DAR for approval. It was only after its review that the PARC, through then Sec.
Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the
SDP. Considerably, it is not the SDOA which gave legal force and effect to the
stock distribution scheme but instead, it is the approval of the SDP under the
PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans
recommendation to the PARC Excom, what he proposed is the recall/revocation
of PARC Resolution No. 89-12-2 approving HLIs SDP, and not the revocation of
the SDOA. Sec. Pangandamans recommendation was favorably endorsed by
the PARC Validation Committee to the PARC Excom, and these
recommendations were referred to in the assailed Resolution No. 2005-32-01.
Clearly, it is not the SDOA which was made the basis for the implementation of
the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this case,
the approval by PARC of the HLI proposal for stock distributionis well-settled in
our jurisprudence. In Chavez v. National Housing Authority,163 We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of
the various agreements implementing the SMDRP is an operative fact that can
no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being declared
as unconstitutional by the courts, is valid and must be complied with, thus:
xxx

xxx

xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension,
as we have no reason to do so, much less retroactively apply such nullification to
deprive private respondent of a compelling and valid reason for not filing the
leave application. For as we have held, a void act though in law a mere scrap of
paper nonetheless confers legitimacy upon past acts or omissions done in

reliance thereof. Consequently, the existence of a statute or executive order prior


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

xxx

xxx

"Similarly, the implementation/enforcement of presidential decrees prior to their


publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased
by a new judicial declaration . . . that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual
existence as an operative fact negating the acceptance of "a principle of absolute
retroactive invalidity." Whatever was done while the legislative or the executive
act was in operation should be duly recognized and presumed to be valid in all
respects. The ASSO that was issued in 1979 under General Order No. 60
long before our Decision in Taada and the arrest of petitioner is an operative
fact that can no longer be disturbed or simply ignored. (Citations omitted;
Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it
revokes or recalls the SDP, what it actually revoked or recalled was the PARCs
approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what
was actually declared null and void was an executive act, PARC Resolution No.
89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it was the
SDOA which was annulled in the instant case. Evidently, the operative fact
doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita
SDP are upheld, the revocation must, by application of the operative fact
principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn a
blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the
MOA), which became the basis of the SDP approved by PARC per its Resolution
No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said
to have received from HLI salaries and cash benefits, hospital and medical
benefits, 240-square meter homelots, 3% of the gross produce from agricultural
lands, and 3% of the proceeds of the sale of the 500-hectare converted land and
the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were
distributed as of April 22, 2005.166 On August 6, 20l0, HLI and private
respondents submitted a Compromise Agreement, in which HLI gave the FWBs
the option of acquiring a piece of agricultural land or remain as HLI stockholders,
and as a matter of fact, most FWBs indicated their choice of remaining as
stockholders. These facts and circumstances tend to indicate that some, if not all,
of the FWBs may actually desire to continue as HLI shareholders. A matter best
left to their own discretion.

With respect to the other FWBs who were not listed as qualified beneficiaries as
of November 21, 1989 when the SDP was approved, they are not accorded the
right to acquire land but shall, however, continue as HLI stockholders. All the
benefits and homelots167 received by the 10,502 FWBs (6,296 original FWBs and
4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall
be respected with no obligation to refund or return them since the benefits
(except the homelots) were received by the FWBs as farmhands in the
agricultural enterprise of HLI and other fringe benefits were granted to them
pursuant to the existing collective bargaining agreement with Tadeco. If the
number of HLI shares in the names of the original FWBs who opt to remain as
HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares
per FWB, the HLI shall assign additional shares to said FWBs to complete said
minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not
obliged to return the same to HLI or pay for its value since this is a benefit
granted under the SDP. The homelots do not form part of the 4,915.75 hectares
covered by the SDP but were taken from the 120.9234 hectare residential lot
owned by Tadeco. Those who did not receive the homelots as of the revocation
of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was
issued, will no longer be entitled to homelots. Thus, in the determination of the
ultimate agricultural land that will be subjected to land distribution, the aggregate
area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land
subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX
lot came after compulsory coverage has taken place, the FWBs should have their
corresponding share of the lands value. There is merit in the claim. Since the
SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the
lands subject of the SDP will automatically be subject of compulsory coverage
under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject
of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot
acquired by the government from the area covered by SDP, then HLI and its
subsidiary, Centennary, shall be liable to the FWBs for the price received for said
lots. HLI shall be liable for the value received for the sale of the 200-hectare land
to LRC in the amount of PhP 500,000,000 and the equivalent value of the
12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to
LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for
PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of
the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take
into account the payment of taxes and expenses relating to the transfer of the
land and HLIs statement that most, if not all, of the proceeds were used for
legitimate corporate purposes. In order to determine once and for all whether or
not all the proceeds were properly utilized by HLI and its subsidiary, Centennary,

DAR will engage the services of a reputable accounting firm to be approved by


the parties to audit the books of HLI to determine if the proceeds of the sale of
the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for
legitimate corporate purposes, titling expenses and in compliance with the
August 14, 1996 Conversion Order. The cost of the audit will be shouldered by
HLI. If after such audit, it is determined that there remains a balance from the
proceeds of the sale, then the balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the
land from 1989. We disagree. It should not be forgotten that the FWBs are also
stockholders of HLI, and the benefits acquired by the corporation from its
possession and use of the land ultimately redounded to the FWBs benefit based
on its business operations in the form of salaries, and other fringe benefits under
the CBA. To still require HLI to pay rent to the FWBs will result in double
compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP
although it will no longer be operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The non-agricultural assets
amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands
valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be
turned over to DAR for distribution to the FWBs. To be deducted from said area
are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the
80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of
individual lots that should have been distributed to FWBs by DAR had they not
opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be
transferred to DAR for land distribution to the FWBs. We find that the date of the
"taking" is November 21, 1989, when PARC approved HLIs SDP per PARC
Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of
just compensation. We cannot use May 11, 1989 when the SDOA was executed,
since it was the SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01
dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006,
placing the lands subject of HLIs SDP under compulsory coverage on mandated
land acquisition scheme of the CARP, are hereby AFFIRMED with the
MODIFICATION that the original 6,296 qualified FWBs shall have the option to
remain as stockholders of HLI. DAR shall immediately schedule meetings with
the said 6,296 FWBs and explain to them the effects, consequences and legal or
practical implications of their choice, after which the FWBs will be asked to

manifest, in secret voting, their choices in the ballot, signing their signatures or
placing their thumbmarks, as the case may be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is
entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to
him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute
additional shares to complete said prescribed number of shares at no cost to the
FWB within thirty (30) days from finality of this Decision. Other FWBs who do not
belong to the original 6,296 qualified beneficiaries are not entitled to land
distribution and shall remain as HLI shareholders. All salaries, benefits, 3%
production share and 3% share in the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare SCTEX lot and homelots already received
by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-qualified
FWBs, shall be respected with no obligation to refund or return them.
Within thirty (30) days after determining who from among the original FWBs will
stay as stockholders, DAR shall segregate from the HLI agricultural land with an
area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 8912-2 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.

4.
Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC),
et al.,G.R. No. 171101, July 5, 2011, VELASCO, JR.,
J
.
I.
Facts
In 1958, Tarlac Development Corporation (Tadeco), assisted by the Central
Bank of the Philippines,purchased Hacienda Luisita and the Central Azucarera
de Tarlac, the sugar mill of the hacienda, from the Spanishowners of Compaia
General de Tabacos de Filipinas (Tabacalera). Tadeco was then owned and
controlled by theJose Cojuangco Sr. Group. Also, the GSIS extended a
PhP5.911 million loan in favor of Tadeco to pay the pesoprice component of the
sale, with the condition that
the lots comprising the Hacienda Luisita 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.
Tadeco however did not comply with thiscondition.On May 7, 1980, the martial
law administration filed a suit before the Manila RTC against Tadeco, et al.,
forthem to surrender Hacienda Luisita to the then Ministry of Agrarian Reform
(MAR) so that the land can be distributedto farmers at cost. Tadeco alleged that
Hacienda Luisita is not covered by existing agrarian reform legislations for itdoes
not have tenants. The argument did not convince the Manila RTC, thus rendered
judgment ordering Tadeco tosurrender Hacienda Luisita to the MAR. Tadeco
appealed the case to the CA.
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw
the governments case
against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case
the Marcos government initiallyinstituted and won against Tadeco, et al. The
dismissal action was, however, made subject to the obtention by
Tadeco of the PARCs approval of a stock distribution plan (SDP) that must
initially be implemented after such
approval shall have been secured. On August 23, 1988, Tadeco organized a
spin-off corporation, herein petitionerHLI, as vehicle to facilitate stock acquisition
by the farmworkers. For this purpose, Tadeco conveyed to HLI theagricultural
land portion (4,915.75 hectares) and other farm-related properties of Hacienda
Luisita in exchange forHLI shares of stock.On May 9, 1989, some 93% of the
then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita
signified in a referendum their acceptance of the proposed HLIs Stock
Distribution Option Plan (SODP).
On May 11,1989, the SDOA was formally entered into by Tadeco, HLI, and the
5,848 qualified FWBs. This attested to by then
DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of
HLIs SDP, which was eventually
approved by the PARC after a follow-up referendum conducted by the DAR on
October 14, 1989, in which 5,117FWBs, out of 5,315 who participated, opted to
receive shares in HLI.On August 15, 1995, HLI applied for the conversion of 500
hectares of land of the hacienda from agriculturalto industrial use, pursuant to
Sec. 65 of RA 6657. The DAR approved the application on August 14, 1996,
subject to
payment of three percent (3%) of the gross selling price to the FWBs and to HLIs
continued compliance with its
undertakings under the SDP, among other conditions. On December 13, 1996,
HLI, in exchange for subscription of12,000,000 shares of stocks of Centennary
Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to
the latter. Consequently, HLIs Transfer Certificate of Title (TCT) No. 287910
was canceled and TCT No.292091 was issued in the name of Centennary. HLI
transferred the remaining 200 hectares covered by TCT No.287909 to Luisita
Realty Corporation (LRC) in two separate transactions in 1997 and 1998, both

uniformly involving100 hectares for PhP 250 million each. Subsequently,


Centennary sold the entire 300 hectares for PhP750 millionto Luisita Industrial
Park Corporation (LIPCO), which used it in developing an industrial complex.
Later, LIPCOtransferred these 2 parcels to the Rizal Commercial Banking
Corporation (RCBC)
in payment of LIPCOs
PhP431,695,732.10 loan obligations to RCBC.
LIPCOs titles were cancelled and new ones were issued to RCBC.
Apart from the 500 hectares, another 80.51 hectares were later detached from
Hacienda Luisita and acquired by the
government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex.
Thus, 4,335.75 hectares remained ofthe original 4,915 hectares Tadeco ceded to
HLI.Such, was the state of things when two separate petitions reached the DAR
in the latter part of 2003. Thefirst was filed by the Supervisory Group of HLI
(Supervisory Group), praying for a renegotiation of the SDOA, or, inthe
alternative, its revocation. The second petition, praying for the revocation and
nullification of the SDOA and thedistribution of the lands in the hacienda, was
filed by
Alyansa ng mga Manggagawang Bukid ng HaciendaLuisita
(AMBALA). The DAR then constituted a Special Task Force (STF) to attend to
issues relating to the SDP ofHLI. After investigation and evaluation, the STF
found that HLI has not complied with its obligations under RA 6657despite the
implementation of the SDP. On December 22, 2005, the PARC issued the
assailed Resolution No. 2005-32-01, recalling/revoking the SDO plan of
Tadeco/HLI. It further resolved that the subject lands be forthwith placedunder
the compulsory coverage or mandated land acquisition scheme of the
CARP.From the foregoing resolution, HLI sought reconsideration. Its motion
notwithstanding, HLI also filed apetiti
on before the Supreme Court in light of what it considers as the DARs hasty
placing of Hacienda Luisita underCARP even before PARC could rule or even
read the motion for reconsideration. PARC would eventually deny HLIs
motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.
II.
Issues
(1) Is Sec. 31 of RA 6657, which allows stock transfer in lieu of outright land
transfer, unconstitutional?(2) Did PARC gravely abuse its discretion in revoking
the subject SDP and placing the
hacienda under CARPs
compulsory acquisition and distribution scheme?(3) Did the
PARC gravely abuse its discretion when it included LIPCOs and RCBCs
respective properties that once
formed part of Hacienda Luisita under the CARP compulsory acquisition scheme
via the assailed Notice ofCoverage
?

III.
Ruling
(1)
NO, Sec. 31 of RA 6657 is not unconstitutional.
The Court actually refused to pass upon theconstitutional question because it
was
not raised at the earliest opportunity
and because the resolution thereofis
not the lis mota
of the case. Moreover, the issue has been rendered
moot and academic
since SDO is no longerone of the modes of acquisition under RA 9700.While
there is indeed an actual case or controversy, it took FARM some eighteen (18)
years from November21, 1989 before it challenged the constitutionality of Sec.
31 of RA 6657 which is quite too late already. The FARMmembers slept on their
rights and even accepted benefits from the SDP without even a complaint on the
allegedunconstitutionality of Sec. 31 upon which the benefits were derived. The
Court cannot now be goaded into resolvinga constitutional issue that FARM
failed to assail after the lapse of a long period of time and the occurrence
ofnumerous events and activities which resulted from the application of an
alleged unconstitutional legal provision.Furthermore, the lis mota is whether
or not PARC acted in grave abuse of discretion when it ordered the recall
of theSDP for such non-compliance and the fact that the SDP, as couched and
implemented, offends certain constitutionaland statutory provisions. Any of these
key issues may be resolved without plunging into the constitutionality of Sec.31
of RA 6657.By virtue of Sec. 5 of RA 9700, the stock distribution scheme under
Sec. 31 of RA 6657 is no longer anavailable option under existing law; thus the
question of unconstitutionality should be a moot issue.

(2)
NO, the PARC did not gravely abuse its discretion in revoking the subject
SDP and placing the
hacienda under CARPs compulsory acquisition and distribution scheme
.
The revocation of the approval of the
SDP is valid: (1) the mechanics and timelines of HLIs stock distribution
violate DAO 10 because the minimumindividual allocation of each original farm
worker-beneficiaries (FWBs) of 18,804.32 shares was diluted as a result of
the use of man days and the hiring of additional farmworkers; (2) the 30

-year timeframe for HLI-to-FWBs stocktransfer is contrary to what Sec. 11 of


DAO 10
prescribes. As explained by HLI, a beneficiary needs to work for at least 37 days
in a fiscal year before he or shebecomes entitled to HLI shares. If it falls below 37
days, the FWB, unfortunately, does not get any share at yearend. The number of
HLI shares distributed varies depending on the number of days the FWBs were
allowed to workin one year. Worse, HLI hired farm workers in addition to the
original 6,296 FWBs, such that, as indicated in theCompliance dated August 2,
2010 submitted by HLI to the Court, the total number of farm workers of HLI as of
saiddate stood at 10,502. All these farm workers, which include the original 6,296
FWBs, were given shares out of the118,931,976.85 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 mandays and the hiring of additional
farm workers.Par. 3 of the SDOA expressly provides for a 30-year timeframe for
HLI-to-FWBs stock transfer is anarrangement contrary to what Sec. 11 of DAO
10 prescribes. Said Sec. 11 provides for the implementation of theapproved
stock distribution plan within three (3) months from receipt by the corporate
landowner of the approval ofthe plan by PARC. Evidently, the land transfer
beneficiaries are given thirty (30) years within which to pay the cost ofthe land
thus awarded them to make it less cumbersome for them to pay the
government.DAO 10, having the force and effect of law, must be duly complied
with; therefore, PARC is correct inrevoking the SDP.
(3) YES, those portions of the converted land within Hacienda Luisita that
RCBC and LIPCOacquired by purchase should be excluded from the
coverage of the assailed PARC resolution.
It can rightfullybe said that both LIPCO and RCBC, adduced from their foregoing
actions, are purchasers in good faith for value, soentitled to the benefits arising
from such status.First, at the time LIPCO purchased the entire three hundred
(300) hectares of industrial land, there was nonotice of any supposed defect in
the title of its transferor, Centennary, or that any other person has a right to
orinterest in such property. The same is true with respect to RCBC. To be sure,
intervenor RCBC and LIPCO knew thatthe lots they bought were subjected to
CARP coverage by means of a stock distribution plan, as the DAR
conversionorder was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that thesubject lots were validly
converted to commercial or industrial purposes and for which said lots were
taken out of theCARP 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 economicallyfeasible 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.

And second, both LIPCO and RCBC purchasedportions of Hacienda Luisita for
value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for
theamount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.
On the other hand, in a Deed of
Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Ha
cienda Luisita in favor of RCBC by wayof dacion en pago to pay for a loan of PhP
431,695,732.10.Both RCBC and LIPCO cannot be considered at fault for
believing that certain portions of Hacienda Luisitaare industrial/commercial lands
and are, thus, outside the ambit of CARP. The PARC, and consequently DAR,
gravely abused its discretion when it placed LIPCOs and RCBCs property which
once formed part of Hacienda
Luisita under the CARP compulsory acquisition scheme

4. G.R. No. 78517 February 27, 1989

GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO RICALDE, VICENTE
RICALDE and ROLANDO SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M. REYES and FE
M. REYES,respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private respondents.

PARAS, J.:
Before us is a petition seeking the reversal of the decision rendered by the respondent Court
of Appeals**on March 3, 1987 affirming the judgment of the court a quo dated April 29, 1986,
the dispositive portion of the trial court's decision reading as follows;
WHEREFORE, the decision rendered by this Court on November 5, 1982 is
hereby reconsidered and a new judgment is hereby rendered:
1. Declaring that Presidential Decree No. 27 is inapplicable to lands obtained
thru the homestead law,
2. Declaring that the four registered co-owners will cultivate and operate the
farmholding themselves as owners thereof; and

3. Ejecting from the land the so-called tenants, namely; Gabino Alita, Jesus
Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando
Salamar, as the owners would want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2) parcels of land,
acquired by private respondents' predecessors-in-interest through homestead patent under
the provisions of Commonwealth Act No. 141. Said lands are situated at Guilinan,
Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but petitioners
refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and appurtenant
regulations issued by the then Ministry of Agrarian Reform (DAR for short), now Department
of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint against Hon.
Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon as Regional
Director of MAR Region IX, and herein petitioners (then defendants) for the declaration of
P.D. 27 and all other Decrees, Letters of Instructions and General Orders issued in
connection therewith as inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8, 1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the defendants
from declaring the lands in litigation under Operation Land Transfer and from being issued
land transfer certificates to which the defendants filed their opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional District, Branch
IV, Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch XVIII) rendered its
decision dismissing the said complaint and the motion to enjoin the defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which
defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision prompting
defendants to move for a reconsideration but the same was denied in its Order dated June 6,
1986.
On appeal to the respondent Court of Appeals, the same was sustained in its judgment
rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the decision appealed
from is hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.

The pivotal issue is whether or not lands obtained through homestead patent are covered by
the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of tenants
from the bondage of the soil and transferring to them ownership of the land they till is a
sweeping social legislation, a remedial measure promulgated pursuant to the social justice
precepts of the Constitution. However, such contention cannot be invoked to defeat the very
purpose of the enactment of the Public Land Act or Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and protection of the
poor. The law gives a needy citizen a piece of land where he may build a
modest house for himself and family and plant what is necessary for
subsistence and for the satisfaction of life's other needs. The right of the
citizens to their homes and to the things necessary for their subsistence is as
vital as the right to life itself. They have a right to live with a certain degree of
comfort as become human beings, and the State which looks after the
welfare of the people's happiness is under a duty to safeguard the
satisfaction of this vital right. (Patricio v. Bayog, 112 SCRA 45)
In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian Reform
statute. In point is Section 6 of Article XIII of the 1987 Philippine Constitution which provides:
Section 6. The State shall apply the principles of agrarian reform or
stewardship, whenever applicable in accordance with law, in the disposition
or utilization of other natural resources, including lands of public domain
under lease or concession suitable to agriculture, subject to prior rights,
homestead rights of small settlers, and the rights of indigenous communities
to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive Agrarian Reform
Law of 1988 or Republic Act No. 6657 likewise contains a proviso supporting the
inapplicability of P.D. 27 to lands covered by homestead patents like those of the property in
question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or their direct
compulsory heirs who still own the original homestead at the time of the
approval of this Act shall retain the same areas as long as they continue to
cultivate said homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of Appeals
sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
SO ORDERED.

SECOND DIVISION
[G.R. No. 78517. February 27, 1989.]
GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR.,
PEDRO RICALDE, VICENTE RICALDE and ROLANDO
SALAMAR, petitioners, vs. THE HONORABLE COURT OF
APPEALS, ENRIQUE M. REYES, PAZ M. REYES and FE
M. REYES, respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N . Zulueta for Enrique Reyes, et al.
Adolfo S. Azcuna for private respondents.
SYLLABUS
1.AGRARIAN REFORM LAW; PRES. DECREE NO. 27; DOES NOT COVER
LANDS OBTAINED THROUGH A HOMESTEAD PATENT. The pivotal
issue is whether or not lands obtained through homestead patent are covered by
the Agrarian Reform under P.D. 27. The question certainly calls for a negative
answer. We agree with the petitioners in saying that P.D. 27 decreeing the
emancipation of tenants from the bondage of the soil and transferring to them
ownership of the land they till is a sweeping social legislation, a remedial measure
promulgated pursuant to the social justice precepts of the Constitution. However,
such contention cannot be invoked to defeat the very purpose of the enactment of
the Public Land Act or Commonwealth Act No. 141. Thus, "The Homestead Act
has been enacted for the welfare and protection of the poor. The law gives a needy
citizen a piece of land where he may build a modest house for himself and family
and plant what is necessary for subsistence and for the satisfaction of life's other
needs. The right of the citizens to their homes and to the things necessary for their
subsistence is as vital as the right to life itself. They have a right to live with a
certain degree of comfort as become human beings, and the State which looks
after the welfare of the people's happiness is under a duty to safeguard the
satisfaction of this vital right." (Patricio v. Bayog, 112 SCRA 45)
2.COMPREHENSIVE AGRARIAN REFORM LAW OF 1988 (RA NO. 6657);
MAINTAINS THE INAPPLICABILITY OF P.D. 27 OVER HOMESTEAD
GRANTEES. It is worthy of note that the newly promulgated Comprehensive
Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a

proviso supporting the inapplicability of P.D. 27 to lands covered by homestead


patents like those of the property in question, reading, "Section 6. Retention Limits
. . . ". . . Provided further, That original homestead grantees or their direct
compulsory heirs who still own the original homestead at the time of the approval
of this Act shall retain the same areas as long as they continue to cultivate said
homestead."

DECISION

PARAS, J :
p

Before Us is a petition seeking the reversal of the decision rendered by the


respondent Court of Appeals ** on March 3, 1987 affirming the judgment of the court
a quo dated April 29, 1986, the dispositive portion of the trial court's decision reading as
follows;
"WHEREFORE, the decision rendered by this Court on November 5,
1982 is hereby reconsidered and a new judgment is hereby rendered:
"1.Declaring that Presidential Decree No. 27 is inapplicable to lands
obtained thru the homestead law;
"2.Declaring that the four registered co-owners will cultivate and operate
the farmholding themselves as owners thereof; and
"3.Ejecting from the land the so-called tenants, namely; Gabino Alita,
Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and
Rolando Salamar, as the owners would want to cultivate the farmholding
themselves.
"No pronouncement as to costs.
SO ORDERED." (p. 31, Rollo)

The facts are undisputed. The subject matter of the case consists of two (2) parcels
of land, acquired by private respondents' predecessors-in-interest through
homestead patent under the provisions of Commonwealth Act No. 141. Said lands
are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but
petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and

appurtenant regulations issued by the then Ministry of Agrarian Reform (MAR for
short), now Department of Agrarian Reform (DAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint
against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D.
Macarambon as Regional Director of MAR Region IX, and herein petitioners
(then defendants) for the declaration of P.D. 27 and all other Decrees, Letters of
Instructions and General Orders issued in connection therewith as inapplicable to
homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8,
1981.
prLL

Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer
and from being issued land transfer certificates to which the defendants filed their
opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional
District, Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial
Region, Branch XVIII) rendered its decision dismissing the said complaint and the
motion to enjoin the defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to
which defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision
prompting defendants to move for a reconsideration but the same was denied in its
Order dated June 6, 1986.
LLphil

On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
"WHEREFORE, finding no reversible error thereof, the decision
appealed from is hereby AFFIRMED.
"SO ORDERED." (p. 34, Rollo)

Hence, the present petition for review on certiorari.


The pivotal issue is whether or not lands obtained through homestead patent are
covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.

We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of
tenants from the bondage of the soil and transferring to them ownership of the land
they till is a sweeping social legislation, a remedial measure promulgated pursuant
to the social justice precepts of the Constitution. However, such contention cannot
be invoked to defeat the very purpose of the enactment of the Public Land Act or
Commonwealth Act No. 141. Thus,
"The Homestead Act has been enacted for the welfare and protection of
the poor. The law gives a needy citizen a piece of land where he may
build a modest house for himself and family and plant what is necessary
for subsistence and for the satisfaction of life's other needs. The right of
the citizens to their homes and to the things necessary for their
subsistence is as vital as the right to life itself. They have a right to live
with a certain degree of comfort as become human beings, and the State
which looks after the welfare of the people's happiness is under a duty to
safeguard the satisfaction of this vital right." (Patricio v. Bayog, 112
SCRA 45)

In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian
Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine
Constitution which provides:
"Section 6.The State shall apply the principles of agrarian reform or
stewardship, whenever applicable in accordance with law, in the
disposition or utilization of other natural resources, including lands of
public domain under lease or concession suitable to agriculture, subject
to prior rights, homestead rights of small settlers, and the rights of
indigenous communities to their ancestral lands."

Additionally, it is worthy of note that the newly promulgated Comprehensive


Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a
proviso supporting the inapplicability of P.D. 27 to lands covered by homestead
patents like those of the property in question, reading,
"Section 6.Retention Limits . . .
". . . Provided further, That original homestead grantees or their direct
compulsory heirs who still own the original homestead at the time of the
approval of this Act shall retain the same areas as long as they continue
to cultivate said homestead."

WHEREFORE, premises considered, the decision of the respondent Court of


Appeals sustaining the decision of the Regional Trial Court is hereby AFFIRMED.

SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.
Footnotes
**Penned by Justice Jorge R. Coquia and concurred in by Justices Josue N. Bellosillo
and Venancio D. Aldecoa, Jr. of the Fourth Division.

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.
Loni M. Patajo for petitioners.
The Solicitor General for respondents.
SYLLABUS
1.POLITICAL LAW; STATUTORY CONSTRUCTION; A SPECIAL LAW
PREVAILS OVER A GENERAL LAW. 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 (National Power Corporation v. Presiding Judge, RTC, Br. XXV, G.R.
No. 72477, 16 October 1990, 190 SCRA 477).
2.ID.; ADMINISTRATIVE LAW; NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES, JUSTIFIED IN THE CASE AT BAR.
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. (Rocamora v. RTC-Cebu, Br. VIII, G.R. No. 65037, 23
November 1988, 167 SCRA 615).
3.CIVIL LAW; LAND REGISTRATION; AGRICULTURAL LAND, DEFINED;
LANDS NOT DEVOTED TO AGRICULTURAL ACTIVITY, OUTSIDE THE
COVERAGE OF 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." (Sec. 3 (c), R.A.
6657) 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." (Luz Farms v. Secretary of the Department of Agrarian Reform, G.R. No.
86889, 4 December 1990, 192 SCRA 51, citing Record, CONCOM, 7 August
1986, Vol. III, p. 30) Indeed, lands not devoted to agricultural activity are outside
the coverage of CARL. These include lands previously converted to nonagricultural 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
Administrative Order No. 1, Series of 1990), DAR itself defined "agricultural
land" thus ". . . Agricultural land 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."
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.

DECISION

BELLOSILLO, J :
p

Are lands already classified for residential, commercial or industrial use, as


approved by the Housing and Land Use Regulatory Board and its precursor
agencies 1 prior to 15 June 1988, 2 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 3 of the Department of
Agrarian Reform over parcels of land already reserved as townsite areas before the
enactment of the law.
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; 4 for Phase II, with an area of 80.0000 hectares, on 13 October 1983; 5
and for Phase III, which consisted of the remaining 31.7707 hectares, on 25 April
1986. 6 Petitioners were likewise issued development permits 7 after complying
with the requirements. Thus the NATALIA properties later became the Antipolo
Hills Subdivision.
Cdpr

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 brevity), filed a complaint against NATALIA and EDIC before
the DAR Regional Adjudicator to restrain petitioners from developing areas under
cultivation by SAMBA members. 8 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.
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 undeveloped 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 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 to 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. 10 And, in all permits
granted to petitioners, the Commission stated invariably therein that the
applications were in "conformance" 11 or "conformity" 12 or "conforming" 13
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.
llcd

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. 15
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.
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." 16 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." 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 continue 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, 18 DAR itself defined "agricultural land" thus
". . . Agricultural land 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.
prLL

Be that as it may, the Secretary of Justice, responding to a query by the Secretary


of Agrarian Reform, noted in an Opinion 19 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.

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 dated 22 November
1990 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.
llcd

SO ORDERED.
Natalia Realty, Inc. and Estate Developer and Investors Corp vs DAR
GR No 103302
August 12, 1993
Facts:
Natalia is the owner of 3 contiguous parcels of land with an area of 120.9793 hectares, 1.3205
hectares and 2.7080 hectares or a total of 125.0078 hectares, which are covered by TCT No.
31527. Presidential Proclamation No. 1637 set aside 20,312 hectares of land 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 with the reservation, petitioner EDIC as developer of Natalia applied for and was
granted preliminary approval and location clearances by the Human Settlements Regulatory
Commission, which Natalia thereafter became Antipolo Hills Subdivision. On June 15 1988, Ra
6657 went to effect. Respondent issed a Notice of Coverage on the undeveloped portions of
Antipolo Hills Subdivision. Natalia and EDIC immediately registered its objection to the notice of
coverage and requested the cancellation of the Notice of Coverage.
Natalia and EDIC both argued that the properties ceased to be agricultural lands when they were
included in the areas reserved by Presidential Proclamation for the townsite reservation. DAR
then contended that the permits granted were not valid and binding since they did not comply with
t he implementing Standards, Rules and Regulations of PD 957 (The Subdivision and
Condominium Buyers Protective Decree), and that there was no valid conversion of the
properties.

Issue:
Whether or not lands not classified for agricultural use, as approved by the Housing and Land
Use Regulatory Board and its agencies prior to June 15, 1988 covered by RA 6657.
Ruling:
No, Sec. 4 of RA 6657 provides that CARL shall cover, regardless of tenurial arrangement and
commodity produced, all public and private agricultural lands. And agricultural lands is referred to
as land devoted to agricultural activity and not classified as mineral, forst, residential, commercial
or industrial land. Thus, the underdeveloped portions of the Antipolo Hills Subdivision cannot be
considered as agricultural lands for this land was intended for residential use. They ceased to be
agricultural land by virtue of the Presidential Proclamation No. 1637.

EN BANC
[G.R. No. 86889. December 4, 1990.]
LUZ FARMS, petitioner, vs. THE HONORABLE
SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, respondent.
Enrique M. Belo for petitioner.

DECISION

PARAS, J :
p

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).
cdrep

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 productionsharing 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.
prLL

The constitutional provision under consideration reads as follows:


ARTICLE XIII
xxx xxx xxx
AGRARIAN AND NATURAL RESOURCES REFORM

Section 4.The State shall, by law, undertake an agrarian reform program


founded on the right of farmers and regular farmworkers, who are
landless, to own directly or collectively the lands they till or, in the case
of other farmworkers, to receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of
just compensation. In determining retention limits, the State shall respect
the rights of small landowners. The State shall further provide incentives
for voluntary land-sharing.
xxx xxx xxx"

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

Livestock domestic animals used or raised on a farm, especially for


profit.
Farm a plot or tract of land devoted to the raising of domestic or other
animals." (Rollo, pp. 82-83).

The petition is impressed with merit.


The question raised is one of constitutional construction. The primary task in
constitutional construction is to ascertain and thereafter assure the realization of
the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).
cdrep

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:
xxx xxx xxx
"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).
xxx xxx xxx

The questions were answered and explained in the statement of then


Commissioner Tadeo, quoted as follows:
xxx xxx xxx
"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 11 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).
cdphil

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 1 of the 1973 Constitution and which was adopted
as part of the Freedom Constitution, and Article VIII, Section 1 of the 1987

Constitution) and which power this Court has exercised in many instances
(Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections
3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of
livestock, poultry and swine in its coverage as well as the Implementing Rules and
Guidelines promulgated in accordance therewith, are hereby DECLARED null and
void for being unconstitutional and the writ of preliminary injunction issued is
hereby MADE permanent.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco,
Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., is on