Luz Farms vs.

Secretary of Agrarian Reform 192 SCRA

51
G.R. 86889
EN BANC
[G.R. No. 86889 : December 4, 1990.]
192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE
SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, Respondent.
DECISION
PARAS, J.:
This is a petition for prohibition with prayer for
restraining order and/or preliminary and permanent
injunction against the Honorable Secretary of the
Department of Agrarian Reform for acting without
jurisdiction in enforcing the assailed provisions of R.A.
No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988 and in promulgating the
Guidelines and Procedure Implementing Production
and Profit Sharing under R.A. No. 6657, insofar as the
same apply to herein petitioner, and further from
performing an act in violation of the constitutional
rights of the petitioner.
As gathered from the records, the factual background
of this case, is as follows:
On June 10, 1988, the President of the Philippines
approved R.A. No. 6657, which includes the raising of
livestock, poultry and swine in its coverage (Rollo, p.
80).
On January 2, 1989, the Secretary of Agrarian Reform
promulgated
the
Guidelines
and
Procedures
Implementing Production and Profit Sharing as

embodied in Sections 13 and 32 of R.A. No. 6657

(Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform
promulgated its Rules and Regulations implementing
Section 11 of R.A. No. 6657 (Commercial Farms).
(Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation
engaged in the livestock and poultry business and
together with others in the same business allegedly
stands to be adversely affected by the enforcement of
Section 3(b), Section 11, Section 13, Section 16(d) and
17 and Section 32 of R.A. No. 6657 otherwise known as
Comprehensive Agrarian Reform Law and of the
Guidelines and Procedures Implementing Production
and Profit Sharing under R.A. No. 6657 promulgated on
January 2, 1989 and the Rules and Regulations
Implementing Section 11 thereof as promulgated by
the DAR on January 9, 1989 (Rollo, pp. 2-36).: rd
Hence, this petition praying that aforesaid laws,
guidelines and rules be declared unconstitutional.
Meanwhile, it is also prayed that a writ of preliminary
injunction or restraining order be issued enjoining
public respondents from enforcing the same, insofar as
they are made to apply to Luz Farms and other
livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved
to deny, among others, Luz Farms' prayer for the
issuance of a preliminary injunction in its Manifestation
dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated
August 24, 1989 resolved to grant said Motion for
Reconsideration regarding the injunctive relief, after
the filing and approval by this Court of an injunction
bond in the amount of P100,000.00. This Court also
gave due course to the petition and required the
parties to file their respective memoranda (Rollo, p.
119).
The petitioner filed its Memorandum on September 6,
1989 (Rollo, pp. 131-168).

On December 22, 1989, the Solicitor General adopted

his Comment to the petition as his Memorandum
(Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A.
6657, insofar as they are made to apply to it:
(a) Section 3(b) which includes the "raising of
livestock (and poultry)" in the definition of
"Agricultural,
Agricultural
Enterprise
or
Agricultural Activity."
(b) Section 11 which defines "commercial farms"
as "private agricultural lands devoted to
commercial, livestock, poultry and swine
raising . . ."
(c) Section 13 which calls upon petitioner to
execute a production-sharing plan.
(d) Section 16(d) and 17 which vest on the
Department of Agrarian Reform the authority to
summarily determine the just compensation to
be paid for lands covered by the Comprehensive
Agrarian Reform Law.
(e) Section 32 which spells out the productionsharing plan mentioned in Section 13
". . . (W)hereby three percent (3%) of the gross
sales from the production of such lands are
distributed within sixty (60) days of the end of
the fiscal year as compensation to regular and
other farmworkers in such lands over and above
the compensation they currently receive:
Provided, That these individuals or entities
realize gross sales in excess of five million pesos
per annum unless the DAR, upon proper
application, determine a lower ceiling.
In the event that the individual or entity realizes
a profit, an additional ten (10%) of the net profit
after tax shall be distributed to said regular and
other farmworkers within ninety (90) days of the
end of the fiscal year . . ."

The main issue in this petition is the constitutionality

of Sections 3(b), 11, 13 and 32 of R.A. No. 6657 (the
Comprehensive Agrarian Reform Law of 1988), insofar
as the said law includes the raising of livestock, poultry
and swine in its coverage as well as the Implementing
Rules and Guidelines promulgated in accordance
therewith.:-cralaw
The constitutional provision under consideration reads
as follows:
ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an
agrarian reform program founded on the right of
farmers and regular farmworkers, who are
landless, to own directly or collectively the lands
they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake
the just distribution of all agricultural lands,
subject to such priorities and reasonable
retention limits as the Congress may prescribe,
taking into account ecological, developmental,
or equity considerations, and subject to the
payment of just compensation. In determining
retention limits, the State shall respect the
rights of small landowners. The State shall
further provide incentives for voluntary landsharing.
x x x"
Luz Farms contended that it does not seek the
nullification of R.A. 6657 in its entirety. In fact, it
acknowledges the correctness of the decision of
this Court in the case of the Association of Small
Landowners in the Philippines, Inc. vs. Secretary
of Agrarian Reform (G.R. 78742, 14 July 1989)
affirming
the
constitutionality
of
the
Comprehensive Agrarian Reform Law. It,

however, argued that Congress in enacting the

said law has transcended the mandate of the
Constitution, in including land devoted to the
raising of livestock, poultry and swine in its
coverage (Rollo, p. 131). Livestock or poultry
raising is not similar to crop or tree farming.
Land is not the primary resource in this
undertaking and represents no more than five
percent (5%) of the total investment of
commercial livestock and poultry raisers.
Indeed, there are many owners of residential
lands all over the country who use available
space in their residence for commercial
livestock and raising purposes, under "contractgrowing arrangements," whereby processing
corporations and other commercial livestock
and poultry raisers (Rollo, p. 10). Lands support
the buildings and other amenities attendant to
the raising of animals and birds. The use of land
is incidental to but not the principal factor or
consideration in productivity in this industry.
Including backyard raisers, about 80% of those
in commercial livestock and poultry production
occupy five hectares or less. The remaining 20%
are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that
livestock and poultry raising is embraced in the term
"agriculture" and the inclusion of such enterprise
under Section 3(b) of R.A. 6657 is proper. He cited that
Webster's International Dictionary, Second Edition
(1954), defines the following words:
"Agriculture the art or science of cultivating
the ground and raising and harvesting crops,
often, including also, feeding, breeding and
management of livestock, tillage, husbandry,
farming.

Farm a plot or tract of land devoted to the raising of

domestic or other animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional
construction. The primary task in constitutional
construction is to ascertain and thereafter assure the
realization of the purpose of the framers in the
adoption of the Constitution (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).:
rd
Ascertainment of the meaning of the provision of
Constitution begins with the language of the document
itself. The words used in the Constitution are to be
given their ordinary meaning except where technical
terms are employed in which case the significance
thus attached to them prevails (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional
provisions which are ambiguous or of doubtful
meaning, the courts may consider the debates in the
constitutional convention as throwing light on the
intent of the framers of the Constitution. It is true that
the intent of the convention is not controlling by itself,
but as its proceeding was preliminary to the adoption
by the people of the Constitution the understanding of
the convention as to what was meant by the terms of
the constitutional provision which was the subject of
the deliberation, goes a long way toward explaining
the understanding of the people when they ratified it
(Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).

It includes farming, horticulture, forestry, dairying,

sugarmaking . . .

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.

Livestock domestic animals used or raised on a

farm, especially for profit.

The Committee adopted the definition of "agricultural

land" as defined under Section 166 of R.A. 3844, as

laud devoted to any growth, including but not limited

to crop lands, saltbeds, fishponds, idle and abandoned
land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).
The intention of the Committee is to limit the
application of the word "agriculture." Commissioner
Jamir proposed to insert the word "ARABLE" to
distinguish this kind of agricultural land from such
lands as commercial and industrial lands and
residential properties because all of them fall under
the general classification of the word "agricultural".
This proposal, however, was not considered because
the Committee contemplated that agricultural lands
are limited to arable and suitable agricultural lands
and therefore, do not include commercial, industrial
and residential lands (Record, CONCOM, August 7,
1986, Vol. III, p. 30).
In the interpellation, then Commissioner Regalado
(now a Supreme Court Justice), posed several
questions, among others, quoted as follows:
x x x
"Line 19 refers to genuine reform program
founded on the primary right of farmers and
farmworkers. I wonder if it means that leasehold
tenancy is thereby proscribed under this
provision because it speaks of the primary right
of farmers and farmworkers to own directly or
collectively the lands they till. As also
mentioned by Commissioner Tadeo, farmworkers
include those who work in piggeries and poultry
projects.
I was wondering whether I am wrong in my
appreciation that if somebody puts up a piggery
or a poultry project and for that purpose hires
farmworkers therein, these farmworkers will
automatically have the right to own eventually,
directly or ultimately or collectively, the land on
which the piggeries and poultry projects were
constructed. (Record, CONCOM, August 2, 1986,
p. 618).

x x x
The questions were answered and explained in
the statement of then Commissioner Tadeo,
quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay
medyo hindi kami nagkaunawaan. Ipinaaalam ko
kay Commissioner Regalado na hindi namin
inilagay ang agricultural worker sa kadahilanang
kasama rito ang piggery, poultry at livestock
workers. Ang inilagay namin dito ay farm worker
kaya hindi kasama ang piggery, poultry at
livestock workers (Record, CONCOM, August 2,
1986, Vol. II, p. 621).
It is evident from the foregoing discussion that Section
II of R.A. 6657 which includes "private agricultural
lands devoted to commercial livestock, poultry and
swine raising" in the definition of "commercial farms"
is invalid, to the extent that the aforecited agroindustrial 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 "productionsharing plans" (pending final redistribution of their
landholdings) whereby they are called upon to
distribute from three percent (3%) of their gross sales
and ten percent (10%) of their net profits to their
workers as additional compensation is unreasonable
for being confiscatory, and therefore violative of due
process (Rollo, p. 21).:-cralaw
It has been established that this Court will assume
jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry
into such a question are first satisfied. Thus, there
must be an actual case or controversy involving a

conflict of legal rights susceptible of judicial

determination, the constitutional question must have
been opportunely raised by the proper party, and the
resolution of the question is unavoidably necessary to
the decision of the case itself (Association of Small
Landowners of the Philippines, Inc. v. Secretary of
Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R.
79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico,
G.R. 79777, 14 July 1989, 175 SCRA 343).

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.

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).

SO ORDERED.

Thus, where the legislature or the executive acts

beyond the scope of its constitutional powers, it
becomes the duty of the judiciary to declare what the
other branches of the government had assumed to do,
as void. This is the essence of judicial power conferred
by the Constitution "(I)n one Supreme Court and in
such lower courts as may be established by law" (Art.
VIII, Section 1 of the 1935 Constitution; Article X,
Section I of the 1973 Constitution and which was
adopted as part of the Freedom Constitution, and
Article VIII, Section 1 of the 1987 Constitution) and
which power this Court has exercised in many
instances (Demetria v. Alba, 148 SCRA 208 [1987]).

SECOND DIVISION
STANFILCO EMPLOYEES
AGRARIAN REFORM
BENEFICIARIES MULTI-PURPOSE
COOPERATIVE,
Petitioner,
-

versus -

G.R. No. 154048

Present:

(b) the CAs resolution[3] of June 13, 2002 in the

same case, denying SEARBEMCOs motion for
reconsideration.
THE FACTUAL ANTECEDENTS

CARPIO, J., Chairperson,

LEONARDO-DE CASTRO, On January 29, 1998, SEARBEMCO, as seller, and
BRION,
respondent DOLE Philippines, Inc. (Stanfilco Division)
DEL CASTILLO, and
(DOLE), as buyer, entered into a Banana Production
ABAD, JJ.
and Purchase Agreement[4] (BPPA). The BPPA provided
that SEARBEMCO shall sell exclusively to DOLE, and
Promulgated:
the latter shall buy from the former, all Cavendish
bananas of required specifications to be planted on the
November 27, 2009
land owned by SEARBEMCO. The BPPA states:

DOLE PHILIPPINES, INC.

(STANFILCO DIVISION), ORIBANEX
SERVICES, INC. and SPOUSES
ELLY AND MYRNA ABUJOS,
Respondents.
x ------------------------------------------------------------------------------------------x
DECISION

BRION, J.:

Before this Court is the petition for review

on certiorari[1] filed by petitioner Stanfilco Employees
Agrarian
Reform
Beneficiaries
Multi-Purpose
Cooperative (SEARBEMCO). It assails:
(a) the decision[2] of the Court of Appeals (CA) in
CA-G.R. SP No. 66148 dated November 27,
2001; and

The SELLER agrees to sell exclusively to

the BUYER, and the BUYER agrees to buy
all
Cavendish
Banana
of
the
Specifications and Quality described in
EXHIBIT A hereof produced on the
SELLERS plantation covering an area of
351.6367 hectares, more or less, and
which is planted and authorized under
letter of instruction no. 790 as amended
on November 6, 1999 under the terms
and conditions herein stipulated. The
SELLER shall not increase or decrease the
area(s) stated above without the prior
written approval of the BUYER. However,
the SELLER may reduce said area(s)
provided that if the SELLER replaces the
reduction by planting bananas on an
equivalent area(s) elsewhere, it is agreed
that such replacement area(s) shall be
deemed covered by the Agreement. If the
SELLER plants an area(s) in excess of said
351.6367 hectares, the parties may enter
into a separate agreement regarding the

production of said additional acreage.

SELLER will produce banana to the
maximum capacity of the plantation, as
much as practicable, consistent with good
agricultural practices designed to produce
banana of quality having the standards
hereinafter set forth for the duration of
this Banana Production and Purchase
Agreement.

SEARBEMCO bound and obliged itself, inter alia,

to do the following:

All disputes arising in connection with this

Agreement shall be finally settled under
the Rules of Conciliation and Arbitration of
the International Chamber of Commerce
by three (3) Arbitrators appointed in
accordance
with
said
Rules.
The
Arbitration shall be held in a venue to be
agreed by the parties. Judgment upon the
award rendered may be entered in any
Philippine Court having jurisdiction or
application may be made to such court
for judicial acceptance of the award and
as order of enforcement, as the case may
be.

V. SPECIFIC OBLIGATIONS OF THE SELLER

xxx
p.) Sell exclusively to the BUYER all
bananas produced from the subject
plantation, except those rejected by the
BUYER
for
failure
to
meet
the
specifications and conditions contained in
Exhibit A hereof. In the case of any
such rejected bananas, the SELLER
shall have the right to sell such
rejected bananas to third parties, for
domestic
non-export
consumption. The SELLER shall only sell
bananas produced from the plantation
and not from any other source. [Emphasis
supplied.]
Any dispute arising from or in connection with the
BPPA between the parties shall be finally settled
through arbitration. To quote the BPPA:
IX. ARBITRATION OF DISPUTE

On December 11, 2000, DOLE filed a complaint with

the Regional Trial Court[5] (RTC) against SEARBEMCO,
the spouses Elly and Myrna Abujos (spouses Abujos),
and Oribanex Services, Inc. (Oribanex) for specific
performance and damages, with a prayer for the
issuance of a writ of preliminary injunction and of a
temporary restraining order.DOLE alleged that
SEARBEMCO sold and delivered to Oribanex, through
the spouses Abujos, the bananas rejected by DOLE, in
violation of paragraph 5(p), Article V of the BPPA which
limited the sale of rejected bananas for domestic nonexport consumption. DOLE further alleged that
Oribanex is likewise an exporter of bananas and is its
direct competitor.
DOLE narrated in its complaint how SEARBEMCO sold
and delivered the rejected bananas to Oribanex
through the spouses Abujos:

9.) That, however, on April 12, 2000 at

about 5:00 oclock in the afternoon,
[DOLE] through its authorized security
personnel discovered that defendant
SEARBEMCO, in violation of Section 5(p)
Article V of the Banana Production and
Purchase Agreement, packed the bananas
rejected by [DOLE] in boxes marked
CONSUL in Packing Plant 32 in DAPCO
Panabo and sold and delivered them to
defendant Abujos;
10.) That about 373 CONSUL marked
boxes were packed and knowingly sold by
defendant SEARBEMCO to ORIBANEX
SERVICES, INC. through defendants
Abujos who carried and loaded the same
on board a blue Isuzu Canter bearing
plate no. LDM 976 and delivered to
defendant ORIBANEX for export at the
TEFASCO Wharf covered by Abujos
Delivery Receipt, a copy of which is
hereto attached as Annex B;
11.) That the following day, April 13,
2000, again the same security found that
defendant SEARBEMCO continued to pack
the bananas rejected by plaintiff in boxes
marked as CONSUL and, in violation of
paragraph 5(p) Article V of the Banana
Production and Purchase Agreement, sold
and
delivered them to defendant
ORIBANEX SERVICES, INC., for export,
through defendants Abujos;
12.) That about 648 CONSUL marked
boxes were packed and knowingly sold by
defendant SEARBEMCO to ORIBANEX
SERVICES, INC., through defendants
Abujos who carried and loaded the same
on board a red Isuzu Forwarder, bearing
plate no. LCV 918, and delivered to

defendant ORIBANEX for export at the

TEFASCO Wharf covered by Abujos
Delivery Receipt, a copy of which is
hereto attached and marked as Annex C;
13.) That the sale of a total of 712 boxes
of rejected bananas covering April 12 and
13, 2000, or any other dates prior thereto
or
made
thereafter
by
defendant
SEARBEMCO to defendant ORIBANEX
SERVICES, INC. through defendant Abujos
is in utter violation of the Agreement
between plaintiff [DOLE] and defendant
SEARBEMCO that SEARBEMCO may sell
bananas rejected by plaintiff to parties for
domestic non-export consumption only.
SEARBEMCO responded with a motion to dismiss on
the grounds of lack of jurisdiction over the subject
matter of the claim, lack of cause of action, failure to
submit to arbitration which is a condition precedent to
the filing of a complaint, and the complaints defective
verification and certification of non-forum shopping.
[6]
SEARBEMCO argued that:
1)

the Department of Agrarian Reform

Adjudication Board (DARAB) has exclusive
jurisdiction over the action filed by DOLE,
pursuant to Sections 1 and 3(e) of
Administrative
Order
[7]
No. 09, Series of 1998 (AO No. 9-98)
and Section 5(a) and (c) of Administrative
Order No. 02, Series of 1999[8] (AO No. 299) of the Department of Agrarian Reform
(DAR), since the dispute between the
parties is an agrarian dispute within the

exclusive competence of the DARAB to

resolve;
2) the filing of the complaint is premature,
as the dispute between DOLE and
SEARBEMCO has not been referred to and
resolved by arbitration, contrary to Article
IX of the BPPA and Article V, Sec. 30(g)
[9]
of AO No. 9-98 of the DAR;
3) it did not violate Section 5(p), Article V
of the BPPA, since the rejected bananas
were sold to the spouses Abujos who
were third-party buyers and not exporters
of bananas; and
4) the complaint is fatally defective as the
Board of Directors of DOLE did not
approve any resolution authorizing Atty.
Reynaldo Echavez to execute the
requisite Verification and Certification
Against Forum Shopping and, therefore,
the same is fatally defective.
DOLE opposed SEARBEMCOs motion to dismiss
alleging, among others, that:
1) the dispute between the parties is not an
agrarian dispute within the exclusive
jurisdiction of the DARAB under Republic Act
No. 6657[10] (RA No. 6657); and
2) the Arbitration Clause of the BPPA is not
applicable as, aside from SEARBEMCO, DOLE
impleaded other parties (i.e., the spouses
Abujos and Oribanex who are not parties to
the BPPA) as defendants.[11]

Subsequently, DOLE filed on February 2, 2001 an

amended complaint,[12] the amendment consisting of
the Verification and Certification against forum
shopping for DOLE executed by Danilo C. Quinto,
DOLEs Zone Manager.
THE RTC RULING
The RTC denied SEARBEMCOs motion to dismiss in an
Order dated May 16, 2001.[13] The trial court stated
that the case does not involve an agrarian conflict and
is a judicial matter that it can resolve.
SEARBEMCO moved for the reconsideration of the RTC
Order.[14] The RTC denied the motion for lack of merit in
its Order of July 12, 2001.[15]
THE CA RULING
On July 26, 2001, SEARBEMCO filed a special civil
action for certiorari[16] with the CA alleging grave
abuse of discretion on the part of the RTC for denying
its motion to dismiss and the subsequent motion for
reconsideration.
SEARBEMCO argued that the BPPA the parties
executed is an agri-business venture agreement
contemplated by DARs AO No. 9-98. Thus, any dispute
arising from the interpretation and implementation of
the BPPA is an agrarian dispute within the exclusive
jurisdiction of the DARAB.

In a decision dated November 27, 2001,[17] the CA

found that the RTC did not gravely abuse its discretion
in denying SEARBEMCOs motion to dismiss and motion
for reconsideration.
The CA ruled that the [DAR] has no jurisdiction,
under said [AO No. 9-98], over actions between
[SEARBEMCO] and [DOLE] for enforcement of the said
Agreement when one commits a breach thereof and
for redress by way of specific performance and
damages inclusive of injunctive relief. [18] It held that
the case is not an agrarian dispute within the purview
of Section 3(d) of RA No. 6657,[19] but is an action to
compel SEARBEMCO to comply with its obligations
under the BPPA; it called for the application of the
provisions of the Civil Code, not RA No. 6657.
The CA likewise disregarded SEARBEMCOs emphatic
argument that DOLEs complaint was prematurely filed
because of its failure to first resort to arbitration. The
arbitration clause under the BPPA, said the CA, applies
only when the parties involved are parties to the
agreement; in its complaint, DOLE included the
spouses Abujos and Oribanex as defendants. According
to the CA, if [DOLE] referred its dispute with
[SEARBEMCO] to a Panel of Arbitrators, any judgment
rendered by the latter, whether for or against [DOLE]
will not be binding on the [spouses Abujos] and
[Oribanex], as case law has it that only the parties to a
suit, as well as their successors-in-interest, are bound
by the judgment of the Court or quasi-judicial bodies.
[20]

On SEARBEMCOs argument that the Verification and

Certification Against Forum Shopping under DOLEs
amended complaint is defective for failure to state that
this was based on personal knowledge, the CA ruled
that the omission of the word personal did not render
the Verification and Certification defective.
SEARBEMCO moved for reconsideration of the
decision, but the CA denied the motion for lack of
merit in its resolution of June 13, 2002.[21]
ASSIGNMENT OF ERRORS
In the present petition, SEARBEMCO submits that the
CA erred in ruling that:
1.) the RTC has jurisdiction over the subject
matter of the complaint of DOLE, considering
that the case involves an agrarian dispute
within the exclusive jurisdiction of the
DARAB;
2.) the complaint of DOLE states a cause of
action, despite the fact that SEARBEMCO has
not violated any provision of the BPPA; and
3.) the filing of the complaint is not premature,
despite DOLEs failure to submit its claim to
arbitration a condition precedent to any
juridical recourse.
THE COURTS RULING

We do not find the petition meritorious.

DOLEs complaint falls
within thejurisdiction of the
regular courts, not the
DARAB.

SEARBEMCO mainly relies on Section 50 [22] of RA No.

6657 and the characterization of the controversy as an
agrarian dispute or as an agrarian reform matter in
contending that the present controversy falls within
the competence of the DARAB and not of the regular
courts. The BPPA, SEARBEMCO claims, is a joint
venture and a production, processing and marketing
agreement, as defined under Section 5 (c) (i) and (ii) of
DAR AO No. 2-99;[23] hence, any dispute arising from
the BPPA is within the exclusive jurisdiction of the
DARAB. SEARBEMCO also asserts that the parties
relationship in the present case is not only that of
buyer and seller, but also that of supplier of land
covered by the CARP and of manpower on the part of
SEARBEMCO, and supplier of agricultural inputs,
financing and technological expertise on the part of
DOLE. Therefore, SEARBEMCO concludes that the BPPA
is not an ordinary contract, but one that involves an
agrarian element and, as such, is imbued with public
interest.
We clarify at the outset that what we are
reviewing in this petition is the legal question of
whether the CA correctly ruled that the RTC committed
no grave abuse discretion in denying SEARBEMCOs

motion to dismiss. In ruling for legal correctness, we

have to view the CA decision in the same context that
the petition for certiorari it ruled upon was presented
to the appellate court; we have to examine the CA
decision from the prism of whether it correctly
determined the presence or absence of grave abuse of
discretion in the RTC ruling before it, not on the basis
of whether the RTC ruling on the merits of the case
was correct. In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a
review on appeal, of the challenged RTC ruling. A court
acts with grave abuse of discretion amounting to lack
or excess of jurisdiction when its action was performed
in a capricious and whimsical exercise of judgment
equivalent to lack of discretion. The abuse of discretion
must be so patent and gross as to amount to an
evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in
contemplation of the law, as where the power is
exercised in an arbitrary and despotic manner by
reason or passion or personal hostility.[24]
As the CA found, the RTCs action was not
attended by any grave abuse of discretion and
the RTC correctly ruled in denying SEARBEMCOs
motion to dismiss. We fully agree with the CA.
Section 3(d) of RA No. 6657 is clear in defining
an agrarian dispute: any controversy relating to
tenurial arrangements, whether leasehold, tenancy,
stewardship or otherwise, over lands devoted to
agriculture, including dispute concerning farm-workers

associations or representations of persons in

negotiating, fixing, maintaining, changing or seeking
to arrange terms or conditions of such tenurial
arrangements. It includes any controversy relating to
compensation of lands acquired under this Act and
other terms and conditions of transfer of ownership
from landowners to farmworkers, tenants and other
agrarian reform beneficiaries, whether the disputants
stand in the proximate relation of farm operator and
beneficiary, landowner and tenant, or lessor and
lessee.[25]
RA No. 6657 is procedurally implemented through the
2003 DARAB Rules of Procedure where Section 1, Rule
II[26] enumerates the instances where the DARAB shall
have primary and exclusive jurisdiction. A notable
feature of RA No. 6657 and its implementing rules is
the focus on agricultural lands and the relationship
over this land that serves as the basis in the
determination of whether a matter falls under DARAB
jurisdiction.
In Heirs of the Late Hernan Rey Santos v. Court of
Appeals,[27] we held that:
For DARAB to have jurisdiction over a
case, there must exist a tenancy
relationship between the parties. x x
x. In Vda. De Tangub v. Court of
Appeals (191 SCRA 885), we held that the
jurisdiction of the Department of Agrarian
Reform is limited to the following: a.)
adjudication of all matters involving
implementation of agrarian reform; b.)
resolution of agrarian conflicts and land
tenure related problems; and c.) approval

and disapproval of the conversion,

restructuring
or
readjustment
of
agricultural
lands
into
residential,
commercial, industrial, and other nonagricultural uses. [Emphasis supplied].

The
case
of Pasong
Bayabas
Farmers
[28]
Association, Inc. v. Court of Appeals
lists down the
indispensable elements for a tenancy relationship to
exist: (1) the parties are the landowner and the tenant
or agricultural lessee; (2) the subject matter of the
relationship is an agricultural land; (3) there is
consent between the parties to the relationship; (4)
the purpose of the relationship is to bring about
agricultural production; (5) there is personal cultivation
on the part of the tenant or agricultural lessee; and (6)
the harvest is shared between the landowner and the
tenant or the agricultural lessee.
The parties in the present case have no tenurial,
leasehold, or any other agrarian relationship that could
bring their controversy within the ambit of agrarian
reform laws and within the jurisdiction of the DARAB. In
fact, SEARBEMCO has no allegation whatsoever in its
motion to dismiss regarding any tenancy relationship
between it and DOLE that gave the present dispute the
character of an agrarian dispute.
We have always held that tenancy relations
cannot be presumed. The elements of tenancy must
first be proved by substantial evidence which can be
shown through records, documents, and written
agreements between the parties. A principal factor,

too, to consider in determining whether a tenancy

relationship exists is the intent of the parties. [29]
SEARBEMCO has not shown that the abovementioned indispensable elements of tenancy
relations are present between it and DOLE. It also
cannot be gleaned from the intention of the parties
that they intended to form a tenancy relationship
between them. In the absence of any such intent and
resulting relationship, the DARAB cannot have
jurisdiction. Instead, the present petition is properly
cognizable by the regular courts, as the CA and the
RTC correctly ruled.
Notably, the requirement of the existence of
tenurial relationship has been relaxed in the cases
of Islanders CARP-Farmers Beneficiaries Muti-Purpose
Cooperative, Inc. v. Lapanday Agricultural and Devt.
Corporation[30] and Cubero v. Laguna West MultiPurpose Cooperative, Inc.[31] The Court, speaking
through former Chief Justice Panganiban, declared
in Islanders that:
[The definition of agrarian dispute in RA
No. 6657 is] broad enough to include
disputes arising from any tenurial
arrangement beyond the traditional
landowner-tenant
or
lessor-lessee
relationship.
xxx
[A]grarian
reform
extends beyond the mere acquisition and
redistribution
of
land,
the
law
acknowledges other modes of tenurial
arrangements
to
effect
the
implementation of CARP.[32]

While Islanders and Cubero may seem to serve

as precedents to the present case, a close analysis of
these cases, however, leads us to conclude that
significant
differences
exist
in
the
factual
circumstances between those cases and the present
case, thus rendering the rulings in these cited cases
inapplicable.
Islanders questioned (through a petition for
declaration of nullity filed before the RTC of Tagum
City) the lack of authority of the farmer-beneficiaries
alleged representative to enter into a Joint Production
Agreement with Lapanday. The farmers-beneficiaries
assailed the validity of the agreement by additionally
claiming that its terms contravened RA No. 6657.
Cubero likewise involved a petition to declare
the nullity of a Joint Venture Agreement between the
farmer-beneficiaries and Laguna West Multi-Purpose
Cooporative, Inc. The successors of the farmerbeneficiaries assailed the agreement before the RTC of
Tanauan, Batangas for having been executed within
the 10-year prohibitory period under Section 27 of RA
No. 6657.
In both cases, the Court ruled that the RTC
lacked jurisdiction to hear the complaint and declared
the DARAB as the competent body to resolve the
dispute. The Court declared that when the question
involves the rights and obligations of persons engaged
in the management, cultivation, and use of

an agricultural land covered by CARP, the case falls

squarely within the jurisdictional ambit of the DAR.
Carefully analyzed, the principal issue raised
in Islanders and Cubero referred to the management,
cultivation, and use of the CARP-covered
agricultural land; the issue of the nullity of the joint
economic
enterprise
agreements
in Islanders and Cubero would directly
affect
the
agricultural land covered by CARP. Those cases
significantly
did notpertain
to postharvest transactions involving the produce from CARPcovered agricultural lands, as the case before us does
now.
Moreover, the resolution of the issue raised
in Islanders and Cubero required the interpretation and
application of the provisions of RA No. 6657,
considering that the farmer-beneficiaries claimed that
the agreements contravened specific provisions of that
law. In the present case, DOLEs complaint for specific
performance and damages before the RTC did not
question the validity of the BPPA that would require the
application of the provisions of RA No. 6657; neither
did SEARBEMCOs motion to dismiss nor its other
pleadings assail the validity of the BPPA on the ground
that its provisions violate RA No. 6657. The resolution
of the present case would therefore involve, more than
anything else, the application of civil law provisions on
breaches of contract, rather than agrarian reform
principles. Indeed, in support of their arguments, the
parties have capitalized and focused on their

relationship as buyer and seller. DOLE, the buyer, filed

a complaint against SEARBEMCO, the seller, to enforce
the BPPA between them and to compel the latter to
comply with its obligations. The CA is thus legally
correct in its declaration that the action before the RTC
does not involve an agrarian dispute, nor does it call
for the application of Agrarian Reform laws. x x x. The
action of [DOLE] involves and calls for the
application of the New Civil Code, in tandem
with the terms and conditions of the [BPPA] of
[SEARBEMCO] and [DOLE].[33]
We find SEARBEMCOs reliance on DAR AO No. 998 and AO No. 2-99 as bases for DARABs alleged
expanded jurisdiction over all disputes arising from the
interpretation of agribusiness ventures to be
misplaced. DARABs jurisdiction under Section 50 of RA
No. 6657 should be read in conjunction with the
coverage of agrarian reform laws; administrative
issuances like DAR AO Nos. 9-98 and 2-99 cannot
validly extend the scope of the jurisdiction set by
law. In so ruling, however, we do not pass upon the
validity of these administrative issuances. We do
recognize the possibility that disputes may exist
between parties to joint economic enterprises
that directly pertain to the management, cultivation,
and use of CARP-covered agricultural land. Based on
our above discussion, these disputes will fall within
DARABs jurisdiction.
Even assuming that the present case can be
classified as an agrarian dispute involving the

interpretation or implementation of agribusiness

venture agreements, DARAB still cannot validly acquire
jurisdiction, at least insofar as DOLEs cause of action
against the third parties the spouses Abujos and
Oribanex is concerned. To prevent multiple actions, we
hold that the present case is best resolved by the trial
court.
DOLEs complaint
states a
cause of action

validly

SEARBEMCO asserts that the pleading containing

DOLEs claim against it states no cause of action. It
contends that it did not violate any of the provisions of
the BPPA, since the bananas rejected by DOLE were
sold to the spouses Abujos who are third-party buyers
and are not exporters of bananas transactions that the
BPPA allows. Since the sole basis of DOLEs complaint
was SEARBEMCOs alleged violation of the BPPA, which
SEARBEMCO insists did not take place, the complaint
therefore did not state a cause of action.
Due consideration of the basic rules on lack of cause of
action as a ground for a motion to dismiss weighs
against SEARBEMCOs argument.
In the case of Jimenez, Jr. v. Jordana,[34] this Court had
the opportunity to discuss the sufficiency of the
allegations of the complaint to uphold a valid cause of
action, as follows:
In a motion to dismiss, a defendant
hypothetically admits the truth of the

material allegations of the plaintiffs

complaint. This hypothetical admission
extends to the relevant and material facts
pleaded in, and the inferences fairly
deductible from, the complaint. Hence, to
determine whether the sufficiency of the
facts alleged in the complaint constitutes
a cause of action, the test is as follows:
admitting the truth of the facts alleged,
can the court render a valid judgment in
accordance with the prayer?
To sustain a motion to dismiss, the
movant needs to show that the plaintiffs
claim for relief does not exist at all. On
the contrary, the complaint is sufficient if
it contains sufficient notice of the cause
of action even though the allegations may
be vague or indefinite, in which event, the
proper recourse would be, not a motion to
dismiss, but a motion for a bill of
particulars.[35]

In applying this authoritative test, we must

hypothetically
assume
the
truth of DOLEs allegations, and determine whether the
RTC can render a valid judgment in accordance with its
prayer.
We find the allegations in DOLEs complaint to be
sufficient
basis
for
the
judgment
prayed
for. Hypothetically admitting the allegations in DOLEs
complaint that SEARBEMCO sold the rejected bananas
to Oribanex, a competitor of DOLE and also an
exporter of bananas, through the spouses Abujos, a
valid judgment may be rendered by the RTC holding
SEARBEMCO liable for breach of contract. That the sale

had been to the spouses Abujos who are not exporters

is essentially a denial of DOLEs allegations and is not
therefore a material consideration in weighing the
merits of the alleged lack of cause of action. What
SEARBEMCO stated is a counter-statement of fact and
conclusion, and is a defense that it will have to prove
at the trial. At this point, the material consideration is
merely
what
the
complaint
expressly
alleged. Hypothetically assuming DOLEs allegations of
ultimate sale to Oribanex, through the spouses Abujos,
to be true, we hold following the test of sufficiency
in Jordana that DOLEs prayer for specific performance
and damages may be validly granted; hence, a cause
of action exists.
The filing of the
complaint is not
premature since
arbitration proceedings
are not necessary in the
present case

SEARBEMCO argues that DOLE failed to comply with a

condition precedent before the filing of its complaint
with the RTC, i.e., DOLE did not attempt to settle their
controversy
through
arbitration
proceedings.
SEARBEMCO relies on Article V, Section 30(g) of DAR
AO
No.
9-98[36]
and Section 10 of DAR AO No. 2-99[37] which provide
that as a rule, voluntary methods such as mediation or
conciliation, shall be preferred in resolving disputes
involving joint economic enterprises. SEARBEMCO also
cites Section IX of the BPPA which provides that all

disputes arising out of or in connection with their

agreement shall be finally settled through arbitration.
Following our conclusion that agrarian laws find no
application in the present case, we find as the CA did
that SEARBEMCOs arguments anchored on these laws
are completely baseless. Furthermore, the cited DAR
AO No. 2-99, on its face, only mentions a preference,
not a strict requirement of referral to arbitration. The
BPPA-based argument deserves more and closer
consideration.
We agree with the CA ruling that the BPPA
arbitration clause does not apply to the present case
since third parties are involved. Any judgment or ruling
to be rendered by the panel of arbitrators will be
useless if third parties are included in the case, since
the arbitral ruling will not bind them; they are not
parties to the arbitration agreement. In the present
case, DOLE included as parties the spouses Abujos and
Oribanex since they are necessary parties, i.e., they
were directly involved in the BPPA violation DOLE
alleged, and their participation are indispensable for a
complete resolution of the dispute. To require the
spouses Abujos and Oribanex to submit themselves to
arbitration and to abide by whatever judgment or
ruling the panel of arbitrators shall make is legally
untenable; no law and no agreement made with their
participation can compel them to submit to arbitration.
In support of its position, SEARBEMCO cites the case
of Toyota Motor Philippines Corp. v. Court of

Appeals[38] which holds that, the contention that the

arbitration clause has become dysfunctional because
of the presence of third parties is untenable. Contracts
are respected as the law between the contracting
parties. As such, the parties are thereby expected to
abide
with
good
faith
in
their
contractual
commitments. SEARBEMCO argues that the presence
of third parties in the complaint does not affect the
validity of the provisions on arbitration.
Unfortunately, the ruling in the Toyota case has been
superseded by the more recent cases of Heirs of
Augusto
L.
Salas,
Jr.
v.
Laperal
Realty
Corporation[39] and Del Monte Corporation-USA v. Court
of Appeals.[40]
Heirs of Salas involved the same issue now before us:
whether or not the complaint of petitioners-heirs in
that case should be dismissed for their failure to
submit the matter to arbitration before filing their
complaint.
The
petitioners-heirs
included
as
respondents third persons who were not parties to the
original agreement between the petitioners-heirs and
respondent Laperal Realty. In ruling that prior resort to
arbitration is not necessary, this Court held:
Respondent Laperal Realty, as a
contracting party to the Agreement, has
the right to compel petitioners to first
arbitrate before seeking judicial relief.
However, to split the proceedings into
arbitration for respondent Laperal Realty
and trial for the respondent lot buyers, or
to hold trial in abeyance pending

arbitration between petitioners and

respondent Laperal Realty, would in effect
result in multiplicity of suits, duplicitous
procedure and unnecessary delay. On the
other hand, it would be in the interest of
justice if the trial court hears the
complaint against all herein respondents
and adjudicates petitioners rights as
against theirs in a single and complete
proceeding.[41]
The case of Del Monte is more direct in stating that the
doctrine held in the Toyota case has already been
abandoned:
The
Agreement
between
petitioner
DMC-USA
and
private
respondent MMI is a contract. The
provision to submit to arbitration any
dispute arising therefrom and the
relationship of the parties is part of
that contract and is itself a contract.
As a rule, contracts are respected as
the law between the contracting
parties and produce effect as between
them, their assigns and heirs.Clearly,
only
parties
to
the
Agreement, i.e., petitioners DMCUSA and its Managing Director for
Export Sales Paul E. Derby, and
private respondents MMI and its
Managing Director Lily Sy are
bound by the Agreement and its
arbitration clause as they are the
only
signatories
thereto. Petitioners Daniel Collins
and
Luis
Hidalgo,
and
private
respondent SFI, not parties to the
Agreement and cannot even be
considered assigns or heirs of the
parties, are not bound by the

Agreement and the arbitration clause

therein. Consequently, referral to
arbitration in the State of California
pursuant to the arbitration clause and
the suspension of the proceedings in
Civil Case No. 2637-MN pending the
return of the arbitral award could be
called for but only as to petitioners
DMC-USA and Paul E. Derby, Jr., and
private respondents MMI and Lily Sy,
and not as to other parties in this
case, in accordance with the recent
case of Heirs of Augusto L. Salas, Jr. v.
Laperal Realty Corporation, which
superseded that of [sic] Toyota Motor
Philippines Corp. v. Court of Appeals.
xxxx
The object of arbitration is to allow the
expeditious
determination
of
a
dispute. Clearly, the issue before us
could not be speedily and efficiently
resolved in its entirety if we allow
simultaneous arbitration proceedings
and trial, or suspension of trial
pending arbitration. Accordingly, the
interest of justice would only be
served if the trial court hears and
adjudicates the case in a single and
complete proceeding.[42]

Following these precedents, the CA was therefore

correct in its conclusion that the parties agreement
to refer their dispute to arbitration applies only
where the parties to the BPPA are solely the
disputing parties.

Additionally, the inclusion of third parties in the

complaint supports our declaration that the present
case does not fall under DARABs jurisdiction. DARABs
quasi-judicial powers under Section 50 of RA No. 6657
may be invoked only when there is prior certification
from the Barangay Agrarian Reform Committee (or
BARC) that the dispute has been submitted to it for
mediation and conciliation, without any success of
settlement.[43] Since the present dispute need not be
referred to arbitration (including mediation or
conciliation) because of the inclusion of third parties,
neither SEARBEMCO nor DOLE will be able to present
the requisite BARC certification that is necessary to
invoke DARABs jurisdiction; hence, there will be no
compliance with Section 53 of RA No. 6657.
WHEREFORE, premises
considered,
we
hereby DENY the petition for certiorari for lack of
merit.
The
Regional
Trial
Court,
Branch
34, Panabo City, is hereby directed to proceed with the
case in accordance with this Decision. Costs against
petitioner SEARBEMCO.
SO ORDERED.

THIRD DIVISION
G.R. No. 171107

Reform) entered into a contract denominated as

"Agreement to Sell No. 5216" involving Lot No. 1222. 6

September 5, 2012

ANITA C. VIANZON, Heir of the Late Lucila

Candelaria Gonzales, Petitioner,
vs.
MINOPLE MACARAEG, Respondents.
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45
seeking to reverse and set aside the October 19, 2005
Decision1 of the Court of Appeals (CA), in CA-G.R. SP
No. 88816, reversing the August 18, 2004
Resolution2 of the Office of the President (OP) which
declared the late Lucila Candelaria Gonzales (Lucila) as
the "legitimate and lawful purchaser/beneficiary" 3 of
x x x Lot No. 1222, Psd-78000 of the Dinalupihan
Landed Estate administered by the Department of
Agrarian Reform, containing an area of 3.1671
hectares located at Barangay Saguing, Dinalupihan,
Bataan.4
The Factual and Procedural Antecedents:
The subject land formed part of the 10-hectare Lot No.
657 earlier awarded to the late Pedro Candelaria
(Pedro), the father of Lucila. In 1950, Pedro hired
respondent Minople Macaraeg (Minople) to work on Lot
657. In 1956, Pedro divided Lot 657 among his four
children, including Lucila. Eventually, Lucilas
undivided share became Lot No. 1222, the subject
landholding.5
On August 17, 1960, Lucila and the Land Tenure
Administration (LTA, now the Department of Agrarian

After almost 30 years, or on May 8, 1989, Lucilas

representative, petitioner Anita C. Vianzon (Anita),
executed a deed of absolute sale in favor of her
daughter, Redenita Vianzon (Redenita), conveying a
2.5- hectare portion of the subject land. In connection
with this, Minople also affixed his signature on a
document denominated as "Waiver of Right"
purportedly relinquishing all his rights as well as his
interest over the same property in favor of Redenita. 7
Soon thereafter, Anita filed two applications to
purchase the subject property one in 1990 and the
other on August 7, 1996. Minople, however, also filed
his own application to purchase the same land on
September 9, 1996. These conflicting claims were
brought before the Department of Agrarian Reform
(DAR). On November 6, 1996, the Chief of the Legal
Division of the DAR Provincial Office recommended
that the subject land be "divided equally" between the
two applicants since both had been in some way
"remiss in their obligations under the agrarian
rules."8 Based on the recommendation, the Officer-inCharge Municipal Agrarian Reform Officer (MARO)
referred the matter to the Provincial Agrarian Reform
Officer (PARO) of Bataan. In his First Endorsement,
dated November 14, 1996, the PARO concurred with
the findings and recommendation of the Legal Division
Chief and forwarded its concurrence to the DAR
Regional Director. The Officer-in-Charge Regional
Director (RD) issued a corresponding order dividing the
subject property equally between the parties.
According to him, the parties were "in pari delicto, the
most equitable solution is to award the property to
both of them."9
Minople sought reconsideration but this was treated as
an appeal by the RD and was elevated to the DAR
Secretary, who, on November 10, 1997, set aside the

order and upheld Minoples right over the property. 10 In

setting aside the RD order, the DAR Secretary found
that it was Minople who was the "actual possessor/
cultivator of the lot in consideration."11 He pointed out
that Lucilas act of "hiring" Minople to render service
pertaining to all the aspects of farming did not only
violate the old LTA Administrative Order (A.O.) but it
also contravened the very undertaking made by
Lucilas representative and heir, Anita, in her latest
sales application warranting its rejection.
Aggrieved, Anita appealed to the OP. On June 18, 2003,
the OP issued a minute decision12 affirming in toto the
November 10, 1997 Order of the DAR Secretary.
According to the OP,
After a careful and thorough evaluation of the records
of the case, this Office hereby adopts by reference the
findings of fact and conclusions of law contained in the
DAR Decision dated 10 November 1997.13
Anita then moved for reconsideration. On August 18,
2004, the OP, giving weight to the "Agreement to Sell
No. 5216" between Lucila and the DARs predecessor
(the LTA), issued a resolution reversing and setting
aside its minute decision and declaring Lucila as "the
legitimate and lawful purchaser/ beneficiary of the
landholding in question."14 The OP stated that the
subject lot had been paid for as early as 1971 and that
the same had been declared in the name of the late
Lucila for tax purposes. In addition, according to the
OP, the "personal cultivation aspect of the said
Agreement to Sell" was achieved or carried out by
Lucila "with Minople Macaraeg as her hired
farmworker."15 The OP also took note that neither the
LTA nor the DAR failed to give the necessary notice of
cancellation to Lucila or Anita.16
Lastly, the OP opined that when the Agreement to Sell
was executed back in 1960, Minople was merely hired
as a farmworker; ergo, his actual possession and

cultivation were not in the concept of owner which

explained why the LTA (now DAR) contracted with
Lucila and not with Minople.17
Not in conformity, Minople elevated the matter to the
CA via a petition for review under Rule 43. In upholding
Minoples right to the subject land, the CA anchored its
Decision on Section 22 of Republic Act (R.A.) No. 6657,
or the Comprehensive Agrarian Reform Law (CARL).
According to the CA, Minople had been working on the
contested lot since 1950, as a tenant and performing
all aspects of farming and sharing in the harvest of the
land, in conformity with DARs A.O. No. 3, Series of
1990, pursuant to the CARL.18
Undaunted, Anita is now before this Court via this
petition for review on certiorari presenting the
following
STATEMENT OF ISSUES
I. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN PASSING OVER THE MERITS OF
THE PETITION FOR REVIEW FILED BY THE RESPONDENT
BEFORE THE SAID COURT DESPITE THE FACT THAT
RESPONDENT THEREIN FILED THE SAME BEYOND THE
REGLEMENTARY PERIOD FOR FILING THE SAME.
II. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN RULING THAT THE RESPONDENT,
AS TENANT, HAS LEGAL STANDING IN IMPUGNING THE
OWNERSHIP OF THE PETITIONER, HIS LANDLORD, IN
CONTRAVENTION OF THE PROVISIONS OF ARTICLE
1436 OF THE CIVIL CODE OF THE PHILIPPINES AS WELL
AS SECTION 3(B), RULE 131 OF THE RULES OF COURT
AND OTHER JURISPRUDENCE ON THE MATTER.
III. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN DEPRIVING THE PETITIONER OF
HER PROPERTY IN VIOLATION OF DUE PROCESS OF
LAW AS WELL AS THE NON-IMPAIRMENT CLAUSE OF

THE CONSTITUTION IN VIEW OF THE LACK OF NOTICE

OF CANCELLATION OF THE AGREEMENT TO SELL.
IV. WHETHER OR NOT THE COURT OF APPEALS ERRED
IN RULING THAT PETITIONER VIOLATED THE
CONDITIONS CONTAINED IN THE AGREEMENT TO SELL.
V. WHETHER OR NOT THE COURT OF APPEALS ERRED
IN RULING THAT THE AWARD OF THE LAND TO THE
RESPONDENT WAS EQUIVALENT TO A NOTICE OF
CANCELLATION OF THE AGREEMENT TO SELL. 19
The Court finds no merit in the petition.
On the procedural issue
Indeed, the perfection of an appeal in the manner and
the period prescribed by law is mandatory and
jurisdictional. Necessarily, the failure to conform to the
rules will render the judgment for review final and
unappealable. By way of exception, however, minor
lapses are at times disregarded in order to give due
course to appeals filed beyond the reglementary
period on the basis of strong and compelling reasons,
such as serving the ends of justice and preventing a
grave miscarriage thereof. The period for appeal is set
in order to avoid or prevent undue delay in the
administration of justice and to put an end to
controversies. It is there not to hinder the very ends of
justice itself. The Court cannot have purely technical
and procedural imperfections as the basis of its
decisions. In several cases, the Court held that "cases
should be decided only after giving all parties the
chance to argue their causes and defenses." 20
In Philippine National Bank, et al. v. Court of Appeals,
we allowed, in the higher interest of justice, an appeal
filed three days late.
In Republic v. Court of Appeals, we ordered the Court
of Appeals to entertain an appeal filed six days after

the expiration of the reglementary period; while in

Siguenza v. Court of Appeals, we accepted an appeal
filed thirteen days late. Likewise, in Olacao v. NLRC, we
affirmed the respondent Commission's order giving
due course to a tardy appeal "to forestall the grant of
separation pay twice" since the issue of separation pay
had been judicially settled with finality in another case.
All of the aforequoted rulings were reiterated in our
2001 decision in the case of Equitable PCI Bank v. Ku.
(previous citations omitted)21
There is no denying that the controversy between the
parties involves the very right over a considerable
spread of land. In fact, it is Anitas position that the
opposing parties in this case "have equal substantive
rights over the lot in question."22 It was, therefore,
correct on the part of the CA not to permit a mere
procedural lapse to determine the outcome of this all
too important case. It must be noted that the CA was
the first level of judicial review, and coming from the
OPs vacillating stance over the controversy, it was but
correct to afford the parties every chance to ventilate
their cause. Considering further that the party who
failed to meet the exacting limits of an appeal by a
mere seven days was an old farmer who was not only
unlearned and unskilled in the ways of the law but was
actually an illiterate who only knew how to affix his
signature,23 certainly, to rule based on technicality
would not only be unwise, but would be inequitable
and unjust. All told, the Court sanctions the CA ruling
allowing the petition for review of Minople.
On the substantive issue
The Court now proceeds with the crux of the case, that
is, who between the opposing parties has a rightful
claim to the subject landholding? In resolving the
second and the fourth issues, this Court finds it
inevitable to resolve the third and the fifth issues as
well. Thus, the Court will discuss them jointly.

The beacon that will serve as our guide in settling the

present controversy is found in the Constitution, more
particularly Articles II and XIII:

sila ng buhay. Kaya kinakailangan talagang magkaroon

ng tinatawag na just distribution. . . .
xxx

Article II
MR. TADEO.
SEC.21. The State shall promote comprehensive rural
development and agrarian reform.
xxx
Article XIII
SEC. 4. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farm workers, who are landless, to own directly
or collectively the lands they till or, in the case of other
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 land owners. The
State shall further provide incentives for voluntary
land-sharing. (Underscoring supplied)
In this regard, the Court finds the elucidation of Framer
Jaime Tadeo, in one of the deliberations of the
Constitutional Commission, enlightening.
MR. TADEO.
. . . Ang dahilan ng kahirapan natin sa Pilipinas ngayon
ay ang pagtitipon-tipon ng vast tracts of land sa
kamay ng iilan. Lupa ang nagbibigay ng buhay sa
magbubukid at sa iba pang manggagawa sa bukid.
Kapag inalis sa kanila ang lupa, parang inalisan na rin

Kasi ganito iyan. Dapat muna nating makita ang

prinsipyo ng agrarian reform, iyong maging may-ari
siya ng lupa na kaniyang binubungkal. Iyon ang kaunaunahang prinsipyo nito. . . .
x x x.24
Picking up from there, Congress enacted R.A. No. 6657,
or the CARL of 1988. Section 22 of this law
enumerates those who should benefit from the CARL.
SEC. 22. Qualified Beneficiaries. The lands covered
by the CARP shall be distributed as much as possible
to landless residents of the same barangay, or in the
absence thereof, landless residents of the same
municipality in the following order of priority:
(a) agricultural lessees and share tenants;
(b) regular farmworkers;
(c) seasonal farmworkers;
(d) other farmworkers;
(e) actual tillers or occupants of public lands;
(f) collectives or cooperatives of the above
beneficiaries; and
(g) others directly working on the land.
x x x.

A basic qualification of a beneficiary shall be his

willingness, aptitude and ability to cultivate and make
the land as productive as possible. The DAR shall
adopt a system of monitoring the record or
performance of each beneficiary, so that any
beneficiary guilty of negligence or misuse of the land
or any support extended to him shall forfeit his right to
continue as beneficiary. The DAR shall submit periodic
reports on the performance of the beneficiaries to the
PARC.
x x x.
Pursuant to this, the DAR issued A.O. No. 3, Series of
1990. The foremost policy in said A.O.s Statement of
Policies states,
Land has a social function, hence, there is a
concomitant social responsibility in its ownership and
should, therefore, be distributed to the actual
tillers/occupants.25

In this case, Anita questions the existence of a tenancy

relationship between her/Lucila and Minople, pointing
out the purported DAR Directors finding that Minople
deliberately failed to deliver the harvest for four
years.29 She argues that this negates any tenancy
relationship between them and insists that Minople
was only a farm worker initially engaged by the late
Pedro Candelaria. To this, she adds that LTA would not
have entered into an agreement to sell with Lucila in
1960 if it was Minople who was the actual possessor
and cultivator back then.30 Anita continues that even if
tenancy existed, Minople could not controvert the title
of Lucila/Anita being his purported landlord. 31
Anitas argument, however, is misplaced. The cases
she relied on referred to possession of leased premises
in general. In this case, the issue is farm or agricultural
tenancy and, inescapably, the applicable law is the
CARL and its implementing rules. After all, the law was
well in effect when Minople and Anita filed their
respective applications to purchase the subject land.

Thus, A.O. No. 3 lays down the qualifications of a

beneficiary in landed estates26 in this wise: he or she
should be (1) landless; (2) Filipino citizen; (3) actual
occupant/tiller who is at least 15 years of age or head
of the family at the time of filing of application; and (4)
has the willingness, ability and aptitude to cultivate
and make the land productive.27

Anita argues that the earlier sale made by LTA to her

predecessor was never questioned, hence, it remains
valid.32In fact, Anita claims, the late Lucila had already
paid the purchase price sometime in 1971.33 She then
proceeds to argue that "personal cultivation" may be
"with the aid of labor from within his immediate
household."34 Finally, Anita cries out for fairness.
According to her:

The significance of the allocatee/awardee being the

actual tiller is made even clearer in the "Operating
Procedures" of A.O. No. 3 itself, where the MARO is
required to make a determination as to who the actual
tiller is, for it is to him that the land should be
awarded. In fact, item 2.1.3, states that if it is found
that the allocatee or awardee employs others to till the
land, the MARO should cancel the Order of Award (OA)
or Certificate of Land Transfer (CLT) and issue a new
one in favor of the "qualified actual
cultivator/occupant."28

It would be unfair and unjust if the subject lot which

was originally cultivated by the Petitioners father,
Pedro Candelaria, would only go to another who was
just a mere helper of the said Pedro Candelaria,
thereby rendering into naught the hardships of the
petitioner and her father in occupying and nourishing
the subject land which they have occupied even before
the 50s decade. Respondent would not have been
there in Dinalupihan were it not for the Petitioners

father who secured his services as boy or mere

household helper.35
While Anita insists that "Agreement to Sell No. 5216"
executed back in 1960 remains effective, her act of
filing the above-mentioned applications to purchase
after three decades of waiting for its fruition only
reveals her skepticism in that very same instrument.
Anita herself filed not one, but two subsequent
applications. It was her application on August 7, 1996
together with that of Minople which gave rise to the
present controversy. These conflicting applications
were brought before the DAR, all the way up to the
Secretary, and then to the OP. At this point, therefore,
Anita had effectively abandoned her, or rather Lucilas
"Agreement to Sell No. 5216" of 1960 with the then
LTA. She cannot later on deny this and conveniently
hide behind the feeble position of the OP that it was
unnecessary for Anita/ Lucila to file her application
because the said agreement remained valid.
The fact remains, however, that there were two
applications subsequently filed by Anita and acted
upon by the DAR, the same office charged with
executing the earlier "Agreement to Sell No. 5216,"
where Anita would have gone to in order to implement
her all important agreement.
This is the same agency, acting through its Secretary,
which found that as early as the time of Lucila, there
had been violations of "Agreement to Sell No. 5216"
and the existing laws and rules upon which it was
based. This is the same agency which eventually
awarded the subject landholding to Minople. The CA
found, to which the Court agrees, that this was
"equivalent to a notice of cancellation of the earlier
Agreement to Sell No. 5216."36
As regards Anitas claim that the land had been paid
for, the provision that she relies on does not only
speak of payment of the purchase price but also

requires the performance of all the conditions found in

the said agreement. Thus, if the Court is to assume the
agreement to be valid, the LTA or the DAR may still not
be compelled to issue a deed of sale in her favor
because of violations of the agreement.
Agreement to Sell No. 5216
Section 10. Upon full payment of the purchase price as
herein stipulated including all interest thereonand the
performance by the PROMISSEE of all the conditions
herein required, the Administration shall execute a
Deed of Sale conveying the property subject of this
Agreement to the PROMISSEE."37(Underscoring
supplied)
Even if the Court assumes that there were no
violations, why did Anita or her predecessor Lucila not
compel the DAR to issue a deed of sale? Why did Anita
choose to file the applications to purchase in the
1990s?
For Minoples part, there is no denying that he had
been tilling the subject land since the 1950s.
According to then DAR Secretary Ernesto D. Garilao:
After a thorough evaluation of the records of the case,
together with its supporting documents, this Office
finds the appeal to be impressed with merit,
considering the fact that Minople Macaraeg is the
actual possessor/cultivator of the lot in consideration
as contained in the Report and Recommendation dated
November 6, 1996 of Atty. Judita C. Montemayor,
Chief, Legal Division of DAR Region III and the
Certification dated April 23, 1997 issued by the BARC
Chairman (Punong Barangay) of Dinalupihan Bataan.
The act of Lucila Candelaria Gonzales in allowing
Minople Macaraeg to perform all the farming activities
in the subject lot established a tenancy relationship
between the former and the latter because the latter is

doing the farm chores and is paid from the produce or

harvest of the land in the amount of 20 cavans of
palay every harvest. The claim of Lucila Candelaria
Gonzales that Minople Macaraeg is only a hired farm
worker will not hold water, considering the fact that he
(Minople Macaraeg) was not hired to work on just a
branch of farming, but performed work pertaining to all
the branches thereof, on the basis of sharing the
harvest not on a fixed salary wage.38
With Minople continuously performing every aspect of
farming on the subject landholding, neither Anita nor
Lucila personally cultivated the subject
land.1wphi1 While Anita continues to question the
existence of a tenancy relationship, she did admit that
her predecessors had hired Minople to till the land
decades earlier. This clearly violated then LTA A.O. No.
2, Series of 1956 as well as the DARs AO No. 3 series
of 1990. This also contravened her own undertaking in
her April 7, 1996 "Application to Purchase Lot."
"2.that I vvill not 1 subdivide, sold (sic) or in any
manner transfer or encumber said land without the
proper consent of the DAR subject further to the terms
and conditions provided for under Republic Act No.
6657 and other Operating laws not inconsistent
thereon; 3.That I shall not employ or use tenants
whatever form in the occupation or cultivation of the
land or shall not be subject of share tenancy pursuant
to the provision of PD No. 132 dated March 13, 1973, x
x x."39 (Emphasis supplied)
R.A. No. 6657 or the CARL "is a social justice and
pove1iy alleviation program which seeks to empower
the lives of agrarian reform beneficiaries through
equitable distribution and ownership of the land based
on the principle of land to the tiller." 40
Given all the laws in place together with the
undisputed fact that Minople worked on the subject
landholding for more than half a century, the

inescapable conclusion is that l'v1inople as the actual

tiller of the land 1s entitled to the land mandated by
our Constitution and R.A. No. 6657.
WHEREFORE, the petition is DENIED, the October 19,
2005 Decision and January 10, 2006 Resolution of the
Court of Appeals, in CA-G.R. SP No. 88816, arc
hereby AFFIRMED. This is without prejudice on the
part of petitioner to recover her payments from the
government, if warranted.
SO ORDERED.

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 coowners 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.

THIRD DIVISION
[G.R. No. 139083. August 30, 2001]
FLORENCIA PARIS, petitioner, vs. DIONISIO A.
ALFECHE, JUAN L. ALFECHE, MAXIMO N.
PADILLA, DIONISIO Q. MATILOS, Heirs of
GREG A. ALFECHE, DIONISIO W. MATILO,
SIMPLICIO L. ADAYA, TEOFILO M. DE
GUZMAN, FRANCISCO B. DINGLE and
MARIFE NAVARO, respondents.

WHEREFORE, premises considered, the assailed

Decision dated March 19, 1992 is hereby REVERSED
and SET ASIDE, and a new one is entered:
1. Declaring the private respondents to be full owners
of the land they till pursuant to Presidential Decree No.
27 and Executive Order No. 228;
2. Declaring the validity of the Emancipation Patents
issued to private respondents; and
3. Dismissing the case.[3]

DECISION
The Facts
PANGANIBAN, J.:
The Court of Appeals narrates the facts thus:
Homesteads are not exempt from the operation of
the Land Reform Law. The right to retain seven
hectares of land is subject to the condition that the
landowner is actually cultivating that area or will
cultivate it upon the effectivity of the said law.
The Case
The Petition for Review before us assails the June
4, 1999 Decision of the Court of Appeals [1] (CA), in CAGR SP No. 45738, which affirmed the ruling of the
Department of Agrarian Reform Adjudication Board
(DARAB). The decretal portion of the CA Decision
reads:
WHEREFORE, [there being] no grave abuse of
discretion x x x committed by DARAB, the instant
petition is hereby DENIED DUE
COURSE and DISMISSED. Costs against the
petitioner.[2]
The Decision of the DARAB, which was affirmed by
the CA, had disposed as follows:

Petitioner is the registered owner of a parcel of land

situated at Paitan, Quezon, Bukidnon with an area of
10.6146 hectares, more or less, covered by Transfer
Certificate of Title No. T-8275 and another property
with an area of 13.2614 hectares covered by Original
Certificate of Title No. P-4985, also located at Paitan,
Quezon, Bukidnon; the said parcels are fully tenanted
by private respondents herein who are recipients of
Emancipation Patents in their names pursuant to
Operation Land Transfer under P.D. 27 (Annexes A, A-1
to A-18) notwithstanding the fact that neither the
tenants nor the Land Bank of the Philippines (LBP)
[has] paid a single centavo for the said land. Petitioner
and the tenants have not signed any Land Transfer
Production Agreement. Petitioner and her children
have been deprived of their property without due
process of law and without just compensation,
especially so that the tenants have already stopped
paying rentals as of December 1988 to the damage
and prejudice of petitioner.
Petitioner contends that since she is entitled to a
retention of seven (7) hectares under P.D. 27 and/or 5

hectares and 3 hectares each for her children under

the Comprehensive Agrarian Reform Law (CARL), the
tenants are not supposed to acquire the subject land
and the Emancipation Patents precipitately issued to
them are null and void for being contrary to
law. Petitioner further alleged that she owns the
subject property covered by OCT No. P-4985 as original
homestead grantee who still owned the same when
Republic Act No. 6657 was approved, thus she is
entitled to retain the area to the exclusion of her
tenants. As regards TCT No. 8275, petitioner has
applied for retention of seven hectares per Letter of
Retention attached as Annex B, that the lands subject
of the instant petition are covered by Homestead
Patents, and as decided by the Supreme Court in the
cases of Patricio vs. Bayug (112 SCRA 41) and Alita vs.
Court of Appeals (170 SCRA 706), the homesteaders
and their heirs have the right to cultivate their
homesteads personally, which is a superior right over
that of tenant-farmers.
Petitioner moved for the cancellation and recall of the
Emancipation Patents issued to private respondentsfarmers and to restore to petitioner and her children
the ownership and cultivation of the subject lots plus
payment of back rentals from the time they stopped
paying the same until ejected therefrom.
Respondents filed their answer dated May 29, 1991
and admitted the generation and issuance of
Emancipation Patents to private respondents as
tenant-farmers thereof and the Supreme Court rulings
on the Bayug and Alita cases relative to homestead
patents, but denied the rest of the material allegations
for want of knowledge or information as to the truth
relative thereto. Respondents alleged that when the
subject lands were covered under P.D. 27, the
petitioner was repeatedly informed and invited by the
DAR Office at Valencia, Bukidnon to thresh out the
matter; that petitioners right to retain seven (7)
hectares is not absolute since she owns other
agricultural landholdings, thus disqualifying her to

retain the area, aside from the fact that she has other
properties sufficient to support her family as shown in
the Certification of the Provincial Assessors Office
listing down the petitioners landholdings (Annex 2). By
way of special affirmative defenses, respondents
averred that the criteria set forth under P.D. 27 were
observed before the generation of the Emancipation
Patents; that under Executive Order No. 228, the
tenant-farmers under P.D. 27 are deemed full owners
of the lands they till and the lease rentals paid by
them should be considered as amortization payments;
that under LOI 474, petitioner who owns more than
seven (7) hectares of lands are not entitled to
retention. Respondents prayed for the dismissal of the
case. They likewise prayed that the Emancipation
Patents issued to private respondents and their
peaceful possession of their farm lots be respected.
The Adjudicator a quo conducted a hearing and
afforded the parties their day in court and the
opportunity to present their evidence. On August 13,
1991, the Adjudicator a quo issued an Order for the
parties to submit their respective position papers with
evidence to buttress their allegations. On March 10,
1992, the Adjudicator a quo rendered the decision,
thus:
WHEREFORE, in the light of the foregoing, this
Adjudicator declares the following:
1. That all the Emancipation Patents issued to
tenants-respondents shall be cancelled and
recalled;
2. That the Register of Deeds of Malaybalay,
Bukidnon shall cancel all Emancipation
Patents registered under the names of the
herein tenants-respondents; and
3. That back rentals due to the petitioners,
which were given to the LBP as

amortizations, shall be given to the said

petitioner.[4]

The Courts Ruling

The Petition is partly meritorious. Respondents are
entitled to the lands they till, subject to the
determination and payment of just compensation to
petitioner.

On appeal, the DARAB reversed the adjudicator.

Ruling of the Court of Appeals
The CA rejected the claim of petitioner. It ruled
that she could not retain her homesteads, since she
was not the actual cultivator thereof. It also held that
she and her heirs had not been deprived of their right
to retain the area mandated by law, because the
records showed that they had other agricultural
landholdings. Finally, it ruled that she had not been
deprived of her properties without just compensation,
since Section 2 of Executive Order 228 declared that
tenant-farmers of agricultural lands under P.D. 27 are
deemed owners of the land they till and the lease
rentals paid by them shall be considered as
amortization payments.[5]
Hence, this Petition.[6]
The Issues
In her Memorandum, petitioner
following issues for our consideration:

submits

the

I. Whether or not the original homesteads issued under

the public land act [are] exempted from the operation
of land reform.
II. Granting arguendo that homesteads are not exempt,
whether or not the Emancipation Patents issued to the
respondents are valid notwithstanding lack of payment
of just compensation.
III. On the assumption that homesteads are exempt
from land reform and/or the emancipation patents are
illegally issued hence, void, can the respondents be
ejected from the premises in question? [7]

First Issue: Petitioners Homesteads Not Exempt

from Land Reform
Petitioner contends that because the subject
properties are covered by homestead patents, they are
exempt from the operation of land reform. In support
of her position, she cites the cases Alita v.
CA[8] andPatricio v. Bayug,[9] in which the Court ruled
that homesteaders had a superior right to cultivate
their homesteads as against their tenants.
Petitioners
contention
is
without
legal
basis. Presidential Decree (PD) No. 27, under which the
Emancipation Patents sought to be cancelled here
were issued to respondents, applies to all tenanted
private agricultural lands primarily devoted to rice and
corn under a system of share-crop or lease-tenancy,
whether classified as landed estate or not.[10] The law
makes
no
exceptions
whatsoever
in
its
coverage.Nowhere therein does it appear that lots
obtained by homestead patents are exempt from its
operation.
The matter is made even clearer by Department
Memorandum Circular No. 2, Series of 1978, which
states: Tenanted private agricultural lands primarily
devoted to rice and/or corn which have been acquired
under the provisions of Commonwealth Act 141, as
amended, shall also be covered by Operation Land
Transfer. Unquestionably, petitioners parcels of land,
though obtained by homestead patents under
Commonwealth Act 141, are covered by land reform
under PD 27.

Petitioners claimed entitlement to retain seven (7)

hectares is also untenable. PD 27, which provides the
retention limit, states:
In all cases, the landowner may retain an area of not
more than seven (7) hectares if such landowner is
cultivating such area or will now cultivate it.
Clearly, the right to retain an area of seven
hectares is not absolute. It is premised on the
condition that the landowner is cultivating the area
sought to be retained or will actually cultivate it upon
effectivity of the law.
In the case at bar, neither of the conditions for
retention is present. As admitted by petitioner herself,
the subject parcels are fully tenanted; thus, she is
clearly not cultivating them, nor will she personally
cultivate any part thereof. Undoubtedly, therefore, she
has no right to retain any portion of her landholdings.
Even under the current primary law on agrarian
reform, Republic Act (RA) No. 6657, to which the
application of PD 27 is suppletory, petitioners lands are
subject to land reform. The said Act lays down the
rights of homestead grantees as follows:
SEC. 6. Retention Limits. Except as otherwise provided
in this Act, no person may own or retain, directly or
indirectly, any public or private agricultural land, the
size of which shall vary according to factors governing
a viable family-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 PD 27 shall be

allowed to keep the area originally retained by them
thereunder; 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. (italics supplied)
Indisputably, homestead grantees or their direct
compulsory heirs can own and retain the original
homesteads, only for as long as they continue to
cultivate them. That parcels of land are covered by
homestead patents will not automatically exempt
them from the operation of land reform. It is the fact of
continued cultivation by the original grantees or their
direct compulsory heirs that shall exempt their lands
from land reform coverage.
In the present case, as previously pointed out,
neither petitioner nor her heirs are personally
cultivating the subject homesteads. The DAR and the
CA found that respondents were the ones who had
been cultivating their respective portions of the
disputed properties.
However, petitioner can retain five (5) hectares in
accordance with Section 6 of RA 6657, which requires
no qualifying condition for the landowner to be entitled
to retain such area. This ruling is in line
with Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform, from
which we quote:
x x x. In any event, assuming that the petitioners have
not yet exercised their retention rights, if any, under
PD No. 27, the Court holds that they are entitled to the
new retention rights provided for by RA No. 6657,
which in fact are on the whole more liberal than those
granted by the decree.

Petitioners heirs, however, are not entitled to

awards of three (3) hectares each, since they are not
actually tilling the parcels or directly managing the
farm.
Patricio v. Bayug and Alita v. CA
Not Applicable
Petitioner insists that the appellate court ignored
the ruling of the Court in Patricio v. Bayug[11] and Alita
v. CA.[12] She relies on the following pronouncement
in Patricio: We hold that the more paramount and
superior policy consideration is to uphold the right of
the homesteader and his heirs to own and cultivate
personally the land acquired from the State without
being encumbered by tenancy relations. [13] She also
cites the statement in Alita that the inapplicability of
P.D. 27 to lands covered by homestead patents like
those of the property in question finds support in the
aforecited Section 6 of RA 6657.[14] A closer look at
these cases shows that they are not applicable to the
issues in the present case.
In Patricio, the owner and his heirs had previously
cultivated the homestead, which was later sold but
subsequently reconveyed to the former. After the
reconveyance, the owners heirs wanted to resume
their cultivation of the homestead, but the previous
buyers tenants did not want to leave it. In Alita, the
owner was also desirous of personally cultivating the
homestead; but the tenants, not wanting to relinquish
it, were asserting their own right to continue
cultivating it. Thus, under these circumstances, the
Court upheld the right of the homestead owners over
that of the tenants.
In the case at bar, petitioner herself has not
personally cultivated the parcels of land. Neither has
she or her heirs expressed, at any time, any desire to
cultivate them personally. She is invoking, yet is

clearly not intending to ever actually exercise, her

alleged right as homesteader to own and personally
cultivate them.
Thus, the rulings in both Patricio and Alita, which
are in line with the state objective of fostering owner
cultivatorship[15] and of abolishing tenancy,[16] would be
inapplicable to the present case. Since petitioner and
her heirs have evinced no intention of actually
cultivating the lands or even directly managing the
farm, they will undoubtedly continue to be absentee
landlords. Therefore, to blindly and indiscriminately
apply the ruling in the cited cases would be
tantamount to encouraging feudalistic practices and
going against the very essence of agrarian
reform. This we cannot sanction.

Second Issue: Just Compensation

It is undisputed that the subject parcels were
covered by Operation Land Transfer under PD 27, and
that
private
respondents
were
identified
as
beneficiaries. In fact, Emancipation Patents have
already been issued to them.
Petitioner, however, claims that she was not paid
just compensation and, thus, prays for the cancellation
of the Emancipation Patents issued to respondents
under PD 27. She contends that it is illegal for the DAR
to take property without full payment of just
compensation[;] until full payment is done the title and
ownership remain with the landholder.[17]
Petitioners contention has merit. Section 2 of PD
266 states:

After the tenant-farmer shall have fully complied with

the requirements for a grant of title under Presidential
Decree No. 27, an Emancipation Patent and/or Grant
shall be issued by the Department of Agrarian Reform
on the basis of a duly approved survey plan.
On the other hand, paragraphs 8 and 9 of PD 27
reads as follows:
For the purpose of determining the cost of the land to
be transferred to the tenant-farmer pursuant to this
Decree, the value of the land shall be equivalent to
two and one-half (2 ) times the average harvest of
three normal crop years immediately preceding the
promulgation of this Decree;
The total cost of the land, including interest at the rate
of six (6) per centum per annum, shall be paid by the
tenant in fifteen (15) years of fifteen (15) equal annual
amortizations[.]
Although, under the law, tenant farmers are
already deemed owners of the land they till, they are
still required to pay the cost of the land, including
interest, within fifteen years before the title is
transferred
to
them. Thus,
the
Court
held
in Association of Small Landowners in the Philippines v.
Secretary of Agrarian Reform:[18]
It is true that PD 27 expressly ordered the
emancipation of tenant-farmers as of October 21, 1972
and declared that he shall be deemed the owner of a
portion of land consisting of a family-sized farm except
that no title to the land owned by him was to be
actually issued to him unless and until he had become
a full-fledged member of a duly recognized farmers
cooperative. It was understood, however, that full
payment of the just compensation also had to be
made first, conformably to the constitutional
requirement.

In the case at bar, there is no showing that

respondents complied with the requirement of full
payment of the cost of the parcels of land. As they
themselves admitted,[19] their value had not even been
determined yet. In the absence of such determination,
the Court cannot rule that just compensation has
already been fully paid.
Presidential Decree 27 and subsequently Executive
Order (EO) 228, which recognized the rights acquired
by tenant-farmers under PD 27, provide in detail the
computation to be used in arriving at the exact total
cost of the parcels of land. Evidently, therefore, the
law recognizes that their exact value, or the just
compensation to be given to the landowner, cannot
just be assumed; it must be determined with certainty
before the land titles are transferred.
Although EO 228 provides that the total lease
rentals paid for the lands from October 21, 1972 shall
be considered as advance payment, it does not
sanction the assumption that such rentals are
automatically considered as equivalent to just
compensation for the land. The provision significantly
designates the lease rentals as advance, not full,
payment. The determination of the exact value of the
lands cannot simply be brushed aside, as it is
fundamental to the determination of whether full
payment has been made.
Necessarily, the lease rentals admittedly paid by
respondents until December 1988 cannot, at this
point, be considered as full settlement of the value of
the lands or as just compensation for them. The value
of the subject lands was never determined; thus, there
is no amount that can be used as basis for applying
the lease rentals.
Under the circumstances, actual title to the subject
lands remains with petitioner. Clearly then, under PD

27 and EO 228, the application of the process of

agrarian reform to the subject lands is still incomplete.
Considering the passage of RA 6657 before the
completion of the application of the agrarian reform
process to the subject lands, the same should now be
completed under the said law, with PD 27 and EO 228
having only suppletory effect. This ruling finds support
in Land Bank of the Philippines v. CA, [20] wherein the
Court stated:
We cannot see why Sec. 18 of RA 6657 should not
apply to rice and corn lands under PD 27. Section 75 of
RA 6657 clearly states that the provisions of PD 27 and
EO 228 shall only have a suppletory effect.Section 7 of
the Act also provides --Sec. 7. Priorities. The DAR, in coordination with the
PARC shall plan and program the acquisition and
distribution of all agricultural lands through a period of
(10) years from the effectivity of this Act. Lands shall
be acquired and distributed as follows:
Phase One: Rice and Corn lands under P.D. 27; all idle
or abandoned lands; all private lands voluntarily
offered by the owners for agrarian reform; x x x and all
other lands owned by the government devoted to or
suitable for agriculture, which shall be acquired and
distributed immediately upon the effectivity of this Act,
with the implementation to be completed within a
period of not more than four (4) years emphasis
supplied).
This eloquently demonstrates that RA 6657 includes
PD 27 lands among the properties which the DAR shall
acquire and distribute to the landless. And to facilitate
the acquisition and distribution thereof, Secs. 16, 17
and 18 of the Act should be adhered to. In Association
of Small Landowners of the Philippines v. Secretary of
Agrarian Reform this Court applied the provisions (of)
RA 6657 to rice and corn lands when it upheld the

constitutionality of the payment of just compensation

for PD 27 lands through the different modes stated in
Sec. 18.
In determining the amount to be paid petitioner, all
lease rentals paid by respondents to her after October
21, 1972 should be deducted therefrom. This formula
is intended to put into effect the provision of Section 2
of EO 228.

Third Issue: Tenants Cannot Be Ejected

Petitioner submits that aside from cancelling the
Emancipation Patents issued to respondents, the
ejectment of the latter from the premises should be
ordered by the Court, in accordance with the doctrine
inPatricio.
Petitioners position is unfounded. As earlier
explained, Patricio finds no application to the case at
bar. Thus, there is no justification for ejecting
respondents. Besides, Section 22 of RA 6657 expressly
states that actual tenant-tillers in the landholding shall
not be ejected or removed therefrom. Furthermore,
there is no reason for ejecting the tillers with respect
to the area of five hectares, which petitioner may
choose to retain. Section 6 of RA 6657 further states:
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 land owner 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 lease holder
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.
In all cases, the security of tenure of the farmers or
farm workers on the land prior to the approval of this
Act shall be respected.
The current provision on retention removes the
necessity, present under PD 27, of ejecting actual
tillers. Under the current law, landowners who do not
personally cultivate their lands are no longer required
to do so in order to qualify for the retention of an area
not exceeding five hectares. Instead, they are now
required to maintain the actual tiller of the area
retained, should the latter choose to remain therein.
WHEREFORE,
the
Petition
is
partially GRANTED. The assailed Decision of the Court
of Appeals is hereby SET ASIDE. The Decision of the
provincial
agrarian
reform
adjudicator
is REINSTATED with the modification that the lease
rentals, which respondents have already paid to
petitioner after October 21, 1972, are to be considered
part of the purchase price for the subject parcels of
land.
SO ORDERED.

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.

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 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.

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.

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

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. Copetitioner 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.

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.

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.

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:

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

(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.

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 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.

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.

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

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

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.

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.

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.

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.

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

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.

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.

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.:

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.

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

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 Twentyfive 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 twentyfour (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,
held:

46

this Court

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 landglutted 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.

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.

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

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.

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

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 wellaccepted 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 full-fledged member of a duly recognized
farmers' cooperative." It was understood, however, that full
payment of the just compensation also had to be made first,
conformably to the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now
deemed full owners as of October 21, 1972 of
the land they acquired by virtue of Presidential
Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired
under the said decree, after proof of full-fledged membership

in the farmers' cooperatives and full payment of just

compensation. 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 tenantfarmers 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.

EN BANC

G.R. No. 127876 December 17, 1999

ROXAS & CO., INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, DEPARTMENT
OF AGRARIAN REFORM, SECRETARY OF AGRARIAN
REFORM, DAR REGIONAL DIRECTOR FOR REGION IV,
MUNICIPAL AGRARIAN REFORM OFFICER OF NASUGBU,
BATANGAS and DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD,respondents.

PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas
owned by petitioner and the validity of the acquisition of
these haciendas by the government under Republic Act No.
6657, the Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the
registered owner of three haciendas, namely, Haciendas
Palico, Banilad and Caylaway, all located in the Municipality
of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in
area and is registered under Transfer Certificate of Title (TCT)
No. 985. This land is covered by Tax Declaration Nos. 0465,
0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050
hectares in area, registered under TCT No. 924 and covered
by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda
Caylaway is 867.4571 hectares in area and is registered
under TCT Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of
then President Corazon C. Aquino. In February 1986,
President Aquino issued Proclamation No. 3 promulgating a
Provisional Constitution. As head of the provisional

government, the President exercised legislative power "until

a legislature is elected and convened under a new
Constitution." 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 hectare under Tax
Declaration No. 0354 as "flat to undulating" with 33 actual
occupants and tillers also of sugarcane. 7

(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

On October 27, 1989, a "Summary Investigation Report" was

submitted and signed jointly by the MARO, representatives of
the Barangay Agrarian Reform Committee (BARC) and Land
Bank of the Philippines (LBP), and by the Provincial Agrarian
Reform Officer (PARO). The Report recommended that
333.0800 hectares of Hacienda Palico be subject to
compulsory acquisition at a value of P6,807,622.20. 8 The
following day, October 28, 1989, two (2) more Summary
Investigation Reports were submitted by the same officers
and representatives. They recommended that 270.0876
hectares and 75.3800 hectares be placed under compulsory
acquisition at a compensation of P8,109,739.00 and
P2,188,195.47, respectively. 9

Almost two years later, on September 26, 1991, the DAR

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

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

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 (08% slope)." On this area were discovered 162 actual
occupants and tillers of sugarcane. 20 In the second Report, it
was found that approximately 235 hectares under Tax
Declaration No. 0390 were "flat to undulating," on which
were 92 actual occupants and tillers of sugarcane. 21
The results of these Reports were discussed at the
conference. Present in the conference were representatives
of the prospective farmer beneficiaries, the BARC, the LBP,
and Jaime Pimentel on behalf of the landowner. 22 After the
meeting, on the same day, September 21, 1989, a Summary
Investigation Report was submitted jointly by the MARO,
representatives of the BARC, LBP, and the PARO. They
recommended that after ocular inspection of the property,
234.6498 hectares under Tax Declaration No. 0390 be subject
to compulsory acquisition and distribution by CLOA. 23 The
following day, September 22, 1989, a second Summary
Investigation was submitted by the same officers. They

recommended that 737.2590 hectares under Tax Declaration

Nos. 0236 and 0237 be likewise placed under compulsory
acquisition for distribution. 24
On December 12, 1989, respondent DAR, through the
Department Secretary, sent to petitioner two (2) separate
"Notices of Acquisition" over Hacienda Banilad. These Notices
were sent on the same day as the Notice of Acquisition over
Hacienda Palico. Unlike the Notice over Hacienda Palico,
however, the Notices over Hacienda Banilad were addressed
to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St.,
Leg.
Makati, Metro Manila.

25

Respondent DAR offered petitioner compensation of

P15,108,995.52 for 729.4190 hectares and
P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to
the LBP Land Valuation Manager a "Request to Open Trust
Account" in 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, T44663, 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.

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:

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

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-0017-9646 (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 haciendas
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 NASUGBU,
BATANGAS AS A TOURIST ZONE, AND THE
ZONING ORDINANCE OF THE MUNICIPALITY OF
NASUGBU RE-CLASSIFYING CERTAIN PORTIONS
OF PETITIONER'S LANDHOLDINGS AS NONAGRICULTURAL, BOTH OF WHICH PLACE SAID
LANDHOLDINGS OUTSIDE THE SCOPE OF
AGRARIAN REFORM, OR AT THE VERY LEAST
ENTITLE PETITIONER TO APPLY FOR
CONVERSION AS CONCEDED BY RESPONDENT
DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY
ERRED WHEN IT FAILED TO DECLARE THE
PROCEEDINGS BEFORE RESPONDENT DAR VOID
FOR FAILURE TO OBSERVE DUE PROCESS,
CONSIDERING THAT RESPONDENTS BLATANTLY
DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A.
6657, MORE PARTICULARLY, IN FAILING TO GIVE
DUE NOTICE TO THE PETITIONER AND TO
PROPERLY IDENTIFY THE SPECIFIC AREAS
SOUGHT TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY
ERRED WHEN IT FAILED TO RECOGNIZE THAT
PETITIONER WAS BRAZENLY AND ILLEGALLY

DEPRIVED OF ITS PROPERTY WITHOUT JUST

COMPENSATION, CONSIDERING THAT
PETITIONER WAS NOT PAID JUST COMPENSATION
BEFORE IT WAS UNCEREMONIOUSLY STRIPPED
OF ITS LANDHOLDINGS THROUGH THE
ISSUANCE OF CLOA'S TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1)
whether this Court can take cognizance of this petition
despite petitioner's failure to exhaust administrative
remedies; (2) whether the acquisition proceedings over the
three haciendas were valid and in accordance with law; and
(3) assuming the haciendas may be reclassified from
agricultural to non-agricultural, whether this court has the
power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent
Court of Appeals gravely erred in finding that petitioner failed
to exhaust administrative remedies. As a general rule, before
a party may be allowed to invoke the jurisdiction of the
courts of justice, he is expected to have exhausted all means
of administrative redress. This is not absolute, however.
There are instances when judicial action may be resorted to
immediately. Among these exceptions are: (1) when the
question raised is purely legal; (2) when the administrative
body is in estoppel; (3) when the act complained of is
patently illegal; (4) when there is urgent need for judicial
intervention; (5) when the respondent acted in disregard of
due process; (6) when the respondent is a department
secretary whose acts, as an alter ego of the President, bear
the implied or assumed approval of the latter; (7) when
irreparable damage will be suffered; (8) when there is no
other plain, speedy and adequate remedy; (9) when strong
public interest is involved; (10) when the subject of the
controversy is private land; and (11) in quo
warranto proceedings. 42

Petitioner rightly sought immediate redress in the courts.

There was a violation of its rights and to require it to exhaust
administrative remedies before the DAR itself was not a
plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award
(CLOA's) to farmer beneficiaries over portions of petitioner's
land without just compensation to petitioner. A Certificate of
Land Ownership Award (CLOA) is evidence of ownership of
land by a beneficiary under R.A. 6657, the Comprehensive
Agrarian Reform Law of 1988. 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 thereceipt 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:
Sec. 16. Procedure for Acquisition of Private
Lands. For purposes of acquisition of private
lands, the following procedures shall be
followed:
a). After having identified the
land, the landowners and the
beneficiaries, the DAR shall send
its notice to acquire the land to the
owners thereof, by personal
delivery or registered mail, and
post the same in a conspicuous
place in the municipal building and
barangay hall of the place where
the property is located. Said notice
shall contain the offer of the DAR to
pay a corresponding value in
accordance with the valuation set
forth in Sections 17, 18, and other
pertinent provisions hereof.
b) Within thirty (30) days from the
date of receipt of written notice by
personal delivery or registered
mail, the landowner, his
administrator or representative

shall inform the DAR of his

acceptance or rejection of the offer.
c) If the landowner accepts the
offer of the DAR, the LBP shall pay
the landowner the purchase price
of the land within thirty (30) days
after he executes and delivers a
deed of transfer in favor of the
Government and surrenders the
Certificate of Title and other
muniments of title.
d) In case of rejection or failure to
reply, the DAR shall conduct
summary administrative
proceedings to determine the
compensation for the land
requiring the landowner, the LBP
and other interested parties to
submit evidence as to the just
compensation for the land, within
fifteen (15) days from receipt of the
notice. After the expiration of the
above period, the matter is
deemed submitted for decision.
The DAR shall decide the case
within thirty (30) days after it is
submitted for decision.
e) Upon receipt by the landowner
of the corresponding payment, or,
in case of rejection or no response
from the landowner, upon the
deposit with an accessible bank
designated by the DAR of the
compensation in cash or in LBP
bonds in accordance with this Act,
the DAR shall take immediate
possession of the land and shall
request the proper Register of

Deeds to issue a Transfer

Certificate of Title (TCT) in the
name of the Republic of the
Philippines. The DAR shall
thereafter proceed with the
redistribution of the land to the
qualified beneficiaries.
f) Any party who disagrees with the
decision may bring the matter to
the court of proper jurisdiction for
final determination of just
compensation.
In the compulsory acquisition of private lands, the
landholding, the landowners and the farmer beneficiaries
must first be identified. After identification, the DAR shall
send a Notice of Acquisition to the landowner, by personal
delivery or registered mail, and post it in a conspicuous place
in the municipal building and barangay hall of the place
where the property is located. Within thirty days from receipt
of the Notice of Acquisition, the landowner, his administrator
or representative shall inform the DAR of his acceptance or
rejection of the offer. If the landowner accepts, he executes
and delivers a deed of transfer in favor of the government
and surrenders the certificate of title. Within thirty days from
the execution of the deed of transfer, the Land Bank of the
Philippines (LBP) pays the owner the purchase price. If the
landowner rejects the DAR's offer or fails to make a reply, the
DAR conducts summary administrative proceedings to
determine just compensation for the land. The landowner,
the LBP representative and other interested parties may
submit evidence on just compensation within fifteen days
from notice. Within thirty days from submission, the DAR
shall decide the case and inform the owner of its decision
and the amount of just compensation. Upon receipt by the
owner of the corresponding payment, or, in case of rejection
or lack of response from the latter, the DAR shall deposit the
compensation in cash or in LBP bonds with an accessible
bank. The DAR shall immediately take possession of the land
and cause the issuance of a transfer certificate of title in the
name of the Republic of the Philippines. The land shall then

be redistributed to the farmer beneficiaries. Any party may

question the decision of the DAR in the regular courts for
final determination of just compensation.
The DAR has made compulsory acquisition the priority mode
of the land acquisition to hasten the implementation of the
Comprehensive Agrarian Reform Program (CARP). 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 or 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 farmerbeneficiaries, the BARC
representative(s), the Land Bank of

the Philippines (LBP)

representative, and other
interested parties to discuss the
inputs to the valuation of the
property. He shall discuss the
MARO/BARC investigation report
and solicit the
views, objection, agreements or
suggestions of the participants
thereon. The landowner shall also
be asked to indicate his retention
area. The minutes of the meeting
shall be signed by all participants
in the conference and shall form an
integral part of the CACF.
4. Submit all completed case
folders to the Provincial Agrarian
Reform Officer (PARO).
B. The PARO shall:
1. Ensure that the individual case
folders are forwarded to him by his
MAROs.
2. Immediately upon receipt of a
case folder, compute the valuation
of the land in accordance with A.O.
No. 6, Series of 1988. 47 The
valuation worksheet and the
related CACF valuation forms shall
be duly certified correct by the
PARO and all the personnel who
participated in the accomplishment
of these forms.
3. In all cases, the PARO may
validate the report of the MARO
through ocular inspection and
verification of the property. This

ocular inspection and verification

shall be mandatory when the
computed value 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 farmerbeneficiaries 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

farmer-beneficiaries, landowner, representatives

of BARC, LBP, DENR, DA, NGO's, farmers'
organizations and other interested parties to
discuss the following matters:

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.

Result of Field Investigation

b) Interview applicants and assist them in the

preparation of the Application For Potential
CARP Beneficiary (CARP Form No. 3).

Comments/recommendations by all parties

concerned.

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

Inputs to valuation
Issues raised

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.

5 DARMO Issue Notice of Coverage CARP

to LO by personal delivery Form No. 2
with proof of service, or
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

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

which should be scheduled at

least two weeks in advance of
said notice.
A copy of said Notice shall CARP
be posted for at least one Form No. 17

(requirements)
A. Identification and
Documentation
xxx xxx xxx

week on the bulletin board of

the municipal and barangay
halls where the property is

located. LGU office concerned

and Land Use Map. However,

notifies DAR about compliance

the field investigation shall

with posting requirements thru

proceed even if the LO, the

return indorsement on CARP

representatives of the DENR and

Form No. 17.

prospective ARBs are not available

6 DARMO Send notice to the LBP, CARP

provided, they were given due

BARC, DENR representatives Form No. 3

notice of the time and date of

and prospective ARBs of the schedule of the field

investigation

investigation to be conducted.
Similarly, if the LBP representative

to be conducted on the subject

is not available or could not come
property.
on the scheduled date, the field
7 DARMO With the participation of CARP
investigation shall also be conducted,
BARC the LO, representatives of Form No. 4
after which the duly accomplished
LBP the LBP, BARC, DENR Land Use
Part I of CARP Form No. 4 shall
DENR and prospective ARBs, Map
be forwarded to the LBP
Local Office conducts the investigation on
representative for validation. If he agrees
subject property to identify
to the ocular inspection report of DAR,
the landholding, determines
he signs the FIR (Part I) and
its suitability and productivity;
accomplishes Part II thereof.
and jointly prepares the Field
In the event that there is a
Investigation Report (FIR)

difference or variance between

the Application of Purchase Form No. 5

the findings of the DAR and the

and Farmer's Undertaking

LBP as to the propriety of

(APFU).

covering the land under CARP,

9 DARMO Furnishes a copy of the CARP

whether in whole or in part, on

duly accomplished FIR to Form No. 4

the issue of suitability to agriculture,

the landowner by personal

degree of development or slope,

delivery with proof of

and on issues affecting idle lands,

service or registered mail

the conflict shall be resolved by

will return card and posts

a composite team of DAR, LBP,

a copy thereof for at least

DENR and DA which shall jointly

one week on the bulletin

conduct further investigation

board of the municipal

thereon. The team shall submit its

and barangay halls where

report of findings which shall be

the property is located.

binding to both DAR and LBP,

LGU office concerned CARP

pursuant to Joint Memorandum

notifies DAR about Form No. 17

Circular of the DAR, LBP, DENR

compliance with posting

and DA dated 27 January 1992.

requirement thru return

8 DARMO Screen prospective ARBs

endorsement on CARP

BARC and causes the signing of CARP

Form No. 17.

B. Land Survey
10 DARMO Conducts perimeter or Perimeter
And/or segregation survey or
DENR delineating areas covered Segregation
Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope
and above, unproductive/
unsuitable to agriculture,
retention, infrastructure.
In case of segregation or
subdivision survey, the
plan shall be approved
by DENR-LMS.
C. Review and Completion
of Documents
11. DARMO Forward VOCF/CACF CARP
to DARPO. Form No. 6
xxx xxx xxx.
DAR A.O. No. 1, Series of 1993, modified the identification
process and increased the number of government agencies
involved in the identification and delineation of the land
subject to acquisition. 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:
Sec. 6. Service upon Private Domestic
Corporation or Partnership. If the defendant is
a corporation organized under the laws of the
Philippines or a partnership duly registered,
service may be made on the president,
manager, secretary, cashier, agent, or any of its
directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in
Section 13, Rule 14 provides:
Sec. 13. Service upon private domestic
corporation or partnership. If the defendant is
a corporation organized under the laws of the
Philippines or a partnership duly registered,
service may be made on the president,
manager, secretary, cashier, agent, or any of its
directors.

Summonses, pleadings and notices in cases against a private

domestic corporation before the DARAB and the regular
courts are served on the president, manager, secretary,
cashier, agent or any of its directors. These persons are
those through whom the private domestic corporation or
partnership is capable of action. 62

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. 68Why
respondent DAR chose to notify Pimentel instead of the
officers of the corporation was not explained by the said
respondent.

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?

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

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." 67Pimentel did not hold office at the principal place
of business of petitioner. Neither did he exercise his functions
in Plaza Cervantes, Manila nor in Cacho-Gonzales Bldg.,
Makati, Metro Manila. He performed his official functions and
actually resided in the haciendas in Nasugbu, Batangas, a
place over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of
petitioner's principal place of business. The Notices of
Acquisition over Haciendas Palico and Banilad were

Assuming further that petitioner was duly notified of the

CARP coverage of its haciendas, the areas found actually
subject to CARP were not properly identified before they were
taken over by respondent DAR. Respondents insist that the
lands were identified because they are all registered property
and the technical description in their respective titles
specifies their metes and bounds. Respondents admit at the
same time, however, that not all areas in the haciendas were
placed under the comprehensive agrarian reform program
invariably by reason of elevation or character or use of the
land. 70
The acquisition of the landholdings did not cover the entire
expanse of the two haciendas, but only portions thereof.
Hacienda Palico has an area of 1,024 hectares and only
688.7576 hectares were targetted for acquisition. Hacienda

Banilad has an area of 1,050 hectares but only 964.0688

hectares were subject to CARP. The haciendas are not
entirely agricultural lands. In fact, the various tax
declarations over the haciendas describe the landholdings as
"sugarland," and "forest, sugarland, pasture land, horticulture
and woodland." 71
Under Section 16 of the CARL, the sending of the Notice of
Acquisition specifically requires that the land subject to land
reform be first identified. The two haciendas in the instant
case cover vast tracts of land. Before Notices of Acquisition
were sent to petitioner, however, the exact areas of the
landholdings were not properly segregated and
delineated. Upon receipt of this notice, therefore, petitioner
corporation had no idea which portions of its estate were
subject to compulsory acquisition, which portions it could
rightfully retain, whether these retained portions were
compact or contiguous, and which portions were excluded
from CARP coverage. Even respondent DAR's evidence does
not show that petitioner, through its duly authorized
representative, was notified of any ocular inspection and
investigation that was to be conducted by respondent DAR.
Neither is there proof that petitioner was given the
opportunity to at least choose and identify its retention area
in those portions to be acquired compulsorily. The right of
retention and how this right is exercised, is guaranteed in
Section 6 of the CARL, viz:
Sec. 6. Retention Limits. . . . .
The right to choose the area to be retained,
which shall be compact or contiguous, shall
pertain to the landowner; Provided, however,
That in case the area selected for retention by
the landowner is tenanted, the tenant shall have
the option to choose whether to remain therein
or be a beneficiary in the same or another
agricultural land with similar or comparable
features. In case the tenant chooses to remain
in the retained area, he shall be considered a
leaseholder and shall lose his right to be a

beneficiary under this Act. In case the tenant

chooses to be a beneficiary in another
agricultural land, he loses his right as a
leaseholder to the land retained by the
landowner. The tenant must exercise this option
within a period of one (1) year from the time the
landowner manifests his choice of the area for
retention.
Under the law, a landowner may retain not more than five
hectares out of the total area of his agricultural land subject
to CARP. The right to choose the area to be retained, which
shall be compact or contiguous, pertains to the landowner. If
the area chosen for retention is tenanted, the tenant shall
have the option to choose whether to remain on the portion
or be a beneficiary in the same or another agricultural land
with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda
Caylaway, which was the subject of a Voluntary Offer to Sell
(VOS). The VOS in the instant case was made on May 6,
1988, 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.

Sec. 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The
government shall purchase all agricultural lands
it deems productive and suitable to farmer
cultivation voluntarily offered for sale to it at a
valuation determined in accordance with Section
6. Such transaction shall be exempt from the
payment of capital gains tax and other taxes
and fees.
Executive Order 229 does not contain the procedure for the
identification of private land as set forth in DAR A.O. No. 12,
Series of 1989. Section 5 of E.O. 229 merely reiterates the
procedure of acquisition in Section 16, R.A. 6657. In other
words, the E.O. is silent as to the procedure for the
identification of the land, the notice of coverage and the
preliminary conference with the landowner, representatives
of the BARC, the LBP and farmer beneficiaries. Does this
mean that these requirements may be dispensed with regard
to VOS filed before June 15, 1988? The answer is no.

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.

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 the two of these four
titles. 75 The land covered by two titles has an area of
855.5257 hectares, but only 648.8544 hectares thereof fell
within the coverage of R.A. 6657. 76 Petitioner claims it does
not know where these portions are located.

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

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

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
present evidence before us that these areas are adjacent to
the haciendas subject of this petition, hence, the haciendas
should likewise be converted. Petitioner urges this Court to
take cognizance of the conversion proceedings and rule
accordingly. 6
We do not agree. Respondent DAR's failure to observe due
process in the acquisition of petitioner's landholdings does
not ipso facto give this Court the power to adjudicate over
petitioner's application for conversion of its haciendas from
agricultural to non-agricultural. The agency charged with the
mandate of approving or disapproving applications for
conversion is the DAR.
At the time petitioner filed its application for conversion, the
Rules of Procedure governing the processing and approval of
applications for land use conversion was the DAR A.O. No. 2,
Series of 1990. Under this A.O., the application for conversion
is filed with the MARO where the property is located. The
MARO reviews the application and its supporting documents
and conducts field investigation and ocular inspection of the
property. The findings of the MARO are subject to review and
evaluation by the Provincial Agrarian Reform Officer (PARO).
The PARO may conduct further field investigation and submit
a supplemental report together with his recommendation to
the Regional Agrarian Reform Officer (RARO) who shall review
the same. For lands less than five hectares, the RARO shall
approve or disapprove applications for conversion. For lands
exceeding five hectares, the RARO shall evaluate the PARO
Report and forward the records and his report to the
Undersecretary for Legal Affairs. Applications over areas
exceeding fifty hectares are approved or disapproved by the
Secretary of Agrarian Reform.

The DAR's mandate over applications for conversion was first

laid down in Section 4 (j) and Section 5 (l) of Executive Order
No. 129-A, Series of 1987 and reiterated in the CARL and
Memorandum Circular No. 54, Series of 1993 of the Office of
the President. The DAR's jurisdiction over applications for
conversion is provided as follows:
A. The Department of Agrarian
Reform (DAR) is mandated to
"approve or disapprove
applications for conversion,
restructuring or readjustment of
agricultural lands into nonagricultural uses," pursuant to
Section 4 (j) of Executive Order No.
129-A, Series of 1987.
B. Sec. 5 (l) of E.O. 129-A, Series of
1987, vests in the DAR, exclusive
authority to approve or disapprove
applications for conversion of
agricultural lands for residential,
commercial, industrial and other
land uses.
C. Sec. 65 of R.A. No. 6657,
otherwise known as the
Comprehensive Agrarian Reform
Law of 1988, likewise empowers
the DAR to authorize under certain
conditions, the conversion of
agricultural lands.
D. Sec. 4 of Memorandum Circular
No. 54, Series of 1993 of the Office
of the President, provides that
"action on applications for land use
conversion on individual
landholdings shall remain as the
responsibility of the DAR, which
shall utilize as its primary

reference, documents on the

comprehensive land use plans and
accompanying ordinances passed
upon and approved by the local
government units concerned,
together with the National Land
Use Policy, pursuant to R.A. No.
6657 and E.O. No. 129-A. 87
Applications for conversion were initially governed by DAR
A.O. No. 1, Series of 1990 entitled "Revised Rules and
Regulations Governing Conversion of Private Agricultural
Lands and 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:

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:

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

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

"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

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. 91Respondent
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 nonagricultural, 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 short-circuit the administrative process, which
has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the
acquisition proceedings. In Hacienda Palico alone, CLOA's
were issued to 177 farmer beneficiaries in 1993. 92 Since then
until the present, these farmers have been cultivating their
lands. 93 It goes against the basic precepts of justice, fairness
and equity to deprive these people, through no fault of their
own, of the land they till. Anyhow, the farmer beneficiaries
hold the property in trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the
acquisition proceedings over the three haciendas are nullified
for respondent DAR's failure to observe due process therein.
In accordance with the guidelines set forth in this decision
and the applicable administrative procedure, the case is
hereby remanded to respondent DAR for proper acquisition
proceedings and determination of petitioner's application for
conversion.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban,
Purisima, Buena, Gonzaga-Reyes and De Leon, Jr., JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Ynares-Santiago, J., concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of
Justice C. Y. Santiago.
Quisumbing, J., I join the in the concurring and dissenting
opinion of J. Santiago.
Pardo, J., I join the concurring and dissenting opinion of J.
Santiago.

Separate Opinions
MELO, J., concurring and dissenting opinion;
I concur in the ponencia of Justice Ynares-Santiago, broad
and exhaustive as it is in its treatment of the issues.
However, I would like to call attention to two or three points
which I believe are deserving of special emphasis.
The apparent incongruity or shortcoming in the petition is
DAR's disregard of a law which settled the non-agricultural
nature of the property as early as 1975. Related to this are
the inexplicable contradictions between DAR's own official
issuances and its challenged actuations in this particular
case.
Presidential Proclamation No. 1520 has the force and effect of
law unless repealed. This law declared Nasugbu, Batangas as
a tourist zone.
Considering the new and pioneering stage of the tourist
industry in 1975, it can safely be assumed that Proclamation
1520 was the result of empirical study and careful
determination, not political or extraneous pressures. It
cannot be disregarded by DAR or any other department of
Government.
In Province of Camarines Sur, et al. vs. Court of Appeals, et
al. (222 SCRA 173, 182 [1993]), we ruled that local
governments need not obtain the approval of DAR to
reclassify lands from agricultural to non-agricultural use. In
the present case, more than the exercise of that power, the
local governments were merely putting into effect a law
when they enacted the zoning ordinances in question.
Any doubts as to the factual correctness of the zoning
reclassifications are answered by the February 2, 1993
certification of the Department of Agriculture that the subject
landed estates are not feasible and economically viable for
agriculture, based on the examination of their slope, terrain,

depth, irrigability, fertility, acidity, and erosion

considerations.
I agree with the ponencia's rejection of respondent's
argument that agriculture is not incompatible and may be
enforced in an area declared by law as a tourist zone.
Agriculture may contribute to the scenic views and variety of
countryside profiles but the issue in this case is not the
beauty of ricefields, cornfields, or coconut groves. May land
found to be non-agricultural and declared as a tourist zone by
law, be withheld from the owner's efforts to develop it as
such? There are also plots of land within Clark Field and other
commercial-industrial zones capable of cultivation but this
does not subject them to compulsory land reform. It is the
best use of the land for tourist purposes, free trade zones,
export processing or the function to which it is dedicated that
is the determining factor. Any cultivation is temporary and
voluntary.
The other point I wish to emphasize is DAR's failure to follow
its own administrative orders and regulations in this case.
The contradictions between DAR administrative orders and
its actions in the present case may be summarized:
1. DAR Administrative Order No. 6, Series of 1994, subscribes
to Department of Justice Opinion No. 44, Series of 1990 that
lands classified as non-agricultural prior to June 15,
1988 when the CARP Law was passed are exempt from its
coverage. By what right can DAR now ignore its own
Guidelines in this case of land declared as forming a tourism
zone since 1975?
2. DAR Order dated January 22, 1991 granted the conversion
of the adjacent and contiguous property of Group Developers
and Financiers, Inc. (GDFI) into the Batulao Tourist Resort.
Why should DAR have a contradictory stance in the adjoining
property of Roxas and Co., Inc. found to be similar in nature
and declared as such?

3. DAR Exemption Order, Case No. H-9999-050-97 dated May

17, 1999 only recently exempted 13.5 hectares of petitioner's
property also found in Caylaway together, and similarly
situated, with the bigger parcel (Hacienda Caylaway) subject
of this petition from CARL coverage. To that extent, it admits
that its earlier blanket objections are unfounded.
4. DAR Administrative Order No. 3, Series of 1996 identifies
the land outside of CARP coverage as:
(a) Land found by DAR as no longer
suitable for agriculture and which
cannot be given appropriate
valuation by the Land Bank;
(b) Land where DAR has already
issued a conversion order;
(c) Land determined as exempt
under DOJ Opinions Nos. 44 and
181; or
(d) Land declared for nonagricultural use by Presidential
Proclamation.
It is readily apparent that the land in this case falls under all
the above categories except the second one. DAR is acting
contrary to its own rules and regulations.
I should add that DAR has affirmed in a Rejoinder (August 20,
1999) the issuance and effectivity of the above
administrative orders.
DAR Administrative Order No. 3, Series of 1996, Paragraph 2
of Part II, Part III and Part IV outlines the procedure for
reconveyance of land where CLOAs have been improperly
issued. The procedure is administrative, detailed, simple, and
speedy. Reconveyance is implemented by DAR which treats
the procedure as "enshrined . . . in Section 50 of Republic Act
No. 6657" (Respondent's Rejoinder). Administrative Order No.

3, Series of 1996 shows there are no impediments to

administrative or judicial cancellations of CLOA's improperly
issued over exempt property. Petitioner further submits, and
this respondent does not refute, that 25 CLOAs covering
3,338 hectares of land owned by the Manila Southcoast
Development Corporation also found in Nasugbu, Batangas,
have been cancelled on similar grounds as those in the case
at bar.
The CLOAs in the instant case were issued over land declared
as non-agricultural by a presidential proclamation and
confirmed as such by actions of the Department of
Agriculture and the local government units concerned. The
CLOAs were issued over adjoining lands similarly situated and
of like nature as those declared by DAR as exempt from CARP
coverage. The CLOAs were surprisingly issued over property
which were the subject of pending cases still undecided by
DAR. There should be no question over the CLOAs having
been improperly issued, for which reason, their cancellation
is warranted.

YNARES-SANTIAGO, J., concurring and dissenting opinion;

I concur in the basic premises of the majority opinion.
However, I dissent in its final conclusions and the dispositive
portion.
With all due respect, the majority opinion centers on
procedure but unfortunately ignores the substantive merits
which this procedure should unavoidably sustain.
The assailed decision of the Court of Appeals had only one
basic reason for its denial of the petition, i.e., the application
of the doctrine of non-exhaustion of administrative remedies.
This Court's majority ponencia correctly reverses the Court of
Appeals on this issue. The ponencia now states that the
issuance of CLOA's to farmer beneficiaries deprived petitioner
Roxas & Co. of its property without just compensation. It rules
that the acts of the Department of Agrarian Reform are

patently illegal. It concludes that petitioner's rights were

violated, and thus to require it to exhaust administrative
remedies before DAR was not a plain, speedy, and adequate
remedy. Correctly, petitioner sought immediate redress from
the Court of Appeals to this Court.
However, I respectfully dissent from the judgment which
remands the case to the DAR. If the acts of DAR are patently
illegal and the rights of Roxas & Co. violated, the wrong
decisions of DAR should be reversed and set aside. It follows
that the fruits of the wrongful acts, in this case the illegally
issued CLOAs, must be declared null and void.
Petitioner Roxas & Co. Inc. is the registered owner of three (3)
haciendas located in Nasugbu, Batangas, namely: Hacienda
Palico comprising of an area of 1,024 hectares more or less,
covered by Transfer Certificate of Title No. 985 (Petition,
Annex "G"; Rollo, p. 203); Hacienda Banilad comprising an
area of 1,050 hectares and covered by TCT No. 924 (Petition,
Annex "I"; Rollo, p. 205); and Hacienda Caylaway comprising
an area of 867.4571 hectares and covered by TCT Nos. T44655 (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 noninclusion of other modes of service can only mean that the
legislature intentionally omitted them. In other words, service
of a notice of acquisition other than personally or by
registered mail is not valid. Casus omissus pro omisso
habendus est. The reason is obvious. Personal service and
service by registered mail are methods that ensure the
receipt by the addressee, whereas service by ordinary mail
affords no reliable proof of receipt.
Since it governs the extraordinary method of expropriating
private property, the CARL should be strictly construed.
Consequently, faithful compliance with its provisions,

especially those which relate to the procedure for acquisition

of expropriated lands, should be observed. Therefore, the
service by respondent DAR of the notices of acquisition to
petitioner by ordinary mail, not being in conformity with the
mandate of R.A. 6657, is invalid and ineffective.
With more reason, the compulsory acquisition of portions of
Hacienda Palico, for which no notices of acquisition were
issued by the DAR, should be declared invalid.
The entire ponencia, save for the last six (6) pages, deals
with the mandatory procedures promulgated by law and DAR
and how they have not been complied with. There can be no
debate over the procedures and their violation. However, I
respectfully dissent in the conclusions reached in the last six
pages. Inspite of all the violations, the deprivation of
petitioner's rights, the non-payment of just compensation,
and the consequent nullity of the CLOAs, the Court is
remanding the case to the DAR for it to act on the
petitioner's pending applications for conversion which have
been unacted upon for seven (7) years.
Petitioner had applications for conversion pending with DAR.
Instead of deciding them one way or the other, DAR sat on
the applications for seven (7) years. At that same time it
rendered the applications inutile by distributing CLOAs to
alleged tenants. This action is even worse than a denial of
the applications because DAR had effectively denied the
application against the applicant without rendering a formal
decision. This kind of action preempted any other kind of
decision except denial. Formal denial was even unnecessary.
In the case of Hacienda Palico, the application was in fact
denied on November 8, 1993.
There are indisputable and established factors which call for
a more definite and clearer judgment.
The basic issue in this case is whether or not the disputed
property is agricultural in nature and covered by CARP. That
petitioner's lands are non-agricultural in character is clearly
shown by the evidence presented by petitioner, all of which

were not disputed by respondents. The disputed property is

definitely not subject to CARP.
The nature of the land as non-agricultural has been resolved
by the agencies with primary jurisdiction and competence to
decide the issue, namely (1) a Presidential Proclamation in
1975; (2) Certifications from the Department of Agriculture;
(3) a Zoning Ordinance of the Municipality of Nasugbu,
approved by the Province of Batangas; and (4) by clear
inference and admissions, Administrative Orders and
Guidelines promulgated by DAR itself.
The records show that on November 20, 1975 even before
the enactment of the CARP law, the Municipality of Nasugbu,
Batangas was declared a "tourist zone" in the exercise of
lawmaking power by then President Ferdinand E. Marcos
under Proclamation No. 1520 (Rollo, pp. 122-123). This
Presidential Proclamation is indubitably part of the law of the
land.
On 20 March 1992 the Sangguniang Bayan of Nasugbu
promulgated its Resolution No. 19, a zonification ordinance
(Rollo, pp. 124-200), pursuant to its powers under Republic
Act No. 7160, i.e., the Local Government Code of 1991. The
municipal ordinance was approved by the Sangguniang
Panlalawigan of Batangas (Rollo, p. 201). Under this
enactment, portions of the petitioner's properties within the
municipality were re-zonified as intended and appropriate for
non-agricultural uses. These two issuances, together with
Proclamation 1520, should be sufficient to determine the
nature of the land as non-agricultural. But there is more.
The records also contain a certification dated March 1, 1993
from the Director of Region IV of the Department of
Agriculture that the disputed lands are no longer
economically feasible and sound for agricultural purposes
(Rollo, p. 213).
DAR itself impliedly accepted and determined that the
municipality of Nasugbu is non-agricultural when it affirmed
the force and effect of Presidential Proclamation 1520. In an

Order dated January 22, 1991, DAR granted the conversion of

the adjoining and contiguous landholdings owned by Group
Developer and Financiers, Inc. in Nasugbu pursuant to the
Presidential Proclamation. The property alongside the
disputed properties is now known as "Batulao Resort
Complex". As will be shown later, the conversion of various
other properties in Nasugbu has been ordered by DAR,
including a property disputed in this petition, Hacienda
Caylaway.
Inspite of all the above, the Court of Appeals concluded that
the lands comprising petitioner's haciendas are agricultural,
citing, among other things, petitioner's acts of voluntarily
offering Hacienda Caylaway for sale and applying for
conversion its lands from agricultural to 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 a
agriculture regardless of the agricultural
products raised or that can be raised thereon."
(RA 6657, Sec. 4; emphasis provided)
In Luz Farms v. Secretary of the Department of Agrarian
Reform and Natalia Realty, Inc. v. Department of Agrarian
Reform, this Court had occasion to rule that agricultural lands
are only those which are arable and suitable.
It is at once noticeable that the common factor that classifies
land use as agricultural, whether it be public or private land,
is its suitability for agriculture. In this connection, RA 6657
defines "agriculture" as follows:
Agriculture, Agricultural Enterprises or
Agricultural Activity means the cultivation of the
soil, planting of crops, growing of fruit trees,
raising of livestock, poultry or fish, including the
harvesting of such farm products, and other
farm activities, and practices performed by a
farmer in conjunction with such farming
operations done by persons whether natural or
juridical. (RA 6657, sec. 3[b])
In the case at bar, petitioner has presented certifications
issued by the Department of Agriculture to the effect that

Haciendas Palico, Banilad and Caylaway are not feasible and

economically viable for agricultural development due to
marginal productivity of the soil, based on an examination of
their slope, terrain, depth, irrigability, fertility, acidity, and
erosion factors (Petition, Annex "L", Rollo, p. 213; Annex
"U", Rollo, p. 228). This finding should be accorded respect
considering that it came from competent authority, said
Department being the agency possessed with the necessary
expertise to determine suitability of lands to agriculture. The
DAR Order dated January 22, 1991 issued by respondent
itself stated that the adjacent land now known as the Batulao
Resort Complex is hilly, mountainous, and with long and
narrow ridges and deep gorges. No permanent sites are
planted. Cultivation is by kaingin method. This confirms the
findings of the Department of Agriculture.
Parenthetically, the foregoing finding of the Department of
Agriculture also explains the validity of the reclassification of
petitioner's lands by the Sangguniang Bayan of Nasugbu,
Batangas, pursuant to Section 20 of the Local Government
Code of 1991. It shows that the condition imposed by
respondent Secretary of Agrarian Reform on petitioner for
withdrawing its voluntary offer to sell Hacienda
Caylaway, i.e., that the soil be unsuitable for agriculture, has
been adequately met. In fact, the DAR in its Order in Case
No. A-9999-050-97, involving a piece of land also owned by
petitioner and likewise located in Caylaway, exempted it from
the coverage of CARL (Order dated May 17, 1999; Annex "D"
of Petitioner's Manifestation), on these grounds.
Furthermore, and perhaps more importantly, the subject
lands are within an area declared in 1975 by Presidential
Proclamation No. 1520 to be part of a tourist zone. This
determination was made when the tourism prospects of the
area were still for the future. The studies which led to the
land classification were relatively freer from pressures and,
therefore, more objective and open-minded. Respondent,
however, contends that agriculture is not incompatible with
the lands' being part of a tourist zone since "agricultural
production, by itself, is a natural asset and, if properly set,
can command tremendous aesthetic value in the form of

scenic views and variety of countryside profiles."

(Comment, Rollo, 579).
The contention is untenable. Tourist attractions are not
limited to scenic landscapes and lush greeneries. Verily,
tourism is enhanced by structures and facilities such as
hotels, resorts, rest houses, sports clubs and golf courses, all
of which bind the land and render it unavailable for
cultivation. As aptly described by petitioner:
The development of resorts, golf courses, and
commercial centers is inconsistent with
agricultural development. True, there can be
limited agricultural production within the
context of tourism development. However, such
small scale farming activities will be dictated by,
and subordinate to the needs or tourism
development. In fact, agricultural use of land
within Nasugbu may cease entirely if deemed
necessary by the Department of Tourism
(Reply, Rollo, p. 400).

The lands subject hereof, therefore, are non-agricultural.

Hence, the voluntary offer to sell Hacienda Caylaway should
not be deemed an admission that the land is agricultural.
Rather, the offer was made by petitioner in good faith,
believing at the time that the land could still be developed
for agricultural production. Notably, the offer to sell was
made as early as May 6, 1988, before the soil thereon was
found by the Department of Agriculture to be unsuitable for
agricultural development (the Certifications were issued on 2
February 1993 and 1 March 1993). Petitioner's withdrawal of
its voluntary offer to sell, therefore, was not borne out of a
whimsical or capricious change of heart. Quite simply, the
land turned out to be outside of the coverage of the CARL,
which by express provision of RA 6657, Section 4, affects only
public and private agricultural lands. As earlier stated, only
on May 17, 1999, DAR Secretary Horacio Morales, Jr.
approved the application for a lot in Caylaway, also owned by
petitioner, and confirmed the seven (7) documentary
evidences proving the Caylaway area to be non-agricultural
(DAR Order dated 17 May 1999, in Case No. A-9999-050-97,
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 noneconomic 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 non-agricultural was meant to stop the DAR
from proceeding with the compulsory acquisition of the lands
and to seek a clear and authoritative declaration that said
lands are outside of the coverage of the CARL and can not be
subjected to agrarian reform.
Petitioner assails respondent's refusal to convert its lands to
non-agricultural use and to recognize Presidential
Proclamation No. 1520, stating that respondent DAR has not
been consistent in its treatment of applications of this nature.
It points out that in the other case involving adjoining lands
in Nasugbu, Batangas, respondent DAR ordered the
conversion of the lands upon application of Group Developers
and Financiers, Inc. Respondent DAR, in that case, issued an
Order dated January 22, 1991 denying the motion for
reconsideration filed by the farmers thereon and finding that:
In fine, on November 27, 1975, or before the
movants filed their instant motion for
reconsideration, then President Ferdinand E.
Marcos issued Proclamation No. 1520, declaring
the municipalities of Maragondon and Ternate in
the province of Cavite and the municipality of
Nasugbu in the province of Batangas
as tourist zone. Precisely, the landholdings in
question are included in such proclamation. Up
to now, this office is not aware that said
issuance has been repealed or amended
(Petition, Annex "W";Rollo, p. 238).
The DAR Orders submitted by petitioner, and admitted by
DAR in its Rejoinder (Rejoinder of DAR dated August 20,
1999), show that DAR has been inconsistent to the extent of
being arbitrary.
Apart from the DAR Orders approving the conversion of the
adjoining property now called Batulao Resort Complex and

the DAR Order declaring parcels of the Caylaway property as

not covered by CARL, a major Administrative Order of DAR
may also be mentioned.
The Department of Justice in DOJ Opinion No. 44 dated March
16, 1990 (Annex "A" of Petitioner's Manifestation) stated that
DAR was given authority to approve land conversions only
after June 15, 1988 when RA 6657, the CARP Law, became
effective. Following the DOJ Opinion, DAR issued its AO No.
06, Series of 1994 providing for the Guidelines on Exemption
Orders (Annex "B", Id.). The DAR Guidelines state that lands
already classified as non-agricultural before the enactment of
CARL are exempt from its coverage. Significantly, the
disputed properties in this case were classified as tourist
zone by no less than a Presidential Proclamation as early as
1975, long before 1988.
The above, petitioner maintains, constitute unequal
protection of the laws. Indeed, the Constitution guarantees
that "(n)o person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied
the equal protection of the laws" (Constitution, Art. III, Sec.
1). Respondent DAR, therefore, has no alternative but to
abide by the declaration in Presidential Proclamation 1520,
just as it did in the case of Group Developers and Financiers,
Inc., and to treat petitioners' properties in the same way it
did the lands of Group Developers, i.e., as part of a tourist
zone not suitable for agriculture.
On the issue of non-payment of just compensation which
results in a taking of property in violation of the Constitution,
petitioner argues that the opening of a trust account in its
favor did not operate as payment of the compensation within
the meaning of Section 16 (e) of RA 6657. In Land Bank of
the Philippines v. Court of Appeals(249 SCRA 149, at 157
[1995]), this Court struck down as null and void DAR
Administrative Circular No. 9, Series of 1990, which provides
for the opening of trust accounts in lieu of the deposit in cash
or in bonds contemplated in Section 16 (e) of RA 6657.

It is very explicit therefrom (Section 16 [e]) that

the deposit must be made only in "cash" or in
"LBP bonds." Nowhere does it appear nor can it
be inferred that the deposit can be made in any
other form. If it were the intention to include a
"trust account" among the valid modes of
deposit, that should have been made express,
or at least, qualifying words ought to have
appeared from which it can be fairly deduced
that a "trust account" is allowed. In sum, there
is no ambiguity in Section 16(e) of RA 6657 to
warrant an expanded construction of the term
"deposit."
xxx xxx xxx
In the present suit, the DAR clearly overstepped
the limits of its powers to enact rules and
regulations when it issued Administrative
Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the
landowner as compensation for his property
because, as heretofore discussed, section 16(e)
of RA 6657 is very specific that the deposit must
be made only in "cash" or in "LBP bonds." In the
same vein, petitioners cannot invoke LRA
Circular Nos. 29, 29-A and 54 because these
implementing regulations cannot outweigh the
clear provision of the law. Respondent court
therefore did not commit any error in striking
down Administrative Circular No. 9 for being null
and void.
There being no valid payment of just compensation, title to
petitioner's landholdings cannot be validly transferred to the
Government. A close scrutiny of the procedure laid down in
Section 16 of RA 6657 shows the clear legislative intent that
there must first be payment of the fair value of the land
subject to agrarian reform, either directly to the affected
landowner or by deposit of cash or LBP bonds in the 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 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 farmerbeneficiaries were illegal inasmuch as no valid payment of
compensation for the lands was as yet effected. By law,
Certificates of Land Ownership Award are issued only to the
beneficiaries after the DAR takes actual possession of the
land (RA 6657, Sec. 24), which in turn should only be after
the receipt by the landowner of payment or, in case of
rejection or no response from the landowner, after the
deposit of the compensation for the land in cash or in LBP
bonds (RA 6657, Sec. 16[e]).
Respondents argue that the Land Bank ruling should not be
made to apply to the compulsory acquisition of petitioner's
landholdings in 1993, because it occurred prior to the
promulgation of the said decision (October 6, 1995). This is
untenable. Laws may be given retroactive effect on
constitutional considerations, where the prospective
application would result in a violation of a constitutional right.
In the case at bar, the expropriation of petitioner's lands was
effected without a valid payment of just compensation, thus
violating the Constitutional mandate that "(p)rivate property
shall not be taken for public use without just compensation"
(Constitution, Art. III, Sec. 9). Hence, to deprive petitioner of

the benefit of the Land Bank ruling on the mere expedient

that it came later than the actual expropriation would be
repugnant to petitioner's fundamental rights.
The controlling last two (2) pages of the ponencia state:
Finally, we stress that the failure of respondent
DAR to comply with the requisites of due
process in the acquisition proceedings does not
give this Court the power to nullify the CLOA's
already issued to the farmer beneficiaries. To
assume the power is to short-circuit the
administrative process, which has yet to run its
regular course. Respondent DAR must be given
the chance to correct its procedural lapses in
the acquisition proceedings. In Hacienda Palico
alone, CLOA's were issued to 177 farmer
beneficiaries in 1993. Since then until the
present, these farmers have been cultivating
their lands. It goes against the basic precepts of
justice, fairness and equity to deprive these
people, through no fault of their own, of the land
they till. Anyhow, the farmer beneficiaries hold
the property in trust for the rightful owner of the
land.
I disagree with the view that this Court cannot nullify illegally
issued CLOA's but must ask the DAR to first reverse and
correct itself.
Given the established facts, there was no valid transfer of
petitioner's title to the Government. This being so, there was
also no valid title to transfer to third persons; no basis for the
issuance of CLOAs.
Equally important, CLOAs do not have the nature of Torrens
Title. Administrative cancellation of title is sufficient to
invalidate them.
The Court of Appeals said so in its Resolution in this case. It
stated:

Contrary to the petitioner's argument that

issuance of CLOAs to the beneficiaries prior to
the deposit of the offered price constitutes
violation of due process, it must be stressed that
the mere issuance of the CLOAs does not vest in
the farmer/grantee ownership of the land
described therein.
At most the certificate merely evidences the
government's recognition of the grantee as the
party qualified to avail of the statutory
mechanisms for the acquisition of ownership of
the land. Thus failure on the part of the
farmer/grantee to comply with his obligations is
a ground for forfeiture of his certificate of
transfer. Moreover, where there is a finding that
the property is indeed not covered by CARP,
then reversion to the landowner shall
consequently be made, despite issuance of
CLOAs to the beneficiaries. (Resolution dated
January 17, 1997, p. 6)
DAR Administrative Order 03, Series of 1996 (issued on
August 8, 1996; Annex "F" of Petitioner's Manifestation)
outlines the procedure for the reconveyance to landowners of
properties found to be outside the coverage of CARP. DAR
itself acknowledges that they can administratively cancel
CLOAs if found to be erroneous. From the detailed provisions
of the Administrative Order, it is apparent that there are no
impediments to the administrative cancellation of CLOAs
improperly issued over exempt properties. The procedure is
followed all over the country. The DAR Order spells out that
CLOAs are not Torrens Titles. More so if they affect land which
is not covered by the law under which they were issued. In its
Rejoinder, respondent DAR states:
3.2. And, finally, on the authority of DAR/DARAB
to cancel erroneously issued Emancipation
Patents (EPs) or Certificate of Landownership
Awards (CLOAs), same is enshrined, it is

respectfully submitted, in Section 50 of Republic

Act No. 6657.

haciendas and that the principal crop of the area

is sugar . . .." (emphasis supplied).

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.

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.

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

With due respect, there is no factual basis for the allegation

in the motion for intervention that farmers have been
cultivating the disputed property.
The property has been officially certified as not fit for
agriculture based on slope, terrain, depth, irrigability, fertility,
acidity, and erosion. DAR, in its Order dated January 22,
1991, stated that "it is quite difficult to provide statistics on
rice and corn yields (in the adjacent property) because there
are no permanent sites planted. Cultivation is by kaingin
method." Any allegations of cultivation, feasible and viable,
are therefore falsehoods.
The DAR Order on the adjacent and contiguous GDFI property
states that "(T)he people entered the property surreptitiously
and were difficult to stop . . .."
The observations of Court of Appeals Justices Verzola and
Magtolis in this regard, found in their dissenting opinion
(Rollo, p. 116), are relevant:
2.9 The enhanced value of land in Nasugbu,
Batangas, has attracted unscrupulous
individuals who distort the spirit of the Agrarian
Reform Program in order to turn out quick
profits. Petitioner has submitted copies of CLOAs
that have been issued to persons other than
those who were identified in the Emancipation

Patent Survey Profile as legitimate Agrarian

Reform beneficiaries for particular portions of
petitioner's lands. These persons to whom the
CLOAs were awarded, according to petitioner,
are not and have never been workers in
petitioner's lands. Petitioners say they are not
even from Batangas but come all the way from
Tarlac. DAR itself is not unaware of the mischief
in the implementation of the CARL in some
areas of the country, including Nasugbu. In fact,
DAR published a "WARNING TO THE PUBLIC"
which appeared in the Philippine Daily Inquirer
of April 15, 1994 regarding this malpractice.
2.10 Agrarian Reform does not mean taking the
agricultural property of one and giving it to
another and for the latter to unduly benefit
therefrom by subsequently "converting" the
same property into non-agricultural purposes.
2.11 The law should not be interpreted to grant
power to the State, thru the DAR, to choose who
should benefit from multi-million peso deals
involving lands awarded to supposed agrarian
reform beneficiaries who then apply for
conversion, and thereafter sell the lands as 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 nonagricultural not so much because of local government action
but by Presidential Proclamation. They were found to be nonagricultural by the Department of Agriculture, and through
unmistakable implication, by DAR itself. The zonification by
the municipal government, approved by the provincial
government, is not the only basis.
On a final note, it may not be amiss to stress that laws which
have for their object the preservation and maintenance of
social justice are not only meant to favor the poor and
underprivileged. They apply with equal force to those who,
notwithstanding their more comfortable position in life, are
equally deserving of protection from the courts. Social justice
is not a license to trample on the rights of the rich in the
guise of defending the poor, where no act of injustice or
abuse is being committed against them. As we held in Land
Bank (supra.):
It has been declared that the duty of the court
to protect the weak and the underprivileged
should not be carried out to such an extent as to
deny justice to the landowner whenever truth
and justice happen to be on his side. As
eloquently stated by Justice Isagani Cruz:
. . . social justice or any justice
for that matter is for the
deserving, whether he be a
millionaire in his mansion or a
pauper in his hovel. It is true that,
in case of reasonable doubt, we are
called upon to tilt the balance in
favor of the poor simply because
they are poor, to whom the
Constitution fittingly extends its
sympathy and compassion. But
never is it justified to prefer the
poor simply because they are poor,

or to eject the rich simply because

they are rich, for justice must
always be served, for poor and rich
alike, according to the mandate of
the law.
IN THE LIGHT OF THE FOREGOING, I vote to grant the petition
for certiorari; and to declare Haciendas Palico, Banilad and
Caylaway, all situated in Nasugbu, Batangas, to be nonagricultural 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.

SECOND DIVISION
G.R. No. 204964

October 15, 2014

REMIGIO D. ESPIRITU AND NOEL AGUSTIN, Petitioners,

vs.
LUTGARDA TORRES DEL ROSARIO represented by
SYLVIA R. ASPERILLA, Respondents.
DECISION
LEONEN, J.:
Lands classified as non-agricultural in zoning ordinances
approved by the Housing and Land Use Regulatory Board or
its predecessors prior to June 15, 1998 are outside the
coverage of the compulsory acquisition program of the
Comprehensive Agrarian Reform Law. However, there has to
be substantial evidence to prove that lands sought to be
exempted fall within the non-agricultural classification.
This is a petition for review on certiorari 1 seeking to set aside
the decision2 dated September 28, 2012 and
resolution3 dated November 29, 2012 of the Court of Appeals.
These orders reinstated the order4 dated February 19, 2004
of then Secretary of Agrarian Reform Roberto M.
Pagdanganan approving petitioners application for
exemption.
The pertinent facts are as follows:
In 1978, the City Council of Angeles City, Pampanga, enacted
Zoning Ordinance No. 13, Series of 1978, classifying areas in
Barangay Margot and Barangay Sapang Bato, Angeles City,
as agricultural land.5
Pursuant to this ordinance, Lutgarda Torres del Rosario (del
Rosario) allegedly requested the City Zoning Administrator to
exempt from the zoning classification Lot Nos. 854 and 855
located in Barangay Margot and Barangay Sapang Bato,
Angeles City.6 The land is covered by Transfer Certificate of

Title No. T-11809 withan area of 164.7605 hectares. 7 The

request was allegedly approved on March 7, 1980 by
Engineer Roque L. Dungca, Angeles City Development
Coordinator/Zoning Administrator, and the lots were allegedly
reclassified as non-agricultural or industrial lots. 8
On June 10, 1988, the Comprehensive Agrarian Reform Law
(Republic Act No. 6657) was enacted.
On October 10, 2000, del Rosario, through her representative
Sylvia R. Asperilla (Asperilla), filed an application for
exemption with the Department of Agrarian Reform, seeking
to exempt Lot Nos. 854 and 855 from the Comprehensive
Agrarian Reform Program (CARP) coverage.9
On February 19, 2004, then Secretary of Agrarian Reform
Roberto M. Pagdanganan (Secretary Pagdanganan) issued an
order granting the application for exemption. Citing
Department of Justice Opinion No. 44, Series of 1990,
Secretary Pagdanganan stated that lands classified as non
agricultural before the enactment of CARP are beyond its
coverage.10
On March 26, 2004, farmers in del Rosarios landholdings, led
by Remigio Espiritu (Espiritu), filed a motion for
reconsideration11 of the order. They argued that under Zoning
Ordinance No. 13, Series of 1978, Housing and Land Use
Regulatory Board Resolution No. 705, Series of 2001, and
Angeles City Council Resolution No. 3300, Series of 2001, the
land holdings were classified as agricultural, not
industrial.12 They argued that as per certifications by the
Housing and Land Use Regulatory Board dated June 1, 2001,
May 28, 2001, and November 24, 2003, the landholdings
were within the agricultural zone, and there was no zoning
ordinance passed that reclassified the area into other land
uses.13
The motion was given due course by the Department of
Agrarian Reform, this time headed by Secretary Nasser C.
Pangandaman (Secretary Pangandaman). Hence, on June 15,
2006, then Secretary Pangandaman issued an

order14 granting the motion for reconsideration and revoking

the earlier order of then Secretary of Agrarian Reform
Pagdanganan.
Del Rosario contended that this order was sent to her
through Clarita Montgomery in Barangay Margot, Sapang
Bato, Angeles City, and not at Asperillas address in Cubao,
Quezon City, which was her address on record. Del Rosario
alleged that she only came to know of the order on January
26, 2007, when the Provincial Agrarian Reform Officer of
Pampanga handed her a copy of the order. 15 She then filed
her motion for reconsideration of the order dated June 15,
2006. The motion was dated February 9, 2007. 16
Acting on del Rosarios motion for reconsideration, Secretary
Pangandaman found that the certifications issued by the
Housing and Land Use Regulatory Board classified the
landholdings as agricultural before June 15, 1988. 17Based on
the ocular inspections conducted by the Center for Land Use
Policy, Planning and Implementation (CLUPPI), the land
remained agricultural and was planted with sugar cane and
corn.18 Accordingly, Secretary Pangandaman denied del
Rosarios motion in the order19 dated March 3, 2008.
Del Rosario filed a notice of appeal20 before the Office of the
President on March 27, 2008.
On May 7, 2009, the Office of the President, through then
Deputy Executive Secretary for Legal Affairs Manuel B. Gaite
(Deputy Executive Secretary Gaite), rendered the
decision21 dismissing the appeal for lack of merit.
Del Rosario filed a motion for extension of 10 days to file her
motion for reconsideration.22 Citing Administrative Order No.
18, Series of 1987, and Habaluyas Enterprises, Inc. v.
Japzon,23 the Office of the President, through then Deputy
Executive Secretary Natividad G. Dizon, denied the motion in
the order24 dated July 14, 2009.
Aggrieved, del Rosario filed a petition for review before the
Court of Appeals arguing (1) that she was denied due process

when the order of Secretary Pangandaman was "erroneously

sent to another address"25 and (2) that the decision of then
Deputy Executive Secretary Gaite was void since he had
been appointed to the Securities and Exchange Commission
two months prior to the rendering of the decision. 26
On September 28, 2012, the Court of Appeals rendered a
decision granting the petition. The Court of Appeals stated
that del Rosario was indeed prevented from participating
inthe proceedings that led to the issuance of Secretary
Pangandamans order when the notices were sent to her
other address on record.27 It also found that the decision
issued by then Deputy Executive Secretary Gaite was void
since it violated Article VII, Section 13 of the
Constitution.28 The dispositive portion of the decision states:
WHEREFORE, premises considered, the PETITION is
GRANTED. The assailed Decision dated 07 May 2009, and the
Order dated 15 June 2006 are hereby SET ASIDE. Perforce,
with the nullity of the said Decision and Order, the
Pagdanganan Order granting exemption to petitioners land is
REINSTATED.
SO ORDERED.29
Their motion for reconsideration having been
denied,30 petitioners, namely Remigio Espiritu and Noel
Agustin, now come before this court via a petition for review
on certiorari, seeking to set aside the ruling of the Court of
Appeals.
In particular, petitioners argue that respondent was not
denied due process as she was able to actively participate in
the proceedings before the Department of Agrarian Reform
and the Office of the President.31 They also argue that
respondent was not able to present proof that Deputy
Executive Secretary Gaite was not authorized tosign the
decision and, hence, his action is presumed to have been
donein the regular performance of duty. 32

Respondent, on the other hand, argues that the Court of

Appeals did not commit any reversible error in itsdecision.
She argues that she was deprived of due process when
Secretary Pangandamans order was sent to the wrong
address. She also argues that the Deputy Executive
Secretary Gaites decision was void since he had already
been appointed to the Securities and Exchange Commission
two months prior.33
The issue, therefore, before this court is whether the Court of
Appeals correctly set aside the order of Secretary
Pangandaman and the decision of Deputy Secretary Gaite
and reinstated the order of Secretary Pagdanganan.
This petition should be granted.
Respondent was not deprived of due process
The Court of Appeals, in finding for respondent, stated that:
Since she was not notified, [del Rosario] was not able to
participate in the proceedings leading to the issuance of the
Pangandaman Order. The absence of notice that resulted in
the inability of [del Rosario] to be heard indubitably confirms
her claim of lackof due process. [Del Rosario] indeed was
denied her day in the administrative proceedings below. And
considering that [del Rosario] was not accorded due process,
the Pangandaman Order is void for lack ofjurisdiction. Hence,
contrary to respondents submission, it could not attain
finality.34
The Court of Appeals, however, did not take into
consideration that respondent was still able to file a motion
for reconsideration of Secretary Pangandamans order, albeit
beyond the allowable period to file. In Department of
Agrarian Reform Administrative Order No. 06,35 Series of
2000:
RULE III
Commencement, Investigation and Resolution of Cases

....
SECTION 21. Motion for Reconsideration. In case any of the
parties disagrees with the decision or resolution, the affected
party may file a written motion for reconsideration within
fifteen (15) days from receipt of the order, furnishing a copy
thereof tothe adverse party. The filing of the motion for
reconsideration shall suspend the running of the period to
appeal.
Any party shall be allowed only one(1) motion for
reconsideration. Thereafter, the RD or approving authority
shall rule on the said motion within fifteen (15) days from
receipt thereof. In the event that the motion is denied, the
adverse party has the right to perfect his appeal within the
remainder of the period to appeal, reckoned from receipt of
the resolution of denial. If the decision is reversed on
reconsideration, the aggrieved party shall have fifteen (15)
days from receipt of the resolution of reversal within which to
perfect his appeal.(Emphasis supplied) Despite being filed
late, Secretary Pangandaman still gave due course to the
motion and resolved it on its merits. This is clear from his
order dated March 3, 2008, which reads:
During the 50th Special CLUPPI Committee-B Meeting, held
on 18 December 2007, the Motion for Reconsideration filed
by Sylvia Espirilla [sic] was deliberated upon and the
Committee recommended the DENIAL of the Motion for
Reconsideration based on the following grounds:
The certifications issued by the HLURB shows that
the subject properties were classified as agricultural
before 15 June 1986 [sic]; and
Based on the ocular inspection conducted by the
CLUPPI Inspection Team, it was found out that the area
remained agricultural. In fact, it [is] still dominantly
planted with sugar cane and corn.36 (Emphasis
supplied)

While it may be true that respondent was prevented from

filing a timelymotion for reconsideration of Secretary
Pangandamans order, it would be erroneous to conclude that
she had been completely denied her opportunity to be heard.
In Department of Agrarian Reform v. Samson:37
. . . . In administrative proceedings, a fair and reasonable
opportunity to explain ones side suffices to meet the
requirements of due process.In Casimiro v. Tandog, the Court
held:
The essence of procedural due process is embodied in the
basic requirement of notice and a real opportunity to be
heard. In administrative proceedings, such as in the case at
bar, procedural due process simply means the opportunity to
explain ones sideor the opportunity to seek a
reconsideration of the action or ruling complained of. "To be
heard" does not mean only verbal arguments in court; one
may be heard also thru pleadings. Where opportunity to be
heard, either through oral arguments or pleadings, is
accorded, there is no denial of procedural due process.
In administrative proceedings, procedural due process has
been recognized toinclude the following: (1) the right to
actual or constructive notice of the institution of proceedings
which may affect a respondents legal rights; (2) a real
opportunity to be heard personally or with the assistance of
counsel, to present witnesses and evidence in ones favor,
and to defend ones rights; (3) a tribunal vested with
competent jurisdiction and so constituted as to afford a
person charged administratively a reasonable guarantee of
honesty as well as impartiality; and (4) a finding by said
tribunal which is supported by substantial evidence
submitted for consideration during the hearing or contained
in the records or made known to the parties
affected.38 (Emphasis supplied)
When respondent filed her motion for reconsideration
assailing Secretary Pangandamans order, she was able to
completely and exhaustively present her arguments. The
denial of her motion was on the basis of the merits of her

arguments and any other evidence she was able to present.

She was given a fair and reasonable opportunity to present
her side; hence, there was no deprivation of due process.
It was also erroneous to conclude that respondent was
"denied her day in the administrative proceedings
below."39Respondent was able to actively participate not only
in the proceedings before the Department of Agrarian
Reform, but also on appeal to the Office of the President and
the Court of Appeals.
Deputy Executive Secretary Gaites decision is presumed
valid, effective, and binding
Article VII, Section 13 of the Constitution states:
Section 13. The President, Vice-President, the Members of the
Cabinet, and their deputies orassistants shall not, unless
otherwise provided in this Constitution, hold any other office
or employment during their tenure. They shall not, during
said tenure, directly or indirectly, practice any other
profession, participate in any business, or be financially
interested in any contract with, or in any franchise, or special
privilege granted by the Government or any subdivision,
agency, or instrumentality thereof, including governmentowned or controlled corporations or their subsidiaries. They
shall strictly avoid conflict ofinterest in the conduct of their
office.
. . . . (Emphasis supplied)
It is alleged that Gaite was appointed Commissioner to the
Securities and Exchange Commission on March 16, 2009. 40 It
is also alleged that he has already lost his authority as
Deputy Executive Secretary for Legal Affairs when he
rendered the decision dated May 7, 2009 since he is
constitutionally prohibited from holding two offices during his
tenure. This, however, is not conclusive since no evidence
was presented as to when he accepted the appointment,
took his oath of office, or assumed the position.

Assuming that Gaites appointment became effective on

March 16, 2009, he can be considered a de factoofficer at the
time he rendered the decision dated May 7, 2009.
In Funa v. Agra,41 a petition was filed against Alberto Agra for
holding concurrent positions as the acting Secretary of Justice
and as Solicitor General. This court, while ruling that the
appointment of Alberto Agra as acting Secretary of Justice
violated Article VII, Section 13 of the Constitution, held that
he was a de facto officer during his tenure in the Department
of Justice:
A de facto officer is one who derives his appointment from
one having colorable authority to appoint, if the office is an
appointive office, and whose appointment is valid on its face.
He may also be one who is in possession of an office, and is
discharging its duties under color of authority, by which is
meant authority derived from an appointment, however
irregular or informal, so that the incumbent is not a mere
volunteer. Consequently, the acts of the de facto officer are
just as valid for all purposes as those of a de jure officer, in
so far as the public or third persons who are interested
therein are concerned.
In order to be clear, therefore, the Court holds that all official
actions of Agra as a de facto Acting Secretary of Justice,
assuming that was his later designation, were presumed
valid, binding and effective as if he was the officer legally
appointed and qualified for the office. This clarification is
necessary in order to protect the sanctity of the dealings by
the public with persons whose ostensible authority emanates
from the State. Agras official actions covered by this
clarification extend to but are not limited to the promulgation
of resolutions on petitions for review filed in the Department
of Justice, and the issuance of department orders,
memoranda and circulars relative to the prosecution of
criminal cases.42 (Emphasis supplied)

Assuming that Gaite was a de facto officer of the Office of the

President after his appointment to the Securities and
Exchange Commission, any decision he renders during this
time is presumed to be valid, binding, and effective.
With Gaite being a public officer, his acts also enjoy the
presumption of regularity, thus:
The presumption of regularity of official acts may be rebutted
by affirmative evidence of irregularity or failure to perform a
duty. The presumption, however, prevails until it is overcome
by no less than clear and convincing evidence to the
contrary. Thus, unless the presumption in [sic] rebutted, it
becomes conclusive. Every reasonable intendment will be
madein support of the presumption and in case of doubt as
to an officers act being lawful or unlawful, construction
should be in favor of its lawfulness. 43 (Emphasis supplied)
Respondent has not presented evidence showing that the
decision was rendered ultra vires, other than her allegation
that Gaite had already been appointed to another office.
Unless there is clear and convincing evidence to the contrary,
the decision dated May 7, 2009 is conclusively presumed to
have been rendered in the regular course of business.
Respondents landholdings were agricultural, not industrial
Prior to the enactment of Republic Act No. 6657, lands were
classified into agricultural, residential, or industrial by law or
by zoning ordinances enacted by local government units. In
Heirs of Luna v. Afable:44
It is undeniable that local governments have the power to
reclassify agricultural into non-agricultural lands. Section 3 of
RA No. 2264 (The Local Autonomy Act of 1959) specifically
empowers municipal and/or city councils to adopt zoning and
subdivision ordinances or regulations in consultation with the
National Planning Commission. By virtue of a zoning
ordinance, the local legislature may arrange, prescribe,
define, and apportion the land within itspolitical jurisdiction
into specific uses based not only on the present, butalso on

the future projection of needs. It may, therefore, be

reasonably presumed that when city and municipal boards
and councils approved an ordinance delineating an area or
district in their cities or municipalities as residential,
commercial, or industrial zone pursuant to the power granted
tothem under Section 3 of the Local Autonomy Act of 1959,
they were, at the same time, reclassifying any agricultural
lands within the zone for non-agricultural use; hence,
ensuring the implementation of and compliance with their
zoning ordinances.45 (Emphasis supplied) Republic Act No.
6657 became effective on June 15, 1988, and it covered all
public and private lands, including lands of the public domain
suited for agriculture.46 Upon its enactment, questions arose
as to the authority of the Department of Agrarian Reform to
approve or disapprove applications for conversion of
agricultural land to non-agricultural. Then Agrarian Reform
Secretary Florencio B.Abad (Secretary Abad) was of the
opinion that laws prior to Republic Act No. 6657 authorized
the Department of Agrarian Reform, together with the
Department of Local Government and Community
Development and the Human Settlements Commission, to
allow or disallow conversions. In response to Secretary
Abads query, the Department of Justice issued Opinion No.
44 on March 16, 1990, written by then Secretary of Justice
Franklin M.Drilon. The opinion, reproduced in full, states:
Sir:
This refers to your letter of the 13th instant stating your
"position that prior to the passage of R.A. 6657, the
Department of Agrarian Reform had the authority to classify
and declare which agricultural lands are suitable for nonagricultural purposes, and to approve or disapprove
applications for conversion from agricultural to nonagricultural uses."
In support of the foregoing view, you contend that under R.A.
No. 3844, as amended, the Department of Agrarian Reform
(DAR) is empowered to "determine and declare anagricultural
land to be suited for residential, commercial, industrial
orsome other urban purpose" and to "convert agricultural

land from agricultural to non-agricultural purposes"; that P.D.

No. 583, as amended by P.D. No. 815 "affirms that the
conversion of agricultural lands shall be allowed only upon
previous authorization of the [DAR]; with respectto tenanted
rice and corn lands"; that a Memorandum of Agreement
dated May 13, 1977 between the DAR, the Department of
Local Government and Community Development and the
then Human Settlements Commission "further affirms the
authority of the [DAR] to allow or disallow conversion of
agricultural lands"; that E.O. No. 129-A expressly invests the
DAR with exclusive authority to approve or disapprove
conversion of agricultural lands for residential, commercial,
industrial and other land uses'; and that while inthe final
version of House Bill 400, Section 9 thereof provided that
lands devoted to "residential, housing, commercial and
industrial sites classified as such by the municipal and city
development councils as already approved by the Housing
and Land Use Regulatory Board, in their respective zoning
development plans" be exempted from the coverage of the
Agrarian Reform program, this clause was deleted from
Section 10 of the final version of the consolidated bill stating
the exemptions from the coverage of the Comprehensive
Agrarian Reform Program. We take it that your query has
been prompted by the study previously made by this
Department for Executive Secretary Catalino Macaraig Jr. and
Secretary Vicente Jayme (Memorandum dated February 14,
1990) which upheld the authority of the DAR to authorize
conversions of agricultural lands to non-agricultural uses as
of June 15, 1988, the date of effectivity of the Comprehensive
Agrarian Reform Law (R.A. No. 6657). [I]t is your position that
the authority of DAR to authorize such conversion existed
even prior to June 15, 1988 or as early as 1963 under the
Agricultural Land Reform Code(R.A. No. 3844; as amended).
It should be made clear at the outset that the
aforementioned study of this Department was based on facts
and issues arising from the implementation of the
Comprehensive Agrarian Reform Program (CARP). While there
is no specific and express authority given to DAR in the CARP
law to approve or disapprove conversion of agricultural lands
to nonagricultural uses, because Section 65 only refers to
conversions effected after five years from date of the award,

we opined that the authority of the DAR to approve or

disapprove conversions of agricultural lands to
nonagricultural uses applies only to conversions made on or
after June 15, 1988, the date of effectivity of R.A.No. 6657,
solely on the basis of our interpretation of DAR's mandate
and the comprehensive coverage of the land reform program.
Thus, we said:
"Being vested with exclusive original jurisdiction over all
matters involving the implementation of agrarian reform, it is
believed to be the agrarian reform law's intention that any
conversion ofa private agricultural land to non-agricultural
uses should be cleared beforehand by the DAR. True, the
DAR's express power over land use conversion is limited to
cases in which agricultural lands already awarded have, after
five years, ceased 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. But to suggest
that these are the only instances when the DAR can require
conversion clearances would open a loophole in the R.A. No.
6657, which every landowner may use to evade compliance
with the agrarian reform program. Hence, it should logically
follow from the said department's express duty and function
to execute and enforce the said statute that any
reclassification of a private land as a residential, commercial
or industrial property should first be cleared by the DAR."
It is conceded that under the laws in force prior to the
enactment and effective date of R.A. No. 6657, the DAR had
likewise the authority, to authorize conversions of agricultural
lands to other uses, but always in coordination with other
concerned agencies. Under R.A. No. 3344, as amended by
R.A. No. 6389, an agricultural lessee may, by order of the
court, be dispossessed of his landholding if after due hearing,
it is shown that the "landholding is declared by the [DAR]
upon the recommendation of the National Planning
Commission to be suited for residential, commercial,
industrial or some other urban purposes."

Likewise, under various Presidential Decrees (P.D. Nos. 583,

815 and 946) which were issued to give teeth to the
implementation of the agrarian reform program decreed
inP.D. No. 27, the DAR was empowered to authorize
conversions of tenanted agricultural lands, specifically those
planted to rice and/or corn, to other agricultural or tononagricultural uses, "subject to studies on zoning of the Human
Settlements Commissions" (HSC). This non-exclusive
authority of the DAR under the aforesaid laws was, as you
have correctly pointed out, recognized and reaffirmed by
other concerned agencies, such as the Department of Local
Government and Community Development (DLGCD) and the
then Human Settlements Commission (HSC) in a
Memorandum of Agreement executed by the DAR and these
two agencies on May 13, 1977, which is an admission that
with respect to land use planning and conversions, the
authority is not exclusive to any particular agency but is a
coordinated effort of all concerned agencies.
It is significant to mention thatin 1978, the then Ministry of
Human Settlements was granted authority to review and
ratify land use plans and zoning ordinance of local
governments and to approve development proposals which
include land use conversions (see LOI No. 729 [1978]). This
was followed by P.D.No. 648 (1981) which conferred upon the
Human Settlements Regulatory Commission (the
predecessors of the Housing and Land Use Regulatory Board
[HLURB][)] the authority to promulgate zoning and other land
use control standards and guidelines which shall govern land
use plans and zoning ordinances of local governments,
subdivision or estate development projects of both the public
and private sector and urban renewal plans, programs and
projects; as well as to review, evaluate and approve or
disapprove comprehensive land use development plans and
zoning components of civil works and infrastructure projects,
of national, regional and local governments, subdivisions,
condominiums or estate development projects including
industrial estates.
P.D. No. 583, as amended by P.D. No. 815, and the 1977
Memorandum of Agreement, abovementioned, cannot
therefore, be construed as sources of authority of the DAR;

these issuances merely affirmed whatever power DAR had at

the time oftheir adoption.
With respect to your observation that E.O. No. 129-A also
empowered the DAR to approve or disapprove conversions of
agricultural lands into non-agricultural uses as of July 22,
1987, it is our view that E.O. No. 129-A likewise did not
provide a new source of power of DAR with respect to
conversion but it merely recognized and reaffirmed the
existence of such power as granted under existing laws. This
is clearly inferrable from the following provision of E.O. No.
129-A to wit:
"Sec. 5. Powers and Functions. Pursuant to the mandate of
the Department, and in order to ensure the successful
implementation of the Comprehensive Agrarian Reform
Program, the Department is hereby authorized to:
1) Have exclusive authority to approve or disapprove
conversion of agricultural lands for residential, commercial,
industrial and other land uses as may be provided by law"
Anent the observation regarding the alleged deletion of
residential, housing, commercial and industrial sites
classifiedby the HLURB in the final version of the CARP bill,
we fail to see how this [sic] circumstances could substantiate
your position that DAR's authority to reclassify or approve
conversions of agricultural lands to non-agricultural uses
already existed prior to June 15, 1988. Surely, it is clear that
the alleged deletion was necessary to avoid a redundancy
inthe CARP law whose coverage is expressly limited to "all
public and private agricultural lands" and "other lands of the
public domain suitable for agriculture" (Sec. 4, R.A. No.
6657). Section 3(c) of R.A. No. 6657 defines "agricultural
land" as that "devoted to agricultural activity as defined in
the Act and not classified as mineral forest, residential,
commercial or industrial land."
Based on the foregoing premises, wereiterate the view that
with respect to conversions ofagricultural lands covered by
R.A. No. 6657 to non-agricultural uses, the authority of DAR

to approve such conversions may be exercised from the date

of the law's effectivity on June 15, 1988. This conclusion is
based on a liberal interpretation of R.A. No. 6657 in the light
of DAR's mandate and the extensive coverage of the agrarian
reform program.47 (Emphasis supplied) Department of Justice
Opinion No. 44 became the basis of subsequent issuances by
the Department of Agrarian Reform, stating in clear terms
that parties need not seek prior conversion clearance from
the Department of Agrarian Reform for lands that were
classified as non-agricultural prior to Republic Act No. 6657.
The subsequent rulings are outlined in Junio v. Secretary
Garilao:48
Following the opinion of the Department of Justice (DOJ), the
DAR issued Administrative Order (AO)No. 6, Series of 1994,
stating that conversion clearances were no longer needed for
lands already classified as non-agricultural before the
enactment of Republic Act 6657. Designed to "streamline the
issuance of exemption clearances, based on DOJ Opinion No.
44," the AO provided guidelines and procedures for the
issuance of exemption clearances.
Thereafter, DAR issued AO 12, Series of 1994, entitled
"Consolidated and Revised Rules and Procedures Governing
Conversion of Agricultural Lands to Non-Agricultural Uses." It
provided that the guidelines on how to secure an exemption
clearance under DAR AO No. 6, Series of 1994, shall apply to
agricultural lands classified or zoned for non-agricultural uses
by local government units (LGUs); and approved by the
Housing and Land Use Regulatory Board (HLURB) before June
15, 1988. Under this AO, the DAR secretary had the ultimate
authority to issue orders granting or denying applications for
exemption filed by landowners whose lands were covered by
DOJ Opinion No. 44.49 (Citations omitted)
Accordingly, lands are consideredexempt from the coverage
of Republic Act No. 6657 if the following requisites are
present:
1. Lands were zoned for non-agricultural use by the
local government unit; and

2. The zoning ordinance was approved by the Housing

and Land Use Regulatory Board before June 15, 1998.
In revoking the prior order of exemption, Secretary
Pangandaman took note of the following considerations:
The Certification dated 18 November 2003, of Mr.
David D. David, Planning Officer IV and Zoning
Administrator of the City of Angeles states that the
City Planning and Development Office, Zoning
Administration Unit (CPDO-ZAU) certifies that subject
property covered by TCT No. 11804 is classified as
agricultural based on the certified photocopy of Zoning
Ordinance, Ordinance No. 13, Series of 1978, issued by
the Housing and Land Use Regulatory Board, Regional
Office No. 3 (HLURB-Region III) on 03 September 2001;
Also, upon verification with HLURB-Region III, we
were informed that as per copy of the approved
Zoning Plan of 1978, the subject properties were
classified as agricultural. The said Zoning Plan of 1978
was approved under NCC Plan dated 24 September
1980; and
Based on the ocular inspection conducted by the
CLUPPI Inspection Team, it was found that the area
remained agricultural. In fact, it is still dominantly
planted withsugar cane and corn.50
(Emphasis supplied)
Upon respondents motion for reconsideration, Secretary
Pangandaman also took into consideration the
recommendations of the Center for Land Use Policy, Planning,
and Implementation Committee, thus:
During the 50th Special CLUPPI Committee-B Meeting, held
on 18 December 2007, the Motion for Reconsideration filed
by Sylvia Espirilla [sic] was deliberated upon and the
Committee recommended the DENIAL of the Motion for
Reconsideration based on the following grounds:

The certifications issued by the HLURB shows that

the subject properties were classified as agricultural
before 15 June 1986 [sic]; and
Based on the ocular inspection conducted by the
CLUPPI Inspection Team, it was found out that the area
remained agricultural.1wphi1 In fact, it [is] still
dominantly planted with sugar cane and
corn.51 (Emphasis supplied)
Secretary Pangandaman also found that:
The certifications submitted by the [respondents] which is
the Certification dated 18 November 2003, of Mr. David D.
David, Planning Officer IV and Zoning Administrator of the
City of Angeles states that the City Planning Development
Office, Zoning Administration Unit (CPDOZAU) certifies that
the subject properties covered by TCT No. T-11804 is
classified as agricultural based on the certified photocopy of
Zoning Ordinance, Ordinance No. 13[,] Series of 1978 issued
by the Housing and Land Use Regulatory Board, Regional
Office No. 3 (HLURB-Region III) on 03 September 2001.
Such certification was corroborated bya certification issued
by the HLURB Regional Director, Region III, Ms. Edithat [sic]
Barrameda in its certification dated 28 May 2001 and 24
November 2003. It was stated in the said certification that
the subject landholding is within the agricultural zone based
on Comprehensive LandUse Plan and Zoning Ordinance of
the City Council of Angeles City approved through HLURB
Resolution No. 705 dated 17 October 2001. Also a
certification was issued by Director Barrameda on 01 June
2001, stating therein that, "Duplicate copies of the
Certification issued by this Board toMs. Lutgarda Torres on 18
December 1991 and 8 July 1998, respectively are not among
the files for safekeeping when she assumed as Regional
Officer on 03 July 2000.["]52 (Emphasis supplied)
These findings were sustained on appeal by the Office of the
President, stating that:

[Respondents'] argument that the land has ceased to be

agricultural by virtue of reclassification under Ordinance No.
13, series of 1978 cannot be sustained since the records of
the case or the evidence presented thereto are bereft of any
indication showing the same. In fact, nowhere was it shown
that a certified true copy of the said Ordinance was
presented before this Office or the office a quo. 53
The factual findings of administrative agencies are generally
given great respect and finality by the courts as it is
presumed that these agencies have the knowledge and
expertise over matters under their jurisdiction.54 Both the
Department of Agrarian Reform and the Office of the
President found respondent's lands to be agricultural. We see
no reason to disturb these findings.
WHEREFORE, the petition is GRANTED. The decision dated
September 28, 2012 and resolution dated November 29,
2012 of the Court of Appeals are SET ASIDE. The order dated
June 15, 2006 of the Department of Agrarian Reform and the
decision dated May 7, 2009 of the Office of the President are
REINSTATED.
SO ORDERED.

FIRST DIVISION
G.R. No. 163026

August 29, 2012

HEIRS OF ARCADIO CASTRO,*SR., represented by

ARCADIO CASTRO, JR., Petitioners,
vs.
RENA TO LOZADA, FELIPE CRUZ, ONOFRE INONCILLO,
ALFREDO FRANCISCO, LIBERATO FRANCISCO, FELIPE
DE LA CRUZ, HERNANDO HERRERA, GERARDO
MIRANDA, FELIX INOVERO, ARCADIO IDAGO and
RESTITUTO DE LA CRUZ, Respondents.
DECISION
VILLARAMA, JR., J.:
Assailed in this petition for review on certiorari under Rule
45 is the Decision1 dated March 30, 2004 of the Court of
Appeals (CA) in CA-G.R. SP No. 56257 affirming the
Decision2 dated August 4, 1999 of the Office of the President
(OP) which upheld the ruling of the Department of Agrarian
Reform (DAR) giving due course to the applications to
purchase of respondents as occupants/tillers of lands under
the provisions of Commonwealth Act (C.A.) No. 539.
Respondents are the occupants/tillers of a rice land situated
at Upig, San Ildefonso, Bulacan, designated as Lot No. 546,
Cad 320-D with an aggregate area of 274,180 square meters,
which is part of the Buenavista Estate. In April 1977,
respondents filed their respective applications to purchase
Lot No. 546 with the DAR-Bulacan Provincial Office. Since the
1940s, respondents recognized Arcadio Castro, Sr. as their
landlord who claimed to be the original tenant of the land.
However, records of the DAR Region III Office showed that
the registered claimant of Lot No. 546 is one "Arcadio Cruz."
Consequently, Land Inspector Rogelio I. Estrella reported to
the Ministry of Agrarian Reform (MAR) District Officer that Lot
No. 546 applied for by the respondents is disposable and
recommended the issuance of corresponding clearance in
favor of the applicants.3

The processing of respondents applications was stalled due

to the opposition of Arcadio Castro, Sr. who submitted
photocopies of certainofficial receipts and the Affidavit
executed by his sister-in-law, Jacobe** Galvez. In the said
affidavit, Jacobe Galvez attested that upon the instruction of
her brother-in-law, she paid on September 27, 1944 the "cost
and rental" of Lot No. 546 in the amount of P 5,091.80.
Additional payments were supposedly made in 1961 in the
amounts of P 1,181.77 and P 530.52. Jacobe Galvez further
explained that while the receipts were issued in her name,
her payments were made for and in behalf of her brother-inlaw who actually owns the land and is the one receiving
rentals or share in the harvest from the tenants. 4 Arcadio
Castro, Sr. also submitted a Certification dated March 29,
1983 issued by MAR Bulacan District Office in Baliuag,
Bulacan stating that per their records, Jacobe Galvez paid
cost and rental of P 5,091.80 under Official Receipt (OR) No.
5429266 dated September 27, 1944.5 On November 25,
1982, respondents applications and supporting documents
were forwarded to Cesar C. Jimenez, Acting District Officer,
BaliuagBulacan.6
On April 22, 1983, Benjamin M. Yambao, Trial Attorney II of
the Bureau of Agrarian Legal Assistance in Baliuag, Bulacan
issued a Report7 upholding the right of Arcadio Castro, Sr.
over Lot No. 546 subject to compliance with further
requirements of the MAR.
In 1989, it appears that Arcadio Castro, Sr. has voluntarily
offered to sell his properties situated in the Buenavista
Estate.8 At this time also, respondents, who began doubting
the ownership of Arcadio Castro, Sr., stopped paying rentals.
On June 19, 1990, Municipal Agrarian Reform Officer (MARO)
Jose S. Danganan forwarded to Erlinda Pearl V. Armada,
Provincial Agrarian Reform Officer (PARO) of Bulacan, the
documents pertaining to the conflicting claims over the
subject landholding. In his letter MARODanganan stated
The undersigned upon review and evaluation of the
documents submitted by Mr. Castro, has noted the following:

1. That, per certification of payment it appears that

only the excess area of 31,300 square meters was paid
by Jacobe Galvez sister of deceased Arcadio Castro Sr.
sometime in 1961;
2. That, the total area of lot 546 is 274,180 square
meters;
3. That, the xerox copy of official receipt submitted
(O.R. No. 3664086) was blard[sic] and unreadable;
4. That, the report of Atty. Benjamin Yambao dated
April 22, 1983 was based only on the certification of
Mr. Oscar M. Trinidad wherein, the actual payment
made by Jacobe Galvez is only P 1,181.77 representing
31,300 square meters only;
5. That, no application nor any documents (Order of
Award, Application to Purchase) to support the claim of
Mr. Castro was submitted;
6. That, no receipt of payment on the remaining area
of lot 546 was presented/submitted.
In view of the above facts, the undersign [sic] honestly
believe that the Legal Affairs Division is more in a position to
review and resolve the said conflict. 9
On December 20, 1990, Atty. Yambao, as directed by PARO
Armada, reported on his findings, maintaining his earlier
finding that Arcadio Castro, Sr. has already acquired a vested
right over Lot 546 by paying for the same in 1944 and 1961,
the latter payment having been made for the increase in area
of 31,300 square meters after the final survey. Citing the
letter of OIC Trinidad, Atty. Yambao stated that Lot 546 was
listed in the name of "Arcadio Cruz" instead of "Arcadio
Castro, Sr."10
On November 14, 1990, Legal Officer II Jose R. Joven of the
Legal Assistance Division of the PARO rendered a legal
opinion stating that: (1) there is no evidence or public

document to show that registrant "Arcadio Cruz" and

claimant Arcadio Castro, Sr. are one and the same person,
and no legal action was taken to correct the discrepancy in
name as to vest unto the claimant legal personality to be the
proper party-in-interest; (2) the recognition and giving of
rentals by tenant-applicants to Arcadio Castro, Sr. and
subsequently to his heirs for several years, do not constitute
estoppel; (3) granting without admitting that "Arcadio Cruz"
and Arcadio Castro, Sr. are one and the same person, the
latter was more than compensated by the payments made by
the tenants who are still immersed in poverty; (4) payments
made by Jacobe Galvez did not specify the lot for which these
were intended, considering that Jacobe Galvez, Nieves Castro
and Arcadio Castro, Sr. were all registrants over several lots,
and also because from the payment for "excess area" made
by Jacobe Galvez it cannot be presumed that it is one for the
main parcel absent any documentary evidence; and (5) in
case of doubt, it is more in keeping with justice and equity to
resolve the issue in favor of the actual tenants of the land.
Said office thus recommended that respondents application
over Lot 546 may be processed subject to guidelines
provided in Administrative Order (AO) No. 3, series of 1990. 11
On May 16, 1991, DAR Regional Director Antonio M. Nuesa
issued the following Order12:
WHEREFORE, premises considered, Order is hereby issued:
1. Declaring Lot No. 546, Cad 320-D, Case I, Buenavista
Estate vacant;
2. Rejecting the claims of the heirs of Arcadio Castro, Sr., to
the lot;
3. Giving due course to the applications of Renato Lozada
and his co-applicants.
SO ORDERED.13
The Regional Director noted that the records do not show
that efforts were exerted by Arcadio Castro, Sr. or his heirs to

rectify what they claimed was an error in the listing of

Arcadio Cruz as tenant of the land. While the tenantapplicants recognized Arcadio Castro, Sr. as their landlord,
such acquiescence does not bind the DAR. Regarding the
payments made by Jacobe Galvez in her name but which she
later disclaimed in favor of her brother-in-law, the Regional
Director found it not credible. Arcadio Castro, Sr.s hiring of
tenants was also found to be in contravention of AO No. 3,
series of 1990, which is applicable to all landed estates. It
was further noted that Arcadio Castro, Sr. appears in the
records of the Municipal Assessor of San Rafael, Bulacanas
declared owner of five other parcels of land.

assailed ruling is in accord with the policy of giving

preference to the landless under C.A. No. 539 which is a
social legislation. Considering that Arcadio Castro, Sr., as
found by the DAR officials, is already the registered owner of
several other real properties, Lot 546, applied for by the
tenants-tillers who are landless, should therefore be awarded
to the latter.15

The heirs of Arcadio Castro, Sr. represented by Arcadio

Castro, Jr., filed a motion for reconsideration which was
treated as an appeal by the Office of the DAR Secretary.

By Decision dated March 30, 2004, the CA concurred with the

finding of the OP and DAR that Arcadio Castro, Sr. and his
heirs failed to show that they personally cultivated the
subject landholding. Neither did Arcadio Castro, Sr. acquire a
vested right over Lot 546 by payments allegedly made on his
behalf by Jacobe Galvez, the amount of which was found by
DAR to be insufficient and no document or application
whatsoever supports the claim of Arcadio Castro, Sr. The CA
also sustained the OP and DAR in ruling that Arcadio Castro,
Sr. should be disqualified from claiming Lot 546 as he already
is the declared owner of several other properties. Finally, the
CA held that the award of Lot 546 to the tenants-applicants is
consistent with the policy under the 1987
Constitution upholding the right of landless farmers and farm
workers to own directly or collectively the lands they till, and
the States duty to undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as Congress may prescribe.16

In his Order14 dated August 12, 1996, Secretary Ernesto D.

Garilao affirmed the Regional Directors ruling. Secretary
Garilao concurred with the Regional Directors finding that
Arcadio Castro, Sr., assuming him to be the bona fide tenant
of Lot 546, had violated Land Tenure Administration (LTA) AO
No. 2, series of 1956 when he leased the subject landholding
already allocated to him without prior consent of the DAR.
Citing the investigation report of Land Inspector-Designate
Rogelio I. Estrella, the SinumpaangSalaysay of the tenantsapplicants and the Joint SinumpaangSalaysay of barangay
kagawads Renato Inovero and LuisitoSabarriaga confirming
that it is the tenants-applicants who are in possession and
actual cultivators of Lot 546, Secretary Garilaoruled
thatArcadio Castro, Sr. failed to comply with the requirement
of personal cultivation under LTA AO No. 2, series of 1956.
The arguments on non-retroactivity of administrative rules
and regulations, as well as Arcadio Castro, Sr.s alleged
vested right to acquire Lot 546, were rejected by Secretary
Garilao who ruled that the tenant-applicants have the right of
preference to purchase their respective portions of the said
landholding.
Dissatisfied, the heirs of Arcadio Castro, Sr. appealed to the
OP which dismissed their appeal. The OP declared that the

The OP likewise denied the motion for reconsideration filed

by the heirs of Arcadio Castro, Sr. who then elevated the case
to the CA in a petition for review under Rule 43 of the 1997
Rules of Civil Procedure, as amended.

Before this Court, petitioners assail the CA in affirming the

ruling of the OP and DAR that Arcadio Castro, Sr. has not
acquired a vested right over Lot 546, which is erroneous and
illegal being based on the report of MARO Jose S. Danganan
which is incomplete and defective. Petitioners averred that
the fact that MARODanganan at the time had no record of
legal opinions concerning the subject landholding was
admitted by him during the September 11, 1990 meeting.
Petitioners thus contend that the DAR Secretarys reliance on

the baseless report by the MARO violated their constitutional

right to due process as laid down in the case of AngTibay v.
CIR17 declaring that the tribunal must consider the evidence
presented and that the decision rendered must be on the
evidence presented at the hearing and to use authorized
legal methods of securing evidence and informing itself of
facts material and relevant to the controversy. They claim
that the DAR Secretary ignored vital documentary evidence
showing that Arcadio Castro, Sr. was really the listed claimant
of Lot 546 and that he had made payments for it.
Petitioners argue that contrary to the conclusions of the DAR
Secretary and OP, Arcadio Castro, Sr. had the legal and
equitable title to Lot 546 since the receipt by the government
of payments made by him resulted in a perfected contract of
sale between them over the said lot. Further, petitioners
contend that independent of such contract of sale, Arcadio
Castro, Sr. obtained legal title over Lot 546 by virtue of
acquisitive prescription from the time he paid for it in 1944
and has since possessed it adversely, openly and publicly. In
any event, petitioners impute bad faith on the part of
respondents who, after all the years of having a tenancy
agreement with Arcadio Castro, Sr. and subsequently his
heirs, would later repudiate the same and question the title
of the landowner. They stress that under Section 2 (b), Rule
131 of the Rules of Court, a tenant is not permitted to deny
the title of his landlord at the time of the commencement of
the relation of tenant and landlord between them.
As to the qualifications of Arcadio Castro, Sr. as the original
tenant under C.A. No. 539, petitioners argue that assuming
LTA AO No. 2, series of 1956 has retroactive application, it
must be presumed that official duty had been regularly
performed so that by the governments acceptance of
payments, it may be presumed that they found him to
possess all qualifications set by law for the purchase of Lot
546. Hence, it is a clear blunder on the part of the CA to
uphold the erroneous findings of the DAR Secretary that
Arcadio Castro, Sr. violated Section 21 of LTA AO No. 2, series
of 1956. Petitioners assert that at the time respondents
applied for Lot 546 in 1977, the said rule applies to them but
not to Arcadio Castro, Sr. because the latter was no longer a

"claimant" or "applicant" but rather the legal or equitable

owner of the land.
Petitioners also stress that C.A. No. 539 does not impose any
restrictions on the exercise of the rights and attributes of
ownership of tenants who purchase and acquire land under
Section 1 thereof. It was therefore erroneous for the DAR
Secretary to conclude that Arcadio Castro, Sr.s act of leasing
the subject landholding allocated to him without the prior
consent of the DAR is a violation of LTA AO No. 2, series of
1956, with the effect of cancellation of the agreement to sell
executed by the government in favor of the transferor or
assignor, the reversion of the lot covered thereby and the
forfeiture of all payments made to the government. Such
conclusion is based on the erroneous assumption that LTA AO
No. 2 is applicable to tenants who have already purchased
and acquired lands under C.A. No. 539.
From the facts established, the Court is presented with the
following issues for resolution: (1) whether Arcadio Castro, Sr.
acquired a vested or preferential right over Lot 546; (2)
whether LTA AO No. 2, series of 1956 was retroactively
applied in this case; and (3) whether the DAR and OP erred in
giving due course to the applications of respondents.
We deny the petition.
A vested right is defined as one which is absolute, complete
and unconditional, to the exercise of which no obstacle
exists, and which is immediate and perfect in itself and not
dependent upon a contingency. 18 The term "vested right"
expresses the concept of present fixed interest which, in right
reason and natural justice, should be protected against
arbitrary State action, or an innately just and imperative right
which enlightened free society, sensitive to inherent and
irrefragable individual rights, cannot deny. To be vested, a
right must have become a titlelegal or equitableto the
present or future enjoyment of property. 19
In this case, the DAR and OP rejected petitioners claim of a
vested right anchored on the payments made in 1944 and

1961 by Jacobe Galvez allegedly for Lot 546 and in behalf of

Arcadio Castro, Sr. The DAR Secretarys finding that
petitioners failed to prove that the registered claimant of said
land, "Arcadio Cruz" and Arcadio Castro, Sr. are one and the
same person is based on the fact that Arcadio Castro, Sr. and
his heirs never exerted efforts to correct the supposed error
in the LTA/DAR files, and the absence of any document to
show that Arcadio Castro, Sr. filed an application to purchase
Lot 546. These findings of fact are binding upon the courts
and may not now be disturbed unless it can be shown that
the official concerned acted arbitrarily or with grave abuse of
discretion.20
Perusing the records, we find that the photocopies of OR Nos.
3664087 and 3664088 are unreadable,21 the
Certification22 dated March 15, 1976 issued by Cesar C.
Jimenez of Agrarian Reform Team II No. 03-11-092-A based on
said receipts indicated payment of only P 1,181.77 in the
name of Jacobe Galvez, the letter23 dated March 8, 1983 of
Oscar M. Trinidad indicated payments of P 1,712.29 also
based on the same receipts, and the Certification 24 dated
March 29, 1983 issued by Corazon P. del Rosario (Accountant
I, MAR Bulacan District Office) stated only that Jacobe Galvez
paid in 1944 the amount of P 5,091.80 as cost and rental
under OR No. 5429266 without any reference to Lot 546 of
the Buenavista Estate and without any copy of such receipt
attached to it. Were it true, indeed, as petitioners claimed,
that MARODanganan simply did not have complete records
before him, petitioners could have submitted those
documents to the DAR Secretary or attached them to their
petition for review before the OP. But except for their bare
allegation of violation of due process with the non
consideration of documentary evidence, petitioners have not
adduced competent proof that Arcadio Castro, Sr. or his heirs
had made full payment for Lot 546. As it is, petitioners failed
to present any document to show that Arcadio Castro, Sr.
filed an application to purchase or have a contract to sell
executed by the government in his favor. From the MARO, to
PARO and DAR Secretary, petitioners evidence were duly
considered and evaluated by said officials and all were one in
concluding that Arcadio Castro, Sr. has not acquired any
vested right over the subject land.

A party claiming a right granted or created by law must

prove his claim by competent evidence. He must rely on the
strength of his evidence and not on the weakness of that of
his opponent.25
The petitioners having failed to prove their right to acquire
Lot 546 under C.A. No. 539, they cannot compel the DAR to
convey the lot to them. Hence, no reversible error was
committed by the CA in sustaining the DAR Secretarys
findings and conclusions as affirmed by the OP.
We likewise find no arbitrariness in the CAs affirmance of the
DAR and OPs ruling that the requirement of personal
cultivation under LTA AO No. 2, series of 1956 applies to
Arcadio Castro, Sr. Indeed, even assuming that Arcadio
Castro, Sr. was actually the registered claimant on Lot 546,
his act of entering into tenancy contracts with respondents
prior to the award of the land to him without the prior
consent of LTA/DAR violated the said AO.
Contrary to petitioners submission, there was no retroactive
application as regards to personal cultivation which
requirement is embodied in the law itself. Section 1 of C.A.
No. 539 explicitly provides that:
SECTION 1. The President of the Philippines is authorized to
acquire private lands or any interest therein, through
purchase or expropriation, and to subdivide the same into
home lots or small farms for resale at reasonable prices and
under such conditions as he may fix to their bona fide
tenants or occupants or to private individuals who will work
the lands themselves and who are qualified to acquire and
own lands in the Philippines. (Emphasis supplied.)
Thus, LTA AO No. 2, series of 1956 merely reiterated or
amplified the foregoing primary condition in the award of lots
comprising private landed estates acquired by the
Government for resale to qualified beneficiaries. The
pertinent provisions of said AO are herein reproduced:

SECTION 14. Persons Qualified to Purchase: Number of Lots

Granted. Subject to the provisions of Section 16 hereof,
any private individual who is qualified to acquire and own
lands in the Philippines and who will personally cultivate
and/or occupy the lot or lots which may be sold to him, may
be allowed to purchase not more than one (1) home lot
and/or farm lot except that in case of farm lots with areas
less than six (6) hectares, more than one (1) lot may be
purchased provided, however, that the total area of the lots
which may be sold to one person shall not exceed six (6)
hectares.
x xxx
SECTION 21. Transfer of Encumbrance of Rights. A person
having a right of preference to purchase a subdivision lot
shall not be allowed to transfer, assign, alienate or encumber
said right and any transfer, assignment, alienation or
encumbrance made in violation of this prohibition shall be
null and void. A bona-fide tenant, however, may transfer,
assign, alienate or encumber his leasehold rights over a
subdivision lot to persons who will personally cultivate and/or
occupy said lot and are qualified to acquired and own lands
in the Philippines with the prior written consent of the
Chairman of the Land Tenure Administration;xxx
xxxx Any transfer, assignment, alienation or encumbrance
made without the approval of the Chairman of the Land
Tenure Administration, as herein provided, is null and void
and shall be sufficient ground for the Chairman of the Land
Tenure Administration to cancel the agreement to sell
executed in favor of the transferor or assignor, and to order
the reversion of the lot covered thereby and the forfeiture of
all payments made on account thereof to the government.
Said payments shall be considered as rentals for the
occupation of said lot by the transferor and as payment for
administration expenses.
xxxx

SECTION 24. Conditions in Agreements to Sell, Deeds of Sale

and Torrens Title. It shall be a condition inall agreements
to sell and deeds of sale covering lots acquired under these
rules and regulations that said lots shall be personally
occupied and/or cultivated by the purchasers thereof.x xx A
purchaser of a farm lot who shall fail to start cultivation of
said lot within six (6) months after the execution of his
agreements to sell or deed of sale therefor shall be deemed
not to have complied with said condition.
xxxx
SECTION 25. Violation of Any of the Conditions in the
Preceding Section; Its Effect. The violation of any of the
conditions set forth in the preceding section shall be
sufficient ground for the Chairman of the Land Tenure
Administration to cancel an agreement to sell or deed of sale,
and to order the reversion of the lot covered thereby and the
forfeiture of all payments made on account thereof to the
government. In case, however, a transfer certificate of title
has already been issued, the violation of any of said
conditions shall be sufficient ground for the Chairman of the
Land Tenure Administration to initiate and prosecute the
proper action in court for the cancellation of said title and for
the reversion of the lot involved to the government.
(Emphases supplied.)
On the other hand, DAR AO No. 03-90 on the "Revised Rules
and Procedures Governing Distribution and/or Titling of Lots
in Landed Estates Administered by DAR" directs the MARO to
review and evaluate the list of allocatees/awardees and
conduct lot verification to determine whether they are still
occupying and tilling the lots subject of Orders of Awards
(OAs)/Certificate of Land Transfer (CLT). 26 An awardee or
allocatee who is not the cultivator/occupant, such as when he
employs tenants prior to full payment of the cost of the lot,
the MARO shall cancel the OA/CLT and issue a Certificate of
Land Ownership Award (CLOA) to qualified actual
cultivator/occupant. DAR AO No. 03-90 also laid down the
following qualifications of a beneficiary in these landed
estates:

V. Qualifications of a beneficiary are as follows:

and which payments are insufficient for the entire area of

said land.

1. Landless;
2. Filipino citizen;
3. Actual occupant/tiller who is at least 15 years of
age or head of the family at the time of filing of
application; and
4. Has the willingness, ability and aptitude to cultivate
and make the land productive. (Emphasis supplied.)
Since Arcadio Castro, Sr. and his heirs (petitioners) were not
the actual occupants or tillers of Lot 546 and merely
employed tenants (respondents) to work on said land, the CA
did not err in sustaining the ruling of the DAR and OP. Thus,
even assuming Arcadio Castro, Sr. to be the legitimate
claimant of Lot 546, petitioners have no right of preference in
the acquisition of said land as they failed to comply with the
requirement of personal cultivation. As correctly observed by
the OP, from the admission by petitioners that they leased
the lands to the respondents in 1955, petitioners continued
the lease even after LTA AO No. 2 already took effect. The OP
likewise found no impairment of rights in applying
retroactively the implementing rules because these are
merely enforcing C.A. No. 539 which was already in effect in
1940.1wphi1
It must also be mentioned that this case does not fall under
the exceptional circumstances when the hiring of laborers
and employment of tenants will not result in the cancellation
of agreements to sell or orders of award under C.A. No. 539.
Assuming Arcadio Castro, Sr. was indeed the original listed
claimant/tenant of the land and the real "Arcadio Cruz,"
evidence on record clearly established that Arcadio Castro,
Sr. had never been an awardee or allocatee. In fact,
investigation by DAR officials revealed that there was not
even any application to purchase filed by Arcadio Castro, Sr.
while the supposed official receipts issued in 1944 to Jacobe
Galvez did not indicate the payments as intended for Lot 546

There being no agreement to sell or order of award yet

issued over Lot 546, DAR officials declared them available for
disposition to qualified beneficiaries. Since Arcadio Castro, Sr.
was not an awardee or allocatee, this case clearly falls under
the general rule of personal cultivation as requirement to
qualify for award of lots under C.A. No. 539. As we held
in Vitalista v. Perez27:
In this case, the general rule requires personal cultivation in
accordance with LTA Administrative Order No. 2 and DAR
Administrative Order No. 3, Series of 1990. However, Land
Authority Circular No. 1, Series of 1971 clearly makes three
exceptions on the personal cultivation requirement in cases
where land is acquired under C.A. No. 539: (1) when the
awardee or promisee dies; or (2) when the awardee or
promisee is physically incapacitated; or (3) when the land is
fully paid for but the government fails to issue the
corresponding deed of sale. By specifying these excepted
cases and limiting them to three, the said circular recognizes
that outside these exceptions, any deed of sale or agreement
to sellinvolving lands acquired under C.A. No. 539 should be
cancelled in cases where the awardee fails to comply with
the requirement of personal cultivation.(Emphasis and
underscoring supplied.)
Finally, the Court holds that no reversible error was
committed by the CA when it ruled that the order of DAR
Regional Director giving due course to the application of
respondents is consistent with the agrarian reform policy
under the 1987 Constitution. Whereas C.A. No. 539 enacted
in 1940 authorized the Government to acquire private lands
and to subdivide the same into home lots or small farms for
resale to bona fide tenants, occupants or private individuals
who will work the lands themselves, the social mandate
under the 1987 Constitution is even more encompassing as it
commands "the Congress to give the highest priority to the
enactment of measures that protect and enhance the right of

all the people to human dignity, reduce social, economic, and

political inequalities, xxx".28
To achieve such goal, "the State shall, by law, undertake an
agrarian reform program founded on the right of farmers and
regular farm workers, who are landless, to own directly and
collectively the land they till or, in the case of other farm
workers, to receive a just share of the fruits thereof." A just
distribution of all agricultural lands was undertaken by the
State through Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), which was
passed by Congress in 1988. It can thus be said that the
1987 Constitution has "a much more expanded treatment of
the subject of land reform than was contained in past
Constitutions."29
Moreover, C.A. No. 539 being a social legislation, this Court
has previously declared that"in the construction of laws that
find its origin in the social justice mandate of the
Constitution," the constant policy is " to assure that its
beneficient effects be enjoyed by thosewho have less in
life."30 And in the words of former Chief Justice Ricardo M.
Paras, Jr., "C.A. No. 539 was conceived to solve a social
problem, not merely as a direct or indirect means of allowing
accumulation of land holdings."31 In this sense, the law
discourages absentee "tenants" or lessees. So it is in this
case, the DAR found it more in keeping with the policy of the
law to give preference to respondents who are landless
tenants (or sub-lessees) of Arcadio Castro, Sr. and later his
heirs, and actual tillers of Lot 546 in Buenavista Estate, over
Arcadio Castro, Sr. who may have been the original "tenant"
but an absentee one and who has other parcels of land
declared in his name.
That the respondents are actual tillers and qualified
beneficiaries under C.A. No. 539 and its implementing rules -to the extent of the portions of Lot 546 they respectively
occupy and cultivate for decades already -- who should be
given preference in the distribution of said land, is a factual
question beyond the scope of this petition. The rule is that in
a petition for review, only questions of law may be raised for

the reason that already -- who should be given preference in

the distribution of said land, is a factual question beyond the
scope of this petition. The rule is that in a petition for review,
only questions of law may be raised for the reason that the
Supreme Court is not a trier of facts and generally does not
weigh anew the evidence already passed upon by the Court
of Appeals. 32
Finally, it is well settled that factual findings of administrative
agencies are generally accorded respect and even finality by
this Court, if such findings are supported by, substantial
evidence.33 The factual findings of the DAR Secretary, who,
by reason of his official position, has acquired expertise in
specific matters within his jurisdiction, deserve full respect
and, without justifiable reason, ought not to be altered,
modified, or reversed.34 In this case, petitioners utterly failed
to show justifiable reason to warrant the reversal of the
decision of the DAR Secretary, as affirmed by the OP and the
CA.
WHEREFORE, the petition for review
on certiorari is DENIED. The Decision dated March 30, 2004
of the Court of Appeals in CA-G.R. SP No. 56257 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

EN BANC
G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL
COMMERCIAL BANKING CORPORATION,Petitioners-inIntervention,
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, tenantfarmers, 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 agriculturalindustrial-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 farmworkerbeneficiaries (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 FWBs 34 and attested to
by then DAR Secretary Philip Juico. The SDOA embodied the

basis and mechanics of the SDP, which would eventually be

submitted to the PARC for approval. In the SDOA, the parties
agreed to the following:
1. The percentage of the value of the agricultural land
of Hacienda Luisita (P196,630,000.00) in relation to
the total assets (P590,554,220.00) transferred and
conveyed to the SECOND PARTY [HLI] is 33.296% that,
under the law, is the proportion of the outstanding
capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par
value of P1.00 per share, that has to be distributed to
the THIRD PARTY [FWBs] under the stock distribution
plan, the said 33.296% thereof being P118,391,976.85
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.

"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.

6. In addition, the SECOND PARTY shall within a

reasonable time subdivide and allocate for free and
without charge among the qualified familybeneficiaries residing in the place where the
agricultural land is situated, residential or homelots of
not more than 240 sq.m. each, with each familybeneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on
the date of the execution of this Agreement.

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

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

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.

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;

(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;

5. That HLI provide guidelines and a timetable for the

distribution of homelots to qualified [FWBs]; and

(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

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. DefensorSantiago, 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 nonmaster 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;

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 whollyowned 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. 310986 53 in
the name of LIPCO.
From the area covered by TCT No. 310986 was carved out
two (2) parcels, for which two (2) separate titles were issued
in the name of LIPCO, specifically: (a) TCT No. 365800 54 and
(b) TCT No. 365801,55 covering 180 and four hectares,
respectively. TCT No. 310986 was, accordingly, partially
canceled.
Later on, in a Deed of Absolute Assignment dated November
25, 2004, LIPCO transferred the parcels covered by its TCT
Nos. 365800 and 365801 to the Rizal Commercial Banking
Corporation (RCBC) by way of dacion en pago in payment of
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 answer 62 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. 2005-32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as
it is HEREBY RESOLVED, to approve and confirm the
recommendation of the PARC Executive Committee adopting
in toto the report of the PARC ExCom Validation Committee
affirming the recommendation of the DAR to recall/revoke the
SDO plan of Tarlac Development Corporation/Hacienda Luisita
Incorporated.
RESOLVED, further, that the lands subject of the
recalled/revoked TDC/HLI SDO plan be forthwith placed under
the compulsory coverage or mandated land acquisition
scheme of the [CARP].
APPROVED.68

A copy of Resolution No. 2005-32-01 was served on HLI the

following day, December 23, without any copy of the
documents adverted to in the resolution attached. A letterrequest 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 ex-members and formed Farmworkers Agrarian
Reform Movement, Inc. (FARM).78 Should this shift in alliance
deny him standing, Mallari also prayed that FARM be allowed
to intervene.

As events would later develop, Mallari had a parting of ways

with other FARM members, particularly would-be intervenors
Renato Lalic, et al. As things stand, Mallari returned to the
AMBALA fold, creating the AMBALA-Noel Mallari faction and
leaving Renato Lalic, et al. as the remaining members of
FARM who sought to intervene.
On January 10, 2007, the Supervisory Group 79 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-InIntervention 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-inintervention admitted.
On August 18, 2010, the Court heard the main and
intervening petitioners on oral arguments. On the other
hand, the Court, on August 24, 2010, heard public
respondents as well as the respective counsels of the
AMBALA-Mallari-Supervisory Group, the AMBALA-Galang
faction, and the FARM and its 27 members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA,
represented by Mallari; the Supervisory Group, represented
by Suniga and Andaya; and the United Luisita Workers Union,
represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise
Agreement (English and Tagalog versions) dated August 6,
2010.
On August 31, 2010, the Court, in a bid to resolve the dispute
through an amicable settlement, issued a

Resolution84 creating a Mediation Panel composed of then

Associate Justice Ma. Alicia Austria-Martinez, as chairperson,
and former CA Justices Hector 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-IN-INTEREST TO FILE
SAID PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND
REMEDIES OF THE PARTIES TO THE SDOA ARE
NOW GOVERNED BY THE CORPORATION CODE
(BATAS PAMBANSA BLG. 68) AND NOT BY THE x x
x [CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DID NOT EXCLUDE THE
SUBJECT PROPERTY FROM THE COVERAGE OF THE
CARP DESPITE THE FACT THAT PETITIONERINTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS
AND INDEFEASIBLE TITLE OVER THE SUBJECT
PROPERTY AS AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01
AND THE NOTICE OF COVERAGE DATED 02
JANUARY 2006 HAVE THE EFFECT OF NULLIFYING
TCT NOS. 391051 AND 391052 IN THE NAME OF
PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE,
PETITIONER-INTERVENOR RCBC CANNOT BE
PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE
NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE
ISSUED WITHOUT AFFORDING 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-in-interest under Sec. 2, Rule 3 of
the Rules of Court, meaning, one who stands to be benefited
or injured by the judgment in the suit or is the party entitled
to the avails of the suit.

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, farmerleaders 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

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.

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.)

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

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 noncompliance with it.98 With the view We take of the case, only
PARC can effect such revocation. The DAR Secretary, by his
own authority as such, cannot plausibly do so, as the
acceptance and/or approval of the SDP sought to be taken
back or undone is the act of PARC whose official composition
includes, no less, the President as chair, the DAR Secretary
as vice-chair, and at least eleven (11) other department
heads.99
On another but related issue, the HLI foists on the Court the
argument that subjecting its landholdings to compulsory

distribution after its approved SDP has been implemented

would impair the contractual obligations created under the
SDOA.
The broad sweep of 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 nonimpairment 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 intra-corporate dispute
which necessitates the application of the Corporation Code.
What private respondents questioned before the DAR is the
proper implementation of the SDP and HLIs compliance with
RA 6657. Evidently, RA 6657 should be the applicable law to
the instant case.
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 noncompliance 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 distributiondirect and indirect
ownership. Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted.
Indirect transfer through collective ownership of the
agricultural land is the alternative to direct ownership of
agricultural land by individual farmers. The aforequoted Sec.
4 EXPRESSLY authorizes collective ownership by farmers. No
language can be found in the 1987 Constitution that
disqualifies or prohibits corporations or cooperatives of
farmers from being the legal entity through which collective
ownership can be exercised. The word "collective" is defined
as "indicating a number of persons or things considered as
constituting one group or aggregate,"115 while "collectively" is
defined as "in a collective sense or manner; in a mass or
body."116 By using the word "collectively," the Constitution
allows for indirect ownership of land and not just outright
agricultural land transfer. This is in recognition of the fact
that land reform may become successful even if it is done
through the medium of juridical entities composed of
farmers.
Collective ownership is permitted in two (2) provisions of RA
6657. Its Sec. 29 allows workers cooperatives or associations
to collectively own the land, while the second paragraph of
Sec. 31 allows corporations or associations to own
agricultural land with the farmers becoming stockholders or
members. Said provisions read:
SEC. 29. Farms owned or operated by corporations or other
business associations.In the case of farms owned or

operated by corporations or other business associations, the

following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual
worker-beneficiaries.
In case it is not economically feasible and sound to divide the
land, then it shall be owned collectively by the worker
beneficiaries who shall form a workers cooperative or
association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning
agricultural lands may give their qualified beneficiaries the
right to purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the 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 nonfarmers. 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 nonqualified 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.

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

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.

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

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

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.

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 productionsharing 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 economic-sized
farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of
land, with due regard to the rights of landowners to just
compensation and to the ecological needs of the nation, shall
be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality
of their lives through greater productivity of agricultural
lands.
The agrarian reform program is founded on the right of
farmers and regular farm workers, who are landless, to own
directly or collectively the lands they till or, in the case of
other farm workers, to receive a share of the fruits thereof. To
this end, the State shall encourage the just distribution of all
agricultural lands, subject to the priorities and retention
limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and

subject to the payment of just compensation. The State shall

respect the right of small landowners and shall provide
incentives for voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically
mentions that "a more equitable distribution and ownership
of land x x x shall be undertaken to provide farmers and farm
workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity
of agricultural lands." Of note is the term "opportunity" which
is defined as a favorable chance or opening offered by
circumstances.127 Considering this, by no stretch of
imagination can said provision be construed as a guarantee
in improving the lives of the FWBs. At best, it merely provides
for a possibility or favorable chance of uplifting the economic
status of the FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is
neither among the legal obligations of HLI under the SDP nor
an imperative imposition by RA 6657 and DAO 10, a violation
of which would justify discarding the stock distribution option.
Nothing in that option agreement, law or department order
indicates otherwise.
Significantly, HLI draws particular attention to its having paid
its FWBs, during the regime of the SDP (1989-2005), some
PhP 3 billion by way of salaries/wages and higher benefits
exclusive of free hospital and medical benefits to their
immediate family. And attached as Annex "G" to 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.

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:

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 landownerapplicant 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

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
worker-beneficiaries.
In case it is not economically feasible and sound to divide the
land, then it shall be owned collectively by the workerbeneficiaries 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 familybeneficiaries 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?

those who should have been benefited, and to use it as a

reward system decided by the company? 142

Atty. Dela Merced: Yes, Your Honor.

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.

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

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 landownerapplicant of the approval thereof by the PARC, and the
transfer of the shares of stocks in the names of the qualified
beneficiaries shall be recorded in 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.)

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.

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.

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.

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 30year 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.

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.

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 rulemaking 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 200hectare 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.

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.)

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

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 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

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.

Millena v. Court of Appeals describes a purchaser in good

faith in this wise:

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.

(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

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.)

(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

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;

(g) Certificate of Registration No. 00794 dated 26

December 1997 issued by the HLURB on the project of
Luisita Industrial Park II with an area of three million
(3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997
issued by the HLURB authorizing the sale of lots in the
Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled
"Declaring Certain Parcels of Private Land in Barangay
San Miguel, Municipality of Tarlac, Province of Tarlac,
as a Special Economic Zone pursuant to Republic Act
No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of
industrial land as a Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07
May 1998 issued by the PEZA, stating that pursuant to
Presidential Proclamation No. 1207 dated 22 April 1998
and Republic Act No. 7916, LIPCO has been registered
as an Ecozone Developer/Operator of Luisita Industrial
Park II located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or
its inclusion in an economic zone does not automatically
allow the corporate or individual landowner to change its
use,158 the reclassification process is a prima facie indicium
that the land has ceased to be economically feasible and
sound for agricultural uses. And if only to stress, DAR
Conversion Order No. 030601074-764-(95) issued in 1996 by
then DAR Secretary Garilao had effectively converted 500

hectares of hacienda land from agricultural to

industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation
and conversion order, both RCBC and LIPCO cannot be
considered at fault for believing that certain portions of
Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently
DAR, gravely abused its discretion when it placed 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 200634-01, 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. 8912-2 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 500hectare 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 80.51hectare 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 80.51hectare 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. 89-12-2 the following: (a) the 500-hectare lot
subject of the August 14, l996 Conversion Order; (b) the
80.51-hectare lot sold to, or acquired by, the government as
part of the SCTEX complex; and (c) the aggregate area of
6,886.5 square meters of individual lots that each FWB is
entitled to under the CARP had he or she not opted to stay in
HLI as a stockholder. After the segregation process, as
indicated, is done, the remaining area shall be turned over to

DAR for immediate land distribution to the original qualified

FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter
lots allotted to the FWBs who stayed with the corporation
shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of
PhP 500,000,000 received by it from Luisita Realty, Inc. for
the sale to the latter of 200 hectares out of the 500 hectares
covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned
subsidiary, Centennary Holdings, Inc. for the sale of the
remaining 300 hectares of the aforementioned 500-hectare
lot to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases
Conversion Development Authority for the sale of the 80.51hectare 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.