ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D.
Recognizing this need, the Constitution in 1935 mandated the policy of social
GOMEZ, GERARDO B. ALARCIO, FELIFE A. GUICO, JR., BERNARDO M.
ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO,
FAUSTO J. SALVA, REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA J.
CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA,
FELICISIMA C. APRESTO, CONSUELO M. MORALES, BENJAMIN R.
SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
FERRER, petitioners, vs.HONORABLE SECRETARY OF AGRARIAN REFORM,
DECISION
CRUZ, J p:
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 battlecry dramatizing the
increasingly urgent demand of the dispossessed among us for a plot of earth as their
place in the sun.
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 must 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
and Manotok v. National
Food Authority. 6
Moreover, the just compensation contemplated by the Bill of Rights is
payable in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order
also deprives the petitioners of their property rights as protected by due process. The
equal protection clause is also violated because the order places the burden of solving
the agrarian problems on the owners only of agricultural lands. No similar obligation is
imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27
to be the owners of the lands occupied by them, E.O. No. 228 ignored judicial
prerogatives and so violated due process. Worse, the measure would not solve the
agrarian problem because even the small farmers are deprived of their lands and the
retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been
upheld in the earlier cases of Chavez v. Zobel,7 Gonzales v. Estrella, 8
and Association
of Rice and Corn Producers of the Philippines, Inc. v. the National Land Reform
council 9 The determination of just compensation by the executive authorities
conformably to the formula prescribed under the questioned order is at best initial or
preliminary only. It does not foreclose judicial intervention whenever sought or
warranted. At any rate, the challenge to the order is premature because no valuation
of their property has as yet been made by the Department of Agrarian Reform. The
petitioners are also not proper parties because the lands owned by them do not
exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does
not provide for retention limits on tenanted lands and that in any event their petition
is a class suit brought in behalf of landowners with landholdings below 24 hectares.
They maintain that the determination of just compensation by the administrative
authorities is a final ascertainment. As for the cases invoked by the public respondent,
the constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was
decided in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1988, it is contended that P.D. No.
27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed
by R.A. No. 6657. Nevertheless, this statute should itself also be declared
unconstitutional because it suffers from substantially the same infirmities as the
earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by
Vicente Cruz, owner of a 1.83-hectare land, who complained that the DAR was
insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of rentals. In a subsequent
motion dated April 10, 1989, he adopted the allegations in the basic amended petition
that the above-mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is an
organization composed of 1,400 planter-members. This petition seeks to prohibit the
implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not the
President. Although they agree that the President could exercise legislative power
until the Congress was convened, she could do so only to enact emergency measures
during the transition period. At that, even assuming that the interim legislative power
of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still
have to be annulled for violating the constitutional provisions on just compensation,
due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund. There is hereby created a special fund, to be known as the
Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00)
to cover the estimated cost of the Comprehensive Agrarian Reform Program from
1987 to 1992 which shall be sourced from the receipts of the sale of the assets of the
Asset Privatization Trust and Receipts of sale of ill-gotten wealth received through the
Presidential Commission on Good Government and such other sources as government
may deem appropriate. The amounts collected and accruing to this special fund shall
be considered automatically appropriated for the purpose authorized in this
Proclamation.
the amount appropriated is in futuro, not in esse. The money needed to cover the
cost of the contemplated expropriation has yet to be raised and cannot be
appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of
just compensation as it is traditionally understood, i.e., with money and in full, but no
such payment is contemplated in Section 5 of the E.O. No. 229. On the contrary,
Section 6, thereof provides that the Land Bank of the Philippines "shall compensate
the landowner in an amount to be established by the government, which shall be
based on the owner's declaration of current fair market value as provided in Section 4
hereof, but subject to certain controls to be defined and promulgated by the
Presidential Agrarian Reform Council." This compensation may not be paid fully in
money but in any of several modes that may consist of part cash and part bond, with
interest, maturing periodically, or direct payment in cash or bond as may be mutually
agreed upon by the beneficiary and the landowner or as may be prescribed or
approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort
was made to make a careful study of the sugar planters' situation. There is no tenancy
problem in the sugar areas that can justify the application of the CARP to them. To the
extent that the sugar planters have been lumped in the same legislation with other
farmers, although they are a separate group with problems exclusively their own, their
right to equal protection has been violated.
A motion for intervention was filed on August 27, 1987 by the National
Federation of Sugarcane Planters (NASP) which claims a membership of at least
20,000 individual sugar planters all over the country. On September 10, 1987, another
motion for intervention was filed, this time by Manuel Barcelona, et al., representing
coconut and riceland owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform
Program and that, in any event, the appropriation is invalid because of uncertainty in
the amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of E.O.
No. 229 provide for an initial appropriation of fifty billion pesos and thus specifies the
minimum rather than the maximum authorized amount. This is not allowed.
Furthermore, the stated initial amount has not been certified to by the National
Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish
by clear and convincing evidence the necessity for the exercise of the powers of
eminent domain, and the violation of the fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is
the expropriation of the said land for an amount equal to the government assessor's
valuation of the land for tax purposes. On the other hand, if the landowner declares
his own valuation, he is unjustly required to immediately pay the corresponding taxes
on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption
of constitutionality in favor of Proc. No. 131 and E.O. No. 229. He also justifies the
necessity for the expropriation as explained in the "whereas" clauses of the
Proclamation and submits that, contrary to the petitioner's contention, a pilot project
to determine the feasibility of CARP and a general survey on the people's opinion
thereon are not indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have
failed to show that they belong to a different class and should be differently treated.
The Comment also suggests the possibility of Congress first distributing public
agricultural lands and scheduling the expropriation of private agricultural lands later.
From this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is
against the payment of public money without the corresponding appropriation. There
is no rule that only money already in existence can be the subject of an appropriation
law. Finally, the earmarking of fifty billion pesos as Agrarian Reform Fund, although
denominated as an initial amount, is actually themaximum sum appropriated. The
word "initial" simply means that additional amounts may be appropriated later when
necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his
own behalf, assailing the constitutionality of E.O. No. 229. In addition to the
arguments already raised, Serrano contends that the measure is unconstitutional
because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not expressed in
the title;
(3) The power of the President to legislate was terminated on July 2, 1987;
and
(4) The appropriation of a P50 billion special fund from the National
Treasury did not originate from the House of Representatives.
 G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform,
in violation of due process and the requirement for just compensation, placed his
landholding under the coverage of Operation Land Transfer. Certificates of Land
Transfer were subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his
small landholding under Operation Land Transfer and asked for the recall and
cancellation of the Certificates of Land Transfer in the name of the private
respondents. He claims that on December 24, 1986, his petition was denied without
hearing. On February 17, 1987, he filed a motion for reconsideration, which had not
been acted upon when E.O. Nos. 228 and 229 were issued. These orders rendered his
motion moot and academic because they directly effected the transfer of his land to
the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the
Philippines.
(2) The said executive orders are violative of the constitutional provision
that no private property shall be taken without due process or just
compensation.
(3) The petitioner is denied the right of maximum retention provided for
under the 1987 Constitution.
The petitioner contends that the issuance of E.O Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the
Transitory Provisions refers only to emergency measures that may be promulgated in
the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without
due process of law and to the retention of his small parcels of riceholding as
guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues that,
besides denying him just compensation for his land, the provisions of E.O. No. 228
declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972
shall be considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention
that the inclusion of even small landowners in the program along with other
landowners with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian Reform is
still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he argues
that they were enacted pursuant to Section 6, Article XVIII of the Transitory Provisions
of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first
Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21, 1972, the tenant-farmer of agricultural land was deemed
the owner of the land he was tilling. The leasehold rentals paid after that date should
therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion
he filed was resolved on December 14, 1987. An appeal to the Office of the President
would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect
sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to
owners of rice and corn lands not exceeding seven hectares as long as they are
cultivating or intend to cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No.
27:
No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be
ejected or removed from his farmholding until such time as the respective rights of
the tenant-farmers and the landowner shall have been determined in accordance with
the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy
their right of retention because the Department of Agrarian Reform has so far not
issued the implementing rules required under the above-quoted decree. They
therefore ask the Court for a writ of mandamus to compel the respondent to issue the
said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who own other
agricultural lands of more than 7 hectares in aggregate area or lands used for
residential, commercial, industrial or other purposes from which they derive adequate
income for their family. And even assuming that the petitioners do not fall under its
terms, the regulations implementing P.D. No. 27 have already been issued, to wit, the
Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small
Landowners, with an accompanying Retention Guide Table), Memorandum Circular No.
11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474), Memorandum
Circular No. 18-81 dated December 29, 1981 (Clarificatory Guidelines on Coverage of
P.D. No. 27 and Retention by Small Landowners), and DAR Administrative Order No. 1,
series of 1985 (Providing for a Cut-off Date for Landowners to Apply for Retention
and/or to Protest the Coverage of their Landholdings under Operation Land Transfer
pursuant to P.D. No. 27). For failure to file the corresponding applications for retention
under these measures, the petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the President of
the Philippines. Moreover, the issuance of the implementing rules, assuming this has
not yet been done, involves the exercise of discretion which cannot be controlled
through the writ of mandamus. This is especially true if this function is entrusted, as in
this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of agricultural
land. Moreover, assumingarguendo 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 Taada 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. cdtai
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 factobecome
inoperative simply because of the dissolution of the legislature that enacted it. By the
same token, President Aquino's loss of legislative power did not have the effect of
invalidating all the measures enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but
in fact substantially affirmed the challenged measures and has specifically provided
that they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17
Indeed, some portions of the said measures, like the creation of the P50
billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have
been incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it does
not conform to the requirements of a valid appropriation as specified in the
Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure even if it
does provide for the creation of said fund, for that is not its principal purpose. An
appropriation law is one the primary and specific purpose of which is to authorize the
release of public funds from the treasury. 19
The creation of the fund is only incidental
to the main objective of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section
24 and Section 25(4) of Article VI, are not applicable. With particular reference to
Section 24, this obviously could not have been complied with for the simple reason
that the House of Representatives, which now has the exclusive power to initiate
appropriation measures, had not yet been convened when the proclamation was
issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for retention limits as required by
Article XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does
provide for such limits now in Section 6 of the law, which in fact is one of its most
controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which
shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land
or directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill
shall have only one subject, to be expressed in its title, deserves only short attention.
It is settled that the title of the bill does not have to be a catalogue of its contents and
will suffice if the matters embodied in the text are relevant to each other and may be
inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law because it
came from President Marcos. Such are the ways of despots. Hence, it is futile to argue,
as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No.
27 because the former was only a letter of instruction. The important thing is that it
was issued by President Marcos, whose word was law during that time.
 But for all their peremptoriness, these issuances from the President Marcos still
had to comply with the requirement for publication as this Court held in Taada v.
Tuvera. 21
Hence, unless published in the Official Gazette in accordance with Article 2
of the Civil Code, they could not have any force and effect if they were among those
enactments successfully challenged in that case. (LOI 474 was published, though, in
the Official Gazette dated November 29, 1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that
the writ of mandamus cannot issue to compel the performance of a discretionary act,
especially by a specific department of the government. That is true as a general
proposition but is subject to one important qualification. Correctly and categorically
stated, the rule is that mandamus will lie to compel the discharge of the discretionary
duty itself but not to control the discretion to be exercised. In other
words, mandamus can issue to require action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary and
unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed by
law, the courts will intervene by the extraordinary legal remedy
of mandamus to compel action. If the duty is purely ministerial, the courts will
require specific action. If the duty is purely discretionary, the courts by mandamus will
requireaction only. For example, if an inferior court, public official, or board should, for
an unreasonable length of time, fail to decide a particular question to the great
detriment of all parties concerned, or a court should refuse to take jurisdiction of a
cause when the law clearly gave it jurisdiction, mandamus will issue, in the first case
to require a decision, and in the second to require that jurisdiction be taken of the
cause. 22
And while it is true that as a rule the writ will not be proper as long as there is
still a plain, speedy and adequate remedy available from the administrative
authorities, resort to the courts may still be permitted if the issue raised is a question
of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the same
time on the same subject. In the case of City of Baguio v. NAWASA, 24
for example,
where a law required the transfer of all municipal waterworks systems to the NAWASA
in exchange for its assets of equivalent value, the Court held that the power being
exercised was eminent domain because the property involved was wholesome and
intended for a public use. Property condemned under the police power is noxious or
intended for a noxious purpose, such as a building on the verge of collapse, which
should be demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is not
compensable, unlike the taking of property under the power of expropriation, which
requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25
Justice Holmes laid down the
limits of the police power in a famous aphorism: "The general rule at least is that
while property may be regulated to a certain extent, if regulation goes too far it will be
recognized as a taking." The regulation that went "too far" was a law prohibiting
mining which might cause the subsidence of structures for human habitation
constructed on the land surface. This was resisted by a coal company which had
earlier granted a deed to the land over its mine but reserved all mining rights
thereunder, with the grantee assuming all risks and waiving any damage claim. The
Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of the
police power. He said:
Every restriction upon the use of property imposed in the exercise of the police power
deprives the owner of some right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition of
a noxious use. The property so restricted remains in the possession of its owner. The
state does not appropriate it or make any use of it. The state merely prevents the
owner from making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious as it may because of further
changes in local or social conditions the restriction will have to be removed and the
owner will again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as an
implement of the former like the power of taxation. The employment of the taxing
power to achieve a police purpose has long been accepted. 26
As for the power of
expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring
to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which sustained a
zoning law under the police power) makes the following significant remarks:
Euclid, moreover, was decided in an era when judges located the police and eminent
domain powers on different planets. Generally speaking, they viewed eminent domain
as encompassing public acquisition of private property for improvements that would
be available for "public use," literally construed. To the police power, on the other
hand, they assigned the less intrusive task of preventing harmful externalities, a point
reflected in the Euclid opinion's reliance on an analogy to nuisance law to bolster its
support of zoning. So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the pertinent measure need
have afforded no compensation whatever. With the progressive growth of
government's involvement in land use, the distance between the two powers has
contracted considerably. Today government often employs eminent domain
interchangeably with or as a useful complement to the police power a trend
expressly approved in the Supreme Court's 1954 decision in Berman v. Parker, which
broadened the reach of eminent domain's "public use" test to match that of the police
power's standard of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police power. On
the role of eminent domain in the attainment of this purpose, Justice Douglas
declared:
If those who govern the District of Columbia decide that the Nation's Capital should be
beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in
the way.
Once the object is within the authority of Congress, the right to realize it through the
exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29
decided by a 6-3 vote in
1978, the U.S. Supreme Court sustained the respondent's Landmarks Preservation
Law under which the owners of the Grand Central Terminal had not been allowed to
construct a multi-story office building over the Terminal, which had been designated a
historic landmark. Preservation of the landmark was held to be a valid objective of the
police power. The problem, however, was that the owners of the Terminal would be
deprived of the right to use the airspace above it although other landowners in the
area could do so over their respective properties. While insisting that there was here
no taking, the Court nonetheless recognized certain compensatory rights accruing to
Grand Central Terminal which it said would "undoubtedly mitigate" the loss caused by
the regulation. This "fair compensation," as he called it, was explained by Prof.
Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central
was authorized to transfer to neighboring properties the authorized but unused rights
accruing to the site prior to the Terminal's designation as a landmark the rights
which would have been exhausted by the 59-story building that the city refused to
countenance atop the Terminal. Prevailing bulk restrictions on neighboring sites were
proportionately relaxed, theoretically enabling Penn Central to recoup its losses at the
Terminal site by constructing or selling to others the right to construct larger, hence
more profitable buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under challenge
merely prescribe retention limits for landowners, there is an exercise of the police
power for the regulation of private property in accordance with the Constitution. But
where, to carry out such regulation, it becomes necessary to deprive such owners of
whatever lands they may own in excess of the maximum area allowed, there is
definitely a taking under the power of eminent domain for which payment of just
compensation is imperative. The taking contemplated is not a mere limitation of the
use of the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner in favor of
the farmer-beneficiary. This is definitely an exercise not of the police power but of the
power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain,
the several measures before us are challenged as violative of the due process and
equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no
retention limits are prescribed has already been discussed and dismissed. It is noted
that although they excited many bitter exchanges during the deliberation of the CARP
Law in Congress, the retention limits finally agreed upon are, curiously enough, not
being questioned in these petitions. We therefore do not discuss them here. The Court
will come to the other claimed violations of due process in connection with our
examination of the adequacy of just compensation as required under the power of
expropriation.
The argument of the small farmers that they have been denied equal protection
because of the absence of retention limits has also become academic under Section 6
of R.A. No. 6657. Significantly, they too have not questioned the area of such limits.
There is also the complaint that they should not be made to share the burden of
agrarian reform, an objection also made by the sugar planters on the ground that they
belong to a particular class with particular interests of their own. However, no
evidence has been submitted to the Court that the requisites of a valid classification
have been violated.
Classification has been defined as the grouping of persons or things similar to
each other in certain particulars and different from each other in these same
particulars. 31
To be valid, it must conform to the following requirements: (1) it must be
based on substantial distinctions; (2) it must be germane to the purposes of the law;
(3) it must not be limited to existing conditions only; and (4) it must apply equally to
all the members of the class. 32
The Court finds that all these requisites have been met
by the measures here challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must
be treated alike both as to the rights conferred and the liabilities imposed. 33
The
petitioners have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of other
properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that is
clearly visible except to those who will not see. There is no need to elaborate on this
matter. In any event, the Congress is allowed a wide leeway in providing for a valid
classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished from
those of a particular class require the interference of the State and, no less important,
the means employed are reasonably necessary for the attainment of the purpose
sought to be achieved and not unduly oppressive upon individuals. 34
As the subject
and purpose of agrarian reform have been laid down by the Constitution itself, we
may say that the first requirement has been satisfied. What remains to be examined
is the validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of
the individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it
be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the
most urgent public need, subject only to a few notable exceptions, will excuse the
bypassing of an individual's rights. It is no exaggeration to say that a person invoking
a right guaranteed under Article III of the Constitution is a majority of one even as
against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the added
protection of Section 9, which reaffirms the familiar rule that private property shall not
be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35
It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the State
over the interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored justification, as in the
case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the constitutional
injunction that "private property shall not be taken for public use without just
compensation" and in the abundant jurisprudence that has evolved from the
interpretation of this principle. Basically, the requirements for a proper exercise of the
power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310
that the State should first distribute public agricultural lands in the pursuit of agrarian
reform instead of immediately disturbing property rights by forcibly acquiring private
agricultural lands. Parenthetically, it is not correct to say that only public agricultural
lands may be covered by the CARP as the Constitution calls for "the just distribution of
all agricultural lands." In any event, the decision to redistribute private agricultural
lands in the manner prescribed by the CARP was made by the legislative and
executive departments in the exercise of their discretion. We are not justified in
reviewing that discretion in the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As explained
by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in ordinary parlance, namely, a
question of policy. It refers to "those questions which, under the Constitution, are to
be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of
the government." It is concerned with issues dependent upon the wisdom, not
legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts "to
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government." 37
Even so, this should not be construed as a license for us to reverse
the other departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to include
in the CARP the redistribution of private landholdings (even as the distribution of
public agricultural lands is first provided for, while also continuing space 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 It bears repeating that the measures challenged in these petitions contemplate
unwise, but illegal. We do not find it to be so. 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
In U.S. v. Chandler-Dunbar Water Power Company, 38
it was held:
owners of their property and deprived them of all its beneficial use and enjoyment, to

Congress having determined, as it did by the Act of March 3, 1909 that the entire St. entitle them to the just compensation mandated by the Constitution.

Mary's river between the American bank and the international line, as well as all of the As held in Republic of the Philippines v. Castellvi, 42
there is compensable taking

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
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

Congress . . . and deprive him of beneficial enjoyment of the property. All these requisites are
envisioned in the measures before us.
As earlier observed, the requirement for public use has already been settled for
Where the State itself is the expropriator, it is not necessary for it to make a
us by the Constitution itself. No less than the 1987 Charter calls for agrarian reform,
deposit upon its taking possession of the condemned property, as "the compensation
which is the reason why private agricultural lands are to be taken from their owners,
is a public charge, the good faith of the public is pledged for its payment, and all the
subject to the prescribed maximum retention limits. The purposes specified in P.D. No.
resources of taxation may be employed in raising the amount." 43
Nevertheless,
27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional
Section 16(e) of the CARP Law provides that:
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
Upon receipt by the landowner of the corresponding payment or, in case of rejection
directly or collectively the lands they till." That public use, as pronounced by the
or no response from the landowner, upon the deposit with an accessible bank
fundamental law itself, must be binding on us.
designated by the DAR of the compensation in cash or in LBP bonds in accordance
The second requirement, i.e., the payment of just compensation, needs a longer
with this Act, the DAR shall take immediate possession of the land and shall request
and more thoughtful examination.
the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name
Just compensation is defined as the full and fair equivalent of the property taken
of the Republic of the Philippines. The DAR shall thereafter proceed with the
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 redistribution of the land to the qualified beneficiaries.
to intensify the meaning of the word "compensation" to convey the idea that the
Objection is raised, however, to the manner of fixing the just compensation,
equivalent to be rendered for the property to be taken shall be real, substantial, full,
which it is claimed is entrusted to the administrative authorities in violation of judicial
ample. 41

prerogatives. Specific reference is made to Section 16(d), which provides that in case
of the rejection or disregard by the owner of the offer of the government to buy his
land
. . . the DAR shall conduct summary administrative proceedings to determine the
compensation for the land by requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for the land, within fifteen (15)
days from the receipt of the notice. After the expiration of the above period, the
matter is deemed submitted for decision. The DAR shall decide the case within thirty
(30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the
courts of justice and may not be usurped by any other branch or official of the
government. EPZA v. Dulay 44
resolved a challenge to several decrees promulgated by
President Marcos providing that the just compensation for property under
expropriation should be either the assessment of the property by the government or
the sworn valuation thereof by the owner, whichever was lower. In declaring these
decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees
constitutes impermissible encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution is reserved to it for final
determination.
Thus, although in an expropriation proceeding the court technically would still have
the power to determine the just compensation for the property, following the
applicable decrees, its task would be relegated to simplystating the lower value of the
property as declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation of the owner and that
of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair. Even
a grade school pupil could substitute for the judge insofar as the determination of
constitutional just compensation is concerned.
xxx xxx xxx
In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx xxx 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 preliminaryunless accepted by all
parties concerned. Otherwise, the courts of justice will still have the right to
review with finality the said determination in the exercise of what is admittedly a
judicial function.
The second and more serious objection to the provisions on just compensation is
not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR and
the LBP, in accordance with the criteria provided for in Sections 16 and 17, and other
pertinent provisions hereof, or as may be finally determined by the court, as the just
compensation for the land.
The compensation shall be paid in one of the following modes, at the option of the
landowner:
(1) Cash payment, under the following terms and
conditions:
(a) For lands above fifty (50) hectares, insofar as the
excess hectarage is concerned Twenty-five percent (25%) cash,
the balance to be paid in government financial instruments
negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to
fifty (50) hectares Thirty percent (30%) cash, the balance to be
paid in government financial instruments negotiable at any time.
(c) For lands twenty-four (24) hectares and below Thirty-
five percent (35%) cash, the balance to be paid in government
financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by
the PARC;
(3) Tax credits which can be used against any tax
liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill
rates. Ten percent (10%) of the face value of the bonds shall mature
every year from the date of issuance until the tenth (10th)
year: Provided, That should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid correspondingly in
LBP bonds;
(b) Transferability and negotiability. Such LBP bonds may
be used by the landowner, his successors-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
bonds for the provisional release of accused
persons, or for performance bonds;
(iv) Security for loans with
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,
schools, and other institutions;
(vii) Payment for fees of the immediate
family of the original bondholder in government
hospital; 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:
or bail
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
any
property. Just compensation has always been understood to be the just and complete
equivalent of the loss which the owner of the thing expropriated has to suffer by
reason of the expropriation. 45
(Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46
this Court held:
It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short of
that is less, than just compensation. It means a fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not whatever gain would accrue to
the expropriating entity. The market value of the land taken is the just compensation
to which the owner of condemned property is entitled, the market value being
that sum of money which a person desirous, but not compelled to buy, and an owner,
willing, but not compelled to sell, would agree on as a price to be given and received
trade
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 thetraditional exercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited area is
sought to be taken by the State from its owner for a specific and perhaps local
purpose. What we deal with here is arevolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found
and of whatever kind as long as they are in excess of the maximum retention limits
allowed their owners. This kind of expropriation is intended for the benefit not only of
a particular community or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the impoverished farmer to the
land-glutted owner. Its purpose does not cover only the whole territory of this country
but goes beyond in time to the foreseeable future, which it hopes to secure and edify
with the vision and the sacrifice of the present generation of Filipinos. Generations yet
to come are as involved in this program as we are today, although hopefully only as
beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow
through our thoughtfulness today. And, finally, let it not be forgotten that it is no less
than the Constitution itself that has ordained this revolution in the farms, calling for "a
just distribution" among the farmers of lands that have heretofore been the prison of
their dreams but can now become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation under the
laws before us, we estimate that hundreds of billions of pesos will be needed, far more
indeed than the amount of P50 billion initially appropriated, which is already
staggering as it is by our present standards. Such amount is in fact not even fully
available at this time.
We assume that the framers of the Constitution were aware of this difficulty
when they called for agrarian reform as a top priority project of the government. It is a
part of this assumption that when they envisioned the expropriation that would be
needed, they also intended that the just compensation would have to be paid not in
the orthodox way but a less conventional if more practical method. There can be no
doubt that they were aware of the financial limitations of the government and had no
illusions that there would be enough money to pay in cash and in full for the lands
they wanted to be distributed among the farmers. We may therefore assume that
their intention was to allow such manner of payment as is now provided for by the
CARP Law, particularly the payment of the balance (if the owner cannot be paid fully
with money), or indeed of the entire amount of the just compensation, with other
things of value. We may also suppose that what they had in mind was a similar
scheme of payment as that prescribed in P.D. No. 27, which was the law in force at the
time they deliberated on the new Charter and with which they presumably agreed in
principle.
The Court has not found in the records of the Constitutional Commission any
categorial agreement among the members regarding the meaning to be given the
concept of just compensation as applied to the comprehensive agrarian reform
program being contemplated. 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 Admittedly, the compensation contemplated in the law will cause the
the lands to be expropriated was reached by the Commission. 50
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,
On the other hand, there is nothing in the records either that militates against
conscious as we know they are of the need for their forebearance and even sacrifice,
the assumptions we are making of the general sentiments and intention of the
will not begrudge us their indispensable share in the attainment of the ideal of
members on the content and manner of the payment to be made to the landowner in
agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for
the light of the magnitude of the expenditure and the limitations of the expropriator.
the Holy Grail.
With these assumptions, the Court hereby declares that the content and manner
The complaint against the effects of non-registration of the land under E.O. No.
of the just compensation provided for in the afore-quoted Section 18 of the CARP Law
229 does not seem to be viable any more as it appears that Section 4 of the said
is not violative of the Constitution. We do not mind admitting that a certain degree of
Order has been superseded by Section 14 of the CARP Law. This repeats the requisites
pragmatism has influenced our decision on this issue, but after all this Court is not a
of registration as embodied in the earlier measure but does not provide, as the latter
cloistered institution removed from the realities and demands of society or oblivious
did, that in case of failure or refusal to register the land, the valuation thereof shall be
to the need for its enhancement. The Court is as acutely anxious as the rest of our
that given by the provincial or city assessor for tax purposes. On the contrary, the
people to see the goal of agrarian reform achieved at last after the frustrations and
CARP Law says that the just compensation shall be ascertained on the basis of the
deprivations of our peasant masses during all these disappointing decades. We are
factors mentioned in its Section 17 and in the manner provided for in Section
aware that invalidation of the said section will result in the nullification of the entire
16. dctai
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 The last major challenge to CARP is that the landowner is divested of his property
view the intention of the Constitution, and that is not what we shall decree today. even before actual payment to him in full of just compensation, in contravention of a
well-accepted principle of eminent domain.
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 The recognized rule, indeed, is that title to the property expropriated shall pass
payment to the other things of value constituting the total payment, as determined on from the owner to the expropriator only upon full payment of the just compensation.
the basis of the areas of the lands expropriated, is not unduly oppressive upon the Jurisprudence on this settled principle is consistent both here and in other democratic
landowner. It is noted that the smaller the land, the bigger the payment in money, jurisdictions. Thus:
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 Title to property which is the subject of condemnation proceedings does not vest the

less importantly, the government financial instruments making up the balance of the condemnor until the judgment fixing just compensation is entered and paid, but the
payment are "negotiable at any time." The other modes, which are likewise available condemnor's title relates back to the date on which the petition under the Eminent
to the landowner at his option, are also not unreasonable because payment is made in
Domain Act, or the commissioner's report under the Local Improvement Act, is filed. 51

shares of stock, LBP bonds, other properties or assets, tax credits, and other things of
value equivalent to the amount of just compensation.
. . . 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 counterbalance 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.
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.

V 3. All rights previously acquired by the tenant-farmers under P.D. No. 27

are retained and recognized.
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 4. Landowners who were unable to exercise their rights of retention under
measures and ask that they be scrapped entirely. To be sure, these enactments are P.D. No. 27 shall enjoy the retention rights granted by R.A. No. 6657 under the
less than perfect; indeed, they should be continuously re-examined and rehoned, that conditions therein prescribed.
they may be sharper instruments for the better protection of the farmer's rights. But
5. Subject to the above-mentioned rulings, all the petitions are
we have to start somewhere. In the pursuit of agrarian reform, we do not tread on
DISMISSED, without pronouncement as to costs.
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 SO ORDERED.
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 G.R. No. 127876 December 17, 1999

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
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.

from the exploitation and disdain of the past and from his own feelings of inadequacy
PUNO, J.:
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
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
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
On December 12, 1989, respondent DAR through then Department Secretary Miriam
D. Santiago sent a "Notice of Acquisition" to petitioner. The Notice was addressed as
follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila. 10
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were
subject to immediate acquisition and distribution by the government under the CARL;
that based on the DAR's valuation criteria, the government was offering compensation
of P3.4 million for 333.0800 hectares; that whether this offer was to be accepted or
rejected, petitioner was to inform the Bureau of Land Acquisition and Distribution
(BLAD) of the DAR; that in case of petitioner's rejection or failure to reply within thirty
days, respondent DAR shall conduct summary administrative proceedings with notice
to petitioner to determine just compensation for the land; that if petitioner accepts
respondent DAR's offer, or upon deposit of the compensation with an accessible bank
if it rejects the same, the DAR shall take immediate possession of the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director sent to the
LBP Land Valuation Manager three (3) separate Memoranda entitled "Request to Open
Trust Account." Each Memoranda requested that a trust account representing the
valuation of three portions of Hacienda Palico be opened in favor of the petitioner in
view of the latter's rejection of its offered value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for
conversion of Haciendas Palico and Banilad from agricultural to non-agricultural lands
under the provisions of the CARL. 13 On July 14, 1993, petitioner sent a letter to the
DAR Regional Director reiterating its request for conversion of the two haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded with the
acquisition of the two Haciendas. The LBP trust accounts as compensation for
Hacienda Palico were replaced by respondent DAR with cash and LBP bonds. 15 On
October 22, 1993, from the mother title of TCT No. 985 of the Hacienda, respondent
DAR registered Certificate of Land Ownership Award (CLOA) No. 6654. On October 30,
1993, CLOA's were distributed to farmer beneficiaries. 16
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas 17
The MARO informed Pimentel that Hacienda Banilad was subject to compulsory
acquisition under the CARL; that should petitioner wish to avail of the other
schemes such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent
DAR was willing to provide assistance thereto. 18
On September 18, 1989, the MARO sent an "Invitation to Parties" again to Pimentel
inviting the latter to attend a conference on September 21, 1989 at the MARO Office
in Nasugbu to discuss the results of the MARO's investigation over Hacienda
Banilad. 19
On September 21, 1989, the same day the conference was held, the MARO submitted
two (2) Reports. In his first Report, he found that approximately 709 hectares of land
under Tax Declaration Nos. 0237 and 0236 were "flat to undulating (0-8% slope)." On
this area were discovered 162 actual occupants and tillers of sugarcane. 20 In the
second Report, it was found that approximately 235 hectares under Tax Declaration
No. 0390 were "flat to undulating," on which were 92 actual occupants and tillers of
sugarcane. 21
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the BARC,
the LBP, and Jaime Pimentel on behalf of the landowner. 22 After the meeting, on the
same day, September 21, 1989, a Summary Investigation Report was submitted
jointly by the MARO, representatives of the BARC, LBP, and the PARO. They
recommended that after ocular inspection of the property, 234.6498 hectares under
Tax Declaration No. 0390 be subject to compulsory acquisition and distribution by
CLOA. 23 The following day, September 22, 1989, a second Summary Investigation was
submitted by the same officers. They recommended that 737.2590 hectares under Tax
Declaration Nos. 0236 and 0237 be likewise placed under compulsory acquisition for
distribution. 24
On December 12, 1989, respondent DAR, through the Department Secretary, sent to
petitioner two (2) separate "Notices of Acquisition" over Hacienda Banilad. These
Notices were sent on the same day as the Notice of Acquisition over Hacienda Palico.
Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda Banilad
were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila. 25
Respondent DAR offered petitioner compensation of P15,108,995.52 for
729.4190 hectares and P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager a "Request to Open Trust Account" in petitioner's name as compensation for
234.6493 hectares of Hacienda Banilad. 27 A second "Request to Open Trust Account"
was sent on November 18, 1991 over 723.4130 hectares of said Hacienda. 28
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and
P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for
petitioner's land in Hacienda Banilad. 29
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and
Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988
before the effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares
and is covered by four (4) titles TCT Nos. T-44662, T-44663, T-44664 and T-44665.
On January 12, 1989, respondent DAR, through the Regional Director for Region IV,
sent to petitioner two (2) separate Resolutions accepting petitioner's voluntary offer to
sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663. 30 The Resolutions
were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M 31
On September 4, 1990, the DAR Regional Director issued two separate Memoranda to
the LBP Regional Manager requesting for the valuation of the land under TCT Nos. T-
44664 and T-44663. 32 On the same day, respondent DAR, through the Regional
Director, sent to petitioner a "Notice of Acquisition" over 241.6777 hectares under TCT
No. T-44664 and 533.8180 hectares under TCT No. T-44663. 33 Like the Resolutions of
Acceptance, the Notice of Acquisition was addressed to petitioner at its office in
Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas,
sent a letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda
Caylaway. The Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the
reclassification of Hacienda Caylaway from agricultural to non-agricultural. As a result,
petitioner informed respondent DAR that it was applying for conversion of Hacienda
Caylaway from agricultural to other
uses. 34
In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner
that a reclassification of the land would not exempt it from agrarian reform.
Respondent Secretary also denied petitioner's withdrawal of the VOS on the ground
that withdrawal could only be based on specific grounds such as unsuitability of the
soil for agriculture, or if the slope of the land is over 18 degrees and that the land is
undeveloped. 35
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993,
petitioner filed its application for conversion of both Haciendas Palico and
Banilad. 36 On July 14, 1993, petitioner, through its President, Eduardo Roxas,
reiterated its request to withdraw the VOS over Hacienda Caylaway in light of the
following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge,
Department of Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman,
Quezon City dated March 1, 1993 stating that the lands subject of
referenced titles "are not feasible and economically sound for further
agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas
approving the Zoning Ordinance reclassifying areas covered by the
referenced titles to non-agricultural which was enacted after extensive
consultation with government agencies, including [the Department of
Agrarian Reform], and the requisite public hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas
dated March 8, 1993 approving the Zoning Ordinance enacted by the
Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the
Municipal Planning & Development, Coordinator and Deputized Zoning
Administrator addressed to Mrs. Alicia P. Logarta advising that the
Municipality of Nasugbu, Batangas has no objection to the conversion
of the lands subject of referenced titles to non-agricultural. 37
On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with respondent
DAR Adjudication Board (DARAB) praying for the cancellation of the CLOA's issued by
respondent DAR in the name of several persons. Petitioner alleged that the
Municipality of Nasugbu, where the haciendas are located, had been declared a tourist
zone, that the land is not suitable for agricultural production, and that the
Sangguniang Bayan of Nasugbu had reclassified the land to non-agricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case
involved the prejudicial question of whether the property was subject to agrarian
reform, hence, this question should be submitted to the Office of the Secretary of
Agrarian Reform for determination. 38
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484.
It questioned the expropriation of its properties under the CARL and the denial of due
process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three 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 NON-
AGRICULTURAL, BOTH OF WHICH PLACE SAID LANDHOLDINGS OUTSIDE
THE SCOPE OF AGRARIAN REFORM, OR AT THE VERY LEAST ENTITLE
PETITIONER TO APPLY FOR CONVERSION AS CONCEDED BY
RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED
TO DECLARE THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR
FAILURE TO OBSERVE DUE PROCESS, CONSIDERING THAT
RESPONDENTS BLATANTLY DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER
AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE
ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED
TO RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY
DEPRIVED OF ITS PROPERTY WITHOUT JUST COMPENSATION,
CONSIDERING THAT PETITIONER WAS NOT PAID JUST COMPENSATION
BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF ITS LANDHOLDINGS
THROUGH THE ISSUANCE OF CLOA'S TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1) whether this Court can take
cognizance of this petition despite petitioner's failure to exhaust administrative
remedies; (2) whether the acquisition proceedings over the three haciendas were
valid and in accordance with law; and (3) assuming the haciendas may be reclassified
from agricultural to non-agricultural, whether this court has the power to rule on this
issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals gravely
erred in finding that petitioner failed to exhaust administrative remedies. As a general
rule, before a party may be allowed to invoke the jurisdiction of the courts of justice,
he is expected to have exhausted all means of administrative redress. This is not
absolute, however. There are instances when judicial action may be resorted to
immediately. Among these exceptions are: (1) when the question raised is purely
legal; (2) when the administrative body is in estoppel; (3) when the act complained of
is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the
respondent acted in disregard of due process; (6) when the respondent is a
department secretary whose acts, as an alter ego of the President, bear the implied or
assumed approval of the latter; (7) when irreparable damage will be suffered; (8)
when there is no other plain, speedy and adequate remedy; (9) when strong public
interest is involved; (10) when the subject of the controversy is private land; and (11)
in quo warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation of its
rights and to require it to exhaust administrative remedies before the DAR itself was
not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to farmer
beneficiaries over portions of petitioner's land without just compensation to petitioner.
A Certificate of Land Ownership Award (CLOA) is evidence of ownership of land by a
beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of
1988. 43 Before this may be awarded to a farmer beneficiary, the land must first be
acquired by the State from the landowner and ownership transferred to the former.
The transfer of possession and ownership of the land to the government are
conditioned upon the receipt by the landowner of the corresponding payment or
deposit by the DAR of the compensation with an accessible bank. Until then, title
remains with the landowner. 44 There was no receipt by petitioner of any
compensation for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law provides
that the deposit must be made only in "cash" or "LBP bonds." 45 Respondent DAR's
opening of trust account deposits in petitioner' s name with the Land Bank of the
Philippines does not constitute payment under the law. Trust account deposits are not
cash or LBP bonds. The replacement of the trust account with cash or LBP bonds did
not ipso facto cure the lack of compensation; for essentially, the determination of this
compensation was marred by lack of due process. In fact, in the entire acquisition
proceedings, respondent DAR disregarded the basic requirements of administrative
due process. Under these circumstances, the issuance of the CLOA's to farmer
beneficiaries necessitated immediate judicial action on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the acquisition
proceedings themselves. Before we rule on this matter, however, there is need to lay
down the procedure in the acquisition of private lands under the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL),
provides for two (2) modes of acquisition of private land: compulsory and voluntary.
The procedure for the compulsory acquisition of private lands is set forth in Section 16
of R.A. 6657, viz:
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 a) CARP CA Form 1 MARO Investigation Report
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 b) CARP CA Form 2 Summary Investigation Report of Findings and Evaluation
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 c) CARP CA Form 3 Applicant's Information Sheet
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 d) CARP CA Form 4 Beneficiaries Undertaking
proceedings to determine just compensation for the land. The landowner, the LBP
representative and other interested parties may submit evidence on just
e) CARP CA Form 5 Transmittal Report to the PARO
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
The MARO/BARC shall certify that all information contained in the above-
compensation. Upon receipt by the owner of the corresponding payment, or, in case
mentioned forms have been examined and verified by him and that the same
of rejection or lack of response from the latter, the DAR shall deposit the
are true and correct.
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
3. Send a Notice of Coverage and a letter of invitation to a conference/meeting
certificate of title in the name of the Republic of the Philippines. The land shall then be
to the landowner covered by the Compulsory Case Acquisition Folder. Invitations
redistributed to the farmer beneficiaries. Any party may question the decision of the
to the said conference/meeting shall also be sent to the prospective farmer-
DAR in the regular courts for final determination of just compensation.
beneficiaries, the BARC representative(s), the Land Bank of the Philippines (LBP)
representative, and other interested parties to discuss the inputs to the
The DAR has made compulsory acquisition the priority mode of the land acquisition to
valuation of the property. He shall discuss the MARO/BARC investigation report
hasten the implementation of the Comprehensive Agrarian Reform Program
and solicit the views, objection, agreements or suggestions of the participants
(CARP). 46 Under Section 16 of the CARL, the first step in compulsory acquisition is the
thereon. The landowner shall also be asked to indicate his retention area. The
identification of the land, the landowners and the beneficiaries. However, the law is
minutes of the meeting shall be signed by all participants in the conference and
silent on how the identification process must be made. To fill in this gap, the DAR
shall form an integral part of the CACF.
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:
4. Submit all completed case folders to the Provincial Agrarian Reform Officer
(PARO).
II. OPERATING PROCEDURE

B. The PARO shall:

A. The Municipal Agrarian Reform Officer, with the assistance of the
pertinent Barangay Agrarian Reform Committee (BARC), shall:
1. Ensure that the individual case folders are forwarded to him by his MAROs.
1. Update the masterlist of all agricultural lands covered under the CARP in his
2. Immediately upon receipt of a case folder, compute the valuation of the land
area of responsibility. The masterlist shall include such information as required
in accordance with A.O. No. 6, Series of 1988. 47 The valuation worksheet and
under the attached CARP Masterlist Form which shall include the name of the
the related CACF valuation forms shall be duly certified correct by the PARO and
landowner, landholding area, TCT/OCT number, and tax declaration number.
all the personnel who participated in the accomplishment of these forms.
2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT)
3. In all cases, the PARO may validate the report of the MARO through ocular
or landholding covered under Phase I and II of the CARP except those for which
inspection and verification of the property. This ocular inspection and verification
the landowners have already filed applications to avail of other modes of land
shall be mandatory when the computed value exceeds = 500,000 per estate.
acquisition. A case folder shall contain the following duly accomplished forms:
 4. Upon determination of the valuation, forward the case folder, together with
the duly accomplished valuation forms and his recommendations, to the Central
Office. The LBP representative and the MARO concerned shall be furnished a
copy each of his report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO, review,
evaluate and determine the final land valuation of the property covered by the
case folder. A summary review and evaluation report shall be prepared and duly
certified by the BLAD Director and the personnel directly participating in the
review and final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized
representative, a Notice of Acquisition (CARP CA Form 8) for the subject
property. Serve the Notice to the landowner personally or through registered
mail within three days from its approval. The Notice shall include, among others,
the area subject of compulsory acquisition, and the amount of just
compensation offered by DAR.
3. Should the landowner accept the DAR's offered value, the BLAD shall prepare
and submit to the Secretary for approval the Order of Acquisition. However, in
case of rejection or non-reply, the DAR Adjudication Board (DARAB) shall conduct
a summary administrative hearing to determine just compensation, in
accordance with the procedures provided under Administrative Order No. 13,
Series of 1989. Immediately upon receipt of the DARAB's decision on just
compensation, the BLAD shall prepare and submit to the Secretary for approval
the required Order of Acquisition.
4. Upon the landowner's receipt of payment, in case of acceptance, or upon
deposit of payment in the designated bank, in case of rejection or non-response,
the Secretary shall immediately direct the pertinent Register of Deeds to issue
the corresponding Transfer Certificate of Title (TCT) in the name of the Republic
of the Philippines. Once the property is transferred, the DAR, through the PARO,
shall take possession of the land for redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian
Reform Officer (MARO) keep an updated master list of all agricultural lands under the
CARP in his area of responsibility containing all the required information. The MARO
prepares a Compulsory Acquisition Case Folder (CACF) for each title covered by CARP.
The MARO then sends the landowner a "Notice of Coverage" and a "letter of
invitation" to a "conference/meeting" over the land covered by the CACF. He also
sends invitations to the prospective farmer-beneficiaries the representatives of the
Barangay Agrarian Reform Committee (BARC), the Land Bank of the Philippines (LBP)
and other interested parties to discuss the inputs to the valuation of the property and
solicit views, suggestions, objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer
(PARO) who shall complete the valuation of the land. Ocular inspection and
verification of the property by the PARO shall be mandatory when the computed value
of the estate exceeds P500,000.00. Upon determination of the valuation, the PARO
shall forward all papers together with his recommendation to the Central Office of the
DAR. The DAR Central Office, specifically, the Bureau of Land Acquisition and
Distribution (BLAD), shall review, evaluate and determine the final land valuation of
the property. The BLAD shall prepare, on the signature of the Secretary or his duly
authorized representative, a Notice of Acquisition for the subject property. 48 From this
point, the provisions of Section 16 of R.A. 6657 then apply. 49
For a valid implementation of the CAR program, two notices are required: (1) the
Notice of Coverage and letter of invitation to a preliminary conference sent to the
landowner, the representatives of the BARC, LBP, farmer beneficiaries and other
interested parties pursuant to DAR A.O. No. 12, Series of 1989; and (2) the Notice of
Acquisition sent to the landowner under Section 16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated. They are
steps designed to comply with the requirements of administrative due process. The
implementation of the CARL is an exercise of the State's police power and the power
of eminent domain. To the extent that the CARL prescribes retention limits to the
landowners, there is an exercise of police power for the regulation of private property
in accordance with the Constitution. 50 But where, to carry out such regulation, the
owners are deprived of lands they own in excess of the maximum area allowed, there
is also a taking under the power of eminent domain. The taking contemplated is not a
mere limitation of the use of the land. What is required is the surrender of the title to
and physical possession of the said excess and all beneficial rights accruing to the
owner in favor of the farmer beneficiary. 51 The Bill of Rights provides that "[n]o
person shall be deprived of life, liberty or property without due process of law." 52 The
CARL was not intended to take away property without due process of law. 53 The
exercise of the power of eminent domain requires that due process be observed in the
taking of private property.
DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was
amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1,
Series of 1993. The Notice of Coverage and letter of invitation to the conference
meeting were expanded and amplified in said amendments.
DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition
Pursuant to R.A. 6657," requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting
documents.
2. Gathers basic ownership documents listed under 1.a or 1.b above and
prepares corresponding VOCF/CACF by landowner/landholding.
3. Notifies/invites the landowner and representatives of the LBP, DENR, BARC
and prospective beneficiaries of the schedule of ocular inspection of the
property at least one week in advance.
4. MARO/LAND BANK FIELD OFFICE/BARC
a) Identify the land and landowner, and determine the suitability for agriculture
and productivity of the land and jointly prepare Field Investigation Report (CARP
Form No. 2), including the Land Use Map of the property.
b) Interview applicants and assist them in the preparation of the Application For
Potential CARP Beneficiary (CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for those found qualified, cause
the signing of the respective Application to Purchase and Farmer's Undertaking
(CARP Form No. 4).
d) Complete the Field Investigation Report based on the result of the ocular
inspection/investigation of the property and documents submitted. See to it
that Field Investigation Report is duly accomplished and signed by all
concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision
survey delineating areas covered by OLT, retention, subject of VOS, CA (by
phases, if possible), infrastructures, etc., whichever is applicable.
b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his
duly authorized representative inviting him for a conference.
c) Sends Invitation Letter (CARP Form No. 6) for a conference/public hearing to
prospective farmer-beneficiaries, landowner, representatives of BARC, LBP,
DENR, DA, NGO's, farmers' organizations and other interested parties to discuss
the following matters:
Result of Field Investigation
Inputs to valuation
Issues raised
Comments/recommendations by all parties concerned.
d) Prepares Summary of Minutes of the conference/public hearing to be guided
by CARP Form No. 7.
e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform Office
(PARO) using CARP Form No. 8 (Transmittal Memo to PARO).
DAR A.O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell
(VOS) and Compulsory Acquisition (CA) transactions involving lands enumerated
under Section 7 of the CARL. 54 In both VOS and CA. transactions, the MARO prepares
the Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory Acquisition Case
Folder (CACF), as the case may be, over a particular landholding. The MARO notifies
the landowner as well as representatives of the LBP, BARC and prospective
beneficiaries of the date of the ocular inspection of the property at least one week
before the scheduled date and invites them to attend the same. The MARO, LBP or
BARC conducts the ocular inspection and investigation by identifying the land and
landowner, determining the suitability of the land for agriculture and productivity,
interviewing and screening prospective farmer beneficiaries. Based on its
investigation, the MARO, LBP or BARC prepares the Field Investigation Report which
shall be signed by all parties concerned. In addition to the field investigation, a
boundary or subdivision survey of the land may also be conducted by a Survey Party
of the Department of Environment and Natural Resources (DENR) to be assisted by
the MARO. 55 This survey shall delineate the areas covered by Operation Land Transfer
(OLT), areas retained by the landowner, areas with infrastructure, and the areas
subject to VOS and CA. After the survey and field investigation, the MARO sends a
"Notice of Coverage" to the landowner or his duly authorized representative inviting
him to a conference or public hearing with the farmer beneficiaries, representatives of
the BARC, LBP, DENR, Department of Agriculture (DA), non-government organizations,
farmer's organizations and other interested parties. At the public hearing, the parties
shall discuss the results of the field investigation, issues that may be raised in relation
thereto, inputs to the valuation of the subject landholding, and other comments and
recommendations by all parties concerned. The Minutes of the conference/public
hearing shall form part of the VOCF or CACF which files shall be forwarded by the
MARO to the PARO. The PARO reviews, evaluates and validates the Field Investigation
Report and other documents in the VOCF/CACF. He then forwards the records to the
RARO for another review.
DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of 1993. DAR
A.O. No. 1, Series of 1993 provided, among others, that:
IV. OPERATING PROCEDURES:
Steps Responsible Activity Forms/
A. Identification and
Documentation
5 DARMO Issue Notice of Coverage CARPto LO by personal delivery Form No.
2with 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 which should be
scheduled at least two weeks in advance of said notice. A copy of said Notice
shall CARP be posted for at least one Form No. 17 week on the bulletin board of
the municipal and barangay halls where the property is located. LGU office
concerned notifies DAR about compliance with posting requirements thru return
indorsement on CARP Form No. 17. 6 DARMO Send notice to the LBP, CARP
BARC, DENR representatives Form No. 3 and prospective ARBs of the schedule of
the field investigation to be conducted on the subject property. 7 DARMO With
the participation of CARP BARC the LO, representatives of Form No. 4 LBP the
LBP, BARC, DENR Land Use DENR and prospective ARBs, Map Local Office
conducts the investigation on subject property to identify the landholding,
determines its suitability and productivity; and jointly prepares the Field
Investigation Report (FIR) and Land Use Map. However, the field investigation
shall proceed even if the LO, the representatives of the DENR and prospective
ARBs are not available provided, they were given due notice of the time and
date of investigation to be conducted. Similarly, if the LBP representative is not
available or could not come on the scheduled date, the field investigation shall
also be conducted, after which the duly accomplished Part I of CARP Form No. 4
shall be forwarded to the LBP representative for validation. If he agrees to the
ocular inspection report of DAR, he signs the FIR (Part I) and accomplishes Part II
thereof. In the event that there is a difference or variance between the findings
of the DAR and the LBP as to the propriety of covering the land under CARP,
whether in whole or in part, on the issue of suitability to agriculture, degree of
development or slope, and on issues affecting idle lands, the conflict shall be
resolved by a composite team of DAR, LBP, DENR and DA which shall jointly
conduct further investigation thereon. The team shall submit its report of
findings which shall be binding to both DAR and LBP, pursuant to Joint
Memorandum Circular of the DAR, LBP, DENR and DA dated 27 January 1992.
8 DARMO Screen prospective ARBs BARC and causes the signing of CARP the
Application of Purchase Form No. 5 and Farmer's Undertaking (APFU). 9 DARMO
Furnishes a copy of the CARP duly accomplished FIR to Form No. 4 the
landowner by personal delivery with proof of service or registered mail will
return card and posts a copy thereof for at least one week on the bulletin board
of the municipal and barangay halls where the property is located. LGU office
concerned CARP notifies DAR about Form No. 17 compliance with posting
requirement thru return endorsement on CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter And/or segregation survey or DENR
delineating areas covered Segregation Local Office by OLT, "uncarpable Survey
Plan areas such as 18% slope and above, unproductive/ unsuitable to
agriculture, retention, infrastructure. In case of segregation or subdivision
survey, the plan shall be approved by DENR-LMS.
C. Review and Completion
of Documents
11. DARMO Forward VOCF/CACF CARP
to DARPO. Form No. 6
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
Jaime Pimentel is not the president, manager, secretary, cashier or director of
petitioner corporation. Is he, as administrator of the two Haciendas, considered an
agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it
reasonably certain that the corporation will receive prompt and proper notice in an
action against it. 63 Service must be made on a representative so integrated with the
corporation as to make it a priori supposable that he will realize his responsibilities
and know what he should do with any legal papers served on him, 64 and bring home
to the corporation notice of the filing of the action. 65Petitioner'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
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.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the
notices and letters of invitation were validly served on petitioner through him, there is
no showing that Pimentel himself was duly authorized to attend the conference
meeting with the MARO, BARC and LBP representatives and farmer beneficiaries for
purposes of compulsory acquisition of petitioner's landholdings. Even respondent
DAR's evidence does not indicate this authority. On the contrary, petitioner claims that
it had no knowledge of the letter-invitation, hence, could not have given Pimentel the
authority to bind it to whatever matters were discussed or agreed upon by the parties
at the preliminary conference or public hearing. Notably, one year after Pimentel was
informed of the preliminary conference, DAR A.O. No. 9, Series of 1990 was issued and
this required that the Notice of Coverage must be sent "to the landowner
concerned or his duly authorized representative." 69
Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly identified
before they were taken over by respondent DAR. Respondents insist that the lands
were identified because they are all registered property and the technical description
in their respective titles specifies their metes and bounds. Respondents admit at the
same time, however, that not all areas in the haciendas were placed under the
comprehensive agrarian reform program invariably by reason of elevation or
character or use of the land. 70
The acquisition of the landholdings did not cover the entire expanse of the two
haciendas, but only portions thereof. Hacienda Palico has an area of 1,024 hectares
and only 688.7576 hectares were targetted for acquisition. Hacienda Banilad has an
area of 1,050 hectares but only 964.0688 hectares were subject to CARP. The
haciendas are not entirely agricultural lands. In fact, the various tax declarations over
the haciendas describe the landholdings as "sugarland," and "forest, sugarland,
pasture land, horticulture and woodland." 71
Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically
requires that the land subject to land reform be first identified. The two haciendas in
the instant case cover vast tracts of land. Before Notices of Acquisition were sent to
petitioner, however, the exact areas of the landholdings were not properly segregated
and delineated. Upon receipt of this notice, therefore, petitioner corporation had no
idea which portions of its estate were subject to compulsory acquisition, which
portions it could rightfully retain, whether these retained portions were compact or
contiguous, and which portions were excluded from CARP coverage. Even respondent
DAR's evidence does not show that petitioner, through its duly authorized
representative, was notified of any ocular inspection and investigation that was to be
conducted by respondent DAR. Neither is there proof that petitioner was given the
opportunity to at least choose and identify its retention area in those portions to be
acquired compulsorily. The right of retention and how this right is exercised, is
guaranteed in Section 6 of the CARL, viz:
Sec. 6. Retention Limits. . . . .
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That in
case the area selected for retention by the landowner is tenanted, the
tenant shall have the option to choose whether to remain therein or be
a beneficiary in the same or another agricultural land with similar or
comparable features. In case the tenant chooses to remain in the
retained area, he shall be considered a leaseholder and shall lose his
right to be a beneficiary under this Act. In case the tenant chooses to
be a beneficiary in another agricultural land, he loses his right as a
leaseholder to the land retained by the landowner. The tenant must
exercise this option within a period of one (1) year from the time the
landowner manifests his choice of the area for retention.
Under the law, a landowner may retain not more than five hectares out of the total
area of his agricultural land subject to CARP. The right to choose the area to be
retained, which shall be compact or contiguous, pertains to the landowner. If the area
chosen for retention is tenanted, the tenant shall have the option to choose whether
to remain on the portion or be a beneficiary in the same or another agricultural land
with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the
subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made on
May 6, 1988, 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.
Sec. 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall purchase all
agricultural lands it deems productive and suitable to farmer
cultivation voluntarily offered for sale to it at a valuation determined in
accordance with Section 6. Such transaction shall be exempt from the
payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of private
land as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O. 229 merely
reiterates the procedure of acquisition in Section 16, R.A. 6657. In other words, the
E.O. is silent as to the procedure for the identification of the land, the notice of
coverage and the preliminary conference with the landowner, representatives of the
BARC, the LBP and farmer beneficiaries. Does this mean that these requirements may
be dispensed with regard to VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land,
landowner and beneficiaries of the land subject to agrarian reform be identified before
the notice of acquisition should be issued. 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.
Respondent DAR, on the other hand, avers that surveys on the land covered by the
four titles were conducted in 1989, and that petitioner, as landowner, was not denied
participation therein, The results of the survey and the land valuation summary
report, however, do not indicate whether notices to attend the same were actually
sent to and received by petitioner or its duly authorized representative. 77 To reiterate,
Executive Order No. 229 does not lay down the operating procedure, much less the
notice requirements, before the VOS is accepted by respondent DAR. Notice to the
landowner, however, cannot be dispensed with. It is part of administrative due
process and is an essential requisite to enable the landowner himself to exercise, at
the very least, his right of retention guaranteed under the CARL.
 III. The Conversion of the three Haciendas.
It is petitioner's claim that the three haciendas are not subject to agrarian reform
because they have been declared for tourism, not agricultural
purposes. 78 In 1975, then President Marcos issued Proclamation No. 1520 declaring
the municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the
subject haciendas, were allegedly reclassified as non-agricultural 13 years before the
effectivity of R. A. No. 6657. 79 In 1993, the Regional Director for Region IV of the
Department of Agriculture certified that the haciendas are not feasible and sound for
agricultural development. 80 On March 20, 1992, pursuant to Proclamation No. 1520,
the Sangguniang Bayan of Nasugbu, Batangas adopted Resolution No. 19 reclassifying
certain areas of Nasugbu as non-agricultural. 81 This Resolution approved Municipal
Ordinance No. 19, Series of 1992, the Revised Zoning Ordinance of Nasugbu 82 which
zoning ordinance was based on a Land Use Plan for Planning Areas for New
Development allegedly prepared by the University of the Philippines. 83 Resolution No.
19 of the Sangguniang Bayan was approved by the Sangguniang Panlalawigan of
Batangas on March 8, 1993. 84
Petitioner claims that proclamation No. 1520 was also upheld by respondent DAR in
1991 when it approved conversion of 1,827 hectares in Nasugbu into a tourist area
known as the Batulao Resort Complex, and 13.52 hectares in Barangay Caylaway as
within the potential tourist belt. 85 Petitioner 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 non-agricultural uses," pursuant to Section 4
(j) of Executive Order No. 129-A, Series of 1987.
B. Sec. 5 (l) of E.O. 129-A, Series of 1987, vests in the
DAR, exclusive authority to approve or disapprove
applications for conversion of agricultural lands for
residential, commercial, industrial and other land uses.
C. Sec. 65 of R.A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988, likewise
empowers the DAR to authorize under certain
conditions, the conversion of agricultural lands.
D. Sec. 4 of Memorandum Circular No. 54, Series of
1993 of the Office of the President, provides that "action
on applications for land use conversion on individual
landholdings shall remain as the responsibility of the
DAR, which shall utilize as its primary reference,
documents on the comprehensive land use plans and
accompanying ordinances passed upon and approved
by the local government units concerned, together with
the National Land Use Policy, pursuant to R.A. No. 6657
and E.O. No. 129-A. 87
Applications for conversion were initially governed by DAR A.O. No. 1, Series of 1990
entitled "Revised Rules and Regulations Governing Conversion of Private Agricultural
Lands and Non-Agricultural Uses," and DAR A.O. No. 2, Series of 1990 entitled "Rules
of Procedure Governing the Processing and Approval of Applications for Land Use
Conversion." These A.O.'s and other implementing guidelines, including Presidential
issuances and national policies related to land use conversion have been consolidated
in DAR A.O. No. 07, Series of 1997. Under this recent issuance, the guiding principle in
land use conversion is:
to preserve prime agricultural lands for food production while, at the
same time, recognizing the need of the other sectors of society
(housing, industry and commerce) for land, when coinciding with the
objectives of the Comprehensive Agrarian Reform Law to promote
social justice, industrialization and the optimum use of land as a
national resource for public welfare. 88
"Land Use" refers to the manner of utilization of land, including its allocation,
development and management. "Land Use Conversion" refers to the act or process of
changing the current use of a piece of agricultural land into some other use as
approved by the DAR. 89 The conversion of agricultural land to uses other than
agricultural requires field investigation and conferences with the occupants of the
land. They involve factual findings and highly technical matters within the special
training and expertise of the DAR. DAR A.O. No. 7, Series of 1997 lays down with
specificity how the DAR must go about its task. This time, the field investigation is not
conducted by the MARO but by a special task force, known as the Center for Land Use
Policy Planning and Implementation (CLUPPI-DAR Central Office). The procedure is that
once an application for conversion is filed, the CLUPPI prepares the Notice of Posting.
The MARO only posts the notice and thereafter issues a certificate to the fact of
posting. The CLUPPI conducts the field investigation and dialogues with the applicants
and the farmer beneficiaries to ascertain the information necessary for the processing
of the application. The Chairman of the CLUPPI deliberates on the merits of the
investigation report and recommends the appropriate action. This recommendation is
transmitted to the Regional Director, thru the Undersecretary, or Secretary of Agrarian
Reform. Applications involving more than fifty hectares are approved or disapproved
by the Secretary. The procedure does not end with the Secretary, however. The Order
provides that the decision of the Secretary may be appealed to the Office of the
President or the Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made to the
Secretary, and from the Secretary to the Office of the President or the
Court of Appeals as the case may be. The mode of appeal/motion for
reconsideration, and the appeal fee, from Undersecretary to the Office
of the Secretary shall be the same as that of the Regional Director to
the Office of the Secretary. 90
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself authority to resolve a controversy the jurisdiction over which is initially lodged
with an administrative body of special competence. 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 non-agricultural, hence, exempt from the
coverage of the CARL lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of
due process in the acquisition proceedings does not give this Court the power to
nullify the CLOA's already issued to the farmer beneficiaries. To assume the power is
to 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.
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION, Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL
MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received with
much misgiving, if not resistance, even if only the number of agrarian suits filed
serves to be the norm. Through the years, this battle cry and root of discord continues
to reflect the seemingly ceaseless discourse on, and great disparity in, the distribution
of land among the people, "dramatizing the increasingly urgent demand of the
dispossessed x x x for a plot of earth as their place in the sun."2 As administrations
and political alignments change, policies advanced, and agrarian reform laws enacted,
the latest being what is considered a comprehensive piece, the face of land reform
varies and is masked in myriads of ways. The stated goal, however, remains the
same: clear the way for the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a government policy
even before the Commonwealth era. In fact, at the onset of the American regime,
initial steps toward land reform were already taken to address social unrest.4 Then,
under the 1935 Constitution, specific provisions on social justice and expropriation of
landed estates for distribution to tenants as a solution to land ownership and tenancy
issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in
motion the expropriation of all tenanted estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was
enacted,6 abolishing share tenancy and converting all instances of share tenancy into
leasehold tenancy.7 RA 3844 created the Land Bank of the Philippines (LBP) to provide
support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice
and corn, supposedly to be accomplished by expropriating lands in excess of 75
hectares for their eventual resale to tenants. The law, however, had this restricting
feature: its operations were confined mainly to areas in Central Luzon, and its
implementation at any level of intensity limited to the pilot project in Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the
entire country a land reform area, and providing for the automatic conversion of
tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit was
cut down to seven hectares.9
Barely a month after declaring martial law in September 1972, then President
Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the "emancipation of
the tiller from the bondage of the soil."10 Based on this issuance, tenant-farmers,
depending on the size of the landholding worked on, can either purchase the land
they tilled or shift from share to fixed-rent leasehold tenancy.11 While touted as
"revolutionary," the scope of the agrarian reform program PD 27 enunciated covered
only tenanted, privately-owned rice and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino and the
drafting and eventual ratification of the 1987 Constitution. Its provisions
foreshadowed the establishment of a legal framework for the formulation of an
expansive approach to land reform, affecting all agricultural lands and covering both
tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in the
Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its
title14 indicates, the mechanisms for CARP implementation. It created the Presidential
Agrarian Reform Council (PARC) as the highest policy-making body that formulates all
policies, rules, and regulations necessary for the implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also
known as CARL or the CARP Law, took effect, ushering in a new process of land
classification, acquisition, and distribution. As to be expected, RA 6657 met stiff
opposition, its validity or some of its provisions challenged at every possible
turn.Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform 15 stated the observation that the assault was inevitable, the CARP being an
untried and untested project, "an experiment [even], as all life is an experiment," the
Court said, borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary
injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside
PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on
December 22, 2005 and May 3, 2006, respectively, as well as the implementing
Notice of Coverage dated January 2, 2006 (Notice of Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-
hectare mixed agricultural-industrial-residential expanse straddling several
municipalities of Tarlac and owned by 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
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.

The details of the events that happened next involving the hacienda and the political Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2) alternative
color some of the parties embossed are of minimal significance to this narration and modalities, i.e., land or stock transfer, pursuant to either of which the corporate
need no belaboring. Suffice it to state that on May 7, 1980, the martial law landowner can comply with CARP, but subject to well-defined conditions and timeline
administration filed a suit before the Manila Regional Trial Court (RTC) against Tadeco, requirements. Sec. 31 of RA 6657 provides:
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
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer
distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda
ownership over their agricultural landholdings to the Republic of the Philippines
Luisita does not have tenants, besides which sugar landsof which the hacienda
pursuant to Section 20 hereof or to qualified beneficiaries x x x.
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 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
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda
agricultural activities, bears in relation to the companys total assets, under
Luisita to the MAR. Therefrom, Tadeco appealed to the Court of Appeals (CA).
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
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the be reduced. x x x
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,
Corporations or associations which voluntarily divest a proportion of their capital
et al. The dismissal action was, however, made subject to the obtention by Tadeco of
stock, equity or participation in favor of their workers or other qualified beneficiaries
the PARCs approval of a stock distribution plan (SDP) that must initially be
under this section shall be deemed to have complied with the provisions of this Act:
implemented after such approval shall have been secured.24 The appellate court
Provided, That the following conditions are complied with:
wrote:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x
dividends and other financial benefits, the books of the corporation or
governmental agencies concerned in moving for the dismissal of the case subject,
association shall be subject to periodic audit by certified public accountants
however, to the following conditions embodied in the letter dated April 8, 1988 (Annex
chosen by the beneficiaries;
2) of the Secretary of the [DAR] quoted, as follows:

(b) Irrespective of the value of their equity in the corporation or association,

1. Should TADECO fail to obtain approval of the stock distribution plan for
the beneficiaries shall be assured of at least one (1) representative in the
failure to comply with all the requirements for corporate landowners set forth
board of directors, or in a management or executive committee, if one exists,
in the guidelines issued by the [PARC]: or
of the corporation or association;
 (c) Any shares acquired by such workers and beneficiaries shall have the same
rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void
ab initio unless said transaction is in favor of a qualified and registered
beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the compulsory coverage of this
Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued
Administrative Order No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and
Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock
Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos preferred
option, for, on August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle to
facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and
conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-
related properties of Hacienda Luisita in exchange for HLI shares of stock.29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C.
Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities
and Exchange Commissions (SECs) approval, increased its capital stock on May 10,
1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP
1/share to PhP 400,000,000 divided into 400,000,000 shares also with par value of
PhP 1/share, 150,000,000 of which were to be issued only to qualified and registered
beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the
corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco contributed to
the capital stock of HLI, as appraised and approved by the SEC, have an aggregate
value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting
to PhP 235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462
shares with a par value of PhP 1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement
of Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs
Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution Option
Agreement (SDOA), styled as a Memorandum of Agreement (MOA),33 was entered into
by Tadeco, HLI, and the 5,848 qualified FWBs34 and attested to by then DAR Secretary
Philip Juico. The SDOA embodied the basis and mechanics of the SDP, which would
eventually be submitted to the PARC for approval. In the SDOA, the parties agreed to
the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred
and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is
the proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share,
that has to be distributed to the THIRD PARTY [FWBs] under the stock
distribution plan, the said 33.296% thereof being P118,391,976.85
or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by the
SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
shall arrange with the FIRST PARTY [Tadeco] the acquisition and
distribution to the THIRD PARTY on the basis of number of days worked and
at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the
capital stock of the SECOND PARTY that are presently owned and held by the
FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall
have been completely acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the
[SDP] that every year they will receive on top of their regular compensation,
an amount that approximates the equivalent of three (3%) of the total gross
sales from the production of the agricultural land, whether it be in the form of
cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from the FIRST PARTY and distributed to the THIRD PARTY,
FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the farmworkers
appearing as shareholders of the SECOND PARTY at the start of said year
which will empower the THIRD PARTY or their representative to vote in
stockholders and board of directors meetings of the SECOND PARTY
convened during the year the entire 33.296% of the outstanding capital stock
of the SECOND PARTY earmarked for distribution and thus be able to gain such
number of seats in the board of directors of the SECOND PARTY that the whole
33.296% of the shares subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time subdivide and
allocate for free and without charge among the qualified family-beneficiaries
residing in the place where the agricultural land is situated, residential or
 homelots of not more than 240 sq.m. each, with each family-beneficiary being
assured of receiving and owning a homelot in the barangay where it actually
resides on the date of the execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of
the government and with the supervision of the [DAR], with the end in view of
improving the lot of the qualified beneficiaries of the [SDP] and obtaining for
them greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are: (a)
production-sharing equivalent to three percent (3%) of gross sales from the
production of the agricultural land payable to the FWBs in cash dividends or incentive
bonus; and (b) distribution of free homelots of not more than 240 square meters each
to family-beneficiaries. The production-sharing, as the SDP indicated, is payable
"irrespective of whether [HLI] makes money or not," implying that the benefits do not
partake the nature of dividends, as the term is ordinarily understood under
corporation law.
While a little bit hard to follow, given that, during the period material, the assigned
value of the agricultural land in the hacienda was PhP 196.63 million, while the total
assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI
would admit that the ratio of the land-to-shares of stock corresponds to 33.3% of the
outstanding capital stock of the HLI equivalent to 118,391,976.85 shares of stock with
a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock
Distribution under C.A.R.P.,"35which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117
FWBs, out of 5,315 who participated, opted to receive shares in HLI.36 One hundred
thirty-two (132) chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec.
Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S.
Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised,
along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure
that there will be no dilution in the shares of stocks of individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of
the percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings
of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the
[MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for
determining the actual number of seats to be allocated for the [FWBs] in the
HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of homelots
to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly provided
for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both the
SDP and MOA.39 Following that exchange, the PARC, under then Sec. Defensor-
Santiago, by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP
of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296,
more or less, composed of permanent, seasonal and casual master list/payroll and
non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe
benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500
hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares
at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and no
interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657,
providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award, when
the land ceases to be economically feasible and sound for agricultural purposes, or
the locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR, upon application of the
beneficiary or the landowner, with due notice to the affected parties, and subject to
existing laws, may authorize the reclassification, or conversion of the land and its
disposition: Provided, That the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs, including
respondent Rene Galang, and Jose Julio Suniga, as evidenced by the Manifesto of
Support they signed and which was submitted to the DAR.44After the usual processing,
the DAR, thru then Sec. Ernesto Garilao, approved the application on August 14, 1996,
per DAR Conversion Order No. 030601074-764-(95), Series of 1996,45 subject to
payment of three percent (3%) of the gross selling price to the FWBs and to HLIs
continued compliance with its undertakings under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of
stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the
converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title (TCT)
No. 28791047 was canceled and TCT No. 29209148 was issued in the name of
Centennary. HLI transferred the remaining 200 hectares covered by TCT No. 287909 to
Luisita Realty Corporation (LRC)49 in two separate transactions in 1997 and 1998, both
uniformly involving 100 hectares for PhP 250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided
into 12,100,000 shares and wholly-owned by HLI, had the following incorporators:
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and
Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park
Corporation (LIPCO) for PhP 750 million. The latter acquired it for the purpose of
developing an industrial complex.52 As a result, Centennarys TCT No. 292091 was
canceled to be replaced by TCT No. 31098653 in the name of LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which
two (2) separate titles were issued in the name of LIPCO, specifically: (a) TCT No.
36580054 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively. TCT
No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal
Commercial Banking Corporation (RCBC) by way of dacion en pagoin payment of
LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled and new
ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later detached
from the area coverage of Hacienda Luisita which had been acquired by the
government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. In
absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco
ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both undated,
reached the DAR in the latter part of 2003. In the first, denominated as
Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya, identifying
themselves as head of the Supervisory Group of HLI (Supervisory Group), and 60 other
supervisors sought to revoke the SDOA, alleging that HLI had failed to give them their
dividends and the one percent (1%) share in gross sales, as well as the thirty-three
percent (33%) share in the proceeds of the sale of the converted 500 hectares of land.
They further claimed that their lives have not improved contrary to the promise and
rationale for the adoption of the SDOA. They also cited violations by HLI of the SDOAs
terms.58 They prayed for a renegotiation of the SDOA, or, in the alternative, its
revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the
hacienda were the call in the second petition, styled as Petisyon (Petition).59 The
Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten name of
respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen.
AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALAs
members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group. On the
other hand, HLIs answer62 to the AMBALA petition was contained in its letter dated
January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the
SDP of HLI. Among other duties, the Special Task Force was mandated to review the
terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLIs
SDP; evaluate HLIs compliance reports; evaluate the merits of the petitions for the
revocation of the SDP; conduct ocular inspections or field investigations; and
recommend appropriate remedial measures for approval of the Secretary.63
After investigation and evaluation, the Special Task Force submitted its "Terminal
Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP)
Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not
complied with its obligations under RA 6657 despite the implementation of the
SDP.65 The Terminal Report and the Special Task Forces recommendations were
adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee
(Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2 dated November 21,
1989 approving HLIs SDP; and (b) the acquisition of Hacienda Luisita through the
compulsory acquisition scheme. Following review, the PARC Validation Committee
favorably endorsed the DAR Secretarys recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01,
disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED,
to approve and confirm the recommendation of the PARC Executive Committee
adopting in toto the report of the PARC ExCom Validation Committee affirming the
recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development
Corporation/Hacienda Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan
be forthwith placed under the compulsory coverage or mandated land acquisition
scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day, December
23, without any copy of the documents adverted to in the resolution attached. A
letter-request dated December 28, 200569 for certified copies of said documents was
sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration. On the same day, the
70
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 Group79 and the AMBALA-Rene Galang faction
submitted their Comment/Opposition dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit
Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO later followed with a
similar motion.82 In both motions, RCBC and LIPCO contended that the assailed
resolution effectively nullified the TCTs under their respective names as the properties
covered in the TCTs were veritably included in the January 2, 2006 notice of coverage.
In the main, they claimed that the revocation of the SDP cannot legally affect their
rights as innocent purchasers for value. Both motions for leave to intervene were
granted and the corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on oral
arguments. On the other hand, the Court, on August 24, 2010, heard public
respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory
Group, the AMBALA-Galang faction, and the FARM and its 27 members83 argue their
case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
Supervisory Group, represented by Suniga and Andaya; and the United Luisita
Workers Union, represented by Eldifonso Pingol, filed with the Court a joint submission
and motion for approval of a Compromise Agreement (English and Tagalog
versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable
settlement, issued a Resolution84 creating a Mediation Panel composed of then
Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices
Hector 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 PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND
INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT
PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF NULLIFYING
TCT NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-
INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR
RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE
DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING 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.
The same holds true with respect to the Supervisory Group whose members were
admittedly employed by HLI and whose names and signatures even appeared in the
annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61
supervisors are certainly parties who would benefit or be prejudiced by the judgment
recalling the SDP or replacing it with some other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular farmworkers,
but are in the category of "other farmworkers" mentioned in Sec. 4, Article XIII of the
Constitution,89 thus only entitled to a share of the fruits of the land, as indeed Fortich
teaches, this does not detract from the fact that they are still identified as being
among the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring an
action upon the SDP.90 At any rate, the following admission made by Atty. Gener
Asuncion, counsel of HLI, during the oral arguments should put to rest any lingering
doubt as to the status of protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified
farmer beneficiaries of Hacienda Luisita were real parties in interest?
Responsible farmer leaders shall be allowed to represent themselves, their
fellow farmers or their organizations in any proceedings before the DAR:
Provided, however, that when there are two or more representatives for any individual
or group, the representatives should choose only one among themselves to represent
such party or group before any DAR proceedings. (Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually
real parties-in-interest allowed by law to file a petition before the DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for as records
show and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry the usual
authorization of the individuals in whose behalf it was supposed to have been
instituted. To date, such authorization document, which would logically include a list of
the names of the authorizing FWBs, has yet to be submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains that
PARC is without authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly
vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to
approve the plan for stock distribution in appropriate cases, the empowerment only
includes the power to disapprove, but not to recall its previous approval of the SDP
after it has been implemented by the parties.93 To HLI, it is the court which has
jurisdiction and authority to order the revocation or rescission of the PARC-approved
SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the
plan for stock distribution of the corporate landowner belongs to PARC. However,
contrary to petitioner HLIs posture, PARC also has the power to revoke the SDP which
it previously approved. It may be, as urged, that RA 6657 or other executive issuances
on agrarian reform do not explicitly vest the PARC with the power to revoke/recall an
approved SDP. Such power or authority, however, is deemed possessed by PARC under
the principle of necessary implication, a basic postulate that what is implied in a
statute is as much a part of it as that which is expressed.94

Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers
We have explained that "every statute is understood, by implication, to contain all
to the complaints of protest initiated before the DAR and the real party in interest
such provisions as may be necessary to effectuate its object and purpose, or to make
there be considered as possessed by the farmer beneficiaries who initiated the
effective rights, powers, privileges or jurisdiction which it grants, including all such
protest.91
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
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed include all incidental power, right or privilege.96
to represent themselves, their fellow farmers or their organizations in any proceedings
before the DAR. Specifically:
Gordon v. Veridiano II is instructive:

SEC. 50. Quasi-Judicial Powers of the DAR.x x x

The power to approve a license includes by implication, even if not expressly granted,
the power to revoke it. By extension, the power to revoke is limited by the authority to
grant the license, from which it is derived in the first place. Thus, if the FDA grants a
license upon its finding that the applicant drug store has complied with the
requirements of the general laws and the implementing administrative rules and
regulations, it is only for their violation that the FDA may revoke the said license. By
the same token, having granted the permit upon his ascertainment that the conditions
thereof as applied x x x have been complied with, it is only for the violation of such
conditions that the mayor may revoke the said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the conferment
of express power to approve a plan for stock distribution of the agricultural land of
corporate owners necessarily includes the power to revoke or recall the approval of
the plan.
As public respondents aptly observe, to deny PARC such revocatory power would
reduce it into a toothless agency of CARP, because the very same agency tasked to
ensure compliance by the corporate landowner with the approved SDP would be
without authority to impose sanctions for non-compliance with it.98 With the view We
take of the case, only PARC can effect such revocation. The DAR Secretary, by his own
authority as such, cannot plausibly do so, as the acceptance and/or approval of the
SDP sought to be taken back or undone is the act of PARC whose official composition
includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the argument that subjecting
its landholdings to compulsory distribution after its approved SDP has been
implemented would impair the contractual obligations created under the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts and
must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations between
or among parties is deemed read into the contract and its implementation cannot
successfully be resisted by force of the non-impairment guarantee. There is, in that
instance, no impingement of the impairment clause, the non-impairment protection
being applicable only to laws that derogate prior acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties. Impairment, in fine,
obtains if a subsequent law changes the terms of a contract between the parties,
imposes new conditions, dispenses with those agreed upon or withdraws existing
remedies for the enforcement of the rights of the parties.100 Necessarily, the
constitutional proscription would not apply to laws already in effect at the time of
contract execution, as in the case of RA 6657, in relation to DAO 10, vis--vis HLIs
SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with the
general principle that laws newly enacted have only a prospective operation, and
cannot affect acts or contracts already perfected; however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof. Thus,
the non-impairment clause under Section 10, Article II [of the Constitution] is limited
in application to laws about to be enacted that would in any way derogate from
existing acts or contracts by enlarging, abridging or in any manner changing the
intention of the parties thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance
within the ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law
impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a
breach of its terms and conditions is not a PARC administrative matter, but one that
gives rise to a cause of action cognizable by regular courts.102 This contention has
little to commend itself. The SDOA is a special contract imbued with public interest,
entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP,
which requires for its validity, or at least its enforceability, PARCs approval. And the
fact that the certificate of compliance103to be issued by agrarian authorities upon
completion of the distribution of stocksis revocable by the same issuing authority
supports the idea that everything about the implementation of the SDP is, at the first
instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the
SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly be
made clear that HLI was precisely created in order to comply with RA 6657, which the
OSG aptly described as the "mother law" of the SDOA and the SDP.104 It is, thus,
paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive
applicability of the Corporation Code under the guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the FWBs
of HLI are also stockholders, its applicability is limited as the rights of the parties
arising from the SDP should not be made to supplant or circumvent the agrarian
reform program.
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is the
special law on agrarian reform. As between a general and special law, the latter shall
prevailgeneralia specialibus non derogant.105 Besides, the present impasse between
HLI and the private respondents is not an 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 non-
compliance and the fact that the SDP, as couched and implemented, offends certain
constitutional and statutory provisions. To be sure, any of these key issues may be
resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover,
looking deeply into the underlying petitions of AMBALA, et al., it is not the said section
per se that is invalid, but rather it is the alleged application of the said provision in the
SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat
after June 30, 2009, the modes of acquisition shall be limited to voluntary offer
to sell and compulsory acquisition." Thus, for all intents and purposes, the stock
distribution scheme under Sec. 31 of RA 6657 is no longer an available option under
existing law. The question of whether or not it is unconstitutional should be a moot
issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional issues
otherwise already moot and academic114 provided the following requisites are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved; third, when
the constitutional issue raised requires formulation of controlling principles to guide
the bench, the bar, and the public; fourth, the case is capable of repetition yet
evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of
the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right of
the farmers and regular farmworkers, who are landless, to OWN directly or
COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a
just share of the fruits thereof. To this end, the State shall encourage and undertake
the just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for voluntary land-
sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular farmworkers
have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic
law allows two (2) modes of land 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
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.
MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands
they till," is this land for the tillers rather than land for the landless? Before, we used
to hear "land for the landless," but now the slogan is "land for the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin
ng "directly" ay tulad sa implementasyon sa rice and corn lands kung saan inaari na
ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng
"collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng
sitwasyon sa Negros.117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land
"sama-sama" or collectively. Thus, the main requisite for collective ownership of land
is collective or group work by farmers of the agricultural land. Irrespective of whether
the landowner is a cooperative, association or corporation composed of farmers, as
long as concerted group work by the farmers on the land is present, then it falls within
the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the
part of the State to pursue, by law, an agrarian reform program founded on the policy
of land for the landless, but subject to such priorities as Congress may prescribe,
taking into account such abstract variable as "equity considerations." The textual
reference to a law and Congress necessarily implies that the above constitutional
provision is not self-executoryand that legislation is needed to implement the
urgently needed program of agrarian reform. And RA 6657 has been enacted precisely
pursuant to and as a mechanism to carry out the constitutional directives. This piece
of legislation, in fact, restates118 the agrarian reform policy established in the
aforementioned provision of the Constitution of promoting the welfare of landless
farmers and farmworkers. RA 6657 thus defines "agrarian reform" as "the
redistribution of lands to farmers and regular farmworkers who are landless to lift
the economic status of the beneficiaries and all other arrangements alternative
to the physical redistribution of lands, such as production or profit sharing, labor
administration and the distribution of shares of stock which will allow
beneficiaries to receive a just share of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under Sec. 31
of RA 6657 hews with the agrarian reform policy, as instrument of social justice under
Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless appears
to be the dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the
Constitution, as couched, does not constrict Congress to passing an agrarian reform
law planted on direct land transfer to and ownership by farmers and no other, or else
the enactment suffers from the vice of unconstitutionality. If the intention were
otherwise, the framers of the Constitution would have worded said section in a
manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not
inconsistent with the States commitment to farmers and farmworkers to advance
their interests under the policy of social justice. The legislature, thru Sec. 31 of RA
6657, has chosen a modality for collective ownership by which the imperatives of
social justice may, in its estimation, be approximated, if not achieved. The Court
should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not
own the agricultural land but are merely given stock certificates. Thus, the farmers
lose control over the land to the board of directors and executive officials of the
corporation who actually manage the land. They conclude that such arrangement runs
counter to the mandate of the Constitution that any agrarian reform must preserve
the control over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly own
the land, still, the Corporation Code is clear that the FWB becomes a stockholder who
acquires an equitable interest in the assets of the corporation, which include the
agricultural lands. It was explained that the "equitable interest of the shareholder in
the property of the corporation is represented by the term stock, and the extent of his
interest is described by the term shares. The expression shares of stock when
qualified by words indicating number and ownership expresses the extent of the
owners interest in the corporate property."119 A share of stock typifies an aliquot part
of the corporations property, or the right to share in its proceeds to that extent when
distributed according to law and equity and that its holder is not the owner of any part
of the capital of the corporation.120 However, the FWBs will ultimately own the
agricultural lands owned by the corporation when the corporation is eventually
dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land operated
and managed by the corporation, a reading of the second paragraph of Sec. 31 shows
otherwise. Said provision provides that qualified beneficiaries have "the right to
purchase such proportion of the capital stock of the corporation that the agricultural
land, actually devoted to agricultural activities, bears in relation to the companys
total assets." The wording of the formula in the computation of the number of shares
that can be bought by the farmers does not mean loss of control on the part of the
farmers. It must be remembered that the determination of the percentage of the
capital stock that can be bought by the farmers depends on the value of the
agricultural land and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
policy on agrarian reform is that control over the agricultural land must always be in
the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it
the farmers should always own majority of the common shares entitled to elect the
members of the board of directors to ensure that the farmers will have a clear
majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP
must always be undertaken by the DAR and PARC, such that the value of the
agricultural land contributed to the corporation must always be more than 50% of the
total assets of the corporation to ensure that the majority of the members of the
board of directors are composed of the farmers. The PARC composed of the President
of the Philippines and cabinet secretaries must see to it that control over the board of
directors rests with the farmers by rejecting the inclusion of non-agricultural assets
which will yield the majority in the board of directors to non-farmers. Any deviation,
however, by PARC or DAR from the correct application of the formula prescribed by
the second paragraph of Sec. 31 of RA 6675 does not make said provision
constitutionally infirm. Rather, it is the application of said provision that can be
challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of
ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is land
distribution and that actual land distribution is the essential characteristic of a
constitutional agrarian reform program. On the contrary, there have been so many
instances where, despite actual land distribution, the implementation of agrarian
reform was still unsuccessful. As a matter of fact, this Court may take judicial notice of
cases where FWBs sold the awarded land even to non-qualified persons and in
violation of the prohibition period provided under the law. This only proves to show
that the mere fact that there is land distribution does not guarantee a successful
implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land
ownership where non-human juridical persons, such as corporations, were prohibited
from owning agricultural lands are no longer realistic under existing conditions.
Practically, an individual farmer will often face greater disadvantages and difficulties
than those who exercise ownership in a collective manner through a cooperative or
corporation. The former is too often left to his own devices when faced with failing
crops and bad weather, or compelled to obtain usurious loans in order to purchase
costly fertilizers or farming equipment. The experiences learned from failed land
reform activities in various parts of the country are lack of financing, lack of farm
equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-to-
market roads, among others. Thus, at the end of the day, there is still no successful
implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a better
position to secure funding and competently maintain the agri-business than the
individual farmer. While direct singular ownership over farmland does offer
advantages, such as the ability to make quick decisions unhampered by interference
from others, yet at best, these advantages only but offset the disadvantages that are
often associated with such ownership arrangement. Thus, government must be
flexible and creative in its mode of implementation to better its chances of success.
One such option is collective ownership through juridical persons composed of
farmers.
Aside from the fact that there appears to be no violation of the Constitution, the
requirement that the instant case be capable of repetition yet evading review is also
wanting. It would be speculative for this Court to assume that the legislature will
enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that a law
is the product of earnest studies by Congress to ensure that no constitutional
prescription or concept is infringed.121 Corollarily, courts will not pass upon questions
of wisdom, expediency and justice of legislation or its provisions. Towards this end, all
reasonable doubts should be resolved in favor of the constitutionality of a law and the
validity of the acts and processes taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a doubtful
or argumentative one, must be demonstrated in such a manner as to leave no doubt
in the mind of the Court. In other words, the grounds for nullity must be beyond
reasonable doubt.123 FARM has not presented compelling arguments to overcome the
presumption of constitutionality of Sec. 31 of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an alternative
mode of implementing agrarian reform is not for judicial determination. Established
jurisprudence tells us that it is not within the province of the Court to inquire into the
wisdom of the law, for, indeed, We are bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises of the
revocation or recall of HLIs SDP. Or to be more precise, the inquiry should be: whether
or not PARC gravely abused its discretion in revoking or recalling the subject SDP and
placing the hacienda under CARPs compulsory acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force contained
and summarized in its Terminal Report provided the bases for the assailed PARC
revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is
contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and
(2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular
terms, the following are essentially the reasons underpinning PARCs revocatory or
recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives of
the FWBs have hardly improved and the promised increased income has not
materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
workedor the so-called "man days"is grossly onerous to the FWBs, as HLI,
in the guise of rotation, can unilaterally deny work to anyone. In elaboration of
this ground, PARCs Resolution No. 2006-34-01, denying HLIs motion for
reconsideration of Resolution No. 2005-32-01, stated that the man days
criterion worked to dilute the entitlement of the original share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the timelines
fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross sales
every year as production-sharing benefit on top of the workers salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its obligations
under the SDP, as approved by PARC itself, and tags the reasons given for the
revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on solid
grounds set forth in the Terminal Report, a position shared by AMBALA, which, in some
pleadings, is represented by the same counsel as that appearing for the Supervisory
Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of the
SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And training its
sight on the resulting dilution of the equity of the FWBs appearing in HLIs masterlist,
FARM would state that the SDP, as couched and implemented, spawned disparity
when there should be none; parity when there should have been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian
reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity
and improve the quality of lives of the FWBs through greater productivity of
agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless
farmers and farm workers will receive the highest consideration to promote social
justice and to move the nation towards sound rural development and industrialization,
and the establishment of owner cultivatorship of 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 farmworker-beneficiaries
(FWBs) in HLI. The total number of shares to be distributed to said qualified FWBs is
118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the
355,531,462 shares which is the outstanding capital stock of HLI with a value of PhP
355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then
each FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to be
given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296
FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be
assured of at least one (1) representative in the board of directors or in a
management or executive committee irrespective of the value of the equity of the
FWBs in HLI, the Court finds that the SDOA contained provisions making certain the
FWBs representation in 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 sub-paragraph (a) on the
auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory minimum
ratio of land-to-shares of stock, referring to the 118,391,976.85 shares with par value
of PhP 1 each, should have been made in full within two (2) years from the approval of
RA 6657, in line with the last paragraph of Sec. 31 of said law.133
Public respondents submission is palpably erroneous. We have closely examined the
last paragraph alluded to, with particular focus on the two-year period mentioned, and
nothing in it remotely supports the public respondents posture. In its pertinent part,
said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the compulsory coverage of this
Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which the
corporate landowner, to avoid land transfer as a mode of CARP coverage under RA
6657, is to avail of the stock distribution option or to have the SDP approved. The HLI
secured approval of its SDP in November 1989, well within the two-year period
reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA
6657 as well as the statutory issues, We shall now delve into what PARC and
respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657, and
DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to
the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many
words, the Report and the resolution view the conversion as an infringement of Sec.
5(a) of DAO 10 which reads: "a. that the continued operation of the corporation with
its agricultural land intact and unfragmented is viable with potential for growth and
increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased
income and greater benefits to qualified beneficiariesis but one of the stated criteria
to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not
exact from the corporate landowner-applicant the undertaking to keep the farm intact
and unfragmented ad infinitum. And there is logic to HLIs stated observation that the
key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is
thus required is not the agricultural land remaining intact x x x but the viability of the
corporate operations with its agricultural land being intact and unfragmented.
Corporate operation may be viable even if the corporate agricultural land does not
remain intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisitas
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA
6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the
land ceases to be economically feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the
beneficiary or landowner with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross
production sales of the hacienda and pay dividends from profit, the entries in its
financial books tend to indicate compliance by HLI of the profit-sharing equivalent to
3% of the gross sales from the production of the agricultural land on top of (a) the
salaries and wages due FWBs as employees of the company and (b) the 3% of the
gross selling price of the converted land and that portion used for the SCTEX. A
plausible evidence of compliance or non-compliance, as the case may be, could be
the books of account of HLI. Evidently, the cry of some groups of not having received
their share from the gross production sales has not adequately been validated on the
ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when supported by
substantial evidence and are accorded due respect and weight, especially when they
are affirmed by the CA.135 However, such rule is not absolute. One such exception is
when the findings of an administrative agency are conclusions without citation of
specific evidence on which they are based,136 such as in this particular instance. As
culled from its Terminal Report, it would appear that the Special Task Force rejected
HLIs claim of compliance on the basis of this ratiocination:
The Task Force position: Though, allegedly, the Supervisory Group receives the
3% gross production share and that others alleged that they received 30
million pesos still others maintain that they have not received anything yet.
Item No. 4 of the MOA is clear and must be followed. There is a distinction
between the total gross sales from the production of the land and the
proceeds from the sale of the land. The former refers to the fruits/yield of the
agricultural land while the latter is the land itself. The phrase "the beneficiaries
are entitled every year to an amount approximately equivalent to 3% would
only be feasible if the subject is the produce since there is at least one harvest
per year, while such is not the case in the sale of the agricultural land. This
negates then the claim of HLI that, all that the FWBs can be entitled to, if any,
is only 3% of the purchase price of the converted land.
 Besides, the Conversion Order dated 14 August 1996 provides that "the
benefits, wages and the like, presently received by the FWBs shall not in any
way be reduced or adversely affected. Three percent of the gross selling price
of the sale of the converted land shall be awarded to the beneficiaries of the
SDO." The 3% gross production share then is different from the 3% proceeds of
the sale of the converted land and, with more reason, the 33% share being
claimed by the FWBs as part owners of the Hacienda, should have been given
the FWBs, as stockholders, and to which they could have been entitled if only
the land were acquired and redistributed to them under the CARP.
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 worker-beneficiaries who shall form a workers cooperative
or association which will deal with the corporation or business association. Until a new
agreement is entered into by and between the workers cooperative or association
and the corporation or business association, any agreement existing at the time this
Act takes effect between the former and the previous landowner shall be respected by
both the workers cooperative or association and the corporation or business
association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge
among the qualified family-beneficiaries x x x residential or homelots of not more than
240 sq. m. each, with each family beneficiary being assured of receiving and owning a
homelot in the barrio or barangay where it actually resides," "within a reasonable
time."
More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240-
square meter homelots and, of those who were already given, some still do not have
the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can you
also [prove] that the qualified family beneficiaries were already provided the 240
square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing that all
the qualified beneficiaries have received homelots was submitted by HLI. Hence, this
Court is constrained to rule that HLI has not yet fully complied with its undertaking to
distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the
SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI]
shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD
PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-
thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY
that are presently owned and held by the FIRST PARTY, until such time as the entire
block of 118,391,976.85 shares shall have been completely acquired and distributed
to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of "man
days," that is, the number of days that the FWBs have worked during the year. This
formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes of
compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-
applicant shall provide for the distribution of an equal number of shares of the same
class and value, with the same rights and features as all other shares, to each of the
qualified beneficiaries. This distribution plan in all cases, shall be at least the
minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline,
the corporate landowner-applicant may adopt additional stock distribution schemes
taking into account factors such as rank, seniority, salary, position and other
circumstances which may be deemed desirable as a matter of sound company policy.
(Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a qualified
beneficiary can acquire from the corporation under the SDP. The first pertains, as
earlier explained, to the mandatory minimum ratio of shares of stock to be distributed
to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates
of that "proportion of the capital stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in relation to the companys total
assets."139 It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is
supposed to be allocated "for the distribution of an equal number of shares of stock of
the same class and value, with the same rights and features as all other shares, to
each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous extra
grant, meaning that this set or category constitutes an augmentation share/s that the
corporate landowner may give under an additional stock distribution scheme, taking
into account such variables as rank, seniority, salary, position and like factors which
the management, in the exercise of its sound discretion, may deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved HLIs SDP,
HLI recognized 6,296individuals as qualified FWBs. And under the 30-year stock
distribution program envisaged under the plan, FWBs who came in after 1989, new
FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of "man days," HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given
up their rights to the land that could have been distributed to them, suffered a dilution
of their due share entitlement. As has been observed during the oral arguments, HLI
has chosen to use the shares earmarked for farmworkers as reward system chips to
water down the shares of the original 6,296 FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter
SDOA instead of placing the land under CARP. And for that reason those who would
have gotten their shares of the land actually gave up their rights to this land in place
of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to the
farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the
farmers at that time that numbered x x x those who signed five thousand four
hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to them
in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if
they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original
(interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for new
workers who come in? It is not that the new workers, in effect, become just workers of
the corporation whose stockholders were already fixed. The TADECO who has shares
there about sixty six percent (66%) and the five thousand four hundred ninety eight
(5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x what
right or where did you get that right to use this shares, to water down the shares of
those who should have been benefited, and to use it as a reward system decided by
the company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from watering
down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI
shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per
beneficiary, because the acquisition and distribution of the HLI shares were based on
"man days" or "number of days worked" by the FWB in a years time. As explained by
HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she
becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does
not get any share at year end. The number of HLI shares distributed varies depending
on the number of days the FWBs were allowed to work in one year. Worse, HLI hired
farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the
Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of
farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which
include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI
shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly,
the minimum individual allocation of each original FWB of 18,804.32 shares was
diluted as a result of the use of "man days" and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-
year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what
Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the
approved stock distribution plan within three (3) months from receipt by the corporate
landowner of the approval of the plan by PARC. In fact, based on the said provision,
the transfer of the shares of stock in the names of the qualified FWBs should be
recorded in the stock and transfer books and must be submitted to the SEC within
sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan
shall be implemented within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the PARC, and the transfer of the
shares of stocks in the names of the qualified beneficiaries shall be recorded in stock
and transfer books and submitted to the Securities and Exchange Commission
(SEC) within sixty (60) days from the said implementation of the stock distribution
plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3) months
from receipt by HLI of the approval of the stock distribution plan by PARC. While
neither of the clashing parties has made a compelling case of the thrust of this
provision, the Court is of the view and so holds that the intent is to compel the
corporate landowner to complete, not merely initiate, the transfer process of shares
within that three-month timeframe. Reinforcing this conclusion is the 60-day stock
transfer recording (with the SEC) requirement reckoned from the implementation of
the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can
veritably evade compliance with agrarian reform by simply deferring to absurd limits
the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the
fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution
under CARP shall be made in thirty (30) annual amortizations. To HLI, said section
provides a justifying dimension to its 30-year stock distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as
the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid
for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what is
involved is stock distribution, it is the corporate landowner who has the obligation to
distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
pay the cost of the land thus awarded them to make it less cumbersome for them to
pay the government. To be sure, the reason underpinning the 30-year accommodation
does not apply to corporate landowners in distributing shares of stock to the qualified
beneficiaries, as the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should
be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the
PARC and the DAR have the power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making power, DAO 10 has the force and
effect of law and must be duly complied with.143 The PARC is, therefore, correct in
revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21,
l989 approving the HLIs SDP is nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the
exclusion from the coverage of the assailed PARC resolution those portions of the
converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the converted
farm land. Thus, their plea for the exclusion of that portion from PARC Resolution
2005-32-01, as implemented by a DAR-issued Notice of Coverage dated January 2,
2006, which called for mandatory CARP acquisition coverage of lands subject of the
SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding the
remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire
three hundred (300) hectares of land from Centennary for the purpose of developing
the land into an industrial complex.144 Accordingly, the TCT in Centennarys name was
canceled and a new one issued in LIPCOs name. Thereafter, said land was subdivided
into two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares to
RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were
subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered
owner receiving a certificate of title in pursuance of a decree of registration and every
subsequent purchaser of registered land taking a certificate of title for value and in
good faith shall hold the same free from all encumbrances except those noted on the
certificate and enumerated therein."145
It is settled doctrine that one who deals with property registered under the Torrens
system need not go beyond the four corners of, but can rely on what appears on, the
title. He is charged with notice only of such burdens and claims as are annotated on
the title. This principle admits of certain exceptions, such as when the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious
man to make such inquiry, or when the purchaser has knowledge of a defect or the
lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation.146 A higher level of care
and diligence is of course expected from banks, their business being impressed with
public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without notice
that some other person has a right to, or interest in, such property at the time of such
purchase, or before he has notice of the claim or interest of some other persons in the
property. Good faith, or the lack of it, is in the final analysis a question of intention;
but in ascertaining the intention by which one is actuated on a given occasion, we are
necessarily controlled by the evidence as to the conduct and outward acts by which
alone the inward motive may, with safety, be determined. Truly, good faith is not a
visible, tangible fact that can be seen or touched, but rather a state or condition of
mind which can only be judged by actual or fancied tokens or signs. Otherwise stated,
good faith x x x refers to the state of mind which is manifested by the acts of the
individual concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a purchaser in
good faith, namely: (1) that the purchaser buys the property of another without notice
that some other person has a right to or interest in such property; and (2) that the
purchaser pays a full and fair price for the property at the time of such purchase or
before he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted land in
questionpurchasers in good faith for value entitled to the benefits arising from such
status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its transferor,
Centennary, or that any other person has a right to or interest in such property. In
fact, at the time LIPCO acquired said parcels of land, only the following annotations
appeared on the TCT in the name of Centennary: the Secretarys Certificate in favor of
Teresita Lopa, the Secretarys Certificate in favor of Shintaro Murai, and the
conversion of the property from agricultural to industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of Hacienda
Luisita, only the following general annotations appeared on the TCTs of LIPCO: the
Deed of Restrictions, limiting its use solely as an industrial estate; the Secretarys
Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in
favor of RCBC to guarantee the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that
were previously covered by the SDP. Good faith "consists in the possessors belief that
the person from whom he received it was the owner of the same and could convey his
title. Good faith requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There is good
faith where there is an honest intention to abstain from taking any unconscientious
advantage from another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected
to CARP coverage by means of a stock distribution plan, as the DAR conversion order
was annotated at the back of the titles of the lots they acquired. However, they are of
the honest belief that the subject lots were validly converted to commercial or
industrial purposes and for which said lots were taken out of the CARP coverage
subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired
by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of
agricultural lands previously covered by CARP land acquisition "after the lapse of five
(5) years from its award when the land ceases to be economically feasible and sound
for agricultural purposes or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial purposes." Moreover,
DAR notified all the affected parties, more particularly the FWBs, and gave them the
opportunity to comment or oppose the proposed conversion. DAR, after going through
the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita
pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and
adjudicate agrarian reform matters and its original exclusive jurisdiction over all
matters involving the implementation of agrarian reform. The DAR conversion order
became final and executory after none of the FWBs interposed an appeal to the CA. In
this factual setting, RCBC and LIPCO purchased the lots in question on their honest
and well-founded belief that the previous registered owners could legally sell and
convey the lots though these were previously subject of CARP coverage. Ergo, RCBC
and LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of
PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.151 On the other hand,
in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed
portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a
loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which
cannot just be disregarded by DAR, PARC or even by this Court. As held in Spouses
Chua v. Soriano:
With the property in question having already passed to the hands of purchasers in
good faith, it is now of no moment that some irregularity attended the issuance of the
SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana
Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot be valid,
is inapplicable in this case as it will directly contravene the Torrens system of
registration. Where innocent third persons, relying on the correctness of the
certificate of title thus issued, acquire rights over the property, the court
cannot disregard such rights and order the cancellation of the
certificate. The effect of such outright cancellation will be to impair public
confidence in the certificate of title. The sanctity of the Torrens system must be
preserved; otherwise, everyone dealing with the property registered under the system
will have to inquire in every instance as to whether the title had been regularly or
irregularly issued, contrary to the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the
property and he is entitled to the protection of the law.152x x x (Emphasis
supplied.)
To be sure, the practicalities of the situation have to a point influenced Our disposition
on the fate of RCBC and LIPCO. After all, the Court, to borrow from Association of
Small Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed"
from the realities on the ground. To note, the approval and issuances of both the
national and local governments showing that certain portions of Hacienda Luisita have
effectively ceased, legally and physically, to be agricultural and, therefore, no longer
CARPable are a matter of fact which cannot just be ignored by the Court and the DAR.
Among the approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of
Tarlac favorably endorsing the 300-hectare industrial estate project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued
in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997,
approving LIPCOs application for a mixed ecozone and proclaiming the three
hundred (300) hectares of the industrial land as a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of
Tarlac, approving the Final Development Permit for the Luisita Industrial Park II
Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan of
Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued
for the proposed project of building an industrial complex on three hundred
(300) hectares of industrial land;156
 (g) Certificate of Registration No. 00794 dated 26 December 1997 issued by
the HLURB on the project of Luisita Industrial Park II with an area of three
million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB
authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain
Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac, Province
of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916,"
designating the Luisita Industrial Park II consisting of three hundred hectares
(300 has.) of industrial land as a Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the
PEZA, stating that pursuant to Presidential Proclamation No. 1207 dated 22
April 1998 and Republic Act No. 7916, LIPCO has been registered as an
Ecozone Developer/Operator of Luisita Industrial Park II located in San Miguel,
Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an
economic zone does not automatically allow the corporate or individual landowner to
change its use,158 the reclassification process is a prima facie indicium that the land
has ceased to be economically feasible and sound for agricultural uses. And if only to
stress, DAR Conversion Order No. 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 2006-34-01, the Court cannot close its eyes to certain
"operative facts" that had occurred in the interim. Pertinently, the "operative fact"
doctrine realizes that, in declaring a law or executive action null and void, or, by
extension, no longer without force and effect, undue harshness and resulting
unfairness must be avoided. This is as it should realistically be, since rights might
have accrued in favor of natural or juridical persons and obligations justly incurred in
the meantime.160 The actual existence of a statute or executive act is, prior to such a
determination, an operative fact and may have consequences which cannot justly be
ignored; the past cannot always be erased by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be
given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with.
This is merely to reflect awareness that precisely because the judiciary is the
government organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power
of judicial review that may lead to a declaration of nullity. It would be to deprive the
law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a
statute, prior to such a determination of [unconstitutionality], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects,with respect to particular
relations, individual and corporate, and particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had passed
since the PARCs approval of the HLIs SDP, in conjunction with numerous activities
performed in good faith by HLI, and the reliance by the FWBs on the legality and
validity of the PARC-approved SDP, perforce, certain rights of the parties, more
particularly the FWBs, have to be respected pursuant to the application in a general
way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of minimal or
altogether without relevance to the instant case as it applies only in considering the
effects of a declaration of unconstitutionality of a statute, and not of a declaration of
nullity of a contract. This is incorrect, for this view failed to consider is that it is NOT
the SDOA dated May 11, 1989 which was revoked in the instant case. Rather, it is
PARCs approval of the HLIs Proposal for Stock Distribution under CARP which
embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and
the qualified FWBs executed the SDOA. This agreement provided the basis and
mechanics of the SDP that was subsequently proposed and submitted to DAR for
approval. It was only after its review that the PARC, through then Sec. Defensor-
Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably,
it is not the SDOA which gave legal force and effect to the stock distribution scheme
but instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2 that
gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans
recommendation to the PARC Excom, what he proposed is the recall/revocation of
PARC Resolution No. 89-12-2 approving HLIs SDP, and not the revocation of the SDOA.
Sec. Pangandamans recommendation was favorably endorsed by the PARC Validation
Committee to the PARC Excom, and these recommendations were referred to in the
assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the
basis for the implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this case, the
approval by PARC of the HLI proposal for stock distributionis well-settled in our
jurisprudence. In Chavez v. National Housing Authority,163We 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:
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.
"Similarly, the implementation/enforcement of presidential decrees prior to their
publication in the Official Gazette is an operative fact which may have consequences
which cannot be justly ignored. The past cannot always be erased by a new judicial
declaration . . . that an all-inclusive statement of a principle of absolute retroactive
invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence as
an operative fact negating the acceptance of "a principle of absolute retroactive
invalidity." Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 long before our Decision
in Taada and the arrest of petitioner is an operative fact that can no longer be
disturbed or simply ignored. (Citations omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or
recalls the SDP, what it actually revoked or recalled was the PARCs approval of the
SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared
null and void was an executive act, PARC Resolution No. 89-12-2,165and not a contract
(SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in the
instant case. Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are
upheld, the revocation must, by application of the operative fact principle, give way to
the right of the original 6,296 qualified FWBs to choose whether they want to remain
as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989,
93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the
SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From
1989 to 2005, the FWBs were said to have received from HLI salaries and cash
benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross
produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005.166On August 6, 20l0, HLI and
private respondents submitted a Compromise Agreement, in which HLI gave the FWBs
the option of acquiring a piece of agricultural land or remain as HLI stockholders, and
as a matter of fact, most FWBs indicated their choice of remaining as stockholders.
These facts and circumstances tend to indicate that some, if not all, of the FWBs may
actually desire to continue as HLI shareholders. A matter best left to their own
discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries as of
November 21, 1989 when the SDP was approved, they are not accorded the right to
acquire land but shall, however, continue as HLI stockholders. All the benefits and
homelots167 received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-
qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with
no obligation to refund or return them since the benefits (except the homelots) were
received by the FWBs as farmhands in the agricultural enterprise of HLI and other
fringe benefits were granted to them pursuant to the existing collective bargaining
agreement with Tadeco. If the number of HLI shares in the names of the original FWBs
who opt to remain as HLI stockholders falls below the guaranteed allocation of
18,804.32 HLI shares per FWB, the HLI shall assign additional shares to said FWBs to
complete said minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not obliged
to return the same to HLI or pay for its value since this is a benefit granted under the
SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but
were taken from the 120.9234 hectare residential lot owned by Tadeco. Those who did
not receive the homelots as of the revocation of the SDP on December 22, 2005 when
PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots.
Thus, in the determination of the ultimate agricultural land that will be subjected to
land distribution, the aggregate area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land subject of
the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after
compulsory coverage has taken place, the FWBs should have their corresponding
share of the lands value. There is merit in the claim. Since the SDP approved by PARC
Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will
automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the
Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order
and the 80.51-hectare SCTEX lot acquired by the government from the area covered
by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the
price received for said lots. HLI shall be liable for the value received for the sale of the
200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value
of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to
LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP
80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account
the payment of taxes and expenses relating to the transfer of the land and HLIs
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. In order to determine once and for all whether or not all the proceeds were
properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services
of a reputable accounting firm to be approved by the parties to audit the books of HLI
to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare
SCTEX lot were actually used for legitimate corporate purposes, titling expenses and
in compliance with the August 14, 1996 Conversion Order. The cost of the audit will be
shouldered by HLI. If after such audit, it is determined that there remains a balance
from the proceeds of the sale, then the balance shall be distributed to the qualified
FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the land
from 1989. We disagree. It should not be forgotten that the FWBs are also
stockholders of HLI, and the benefits acquired by the corporation from its possession
and use of the land ultimately redounded to the FWBs benefit based on its business
operations in the form of salaries, and other fringe benefits under the CBA. To still
require HLI to pay rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP
although it will no longer be operating under the SDP, but pursuant to the Corporation
Code as a private stock corporation. The non-agricultural assets amounting to PhP
393,924,220 shall remain with HLI, while the agricultural lands valued at PhP
196,630,000 with an original area of 4,915.75 hectares shall be turned over to DAR for
distribution to the FWBs. To be deducted from said area are the 500-hectare lot
subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and
the total area of 6,886.5 square meters of individual lots that should have been
distributed to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be
transferred to DAR for land distribution to the FWBs. We find that the date of the
"taking" is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution
No. 89-12-2. DAR shall coordinate with LBP for the determination of just
compensation. We cannot use May 11, 1989 when the SDOA was executed, since it
was the SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated
December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the
lands subject of HLIs SDP under compulsory coverage on mandated land acquisition
scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the original
6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall
immediately schedule meetings with the said 6,296 FWBs and explain to them the
effects, consequences and legal or practical implications of their choice, after which
the FWBs will be asked to manifest, in secret voting, their choices in the ballot, signing
their signatures or placing their thumbmarks, as the case may be, over their printed
names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled
to 18,804.32 HLI shares, and, in case the HLI shares already given to him or her is less
than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to
complete said prescribed number of shares at no cost to the FWB within thirty (30)
days from finality of this Decision. Other FWBs who do not belong to the original 6,296
qualified beneficiaries are not entitled to land distribution and shall remain as HLI
shareholders. All salaries, benefits, 3% production share and 3% share in the proceeds
of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and
homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and
4,206 non-qualified FWBs, shall be respected with no obligation to refund or return
them.
Within thirty (30) days after determining who from among the original FWBs will stay
as stockholders, DAR shall segregate from the HLI agricultural land with an area of
4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-12-2 the
following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order; (b)
the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX
complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that
each FWB is entitled to under the CARP had he or she not opted to stay in HLI as a
stockholder. After the segregation process, as indicated, is done, the remaining area
shall be turned over to DAR for immediate land distribution to the original qualified
FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs
who stayed with the corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received
by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of the 500
hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP
750,000,000 received by its owned subsidiary, Centennary Holdings, Inc. for the sale
of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita
Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government
through the Bases Conversion Development Authority for the sale of the 80.51-
hectare lot used for the construction of the SCTEX road network. From the total
amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500
= PhP 1,330,511,500) shall be deducted the 3% of the total gross sales from the
production of the agricultural land and the 3% of the proceeds of said transfers that
were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for
legitimate corporate purposes. For this purpose, DAR is ordered to engage the
services of a reputable accounting firm approved by the parties to audit the books of
HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of
the sale of the three (3) aforementioned lots were used or spent for legitimate
corporate purposes. Any unspent or unused balance as determined by the audit shall
be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to
DAR to be reckoned from November 21, 1989 per PARC Resolution No. 89-12-2. DAR
and LBP are ordered to determine the compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report, quarterly
reports on the execution of this judgment to be submitted within the first 15 days at
the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.