[G.R. No. L-36213. June 29, 1989.

FELlX GONZALES & CARMEN GONZALES, petitioners, vs. HON. COURT OF APPEALS, DECEASED SPOUSES
ANDRES AGCAOILE & LEONORA AGCAOILE, substituted by LUCIA A. SISON, respondents.

Tomas A. Leonardo for private respondent.

SYLLABUS

1.LABOR AND SOCIAL LEGISLATION; AGRICULTURAL TENANCY LAW; LEASEHOLD; CANNOT BE ESTABLISHED ON LAND NO LONGER
DEVOTED TO CULTIVATION OR FARMING. — An agricultural leasehold cannot be established on land which has ceased to be devoted to cultivation
or farming because of its conversion into a residential subdivision.

2.ID.; ID.; REPUBLIC ACT NO. 3844; SECTION 36 (1) THEREOF FINDS NO APPLICATION TO A CASE WHERE THERE WAS NO
DISPOSSESSION BY THE CONVERSION OF THE LAND INTO A RESIDENTIAL SUBDIVISION. — Petitioners may not invoke Section 36(1)
of Republic Act No. 3844 which provides that "when the lessor-owner fails to substantially carry out the conversion of his agricultural land into a
subdivision within one year after the dispossession of the lessee, the lessee shall be entitled to reinstatement and damages," for the petitioners were
not agricultural lessees or tenants of the land before its conversion into a residential subdivision in 1955. Not having been dispossessed by the
conversion of the land into a residential subdivision, they may not claim a right to reinstatement.

3.ID.; ID.; CIRCUMSTANCES NEGATING THAT THE CONVERSION OF LAND WAS A MERE SCHEME TO DISPOSSESS TENANT; CASE AT
BAR. — Furthermore, their admission that: (1) they leased from the respondents a lot (No. 1285-M) in the subdivision on which they built their house;
(2) that as commission agents for the respondents, they were able to sell a subdivision lot to Clemente Bernabe and received a P300-commission on
the sale; and (3) that "a number of other lots were sold by respondents to different buyers," (p. 51, Rollo) refutes the petitioners' contention that the
development of the subdivision was a mere "scheme" to dispossess the previous tenant.

DECISION

GRIÑO-AQUINO, J p:

The issue in this case is whether an agricultural tenancy relationship can be created over land embraced in an approved residential subdivision. The
petitioners leased a lot in the subdivision on which they built their house, and, by tolerance of the subdivision owner, they cultivated some vacant
adjoining lots. The Court of Agrarian Relations, as well as the Court of Appeals, ruled that "the plaintiffs are not de jure agricultural tenants." (p. 66,
Rollo.) That ruling is assailed in this appeal by certiorari. LLphil

On October 26, 1988, Lucia A. Sison filed a motion to be substituted in lieu of the private respondents Andres Agcaoile (who died on May 20, 1976)
and Leonora Agcaoile (who died on March 22, 1979) as she inherited, and is now the registered owner of, nine (9) unsold lots in the subdivision
covered by TCT Nos. 20397 and 20398 of the Agcaoile spouses, now registered in her name under TCT Nos. T-98.096 up to T-98.104 (pp. 117-130,
Rollo). On February 22, 1989, this Court granted her motion.

The facts of this case are not disputed and are recited in the appealed decision dated December 6, 1972 of the Court of Appeals in CA-G.R. No.
00253-R, as follows:

"Defendants spouses are the owners of two parcels of land registered in their names under T.C.T. Nos. 20397 and 20398,
with an area of 43,383 square meters, located in Barrio Bagbaguin, Sta. Maria, Bulacan. At the time defendants purchased
the land in 1937, Maximo Cruz was the tenant who was planting palay thereon. Maximo continued as tenant until he was
succeeded upon his death by his son, Fidel Cruz. After tenanting the land for four years, Fidel was succeeded by Pascual
Gonzales, father of plaintiff Felix Gonzales. In 1954, Pascual ceased to be a tenant because the land was proposed to be
converted into a residential subdivision. The following year, or on May 3, 1955, the land became an approved subdivision. It
was subdivided into twenty-six (26) residential lots.

"Sometime in 1956, the plaintiffs spouses offered to pay a rental for Lot No. 1285-M of the subdivision on which they were to
build a house. Defendant Leonora Agcaoile agreed to a rental of P20.00 a month. Plaintiffs also offered to act as agents for
the subdivision. Leonora agreed. Plaintiffs were able to sell a lot to one Clemente Bernabe, and they received the
corresponding commission of P300.00. A number of other lots were sold by defendants to different buyers. While plaintiffs
were renting a portion of the subdivision, they requested to be allowed to plant palay on the lots that have not yet been sold.
Leonora acquiesced because she pitied the plaintiffs who have many children. No specific agreement was concluded with
regard to the sharing of harvests, but plaintiffs delivered part of the yield to Federico Mateo, defendants' overseer. When
plaintiffs defaulted renting Lot 1285-M, defendants sent the letter dated September 12, 1968 asking them to pay the accrued
rentals or to vacate the premises (Exh. 1). Plaintiffs countered with an action to elect the leasedhold system of tenancy,
docketed as CAR Case No. 2169 Bulacan '68. Said case was dismissed on August 7, 1969.

"On November 18, 1969, plaintiffs filed the present action seeking to elect the leasehold system and praying for a reliquidation
of past harvests embracing the agricultural years 1961-1962 to 1967-1968, inclusive. Before summons could be served on
defendants, they initiated an action against the plaintiffs for recovery of possession, in the Court of First Instance of Bulacan,
where said action was docketed as Civil Case No. SM-329. Then defendants answered the complaint in the present case,
alleging that the property subject of the action is residential land. On October 29, 1970, the Bulacan CFI rendered a decision
in Civil Case SM-329 favorably to the plaintiffs therein. On May 14, 1971, the judgment subject of the present appeal was
rendered." (pp. 15-16, Rollo).

Upon the evidence, the Court of Appeals upheld the decision of the Agrarian Court. It ruled: cdll

". . . Upon the evidence, it appears that in 1955 the property subject of the action ceased to be agricultural or farmland, it
having been converted as of that year into a homesite or residential subdivision. When plaintiffs, therefore, gained possession
of a portion of the land in 1956, upon acquiescence of defendants, they were not installed as agricultural tenants on a piece of
 agricultural land. Agricultural tenancy cannot be created on a homesite or residential subdivision. Republic Act No. 1199,
invoked by the appellants, does not apply to such property. And neither are the rights to elect leasehold and to reliquidate the
harvests assertible in respect to a residential subdivision or homesite." (p. 16, Rollo).

After deliberating on the petition and arguments in the briefs of the parties, We resolved to deny the petition for review.

There is no merit in the petitioners' argument that inasmuch as residential and commercial lots may be considered "agricultural" (Krivenko vs. Register
of Deeds, 79 Phil. 461 ) an agricultural tenancy can be established on land in a residential subdivision. The Krivenko decision interpreting the
constitutional prohibition against transferring private agricultural land to individuals, corporations, or associations not qualified to acquire or hold lands
of the public domain, save in the case of hereditary succession (Art. XIII, Sec. 5, 1935 Constitution; later Art. XIV, Sec. 14, 1973 Constitution; Art. XII,
Sec. 7, 1987 Constitution) has nothing to do with agricultural tenancy. An agricultural leasehold cannot be established on land which has ceased to
be devoted to cultivation or farming because of its conversion into a residential subdivision.

Petitioners may not invoke Section 36(1) of Republic Act No. 3844 which provides that "when the lessor-owner fails to substantially carry out the
conversion of his agricultural land into a subdivision within one year after the dispossession of the lessee, the lessee shall be entitled to reinstatement
and damages," for the petitioners were not agricultural lessees or tenants of the land before its conversion into a residential subdivision in 1955. Not
having been dispossessed by the conversion of the land into a residential subdivision, they may not claim a right to reinstatement. cdphil

Furthermore, their admission that: (1) they leased from the respondents a lot (No. 1285-M) in the subdivision on which they built their house; (2) that
as commission agents for the respondents, they were able to sell a subdivision lot to Clemente Bernabe and received a P300-commission on the
sale; and (3) that "a number of other lots were sold by respondents to different buyers," (p. 51, Rollo) refutes the petitioners' contention that the
development of the subdivision was a mere "scheme" to dispossess the previous tenant.

On the other hand, the petitioners' tactic of entering the subdivision as lessee of a homelot and thereafter cultivating some unsold lots ostensibly for
temporary use as a home garden, but covertly for the purpose of later claiming the land as "tenanted" farm lots, recalls the fable of the camel that
sought shelter inside its master's tent during a storm, and once inside, kicked its master out of the tent. Here, the private respondents' tolerance of
the petitioners' supposedly temporary use of some vacant lots in the subdivision was seized by the latter as a weapon to deprive the respondents of
their land.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals, We deny the petition for review for lack of merit.

SO ORDERED.

||| (Gonzales v. Court of Appeals, G.R. No. L-36213, [June 29, 1989], 256 PHIL 153-158)

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 title 14 indicates, the mechanisms for CARP implementation. It
created the Presidential Agrarian Reform Council (PARC) as the highest policy-making body that formulates all policies, rules, and regulations
necessary for the implementation of CARP.

On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the CARP Law, took effect, ushering in a
new process of land classification, acquisition, and distribution. As to be expected, RA 6657 met stiff opposition, its validity or some of its provisions
challenged at every possible turn. Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the observation
that the assault was inevitable, the CARP being an untried and untested project, "an experiment [even], as all life is an experiment," the Court said,
borrowing from Justice Holmes.

The Case

In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails
and seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on December 22, 2005 and May 3, 2006,
respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).18

The Facts

At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-industrial-residential expanse
straddling several municipalities of Tarlac and owned by Compañia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of
Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the hacienda, the Central Azucarera de Tarlac
(CAT), as an indivisible transaction. The Tarlac Development Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group,
was willing to buy. As agreed upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for the controlling interest
in CAT, in US dollars.19

To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of the Philippines, assisted the buyer
to obtain a dollar loan from a US bank.20 Also, the Government Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957
a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale. One of the conditions contained in the approving GSIS
Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as follows:

That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants, should there be any,
and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act; 21

As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and Tabacalera’s interest in CAT. 22

The details of the events that happened next involving the hacienda and the political color some of the parties embossed are of minimal significance
to this narration and need no belaboring. Suffice it to state that on May 7, 1980, the martial law administration filed a suit before the Manila Regional
Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR, now the Department
of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda Luisita
does not have tenants, besides which sugar lands––of which the hacienda consisted––are not covered by existing agrarian reform legislations. As
perceived then, the government commenced the case against Tadeco as a political message to the family of the late Benigno Aquino, Jr.23

Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court
of Appeals (CA).

On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government’s case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al. The dismissal action was, however,
made subject to the obtention by Tadeco of the PARC’s approval of a stock distribution plan (SDP) that must initially be implemented after such
approval shall have been secured.24 The appellate court wrote:

The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies concerned in moving for the dismissal of the
case subject, however, to the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as
follows:

1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements for corporate
landowners set forth in the guidelines issued by the [PARC]: or

2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.

xxxx
WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as above set forth
is not duly complied with by the TADECO.25

Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of the corporation under a stock ownership arrangement and/or land-to-share ratio.

Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2) alternative modalities, i.e., land or stock transfer, pursuant to either of which
the corporate landowner can comply with CARP, but subject to well-defined conditions and timeline requirements. Sec. 31 of RA 6657 provides:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of
the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion
of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s
total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the
time the shares of stocks are distributed be reduced. x x x

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied
with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries;

(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.

If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Emphasis added.)

Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series of 1988 (DAO
10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of
RA 6657.

From the start, the stock distribution scheme appeared to be Tadeco’s preferred option, for, on August 23, 1988, 28 it organized a spin-off corporation,
HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock. 29

Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI. 30

To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commission’s (SEC’s) approval, increased its
capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP 400,000,000 divided into
400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be issued only to qualified and registered beneficiaries of the
CARP, and the remaining 250,000,000 to any stockholder of the corporation.31

As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and approved by the
SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of
PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share.32

On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a referendum their acceptance
of the proposed HLI’s Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution Option Agreement (SDOA), styled as a Memorandum
of Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs 34 and attested to by then DAR Secretary Philip Juico. The
SDOA embodied the basis and mechanics of the SDP, which would eventually be submitted to the PARC for approval. In the SDOA, the parties
agreed to the following:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share,
that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof being P118,391,976.85
or 118,391,976.85 shares.

2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive of the
permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY.

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY [Tadeco]
the acquisition and distribution to the THIRD PARTY on the basis of number of days worked and at no cost to them of one-thirtieth (1/30)
 of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such
time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.

4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three (3%) of the total gross sales from the production of the agricultural
land, whether it be in the form of cash dividends or incentive bonuses or both.

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to
the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1)
year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD
PARTY or their representative to vote in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the year
the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number
of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to.

6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge among the qualified
family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not more than 240 sq.m. each,
with each family-beneficiary being assured of receiving and owning a homelot in the barangay where it actually resides on the date of the
execution of this Agreement.

7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the supervision of the [DAR], with
the end in view of improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them greater benefits. (Emphasis added.)

As may be gleaned from the SDOA, included as part of the distribution plan are: (a) 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.¾After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for
agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial
purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may
authorize the reclassification, or conversion of the land and its disposition: Provided, That the beneficiary shall have fully paid its obligation.

The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and Jose Julio Suniga, as evidenced by
the Manifesto of Support they signed and which was submitted to the DAR. 44After the usual processing, the DAR, thru then Sec. Ernesto Garilao,
approved the application on August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series of 1996,45 subject to payment of three
percent (3%) of the gross selling price to the FWBs and to HLI’s continued compliance with its undertakings under the SDP, among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300
hectares of the converted area to the latter. 46 Consequently, HLI’s Transfer Certificate of Title (TCT) No. 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, Centennary’s TCT No. 292091 was canceled to be replaced by TCT No. 31098653 in
the name of LIPCO.

From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were issued in the name of LIPCO,
specifically: (a) TCT No. 36580054 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively. TCT No. 310986 was, accordingly, partially
canceled.

Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its TCT Nos. 365800 and 365801
to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in payment of LIPCO’s PhP 431,695,732.10 loan obligations. LIPCO’s
titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.

Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of Hacienda Luisita which had been
acquired by the government as part of the 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 SDOA’s terms.58 They prayed for a renegotiation of the SDOA, or, in the alternative, its revocation.

Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second petition, styled
as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita
(AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared.
As alleged, the petition was filed on behalf of AMBALA’s members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita.

HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand, HLI’s answer62 to the AMBALA petition was contained
in its letter dated January 21, 2005 also filed with DAR.

Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other duties, the Special Task Force was
mandated to review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLI’s SDP; evaluate HLI’s compliance
reports; evaluate the merits of the petitions for the revocation of the SDP; conduct ocular inspections or field investigations; and recommend
appropriate remedial measures for approval of the Secretary.63

After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task Force’s recommendations were adopted by then DAR Sec. Nasser
Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-
12-2 dated November 21, 1989 approving HLI’s SDP; and (b) the acquisition of Hacienda Luisita through the compulsory acquisition scheme.
Following review, the PARC Validation Committee favorably endorsed the DAR Secretary’s recommendation afore-stated.67

On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:

NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the recommendation of the PARC
Executive Committee adopting in toto the report of the PARC ExCom Validation Committee affirming the recommendation of the DAR to recall/revoke
the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the compulsory coverage or
mandated land acquisition scheme of the [CARP].

APPROVED.68

A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the documents adverted to in the
resolution attached. A letter-request dated December 28, 200569 for certified copies of said documents was sent to, but was not acted upon by, the
PARC secretariat.

Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day, the DAR Tarlac provincial office issued the Notice of
Coverage71 which HLI received on January 4, 2006.

Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DAR’s hasty placing of Hacienda Luisita under CARP
even before PARC could rule or even read the motion for reconsideration.72 As HLI later rued, it "can not know from the above-quoted resolution the
facts and the law upon which it is based."73

PARC would eventually deny HLI’s motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.

By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a temporary restraining order,75enjoining the implementation of Resolution
No. 2005-32-01 and the notice of coverage.

On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment 76 on the petition.

On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In it, Mallari stated that he has broken away from AMBALA with other
AMBALA ex-members and formed Farmworkers Agrarian Reform Movement, Inc. (FARM). 78 Should this shift in alliance deny him standing, Mallari
also prayed that FARM be allowed to intervene.

As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be intervenors Renato Lalic, et al. As
things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al. as the remaining members
of FARM who sought to intervene.

On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted their Comment/Opposition dated December 17,
2006.80

On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-Intervention dated October 18,
2007.81 LIPCO later followed with a similar motion.82 In both motions, RCBC and LIPCO contended that the assailed resolution effectively nullified the
TCTs under their respective names as the properties covered in the TCTs were veritably included in the January 2, 2006 notice of coverage. In the
main, they claimed that the revocation of the SDP cannot legally affect their rights as innocent purchasers for value. Both motions for leave to intervene
were granted and the corresponding petitions-in-intervention admitted.

On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the Court, on August 24, 2010,
heard public respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang faction, and the FARM
and its 27 members83 argue their case.

Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by Suniga and Andaya; and the
United Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a joint submission and motion for approval of a Compromise
Agreement (English and Tagalog versions) dated August 6, 2010.

On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a Resolution84 creating a Mediation Panel
composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices Hector Hofileña and Teresita Dy-Liacco
Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted. Despite persevering and
painstaking efforts on the part of the panel, mediation had to be discontinued when no acceptable agreement could be reached.

The Issues

HLI raises the following issues for our consideration:

I.

WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER AND/OR
AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
 II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN
(16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF
ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW
AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER
THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT
CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?

III.

WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND
WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID PETITIONS.

IV.

WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW GOVERNED BY THE
CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x x.

On the other hand, RCBC submits the following issues:

I.

RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN
IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP DESPITE THE FACT THAT PETITIONER-
INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN
INNOCENT PURCHASER FOR VALUE.

A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE THE
EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-INTERVENOR RCBC.

B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE PREJUDICED BY A

SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.

II.

THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE ISSUED
WITHOUT AFFORDING 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 HLI’s SDP; (4) the
validity or propriety of such recall or revocatory action; and (5) corollary to (4), the validity of the terms and conditions of the SDP, as embodied in the
SDOA.

Our Ruling

I.

We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing on the validity of PARC’s assailed
issuance and the grounds for it.

Supervisory Group, AMBALA and their

respective leaders are real parties-in-interest

HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and
Rene Galang, who filed the revocatory petitions before the DAR. As HLI would have it, Galang, the self-styled head of AMBALA, gained HLI
employment in June 1990 and, thus, could not have been a party to the SDOA executed a year earlier. 85 As regards the Supervisory Group, HLI
alleges that supervisors are not regular farmworkers, but the company nonetheless considered them FWBs under the SDOA as a mere concession
to enable them to enjoy the same benefits given qualified regular farmworkers. However, if the SDOA would be canceled and land distribution effected,
so HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded from receiving lands as farmworkers other than the regular farmworkers
who are merely entitled to the "fruits of the land."87

The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by [HLI]." 88 Galang, per HLI’s own admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one
who stands to be benefited or injured by the judgment in the suit or is the party entitled to the avails of the suit.
The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and whose names and signatures
even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly parties who
would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some other modality to comply with RA 6657.

Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of "other farmworkers" mentioned in Sec.
4, Article XIII of the Constitution,89 thus only entitled to a share of the fruits of the land, as indeed Fortich teaches, this does not detract from the fact
that they are still identified as being among the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP. 90 At
any rate, the following admission made by Atty. Gener Asuncion, counsel of HLI, during the oral arguments should put to rest any lingering doubt as
to the status of protesters Galang, Suniga, and Andaya:

Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer beneficiaries of Hacienda Luisita were real parties in
interest?

Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest initiated before the DAR and the
real party in interest there be considered as possessed by the farmer beneficiaries who initiated the protest.91

Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves, their fellow farmers or their
organizations in any proceedings before the DAR. Specifically:

SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x

xxxx

Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their organizations in any proceedings before
the DAR: Provided, however, that when there are two or more representatives for any individual or group, the representatives should choose only
one among themselves to represent such party or group before any DAR proceedings. (Emphasis supplied.)

Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real 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.

PARC’s Authority to Revoke a Stock Distribution Plan

On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to revoke an SDP, for neither RA 6657
nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to approve the plan for stock distribution in
appropriate cases, the empowerment only includes the power to disapprove, but not to recall its previous approval of the SDP after it has been
implemented by the parties.93 To HLI, it is the court which has jurisdiction and authority to order the revocation or rescission of the PARC-approved
SDP.

We disagree.

Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to
PARC. However, contrary to petitioner HLI’s posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as urged,
that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such
power or authority, however, is deemed possessed by PARC under the principle of necessary implication, a basic postulate that what is implied in a
statute is as much a part of it as that which is expressed. 94

We have explained that "every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and
purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary consequences as
may be fairly and logically inferred from its terms."95 Further, "every statutory grant of power, right or privilege is deemed to include all incidental
power, right or privilege.96

Gordon v. Veridiano II is instructive:

The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power to revoke is
limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant
drug store has complied with the requirements of the general laws and the implementing administrative rules and regulations, it is only for their
violation that the FDA may revoke the said license. By the same token, having granted the permit upon his ascertainment that the conditions thereof
as applied x x x have been complied with, it is only for the violation of such conditions that the mayor may revoke the said permit. 97 (Emphasis
supplied.)

Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan.

As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the very same
agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to impose sanctions for 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 HLI’s argument ignores certain established legal precepts and must, therefore, be rejected.

A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the non-impairment guarantee. There is, in that instance, no impingement of the impairment
clause, the non-impairment protection being applicable only to laws that derogate prior acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties. Impairment, in fine, obtains if a subsequent law changes the terms of a contract between the parties, imposes
new conditions, dispenses with those agreed upon or withdraws existing remedies for the enforcement of the rights of the parties.100 Necessarily, the
constitutional proscription would not apply to laws already in effect at the time of contract execution, as in the case of RA 6657, in relation to DAO 10,
vis-à-vis HLI’s SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:

The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence, their provisions are read into contracts and
deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)

Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10, Art. III of the Constitution providing
that "[n]o law impairing the obligation of contracts shall be passed."

Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and conditions is not a PARC administrative
matter, but one that gives rise to a cause of action cognizable by regular courts. 102 This contention has little to commend itself. The SDOA is a special
contract imbued with public interest, entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP, which requires for its
validity, or at least its enforceability, PARC’s approval. And the fact that the certificate of compliance 103––to be issued by agrarian authorities upon
completion of the distribution of stocks––is revocable by the same issuing authority supports the idea that everything about the implementation of the
SDP is, at the first instance, subject to administrative adjudication.

HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the agricultural land of HLI.

Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed by RA 6657.
It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly described as the "mother
law" of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the
Corporation Code under the guise of being a corporate entity.

Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its applicability is limited as the
rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian reform program.

Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other
hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevail—generalia specialibus non
derogant.105 Besides, the present impasse between HLI and the private respondents is not an 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 HLI’s
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case.

HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the eventual distribution of the
land to the FWBs would amount to a disposition of all or practically all of the corporate assets of HLI. HLI would add that this contingency, if ever it
comes to pass, requires the applicability of the Corporation Code provisions on corporate dissolution.

We are not persuaded.

Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of HLI’s affairs or liquidation of the
assets is concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the land’s eventual
distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As stated in the SDOA itself, the percentage of the value
of the agricultural land of Hacienda Luisita in relation to the total assets transferred and conveyed by Tadeco to HLI comprises only 33.296%, following
this equation: value of the agricultural lands divided by total corporate assets. By no stretch of imagination would said percentage amount to a
disposition of all or practically all of HLI’s corporate assets should compulsory land acquisition and distribution ensue.

This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom. But first, the matter of the constitutionality of said
section.

Constitutional Issue

FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP compliance, to resort to stock
distribution, an arrangement which, to FARM, impairs the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution.106

To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright agricultural land transfer; in fine,
there is stock certificate ownership of the farmers or farmworkers instead of them owning the land, as envisaged in the Constitution. For FARM, this
modality of distribution is an anomaly to be annulled for being inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of
the Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries. It draws attention
in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as
here, be attacked collaterally.

The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO 229 must fail as explained below.

When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are first met, to wit:

(1) there is an actual case or controversy;

(2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with locus standi; and

(3) the issue of constitutionality must be the very lis mota of the case.108

Not all the foregoing requirements are satisfied in the case at bar.

While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP of Hacienda Luisita or at
least within a reasonable time thereafter and why its members received benefits from the SDP without so much of a protest. It was only on December
4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution
were sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT
question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP.
Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM,
whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment
with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657
which is quite too late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the
alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue
that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from the
application of an alleged unconstitutional legal provision.

It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is properly raised
and presented in an appropriate case at the first opportunity. 109 FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of
RA 6657. The second requirement that the constitutional question should be raised at the earliest possible opportunity is clearly wanting.

The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect
is not present, the constitutional issue tendered not being critical to the resolution of the case. The unyielding rule has been to avoid, whenever
plausible, an issue assailing the constitutionality of a statute or governmental act. 110 If some other grounds exist by which judgment can be made
without touching the constitutionality of a law, such recourse is favored. 111 Garcia v. Executive Secretary explains why:

Lis Mota — the fourth requirement to satisfy before this Court will undertake judicial review — means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the application of the statute or the
general law. The petitioner must be able to show that the case cannot be legally resolved unless the constitutional question raised is determined. This
requirement is based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative. 112 (Italics in the original.)

The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously belonged) and
the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the Court,
the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact
that the SDP, as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be
resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it
is not the said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed.

It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis-à-vis
the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30, 2009, the modes of
acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for all intents and purposes, the stock distribution scheme
under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional should be a moot
issue.

It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and academic 114 provided the following
requisites are present:

x x x first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved;
third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; fourth, the case is
capable of repetition yet evading review.

These requisites do not obtain in the case at bar.

For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:

The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular farmworkers, who are landless, to
OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as
the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation.
In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-
sharing. (Emphasis supplied.)

The wording of the provision is unequivocal––the farmers and regular farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE
LANDS THEY TILL. The basic law allows two (2) modes of land distribution—direct and indirect ownership. Direct transfer to individual farmers is the
most commonly used method by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land is the alternative to
direct ownership of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No
language can be found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. The word "collective" is defined as "indicating a number of persons or things considered as constituting
one group or aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a mass or body." 116 By using the word "collectively,"
the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that land reform
may become successful even if it is done through the medium of juridical entities composed of farmers.

Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers’ cooperatives or associations to collectively own the
land, while the second paragraph of Sec. 31 allows corporations or associations to own agricultural land with the farmers becoming stockholders or
members. Said provisions read:

SEC. 29. Farms owned or operated by corporations or other business associations.—In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.

In general, lands shall be distributed directly to the individual worker-beneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries who shall form a
workers’ cooperative or association which will deal with the corporation or business association. x x x (Emphasis supplied.)

SEC. 31. Corporate Landowners.— x x x

xxxx

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of
the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets,
under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares
of stocks are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or participation. x x x (Emphasis
supplied.)

Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the succeeding Sec. 31, as
differentiated from individual farmers, are authorized vehicles for the collective ownership of agricultural land. Cooperatives can be registered with
the Cooperative Development Authority and acquire legal personality of their own, while corporations are juridical persons under the Corporation
Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers.
Even the framers of the l987 Constitution are in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmers––DIRECT
and COLLECTIVE, thus:

MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller?

MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership?

MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the land, not the State.

MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do the farmers own specific areas of land where they only unite
in their efforts?

MS. NIEVA. That is one way.

MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the "kibbutz." So are both
contemplated in the report?

MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual
na pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay
gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang sasakahin.

xxxx

MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather than land for the
landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right?

MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands
kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang
lupain o isang bukid, katulad ng sitwasyon sa Negros. 117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus, the main requisite for collective
ownership of land is collective or group work by farmers of the agricultural land. Irrespective of whether the landowner is a cooperative, association
or corporation composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls within the ambit of collective
ownership scheme.

Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue, by law, an agrarian reform program
founded on the policy of land for the landless, but subject to such priorities as Congress may prescribe, taking into account such abstract variable as
"equity considerations." The textual reference to a law and Congress necessarily implies that the above constitutional provision is not self-
executoryand that legislation is needed to implement the urgently needed program of agrarian reform. And RA 6657 has been enacted precisely
pursuant to and as a mechanism to carry out the constitutional directives. This piece of legislation, in fact, restates 118 the agrarian reform policy
established in the aforementioned provision of the Constitution of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines
"agrarian reform" as "the redistribution of lands … to farmers and regular farmworkers who are landless … to lift the economic status of the
beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as production or profit sharing, labor
administration and the distribution of shares of stock which will allow beneficiaries to receive a just share of the fruits of the lands they work."

With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument
of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless appears to be the dominant theme of that policy,
We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to passing an agrarian reform law planted on
direct land transfer to and ownership by farmers and no other, or else the enactment suffers from the vice of unconstitutionality. If the intention were
otherwise, the framers of the Constitution would have worded said section in a manner mandatory in character.

For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the State’s commitment to farmers and
farmworkers to advance their interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective
ownership by which the imperatives of social justice may, in its estimation, be approximated, if not achieved. The Court should be bound by such
policy choice.

FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but are merely given stock certificates.
Thus, the farmers lose control over the land to the board of directors and executive officials of the corporation who actually manage the land. They
conclude that such arrangement runs counter to the mandate of the Constitution that any agrarian reform must preserve the control over the land in
the hands of the tiller.

This contention has no merit.

While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation Code is clear that the FWB becomes
a stockholder who acquires an equitable interest in the assets of the corporation, which include the agricultural lands. It was explained that the
"equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the extent of his interest is described by
the term shares. The expression shares of stock when qualified by words indicating number and ownership expresses the extent of the owner’s
interest in the corporate property."119 A share of stock typifies an aliquot part of the corporation’s property, or the right to share in its proceeds to that
extent when distributed according to law and equity and that its holder is not the owner of any part of the capital of the corporation.120 However, the
FWBs will ultimately own the agricultural lands owned by the corporation when the corporation is eventually dissolved and liquidated.

Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation, a reading of the second paragraph
of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries have "the right to purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets." The wording of the
formula in the computation of the number of shares that can be bought by the farmers does not mean loss of control on the part of the farmers. It
must be remembered that the determination of the percentage of the capital stock that can be bought by the farmers depends on the value of the
agricultural land and the value of the total assets of the corporation.

There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over the agricultural land
must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own majority of
the common shares entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority in the board. Before
the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural
land contributed to the corporation must always be more than 50% of the total assets of the corporation to ensure that the majority of the members of
the board of directors are composed of the farmers. The PARC composed of the President of the Philippines and cabinet secretaries must see to it
that control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the
board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second
paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be
challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers.

A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land distribution is the essential
characteristic of a constitutional agrarian reform program. On the contrary, there have been so many instances where, despite actual land distribution,
the implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may take judicial notice of cases where FWBs sold the
awarded land even to non-qualified persons and in violation of the prohibition period provided under the law. This only proves to show that the mere
fact that there is land distribution does not guarantee a successful implementation of agrarian reform.

As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where non-human juridical persons, such as corporations,
were prohibited from owning agricultural lands are no longer realistic under existing conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a collective manner through a cooperative or corporation. The former is too often
left to his own devices when faced with failing crops and bad weather, or compelled to obtain usurious loans in order to purchase costly fertilizers or
farming equipment. The experiences learned from failed land reform activities in various parts of the country are lack of financing, lack of farm
equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is
still no successful implementation of agrarian reform to speak of in such a case.

Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and competently maintain the agri-
business than the individual farmer. While direct singular ownership over farmland does offer advantages, such as the ability to make quick decisions
unhampered by interference from others, yet at best, these advantages only but offset the disadvantages that are often associated with such
ownership arrangement. Thus, government must be flexible and creative in its mode of implementation to better its chances of success. One such
option is collective ownership through juridical persons composed of farmers.

Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be capable of repetition yet evading
review is also wanting. It would be speculative for this Court to assume that the legislature will enact another law providing for a similar stock option.

As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official functions, the heavy presumption
being that a law is the product of earnest studies by Congress to ensure that no constitutional prescription or concept is infringed.121 Corollarily, courts
will not pass upon questions of wisdom, expediency and justice of legislation or its provisions. Towards this end, all reasonable doubts should be
resolved in favor of the constitutionality of a law and the validity of the acts and processes taken pursuant thereof. 122

Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict with the Constitution, not
merely a doubtful or argumentative one, must be demonstrated in such a manner as to leave no doubt in the mind of the Court. In other words, the
grounds for nullity must be beyond reasonable doubt. 123 FARM has not presented compelling arguments to overcome the presumption of
constitutionality of Sec. 31 of RA 6657.

The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian reform is not for judicial
determination. Established jurisprudence tells us that it is not within the province of the Court to inquire into the wisdom of the law, for, indeed, We
are bound by words of the statute.124

II.

The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLI’s SDP. Or to be more precise, the
inquiry should be: whether or not PARC gravely abused its discretion in revoking or recalling the subject SDP and placing the hacienda under CARP’s
compulsory acquisition and distribution scheme.

The findings, analysis and recommendation of the DAR’s Special Task Force contained and summarized in its Terminal Report provided the bases
for the assailed PARC revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is contrary to either the policy on agrarian
reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular terms, the following
are essentially the reasons underpinning PARC’s revocatory or recall action:

(1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of the FWBs have hardly improved and the promised increased
income has not materialized;

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;

(3) The issuance of HLI shares of stock on the basis of number of hours worked––or the 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, PARC’s Resolution No. 2006-
34-01, denying HLI’s motion for reconsideration of Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the
entitlement of the original share beneficiaries;125

(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;

(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-sharing benefit on top of the workers’
salary; and

(6) Several homelot awardees have yet to receive their individual titles.

Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.

Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the Terminal Report, a position shared by
AMBALA, which, in some pleadings, is represented by the same counsel as that appearing for the Supervisory Group.

FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO
10. And training its sight on the resulting dilution of the equity of the FWBs appearing in HLI’s masterlist, FARM would state that the SDP, as couched
and implemented, spawned disparity when there should be none; parity when there should have been differentiation.126

The petition is not impressed with merit.

In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed
to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of agricultural lands. We disagree.

Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP). The
welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to move the nation towards sound
rural development and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture.

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

Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x x x shall be undertaken
to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of
agricultural lands." Of note is the term "opportunity" which is defined as a favorable chance or opening offered by circumstances. 127 Considering this,
by no stretch of imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it merely provides for a
possibility or favorable chance of uplifting the economic status of the FWBs, which may or may not be attained.

Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an imperative imposition by
RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option. Nothing in that option agreement, law or department
order indicates otherwise.

Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3 billion by way of
salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And attached as Annex "G" to HLI’s
Memorandum is the certified true report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations, captioned as
"HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was Approved by PARC/CARP,"
detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash
Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures,
as stated in the report, include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the PhP
37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI manifests having
given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the SCTEX.128 On top of these, it is worth remembering that
the shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP.

To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years, it cannot be over-
emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the time. As has been suggested, one
of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money.129

The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock distribution plan is the
likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries] than if the lands were divided and distributed
to them individually."130 But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot, actually exact assurance of success on
something that is subject to the will of man, the forces of nature or the inherent risky nature of business. 131 Just like in actual land distribution, an SDP
cannot guarantee, as indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact that there
were many instances wherein after a farmworker beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually
left with nothing in the end.

In all then, the onerous condition of the FWBs’ economic status, their life of hardship, if that really be the case, can hardly be attributed to HLI and its
SDP and provide a valid ground for the plan’s revocation.

Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.

The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of the assailed order revoking HLI’s
SDP, for the paragraph deals with the transfer of agricultural lands to the government, as a mode of CARP compliance, thus:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of
the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such terms and conditions, consistent with this Act, as they may
agree, subject to confirmation by the DAR.

The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion
of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s
total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the
time the shares of stocks are distributed be reduced. x x x

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied
with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries;

(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified beneficiaries, adverting to what Sec. 31
of RA 6657 refers to as that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears
in relation to the company’s total assets" had been observed.

Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation reads:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00)
transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND
PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY under
the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.

The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s other assets is PhP 393,924,220. The total value of HLI’s assets is,
therefore, PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP 196,630,000) in relation to the total assets (PhP
590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified farmworker-beneficiaries (FWBs) in HLI. The total number
of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the 355,531,462 shares
which is the outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then
each FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for free.

The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of
RA 6657.

Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1) representative in the board of
directors or in a management or executive committee irrespective of the value of the equity of the FWBs in HLI, the Court finds that the SDOA
contained provisions making certain the FWBs’ representation in HLI’s governing board, thus:

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative
to vote in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding
capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the
SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to.

Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by the FWBs; hence, the assumption
may be made that there has been no violation of the statutory prescription under sub-paragraph (a) on the auditing of HLI’s accounts.

Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-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 beneficiaries––is but
one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landowner-
applicant the undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic to HLI’s stated observation that the key phrase in
the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural land remaining intact x x x but the viability
of the corporate operations with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate
agricultural land does not remain intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining the viability of
Hacienda Luisita’s operation, as the DAR Secretary approved the land conversion applied for and its disposition via his Conversion Order dated
August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads:

Sec. 65. Conversion of Lands.¾After the lapse of five years from its award when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes,
the DAR upon application of the beneficiary or landowner with due notice to the affected parties, and subject to existing laws, may authorize the x x
x conversion of the land and its dispositions. x x x

On the 3% Production Share

On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the hacienda and pay dividends from profit,
the entries in its financial books tend to indicate compliance by HLI of the profit-sharing equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due FWBs as employees of the company and (b) the 3% of the gross selling price of the
converted land and that portion used for the SCTEX. A plausible evidence of compliance or non-compliance, as the case may be, could be the books
of account of HLI. Evidently, the cry of some groups of not having received their share from the gross production sales has not adequately been
validated on the ground by the Special Task Force.

Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are accorded due respect and weight,
especially when they are affirmed by the CA. 135 However, such rule is not absolute. One such exception is when the findings of an administrative
agency are conclusions without citation of specific evidence on which they are based, 136 such as in this particular instance. As culled from its Terminal
Report, it would appear that the Special Task Force rejected HLI’s claim of compliance on the basis of this ratiocination:

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

xxxx

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

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

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below.

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:

SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual members of the cooperatives or corporations mentioned in the
preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the land owned by the cooperative or
corporation.

The "preceding section" referred to in the above-quoted provision is as follows:

SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.¾In the case of farms owned or operated by corporations or
other business associations, the following rules shall be observed by the PARC.

In general, lands shall be distributed directly to the individual worker-beneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a
workers’ cooperative or association which will deal with the corporation or business association. Until a new agreement is entered into by and between
the workers’ cooperative or association and the corporation or business association, any agreement existing at the time this Act takes effect between
the former and the previous landowner shall be respected by both the workers’ cooperative or association and the corporation or business association.

Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x residential or
homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot in the barrio or barangay
where it actually resides," "within a reasonable time."

More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the FWBs that not all
was given the 240-square meter homelots and, of those who were already given, some still do not have the corresponding titles.

During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs were already given the
said homelots:

Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the 240 square meters
each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square meter homelots.

Atty. Asuncion: We will, your Honor please.138

Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received homelots was submitted
by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the
SDP.

On "Man Days" and the Mechanics of Stock Distribution

In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2) provisions of
DAO 10. Par. 3 of the SDOA states:

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of
118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.

Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from them, is contingent on
the number of "man days," that is, the number of days that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10,
which decrees the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Sec.
31 of RA 6657. As stated in Sec. 4 of DAO 10:

Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution of an equal number
of shares of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution
plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.

On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as
a matter of sound company policy. (Emphasis supplied.)

The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the corporation under the SDP.
The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31
of RA 6657. This minimum ratio contemplates of that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total assets." 139 It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed
to be allocated "for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries."

On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category constitutes an
augmentation share/s that the corporate landowner may give under an additional stock distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the management, in the exercise of its sound discretion, may deem desirable.140

Before anything else, it should be stressed that, at the time PARC approved HLI’s SDP, HLI recognized 6,296individuals as qualified FWBs. And
under the 30-year stock distribution program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated,
as they appear to have in fact been accommodated as evidenced by their receipt of HLI shares.

Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI violated the afore-quoted
rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs,
who theoretically had given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement. As
has been observed during the oral arguments, HLI has chosen to use the shares earmarked for farmworkers as reward system chips to water down
the shares of the original 6,296 FWBs.141 Particularly:

Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: That’s the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the land under CARP. And for that
reason those who would have gotten their shares of the land actually gave up their rights to this land in place of the shares of the stock, is that correct?

Atty. Dela Merced: It would be that way, Your Honor.

Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes own [sic] the land
and distribute it to the farmers and pay for the land, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x x x those who signed five
thousand four hundred ninety eight (5,498) beneficiaries, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of the years that you
gave additional shares who were not in the original list of owners?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to have been placed
under CARP?

Atty. Dela Merced: If you are talking or referring… (interrupted)

Justice Abad: None! You tell me. None. They gave up no rights to land?

Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.

Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on.

Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original… (interrupted)

Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to use the shares as
reward system for new workers who come in? It is not that the new workers, in effect, become just workers of the corporation whose stockholders
were already fixed. The TADECO who has shares there about sixty six percent (66%) and the five thousand four hundred ninety eight (5,498) farmers
at the time of the SDOA? Explain to me. Why, why will you x x x what right or where did you get that right to use this shares, to water down the shares
of those who should have been benefited, and to use it as a reward system decided by the company? 142

From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of the SDP,
suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than
the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on "man days" or "number
of days worked" by the FWB in a year’s time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she
becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the
original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers
of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85
HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of "man days" and the hiring of additional farmworkers.

Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan within three (3)
months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares
of stock in the names of the qualified FWBs should be recorded in the stock and transfer books and must be submitted to the SEC within sixty (60)
days from implementation. As stated:

Section 11. Implementation/Monitoring of Plan.¾The approved stock distribution plan shall be implemented within three (3) months from receipt by
the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the names of the qualified
beneficiaries shall be recorded in stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days
from the said implementation of the stock distribution plan. (Emphasis supplied.)

It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must be made within
three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the clashing parties has made a compelling
case of the thrust of this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to complete, not merely
initiate, the transfer process of shares within that three-month timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the
SEC) requirement reckoned from the implementation of the SDP.

To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution
scheme.

The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries
of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying dimension to its 30-year
stock distribution program.

HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual
amortizations x x x.

Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case, aside from the fact
that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the shares of stock among the FWBs.

Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to make it less
cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time.

Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears stressing that under
Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being a product of such rule-
making power, DAO 10 has the force and effect of law and must be duly complied with. 143 The PARC is, therefore, correct in revoking the SDP.
Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLI’s SDP is nullified and voided.

III.

We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of the assailed PARC resolution
those portions of the converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase.

Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for the exclusion of that portion from
PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage dated January 2, 2006, which called for mandatory CARP
acquisition coverage of lands subject of the SDP.

To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the 300 hectares to Centennary,
while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire three hundred (300) hectares of land from
Centennary for the purpose of developing the land into an industrial complex.144 Accordingly, the TCT in Centennary’s name was canceled and a new
one issued in LIPCO’s name. Thereafter, said land was subdivided into two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares
to RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were subsequently issued.

Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title in pursuance of a decree of
registration and every subsequent purchaser of registered land taking a certificate of title for value and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and enumerated therein." 145

It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the four corners of, but can rely on
what appears on, the title. He is charged with notice only of such burdens and claims as are annotated on the title. This principle admits of certain
exceptions, such as when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such
inquiry, or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation. 146 A higher level of care and diligence is of course expected from banks, their business
being impressed with public interest.147

Millena v. Court of Appeals describes a purchaser in good faith in this wise:

x x x A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property
at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. Good faith, or the lack of it, is in
the final analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled
by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. Truly, good faith is not a
visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged by actual or fancied tokens or signs.
Otherwise stated, good faith x x x refers to the state of mind which is manifested by the acts of the individual concerned. 148 (Emphasis supplied.)

In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has notice of the claim of another.

It can rightfully be said that both LIPCO and RCBC are––based on the above requirements and with respect to the adverted transactions of the
converted land in question––purchasers in good faith for value entitled to the benefits arising from such status.

First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed defect in the title
of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of
land, only the following annotations appeared on the TCT in the name of Centennary: the Secretary’s Certificate in favor of Teresita Lopa, the
Secretary’s Certificate in favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and residential use.149

The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general annotations appeared on the
TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the Secretary’s Certificate in favor of Koji Komai and Kyosuke
Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million.

It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good faith "consists in
the possessor’s belief that the person from whom he received it was the owner of the same and could convey his title. Good faith requires a well-
founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it. There is good faith where
there is an honest intention to abstain from taking any unconscientious advantage from another." 150 It is the opposite of fraud.

To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as
the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots
were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution
No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of
agricultural lands previously covered by CARP land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically
feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to
comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda
Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original exclusive
jurisdiction over all matters involving the implementation of agrarian reform. The DAR conversion order became final and executory after none of the
FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief
that the previous registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and
LIPCO acted in good faith in acquiring the subject lots.

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares of land from
Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.151 On the other hand, in a Deed of Absolute Assignment
dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP
431,695,732.10.

As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by DAR, PARC or even by this
Court. As held in Spouses Chua v. Soriano:

With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment that some irregularity attended
the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:

x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly contravene the
Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights
over the property, the court cannot disregard such rights and order the cancellation of the certificate. The effect of such outright cancellation
will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with
the property registered under the system will have to inquire in every instance as to whether the title had been regularly or irregularly issued, contrary
to the evident purpose of the law.

Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good faith holds an indefeasible title
to the property and he is entitled to the protection of the law.152 x x x (Emphasis supplied.)

To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed" from the realities on the ground. To note, the
approval and issuances of both the national and local governments showing that certain portions of Hacienda Luisita have effectively ceased, legally
and physically, to be agricultural and, therefore, no longer CARPable are a matter of fact which cannot just be ignored by the Court and the DAR.
Among the approving/endorsing issuances:154

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing the 300-hectare industrial estate
project of LIPCO;

(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the Omnibus Investments Code of 1987;

(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCO’s application for a mixed ecozone and
proclaiming the three hundred (300) hectares of the industrial land as a Special Economic Zone;

(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final Development Permit for the Luisita
Industrial Park II Project;

(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by the Office of the Sangguniang
Bayan of Tarlac;155

(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of building an industrial complex
on three hundred (300) hectares of industrial land;156

(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of Luisita Industrial Park II with an
area of three million (3,000,000) square meters;157

(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in the Luisita Industrial Park II;

(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in Barangay San Miguel, Municipality of
Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of industrial land as a Special Economic Zone; and

(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to Presidential Proclamation No.
1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered as an Ecozone Developer/Operator of Luisita Industrial
Park II located in San Miguel, Tarlac, Tarlac.

While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie indicium that the land has ceased to be economically feasible and sound
for agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued in 1996 by then DAR Secretary Garilao had
effectively converted 500 hectares of hacienda land from agricultural to industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered at fault for believing
that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and consequently
DAR, gravely abused its discretion when it placed LIPCO’s and RCBC’s property which once formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed Notice of Coverage.

As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be excluded from the compulsory
agrarian reform coverage considering that the transfer was consistent with the government’s exercise of the power of eminent 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 PARC’s approval of the HLI’s SDP, in conjunction
with numerous activities performed in good faith by HLI, and the reliance by the FWBs on the legality and validity of the PARC-approved SDP,
perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to the application in a general way of the operative
fact doctrine.

A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to the instant case as it applies
only in considering the effects of a declaration of unconstitutionality of a statute, and not of a declaration of nullity of a contract. This is incorrect, for
this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the instant case. Rather, it is PARC’s approval of
the HLI’s Proposal for Stock Distribution under CARP which embodied the SDP that was nullified.

A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed the SDOA. This agreement
provided the basis and mechanics of the SDP that was subsequently proposed and submitted to DAR for approval. It was only after its review that
the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably, it is not the SDOA
which gave legal force and effect to the stock distribution scheme but instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2
that gave it its validity.

The above conclusion is bolstered by the fact that in Sec. Pangandaman’s recommendation to the PARC Excom, what he proposed is the
recall/revocation of PARC Resolution No. 89-12-2 approving HLI’s SDP, and not the revocation of the SDOA. Sec. Pangandaman’s recommendation
was favorably endorsed by the PARC Validation Committee to the PARC Excom, and these recommendations were referred to in the assailed
Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the basis for the implementation of the stock distribution scheme.

That the operative fact doctrine squarely applies to executive acts––in this case, the approval by PARC of the HLI proposal for stock distribution––is
well-settled in our jurisprudence. In Chavez v. National Housing Authority, 163 We held:

Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used
to countenance an inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact
that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.

The argument of the Solicitor General is meritorious.

The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid and must be complied with, thus:

xxx xxx xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that:

Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less retroactively apply such
nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though
in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a
statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly
unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application. (Citations omitted; Emphasis
supplied.)

The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People,164 thus:

Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated
— General Order No. 60, issued by then President Ferdinand E. Marcos — was subsequently declared by the Court, in Tañada v. Tuvera, 33 to have
no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence.

We do not agree. In Tañada, the Court addressed the possible effects of its declaration of the invalidity of various presidential issuances. Discussing
therein how such a declaration might affect acts done on a presumption of their validity, the Court said:

". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter
Bank to wit:

‘The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite clear, however, that
such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects — with
respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to
have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest
from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’

xxx xxx xxx

"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is ‘an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration . . . that an all-inclusive statement of
a principle of absolute retroactive invalidity cannot be justified.’"

The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its
actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative
or the executive act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under
General Order No. 60 — long before our Decision in Tañada and the arrest of petitioner — is an operative fact that can no longer be disturbed or
simply ignored. (Citations omitted; Emphasis supplied.)

To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it actually revoked or recalled was the
PARC’s approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared null and void was an executive act,
PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in the instant
case. Evidently, the operative fact doctrine is applicable.

IV.

While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by application of the operative
fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court
cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved
by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries and
cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds
of the sale of the 500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of
April 22, 2005.166 On August 6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of
acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as
stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders.
A matter best left to their own discretion.

With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the SDP was approved, they are not
accorded the right to acquire land but shall, however, continue as HLI stockholders. All the benefits and homelots 167 received by the 10,502 FWBs
(6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with no obligation to refund
or return them since the benefits (except the homelots) were received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe
benefits were granted to them pursuant to the existing collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the
original FWBs who opt to remain as HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign
additional shares to said FWBs to complete said minimum number of shares at no cost to said FWBs.

With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or pay for its value since this is a
benefit granted under the SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but were taken from the 120.9234 hectare
residential lot owned by Tadeco. Those who did not receive the homelots as of the revocation of the SDP on December 22, 2005 when PARC
Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the determination of the ultimate agricultural land that will be
subjected to land distribution, the aggregate area of the homelots will no longer be deducted.

There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and the 80.51-hectare
SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share of the land’s value. There is merit in
the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will automatically be
subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion
Order and the 80.51-hectare SCTEX lot acquired by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall
be liable to the FWBs for the price received for said lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the
amount of PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO
for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX
lot.

We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We
also take into account the payment of taxes and expenses relating to the transfer of the land and HLI’s statement that most, if not all, of the proceeds
were used for legitimate corporate purposes. In order to determine once and for all whether or not all the proceeds were properly utilized by HLI and
its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be approved by the parties to audit the books of HLI to
determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes,
titling expenses and in compliance with the August 14, 1996 Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it
is determined that there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs.

A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It should not be forgotten that the
FWBs are also stockholders of HLI, and the benefits acquired by the corporation from its possession and use of the land ultimately redounded to the
FWBs’ benefit based on its business operations in the form of salaries, and other fringe benefits under the CBA. To still require HLI to pay rent to the
FWBs will result in double compensation.

For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be operating under the SDP, but pursuant
to the Corporation Code as a private stock corporation. The non-agricultural assets amounting to PhP 393,924,220 shall remain with HLI, while the
agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be turned over to DAR for distribution to the FWBs. To
be deducted from said area are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total area
of 6,886.5 square meters of individual lots that should have been distributed to FWBs by DAR had they not opted to stay in HLI.

HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs. We find that
the date of the "taking" is November 21, 1989, when PARC approved HLI’s SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP
for the determination of just compensation. We cannot use May 11, 1989 when the SDOA was executed, since it was the SDP, not the SDOA, that
was approved by PARC.

The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case.

WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01 dated
May 3, 2006, placing the lands subject of HLI’s SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are hereby
AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall
immediately schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and legal or practical implications of their
choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks,
as the case may be, over their printed names.

Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares, and, in case the HLI shares already
given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to complete said prescribed number of
shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other FWBs who do not belong to the original 6,296 qualified
beneficiaries are not entitled to land distribution and shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3% share in
the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs,
composed of 6,296 original FWBs and 4,206 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 PARC’s SDP-approving Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the
August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX complex; and (c) the
aggregate area of 6,886.5 square meters of individual lots that each FWB is entitled to under the CARP had he or she not opted to stay in HLI as a
stockholder. After the segregation process, as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to
the original qualified FWBs who opted not to remain as HLI stockholders.

The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation shall form part of the HLI
assets.

HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to the latter of 200
hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000 received by its owned
subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita Industrial Park
Corporation, and the price of PhP 80,511,500 paid by the government through the Bases Conversion Development Authority for the sale of the 80.51-
hectare lot used for the construction of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000
+ PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the total gross sales from the production of the agricultural land and the 3% of
the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the
expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is ordered to engage the
services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP
1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or unused
balance as determined by the audit shall be distributed to the 6,296 original FWBs.

HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21, 1989 per PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI.

DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of the compliance report,
quarterly reports on the execution of this judgment to be submitted within the first 15 days at the end of each quarter, until fully implemented.

The temporary restraining order is lifted.

SO ORDERED.
G.R. No. 123417 June 10, 1999

JAIME MORTA, SR. and PURIFICACION PADILLA, petitioners,

vs.
JAIME OCCIDENTAL, ATTY. MARIANO BARANDA, JR., and DANIEL CORRAL, respondents.

PARDO, J.:

What is before us is a petition for review on certiorari of the decision1 of the Court of Appeals and the resolution, 2denying petitioners' motion for
reconsideration and supplemental motion for reconsideration. In its decision, the Court of Appeals dismissed the petition for review filed before it,
ruling that the cases below fall within the jurisdiction of the DARAB.

The antecedent facts are as follows:

On January 10 and 21, 1994, 3 petitioners Jaime Morta, Sr. and Purificacion Padilla filed two (2) cases 4 for damages with preliminary injunction, with
the Municipal Trial Court, Guinobatan, Albay, against respondents Jaime Occidental, Atty. Mariano Baranda, Jr. and Daniel Corral, which were
consolidated pursuant to Rule 31 of the Revised Rules of Court. In the complaints, petitioners alleged that respondents through the instigation of Atty.
Baranda, gathered pilinuts, anahaw leaves, and coconuts from their respective land, delivered the produce to Atty. Mariano Baranda, Jr., and
destroyed their banana and pineapple plants. In Civil Case No. 481, petitioners claimed damages amounting to P8,930.00, plus costs of suit; in Civil
Case No. 482, petitioners claimed P9,950.00, as damages. The court considered the cases covered by the Rule on Summary Procedure and ordered
respondents to file their answer.

In their answer, respondents claimed that petitioners were not the owners of the land in question. They alleged that the torrens titles of the land
indicated a certain Gil Opiana as the registered owner. Gil Opiana was the father of Josefina Opiana-Baraclan who inherited the lots upon the former's
death. Respondent Jaime Occidental contended that he was a bona fide tenant of Josefina Opiana-Baraclan. Respondents stated that there was no
annotation on the titles establishing petitioners' right over the land. They denied harvesting the anahaw leaves and coconuts, as well as delivering the
produce to Atty. Baranda, Jr.

Thereafter, the Municipal Trial Court ordered the parties to submit affidavits of their witnesses and other evidence on the factual issues, together with
their respective position papers. After respondents' failure to file their position papers within the prescribed period, the trial court considered the case
submitted for decision.

On March 29, 1994, the Municipal Trial Court rendered decision5 in favor of petitioners. It held that petitioners had been in actual, continuous, open
and adverse possession of the land in question for forty-five (45) years. The decretal portion of the decision reads:

WHEREFORE, in view of the foregoing considerations, judgment is rendered in favor of the plaintiffs and against the defendants
in both cases as follows:
 1) Ordering the defendants not to molest and disturb the peaceful possession of the plaintiffs in the lands in question situated at
San Rafael, Guinobatan;

2) Condemning the defendants in Civil Cases No. 481 to jointly and severally pay the plaintiffs the total amount of P8,130.00
representing the value of the coconuts, pilinuts and anahaw leaves and for the destroyed plants;

3) Ordering the defendants in Civil Cases No. 481 jointly and severally to reimburse the plaintiffs the amount of P202.00 as legal
expenses incurred filing this suit;

4) Condemning the defendants in Civil Case No. 482 jointly and severally to pay the plaintiffs the total amount of P9,950.00
representing the value of the coconuts and anahaw leaves;

5) Ordering the said defendants in Civil Case No. 482 to jointly and severally reimburse the plaintiffs the sum of P202.00 as legal
expenses in filing this suit.

Guinobatan, Albay, March 29, 1994.

(signed)

JAIME R. REMONTE

Judge6

Respondents appealed to the Regional Trial Court, Ligao, Albay. They questioned the trial court's jurisdiction contending that the case was cognizable
by the Department of Agrarian Reform Adjudicatory Board (DARAB). They alleged that petitioners engaged in forum shopping and that the trial court
erred in granting the reliefs prayed for.

On August 10, 1994, the Regional Trial Court rendered decision reversing that of the Municipal Trial Court and dismissing the above cases,7 ruling
that these cases for damages are tenancy-related problems which fall under the original and exclusive jurisdiction of the DARAB. The court also
declared that the filing of Civil Cases Nos. 481 and 482, while a case involving the same issue was pending before the DARAB, amounted to forum
shopping.

On September 9, 1994, petitioners filed a petition for review8 with the Court of Appeals, contesting the decision of the Regional Trial Court. On May
31, 1995, the Court of Appeals9 rendered decision affirming the lower's court ruling that the cases fall within the original and exclusive jurisdiction of
DARAB. However, it ruled that petitioners did not engage in forum shopping.

On June 6, 1995, petitioners filed a motion for reconsideration. 10 On June 13, 1995, they filed a supplemental motion for reconsideration, 11 stressing
that there was no tenancy relationship between the parties, as certified by the Municipal Agrarian Reform Office (MARO). 12

13
On December 8, 1995, the Court of Appeals denied the motions.

Hence, this petition for review on certiorari.

Petitioners claim that Morta is not a tenant of either Jaime Occidental or Josefina Opiana-Baraclan, as shown by the MARO certification. They argue
that the civil actions for damages are not tenancy-related, and, hence, are properly cognizable by the trial court, not the DARAB.

We resolve to grant the petition.

It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it, are the allegations in the complaint and the
character of the relief sought. 14 "Jurisdiction over the subject matter is determined upon the allegations made in the complaint, irrespective of whether
the plaintiff is entitled to recover upon a claim asserted therein — a matter resolved only after and as a result of the trial. Neither can the jurisdiction
of the court be made to depend upon the defenses made by the defendant in his answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the defendant." 15 The complaint filed by petitioners before the Municipal Trial Court is an action for
damages for illegal gathering of anahaw leaves, pilinuts and coconuts, and the destruction of their banana and pineapple plantations. The respondents
did not question the municipal trial court's jurisdiction in their answer. The issue of jurisdiction was raised for the first time on appeal.

For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the parties. In order for a tenancy agreement to take
hold over a dispute, it would be essential to establish all its indispensable elements, to wit: 1) that the parties are the landowner and the tenant or
agricultural lessee; 2) that the subject matter of the relationship is an agricultural land; 3) that there is consent between the parties to the relationship;
4) that the purpose of the relationship is to bring about agricultural production; 5) that there is personal cultivation on the part of the tenant or agricultural
lessee; and 6) that the harvest is shared between the landowner and the tenant or agricultural lessee. 16 In Vda. de Tangub v. Court of Appeals, 17 we
held that the jurisdiction of the Department of Agrarian Reforms is limited to the following:

a) adjudication of all matters involving implementation of agrarian reform;

b) resolution of agrarian conflicts and land-tenure related problems; and

c) approval and disapproval of the conversion, restructuring or readjustment of agricultural lands into
residential, commercial, industrial, and other non-agricultural uses.

The regional trial court ruled that the issue involved is tenancy-related that falls within the exclusive jurisdiction of the DARAB. It relied on the findings
in DARAB Case No. 2413 that Josefina Opiana-Baraclan appears to be the lawful owner of the land and Jaime Occidental was her recognized tenant.
However, petitioner Morta claimed that he is the owner of the land. Thus, there is even a dispute as to who is the rightful owner of the land, Josefina
Opiana-Baraclan or petitioner Morta. The issue of ownership cannot be settled by the DARAB since it is definitely outside its jurisdiction. Whatever
findings made by the DARAB regarding the ownership of the land are not conclusive to settle the matter. The issue of ownership shall be resolved in
a separate proceeding before the appropriate trial court between the claimants thereof.

At any rate, whoever is declared to be the rightful owner of the land, the case can not be considered as tenancy-related for it still fails to comply with
the other requirements. Assuming arguendo that Josefina Opiana-Baraclan is the owner, then the case is not between the landowner and tenant. If,
however, Morta is the landowner, Occidental can not claim that there is consent to a landowner-tenant relationship between him and Morta. Thus, for
failure to comply with the above requisites, we conclude that the issue involved is not tenancy-related cognizable by the DARAB.

WHEREFORE, the Court SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP No. 35300 and that of the Regional Trial Court in Civil
Cases Nos. 1751 and 1752.

The Court AFFIRMS the decision of the Municipal Trial Court, Guinobatan, Albay, in Civil Cases Nos. 481 and 482, for damages.

SO ORDERED.

G.R. No. 78742 July 14, 1989

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA
C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.

G.R. No. 79310 July 14, 1989

ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA, HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and
PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM COUNCIL, respondents.

G.R. No. 79744 July 14, 1989

INOCENTES PABICO, petitioner,

vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE SECRETARY
OF THE OFFICE OF THE PRESIDENT, and Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO
TAAY, respondents.

G.R. No. 79777 July 14, 1989

NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,

vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE PHILIPPINES, respondents.

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life on his way to Mycenae after performing his
eleventh labor. The two wrestled mightily and Hercules flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume
their struggle. This happened several times to Hercules' increasing amazement. Finally, as they continued grappling, it dawned on Hercules that
Antaeus was the son of Gaea and could never die as long as any part of his body was touching his Mother Earth. Thus forewarned, Hercules then
held Antaeus up in the air, beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful Antaeus weakened and died.

The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces of life and death, of men and women who, like
Antaeus need the sustaining strength of the precious earth to stay alive.

"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this precious resource among our people. But it is more
than a slogan. Through the brooding centuries, it has become a battle-cry dramatizing the increasingly urgent demand of the dispossessed among
us for a plot of earth as their place in the sun.

Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the well-being and economic security of all the
people," 1 especially the less privileged. In 1973, the new Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property and equitably diffuse property ownership and profits." 2 Significantly, there was also the
specific injunction to "formulate and implement an agrarian reform program aimed at emancipating the tenant from the bondage of the soil." 3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:

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

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already been enacted by the Congress of the Philippines
on August 8, 1963, in line with the above-stated principles. This was substantially superseded almost a decade later by P.D. No. 27, which was
promulgated on October 21, 1972, along with martial law, to provide for the compulsory acquisition of private lands for distribution among tenant-
farmers and to specify maximum retention limits for landowners.

The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian reform. Thus, on July 17, 1987, President
Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the valuation of
still unvalued lands covered by the decree as well as the manner of their payment. This was followed on July 22, 1987 by Presidential Proclamation
No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for its implementation.

Subsequently, with its formal organization, the revived Congress of the Philippines took over legislative power from the President and started its own
deliberations, including extensive public hearings, on the improvement of the interests of farmers. The result, after almost a year of spirited debate,
was the enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which President Aquino signed on June
10, 1988. This law, while considerably changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as they are not
inconsistent with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions, including serious challenges to the
constitutionality of the several measures mentioned above. They will be the subject of one common discussion and resolution, The different
antecedents of each case will require separate treatment, however, and will first be explained hereunder.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A. No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner Nicolas Manaay and his wife and a 5-hectare
riceland worked by four tenants and owned by petitioner Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No.
228 as qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of separation of powers, due process, equal protection
and the constitutional limitation that no private property shall be taken for public use without just compensation.

They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228. The said measure is invalid also for violation of
Article XIII, Section 4, of the Constitution, for failure to provide for retention limits for small landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.

In connection with the determination of just compensation, the petitioners argue that the same may be made only by a court of justice and not by the
President of the Philippines. They invoke the recent cases of EPZA v. Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just
compensation contemplated by the Bill of Rights is payable in money or in cash and not in the form of bonds or other things of value.

In considering the rentals as advance payment on the land, the executive order also deprives the petitioners of their property rights as protected by
due process. The equal protection clause is also violated because the order places the burden of solving the agrarian problems on the owners only
of agricultural lands. No similar obligation is imposed on the owners of other properties.

The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of the lands occupied by them, E.O. No. 228
ignored judicial prerogatives and so violated due process. Worse, the measure would not solve the agrarian problem because even the small farmers
are deprived of their lands and the retention rights guaranteed by the Constitution.

In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier cases ofChavez v. Zobel, 7 Gonzales v.
Estrella, 8 and Association of Rice and Corn Producers of the Philippines, Inc. v. The National Land Reform Council. 9 The determination of just
compensation by the executive authorities conformably to the formula prescribed under the questioned order is at best initial or preliminary only. It
does not foreclose judicial intervention whenever sought or warranted. At any rate, the challenge to the order is premature because no valuation of
their property has as yet been made by the Department of Agrarian Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.

Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for retention limits on tenanted lands and that in any
event their petition is a class suit brought in behalf of landowners with landholdings below 24 hectares. They maintain that the determination of just
compensation by the administrative authorities is a final ascertainment. As for the cases invoked by the public respondent, the constitutionality of P.D.
No. 27 was merely assumed in Chavez, while what was decided in Gonzales was the validity of the imposition of martial law.

In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been
impliedly repealed by R.A. No. 6657. Nevertheless, this statute should itself also be declared unconstitutional because it suffers from substantially
the same infirmities as the earlier measures.

A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR
was insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise agreement he had reached with his tenant on the payment
of rentals. In a subsequent motion dated April 10, 1989, he adopted the allegations in the basic amended petition that the above- mentioned
enactments have been impliedly repealed by R.A. No. 6657.

G.R. No. 79310

The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros Occidental. Co-petitioner Planters' Committee,
Inc. is an organization composed of 1,400 planter-members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229.

The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as decreed by the Constitution belongs to Congress
and not the President. Although they agree that the President could exercise legislative power until the Congress was convened, she could do so
only to enact emergency measures during the transition period. At that, even assuming that the interim legislative power of the President was properly
exercised, Proc. No. 131 and E.O. No. 229 would still have to be annulled for violating the constitutional provisions on just compensation, due process,
and equal protection.

They also argue that under Section 2 of Proc. No. 131 which provides:

Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from
the receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten wealth received through the Presidential
Commission on Good Government and such other sources as government may deem appropriate. The amounts collected and accruing to this special
fund shall be considered automatically appropriated for the purpose authorized in this Proclamation the amount appropriated is in futuro, not in esse.
The money needed to cover the cost of the contemplated expropriation has yet to be raised and cannot be appropriated at this time.

Furthermore, they contend that taking must be simultaneous with payment of just compensation as it is traditionally understood, i.e., with money and
in full, but no such payment is contemplated in Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to be established by the government, which shall be based on the owner's declaration of
current fair market value as provided in Section 4 hereof, but subject to certain controls to be defined and promulgated by the Presidential Agrarian
Reform Council." This compensation may not be paid fully in money but in any of several modes that may consist of part cash and part bond, with
interest, maturing periodically, or direct payment in cash or bond as may be mutually agreed upon by the beneficiary and the landowner or as may be
prescribed or approved by the PARC.

The petitioners also argue that in the issuance of the two measures, no effort was made to make a careful study of the sugar planters' situation. There
is no tenancy problem in the sugar areas that can justify the application of the CARP to them. To the extent that the sugar planters have been lumped
in the same legislation with other farmers, although they are a separate group with problems exclusively their own, their right to equal protection has
been violated.

A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane Planters (NASP) which claims a membership of at
least 20,000 individual sugar planters all over the country. On September 10, 1987, another motion for intervention was filed, this time by Manuel
Barcelona, et al., representing coconut and riceland owners. Both motions were granted by the Court.

NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that, in any event, the appropriation is invalid because
of uncertainty in the amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of
fifty billion pesos and thus specifies the minimum rather than the maximum authorized amount. This is not allowed. Furthermore, the stated initial
amount has not been certified to by the National Treasurer as actually available.

Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and convincing evidence the necessity for the exercise of
the powers of eminent domain, and the violation of the fundamental right to own property.

The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of the said land for an amount equal to the
government assessor's valuation of the land for tax purposes. On the other hand, if the landowner declares his own valuation he is unjustly required
to immediately pay the corresponding taxes on the land, in violation of the uniformity rule.

In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in favor of Proc. No. 131 and E.O. No. 229. He
also justifies the necessity for the expropriation as explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general survey on the people's opinion thereon are not indispensable prerequisites
to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed to show that they belong to a different class and should be
differently treated. The Comment also suggests the possibility of Congress first distributing public agricultural lands and scheduling the expropriation
of private agricultural lands later. From this viewpoint, the petition for prohibition would be premature.

The public respondent also points out that the constitutional prohibition is against the payment of public money without the corresponding
appropriation. There is no rule that only money already in existence can be the subject of an appropriation law. Finally, the earmarking of fifty billion
pesos as Agrarian Reform Fund, although denominated as an initial amount, is actually the maximum sum appropriated. The word "initial" simply
means that additional amounts may be appropriated later when necessary.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing the constitutionality of E.O. No. 229. In addition
to the arguments already raised, Serrano contends that the measure is unconstitutional because:

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;

(3) The power of the President to legislate was terminated on July 2, 1987; and

(4) The appropriation of a P50 billion special fund from the National Treasury did not originate from the House of Representatives.

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due process and the requirement for just compensation,
placed his landholding under the coverage of Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.

On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under Operation Land transfer and asked for the
recall and cancellation of the Certificates of Land Transfer in the name of the private respondents. He claims that on December 24, 1986, his petition
was denied without hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been acted upon when E.O. Nos. 228 and
229 were issued. These orders rendered his motion moot and academic because they directly effected the transfer of his land to the private
respondents.

The petitioner now argues that:

(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.

(2) The said executive orders are violative of the constitutional provision that no private property shall be taken without due
process or just compensation.

(3) The petitioner is denied the right of maximum retention provided for under the 1987 Constitution.

The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress convened is anomalous and arbitrary, besides violating
the doctrine of separation of powers. The legislative power granted to the President under the Transitory Provisions refers only to emergency
measures that may be promulgated in the proper exercise of the police power.

The petitioner also invokes his rights not to be deprived of his property without due process of law and to the retention of his small parcels of riceholding
as guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues that, besides denying him just compensation for his land, the
provisions of E.O. No. 228 declaring that:

Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972 shall be considered as advance payment
for the land.

is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of even small landowners in the program along with
other landowners with lands consisting of seven hectares or more is undemocratic.

In his Comment, the Solicitor General submits that the petition is premature because the motion for reconsideration filed with the Minister of Agrarian
Reform is still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article
XVIII of the Transitory Provisions of the 1987 Constitution which reads:

The incumbent president shall continue to exercise legislative powers until the first Congress is convened.

On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October 21. 1972, the tenant-farmer of agricultural land
was deemed the owner of the land he was tilling. The leasehold rentals paid after that date should therefore be considered amortization payments.

In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved on December 14, 1987. An appeal to the Office
of the President would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public respondent's
acts.

G.R. No. 78742

The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and corn lands not exceeding seven hectares as
long as they are cultivating or intend to cultivate the same. Their respective lands do not exceed the statutory limit but are occupied by tenants who
are actually cultivating such lands.

According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be ejected or removed from his farmholding until
such time as the respective rights of the tenant- farmers and the landowner shall have been determined in accordance with the
rules and regulations implementing P.D. No. 27.

The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention because the Department of Agrarian Reform
has so far not issued the implementing rules required under the above-quoted decree. They therefore ask the Court for a writ of mandamus to compel
the respondent to issue the said rules.

In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474 removing any right of retention from persons who own
other agricultural lands of more than 7 hectares in aggregate area or lands used for residential, commercial, industrial or other purposes from which
they derive adequate income for their family. And even assuming that the petitioners do not fall under its terms, the regulations implementing P.D.
No. 27 have already been issued, to wit, the Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small Landowners, with an
accompanying Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474), Memorandum
Circular No. 18-81 dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners), and DAR
Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to Apply for Retention and/or to Protest the Coverage of their
Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to file the corresponding applications for retention under these
measures, the petitioners are now barred from invoking this right.

The public respondent also stresses that the petitioners have prematurely initiated this case notwithstanding the pendency of their appeal to the
President of the Philippines. Moreover, the issuance of the implementing rules, assuming this has not yet been done, involves the exercise of discretion
which cannot be controlled through the writ of mandamus. This is especially true if this function is entrusted, as in this case, to a separate department
of the government.

In their Reply, the petitioners insist that the above-cited measures are not applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended to cover them also, the said measures are nevertheless not in force
because they have not been published as required by law and the ruling of this Court in Tanada v. Tuvera.10 As for LOI 474, the same is ineffective
for the additional reason that a mere letter of instruction could not have repealed the presidential decree.

Although holding neither purse nor sword and so regarded as the weakest of the three departments of the government, the judiciary is nonetheless
vested with the power to annul the acts of either the legislative or the executive or of both when not conformable to the fundamental law. This is the
reason for what some quarters call the doctrine of judicial supremacy. Even so, this power is not lightly assumed or readily exercised. The doctrine of
separation of powers imposes upon the courts a proper restraint, born of the nature of their functions and of their respect for the other departments,
in striking down the acts of the legislative and the executive as unconstitutional. The policy, indeed, is a blend of courtesy and caution. To doubt is to
sustain. The theory is that before the act was done or the law was enacted, earnest studies were made by Congress or the President, or both, to
insure that the Constitution would not be breached.

In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality, requiring therefor the concurrence of a majority
of the members of the Supreme Court who took part in the deliberations and voted on the issue during their session en banc. 11 And as established
by judge made doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial
inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been opportunely raised by the proper party, and the resolution of the question is
unavoidably necessary to the decision of the case itself. 12

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

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the constitutionality of several executive orders
issued by President Quirino although they were invoking only an indirect and general interest shared in common with the public. The Court dismissed
the objection that they were not proper parties and ruled that "the transcendental importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must, technicalities of procedure." We have since then applied this exception in many other cases. 15

The other above-mentioned requisites have also been met in the present petitions.

In must be stressed that despite the inhibitions pressing upon the Court when confronted with constitutional issues like the ones now before it, it will
not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the
Constitution as God and its conscience give it the light to probe its meaning and discover its purpose. Personal motives and political considerations
are irrelevancies that cannot influence its decision. Blandishment is as ineffectual as intimidation.

For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make the hammer fall, and heavily," to use Justice
Laurel's pithy language, where the acts of these departments, or of any public official, betray the people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that —

... when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments;
it does not in reality nullify or invalidate an act of the Legislature, but only asserts the solemn and sacred obligation assigned to
 it by the Constitution to determine conflicting claims of authority under the Constitution and to establish for the parties in an actual
controversy the rights which that instrument secures and guarantees to them. This is in truth all that is involved in what is termed
"judicial supremacy" which properly is the power of judicial review under the Constitution. 16

The cases before us categorically raise constitutional questions that this Court must categorically resolve. And so we shall.

II

We proceed first to the examination of the preliminary issues before resolving the more serious challenges to the constitutionality of the several
measures involved in these petitions.

The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue. As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos.
228 and 229, the same was authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.

The said measures were issued by President Aquino before July 27, 1987, when the Congress of the Philippines was formally convened and took
over legislative power from her. They are not "midnight" enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July
17, 1987, and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it correct to say that these
measures ceased to be valid when she lost her legislative power for, like any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso facto become inoperative simply because of the dissolution of the legislature
that enacted it. By the same token, President Aquino's loss of legislative power did not have the effect of invalidating all the measures enacted by her
when and as long as she possessed it.

Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially affirmed the challenged measures and has
specifically provided that they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said
measures, like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have been incorporated by
reference in the CARP Law. 18

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

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

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated because they do not provide for retention limits
as required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law,
which in fact is one of its most controversial provisions. This section declares:

Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or
private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm, such as commodity
produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created
hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each
child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm; Provided, That landowners whose lands have been covered by Presidential
Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, further, That original homestead grantees
or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas
as long as they continue to cultivate said homestead.

The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one subject, to be expressed in its title, deserves
only short attention. It is settled that the title of the bill does not have to be a catalogue of its contents and will suffice if the matters embodied in the
text are relevant to each other and may be inferred from the title. 20

The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name it was called, had the force and effect of
law because it came from President Marcos. Such are the ways of despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that
LOI 474 could not have repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was issued by President
Marcos, whose word was law during that time.

But for all their peremptoriness, these issuances from the President Marcos still had to comply with the requirement for publication as this Court held
in Tanada v. Tuvera. 21 Hence, unless published in the Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force
and effect if they were among those enactments successfully challenged in that case. LOI 474 was published, though, in the Official Gazette dated
November 29,1976.)

Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus cannot issue to compel the performance of a
discretionary act, especially by a specific department of the government. That is true as a general proposition but is subject to one important
qualification. Correctly and categorically stated, the rule is that mandamus will lie to compel the discharge of the discretionary duty itself but not to
control the discretion to be exercised. In other words, mandamus can issue to require action only but not specific action.

Whenever a duty is imposed upon a public official and an unnecessary and unreasonable delay in the exercise of such duty
occurs, if it is a clear duty imposed by law, the courts will intervene by the extraordinary legal remedy of mandamus to compel
action. If the duty is purely ministerial, the courts will require specific action. If the duty is purely discretionary, the courts
by mandamus will require action only. For example, if an inferior court, public official, or board should, for an unreasonable length
 of time, fail to decide a particular question to the great detriment of all parties concerned, or a court should refuse to take
jurisdiction of a cause when the law clearly gave it jurisdiction mandamus will issue, in the first case to require a decision, and in
the second to require that jurisdiction be taken of the cause. 22

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

III

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

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

Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right theretofore
enjoyed, and is, in that sense, an abridgment by the State of rights in property without making compensation. But restriction
imposed to protect the public health, safety or morals from dangers threatened is not a taking. The restriction here in question is
merely the prohibition of a noxious use. The property so restricted remains in the possession of its owner. The state does not
appropriate it or make any use of it. The state merely prevents the owner from making a use which interferes with paramount
rights of the public. Whenever the use prohibited ceases to be noxious — as it may because of further changes in local or social
conditions — the restriction will have to be removed and the owner will again be free to enjoy his property as heretofore.

Recent trends, however, would indicate not a polarization but a mingling of the police power and the power of eminent domain, with the latter being
used as an implement of the former like the power of taxation. The employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring to the earlier case of Euclid
v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the police power) makes the following significant remarks:

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

The Berman case sustained a redevelopment project and the improvement of blighted areas in the District of Columbia as a proper exercise of the
police power. On the role of eminent domain in the attainment of this purpose, Justice Douglas declared:

If those who govern the District of Columbia decide that the Nation's Capital should be beautiful as well as sanitary, there is
nothing in the Fifth Amendment that stands in the way.

Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear.

28
For the power of eminent domain is merely the means to the end.

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 Tañada v. Cuenco: 36
 The term "political question" connotes what it means in ordinary parlance, namely, a question of policy. It refers to "those
questions which, under the Constitution, are to be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of the government." It is concerned with issues
dependent upon the wisdom, not legality, of a particular measure.

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

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

In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:

Congress having determined, as it did by the Act of March 3,1909 that the entire St. Mary's river between the American bank and
the international line, as well as all of the upland north of the present ship canal, throughout its entire length, was "necessary for
the purpose of navigation of said waters, and the waters connected therewith," that determination is conclusive in condemnation
proceedings instituted by the United States under that Act, and there is no room for judicial review of the judgment of Congress
... .

As earlier observed, the requirement for public use has already been settled for us by the Constitution itself No less than the 1987 Charter calls for
agrarian reform, which is the reason why private agricultural lands are to be taken from their owners, subject to the prescribed maximum retention
limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional injunction that the State
adopt the necessary measures "to encourage and undertake the just distribution of all agricultural lands to enable farmers who are landless to own
directly or collectively the lands they till." That public use, as pronounced by the fundamental law itself, must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and more thoughtful examination.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. 39 It has been repeatedly stressed
by this Court that the measure is not the taker's gain but the owner's loss. 40 The word "just" is used to intensify the meaning of the word "compensation"
to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, ample. 41

It bears repeating that the measures challenged in these petitions contemplate more than a mere regulation of the use of private lands under the
police power. We deal here with an actual taking of private agricultural lands that has dispossessed the owners of their property and deprived them
of all its beneficial use and enjoyment, to entitle them to the just compensation mandated by the Constitution.

As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following conditions concur: (1) the expropriator must enter
a private property; (2) the entry must be for more than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the
property must be devoted to public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use
must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property. All these requisites are envisioned in the measures
before us.

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

Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from the landowner, upon
the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this
Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution
of the land to the qualified beneficiaries.

Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted to the administrative authorities in violation
of judicial prerogatives. Specific reference is made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the offer
of the government to buy his land-

... the DAR shall conduct summary administrative proceedings to determine the compensation for the land by requiring the
landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15)
days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The
DAR shall decide the case within thirty (30) days after it is submitted for decision.

To be sure, the determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other branch or
official of the government. EPZA v. Dulay 44 resolved a challenge to several decrees promulgated by President Marcos providing that the just
compensation for property under expropriation should be either the assessment of the property by the government or the sworn valuation thereof by
the owner, whichever was lower. In declaring these decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:

The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial
prerogatives. It tends to render this Court inutile in a matter which under this Constitution is reserved to it for final determination.

Thus, although in an expropriation proceeding the court technically would still have the power to determine the just compensation
for the property, following the applicable decrees, its task would be relegated to simply stating the lower value of the property as
declared either by the owner or the assessor. As a necessary consequence, it would be useless for the court to appoint
 commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private
property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual taking. However,
the strict application of the decrees during the proceedings would be nothing short of a mere formality or charade as the court
has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of
the two. The court cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil
could substitute for the judge insofar as the determination of constitutional just compensation is concerned.

xxx

In the present petition, we are once again confronted with the same question of whether the courts under P.D. No. 1533, which
contains the same provision on just compensation as its predecessor decrees, still have the power and authority to determine
just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for such purpose.

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong.
And it is repulsive to the basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to
absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property,
after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and
just determination have been judiciously evaluated.

A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that rendered the challenged decrees
constitutionally objectionable. Although the proceedings are described as summary, the landowner and other interested parties are nevertheless
allowed an opportunity to submit evidence on the real value of the property. But more importantly, the determination of the just compensation by the
DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section 16(f) clearly provides:

Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just
compensation.

The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts of justice will still have the
right to review with finality the said determination in the exercise of what is admittedly a judicial function.

The second and more serious objection to the provisions on just compensation is not as easily resolved.

This refers to Section 18 of the CARP Law providing in full as follows:

SEC. 18. Valuation and Mode of Compensation. — The LBP shall compensate the landowner in such amount as may be agreed
upon by the landowner and the DAR and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and other
pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land.

The compensation shall be paid in one of the following modes, at the option of the landowner:

(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned —
Twenty-five percent (25%) cash, the balance to be paid in government financial
instruments negotiable at any time.

(b) For lands above twenty-four (24) hectares and up to fifty (50) hectares — Thirty
percent (30%) cash, the balance to be paid in government financial instruments
negotiable at any time.

(c) For lands twenty-four (24) hectares and below — Thirty-five percent (35%) cash, the
balance to be paid in government financial instruments negotiable at any time.

(2) Shares of stock in government-owned or controlled corporations, LBP preferred shares, physical assets or other qualified
investments in accordance with guidelines set by the PARC;

(3) Tax credits which can be used against any tax liability;

(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 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 or bail bonds for the provisional release of accused persons,
or for performance bonds;

(iv) Security for loans with any government financial institution, provided the proceeds
of the loans shall be invested in an economic enterprise, preferably in a small and
medium- scale industry, in the same province or region as the land for which the bonds
are paid;

(v) Payment for various taxes and fees to government: Provided, That the use of these
bonds for these purposes will be limited to a certain percentage of the outstanding
balance of the financial instruments; Provided, further, That the PARC shall determine
the percentages mentioned above;

(vi) Payment for tuition fees of the immediate family of the original bondholder in
government universities, colleges, trade schools, and other institutions;

(vii) Payment for fees of the immediate family of the original bondholder in government
hospitals; and

(viii) Such other uses as the PARC may from time to time allow.

The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional insofar as it requires the owners of the expropriated
properties to accept just compensation therefor in less than money, which is the only medium of payment allowed. In support of this contention, they
cite jurisprudence holding that:

The fundamental rule in expropriation matters is that the owner of the property expropriated is entitled to a just compensation,
which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said
property. Just compensation has always been understood to be the just and complete equivalent of the loss which the owner of
the thing expropriated has to suffer by reason of the expropriation . 45 (Emphasis supplied.)

In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:

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

In the United States, where much of our jurisprudence on the subject has been derived, the weight of authority is also to the effect that just
compensation for property expropriated is payable only in money and not otherwise. Thus —

The medium of payment of compensation is ready money or cash. The condemnor cannot compel the owner to accept anything
but money, nor can the owner compel or require the condemnor to pay him on any other basis than the value of the property in
money at the time and in the manner prescribed by the Constitution and the statutes. When the power of eminent domain is
resorted to, there must be a standard medium of payment, binding upon both parties, and the law has fixed that standard as
money in cash. 47 (Emphasis supplied.)

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

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

It cannot be denied from these cases that the traditional medium for the payment of just compensation is money and no other. And so, conformably,
has just compensation been paid in the past solely in that medium. However, we do not deal here with the traditional excercise of the power of eminent
domain. This is not an ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner
for a specific and perhaps local purpose.

What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever kind as long as they are in excess of the maximum
retention limits allowed their owners. This kind of expropriation is intended for the benefit not only of a particular community or of a small segment of
the population but of the entire Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted owner. Its purpose does
not cover only the whole territory of this country but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision
and the sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program as we are today, although hopefully
only as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself that has ordained this revolution in the farms, calling for "a just distribution" among the farmers
of lands that have heretofore been the prison of their dreams but can now become the key at least to their deliverance.

Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the vast areas of land subject to expropriation under
the laws before us, we estimate that hundreds of billions of pesos will be needed, far more indeed than the amount of P50 billion initially appropriated,
which is already staggering as it is by our present standards. Such amount is in fact not even fully available at this time.

We assume that the framers of the Constitution were aware of this difficulty when they called for agrarian reform as a top priority project of the
government. It is a part of this assumption that when they envisioned the expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less conventional if more practical method. There can be no doubt that they were
aware of the financial limitations of the government and had no illusions that there would be enough money to pay in cash and in full for the lands
they wanted to be distributed among the farmers. We may therefore assume that their intention was to allow such manner of payment as is now
provided for by the CARP Law, particularly the payment of the balance (if the owner cannot be paid fully with money), or indeed of the entire amount
of the just compensation, with other things of value. We may also suppose that what they had in mind was a similar scheme of payment as that
prescribed in P.D. No. 27, which was the law in force at the time they deliberated on the new Charter and with which they presumably agreed in
principle.

The Court has not found in the records of the Constitutional Commission any categorical agreement among the members regarding the meaning to
be given the concept of just compensation as applied to the comprehensive agrarian reform program being contemplated. There was the suggestion
to "fine tune" the requirement to suit the demands of the project even as it was also felt that they should "leave it to Congress" to determine how
payment should be made to the landowner and reimbursement required from the farmer-beneficiaries. Such innovations as "progressive
compensation" and "State-subsidized compensation" were also proposed. In the end, however, no special definition of the just compensation for the
lands to be expropriated was reached by the Commission. 50

On the other hand, there is nothing in the records either that militates against the assumptions we are making of the general sentiments and intention
of the members on the content and manner of the payment to be made to the landowner in the light of the magnitude of the expenditure and the
limitations of the expropriator.

With these assumptions, the Court hereby declares that the content and manner of the just compensation provided for in the afore- quoted Section
18 of the CARP Law is not violative of the Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our decision on
this issue, but after all this Court is not a cloistered institution removed from the realities and demands of society or oblivious to the need for its
enhancement. The Court is as acutely anxious as the rest of our people to see the goal of agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these disappointing decades. We are aware that invalidation of the said section will result in the
nullification of the entire program, killing the farmer's hopes even as they approach realization and resurrecting the spectre of discontent and dissent
in the restless countryside. That is not in our view the intention of the Constitution, and that is not what we shall decree today.

Accepting the theory that payment of the just compensation is not always required to be made fully in money, we find further that the proportion of
cash payment to the other things of value constituting the total payment, as determined on the basis of the areas of the lands expropriated, is not
unduly oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily because the small landowner
will be needing it more than the big landowners, who can afford a bigger balance in bonds and other things of value. No less importantly, the
government financial instruments making up the balance of the payment are "negotiable at any time." The other modes, which are likewise available
to the landowner at his option, are also not unreasonable because payment is made in shares of stock, LBP bonds, other properties or assets, tax
credits, and other things of value equivalent to the amount of just compensation.

Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little inconvenience. As already remarked, this
cannot be avoided. Nevertheless, it is devoutly hoped that these countrymen of ours, conscious as we know they are of the need for their forebearance
and even sacrifice, will not begrudge us their indispensable share in the attainment of the ideal of agrarian reform. Otherwise, our pursuit of this
elusive goal will be like the quest for the Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be viable any more as it appears that Section
4 of the said Order has been superseded by Section 14 of the CARP Law. This repeats the requisites of registration as embodied in the earlier
measure but does not provide, as the latter did, that in case of failure or refusal to register the land, the valuation thereof shall be that given by the
provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the just compensation shall be ascertained on the basis of the
factors mentioned in its Section 17 and in the manner provided for in Section 16.

The last major challenge to CARP is that the landowner is divested of his property even before actual payment to him in full of just compensation, in
contravention of a well- accepted principle of eminent domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. Thus:

Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered
and paid, but the condemnor's title relates back to the date on which the petition under the Eminent Domain Act, or the commissioner's report under
the Local Improvement Act, is filed. 51

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

In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just
compensation had actually been made. In fact, the decisions appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was
held that "actual payment to the owner of the condemned property was a condition precedent to the investment of the title to the property in the State"
albeit "not to the appropriation of it to public use." In Rexford v. Knight, 55 the Court of Appeals of New York said that the construction upon the statutes
was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was
complete prior to the payment. Kennedy further said that "both on principle and authority the rule is ... that the right to enter on and use the property
is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner
without his consent, until just compensation has been made to him."

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

If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the
method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally
and irrevocably taken from an unwilling owner until compensation is paid ... . (Emphasis supplied.)

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972 and declared that he shall "be deemed the owner"
of a portion of land consisting of a family-sized farm except that "no title to the land owned by him was to be actually issued to him unless and until
he had become a full-fledged member of a duly recognized farmers' cooperative." It was understood, however, that full payment of the just
compensation also had to be made first, conformably to the constitutional requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972 of the land they acquired by virtue of
Presidential Decree No. 27. (Emphasis supplied.)

it was obviously referring to lands already validly acquired under the said decree, after proof of full-fledged membership in the farmers' cooperatives
and full payment of just compensation. Hence, it was also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to
the landowner by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after full payment of just compensation), shall be
considered as advance payment for the land."

The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the government on receipt by the landowner of the
corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains
with the landowner. 57 No outright change of ownership is contemplated either.

Hence, the argument that the assailed measures violate due process by arbitrarily transferring title before the land is fully paid for must also be
rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as recognized under E.O. No. 228, are retained by
him even now under R.A. No. 6657. This should counter-balance the express provision in Section 6 of the said law that "the landowners whose lands
have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, further, That original
homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas
as long as they continue to cultivate said homestead."

In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by the petitioners with the Office of the President
has already been resolved. Although we have said that the doctrine of exhaustion of administrative remedies need not preclude immediate resort to
judicial action, there are factual issues that have yet to be examined on the administrative level, especially the claim that the petitioners are not
covered by LOI 474 because they do not own other agricultural lands than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have not yet exercised their retention rights, if any,
under P.D. No. 27, the Court holds that they are entitled to the new retention rights provided for by R.A. No. 6657, which in fact are on the whole more
liberal than those granted by the decree.

The CARP Law and the other enactments also involved in these cases have been the subject of bitter attack from those who point to the shortcomings
of these measures and ask that they be scrapped entirely. To be sure, these enactments are less than perfect; indeed, they should be continuously
re-examined and rehoned, that they may be sharper instruments for the better protection of the farmer's rights. But we have to start somewhere. In
the pursuit of agrarian reform, we do not tread on familiar ground but grope on terrain fraught with pitfalls and expected difficulties. This is inevitable.
The CARP Law is not a tried and tested project. On the contrary, to use Justice Holmes's words, "it is an experiment, as all life is an experiment," and
so we learn as we venture forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should strive for it by all means.
Meantime, we struggle as best we can in freeing the farmer from the iron shackles that have unconscionably, and for so long, fettered his soul to the
soil.

By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform program are removed, to clear the way for the true
freedom of the farmer. We may now glimpse the day he will be released not only from want but also from the exploitation and disdain of the past and
from his own feelings of inadequacy and helplessness. At last his servitude will be ended forever. At last the farm on which he toils will be his farm. It
will be his portion of the Mother Earth that will give him not only the staff of life but also the joy of living. And where once it bred for him only deep
despair, now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can he banish from his small plot of earth his insecurities
and dark resentments and "rebuild in it the music and the dream."

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED against all the constitutional objections
raised in the herein petitions.

2. Title to all expropriated properties shall be transferred to the State only upon full payment of compensation to their respective
owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are retained and recognized.
 4. Landowners who were unable to exercise their rights of retention under P.D. No. 27 shall enjoy the retention rights granted by
R.A. No. 6657 under the conditions therein prescribed.

5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without pronouncement as to costs.

SO ORDERED.

G.R. No. 103302 August 12, 1993

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners,
vs.
DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO LEANO, DAR REGION IV, respondents.

.BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the Housing and Land Use Regulatory Board and its precursor
agencies1 prior to 15 June 1988,2 covered by R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988? This is the pivotal
issue in this petition for certiorari assailing the Notice of Coverage3 of the Department of Agrarian Reform over parcels of land already reserved as
townsite areas before the enactment of the law.

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous parcels of land located in Banaba, Antipolo, Rizal, with areas
of 120.9793 hectares, 1.3205 hectares and 2.7080 hectares, or a total of 125.0078 hectares, and embraced in Transfer Certificate of Title No. 31527
of the Register of Deeds of the Province of Rizal.

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located in the Municipalities of Antipolo, San Mateo and
Montalban as townsite areas to absorb the population overspill in the metropolis which were designated as the Lungsod Silangan Townsite. The
NATALIA properties are situated within the areas proclaimed as townsite reservation.

Since private landowners were allowed to develop their properties into low-cost housing subdivisions within the reservation, petitioner Estate
Developers and Investors Corporation (EDIC, for brevity), as developer of NATALIA properties, applied for and was granted preliminary approval and
locational clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of the subdivision project, which consisted
of 13.2371 hectares, was issued sometime in 1982;4 for Phase II, with an area of 80,000 hectares, on 13 October 1983; 5 and for Phase III, which
consisted of the remaining 31.7707 hectares, on 25 April 1986. 6 Petitioner were likewise issued development permits7 after complying with the
requirements. Thus the NATALIA properties later became the Antipolo Hills Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988" (CARL, for brevity), went into effect.
Conformably therewith, respondent Department of Agrarian Reform (DAR, for brevity), through its Municipal Agrarian Reform Officer, issued on 22
November 1990 a Notice of Coverage on the undeveloped portions of the Antipolo Hills Subdivision which consisted of roughly 90.3307 hectares.
NATALIA immediately registered its objection to the notice of Coverage.

EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and twice wrote him requesting the cancellation of the Notice
of Coverage.
On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA, for the brevity), filed a complaint against NATALIA
and EDIC before the DAR Regional Adjudicator to restrain petitioners from developing areas under cultivation by SAMBA members.8 The Regional
Adjudicator temporarily restrained petitioners from proceeding with the development of the subdivision. Petitioners then moved to dismiss the
complaint; it was denied. Instead, the Regional Adjudicator issued on 5 March 1991 a Writ of Preliminary Injunction.

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

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set aside the Notice of Coverage. Neither respondent
Secretary nor respondent Director took action on the protest-letters, thus compelling petitioners to institute this proceeding more than a year thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including undedeveloped portions of the Antipolo Hills Subdivision
within the coverage of the CARL. They argue that NATALIA properties already ceased to be agricultural lands when they were included in the areas
reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain that the permits granted petitioners were not
valid and binding because they did not comply with the implementing Standards, Rules and Regulations of P.D. 957, otherwise known as "The
Subdivision and Condominium Buyers Protective Decree," in that no application for conversion of the NATALIA lands from agricultural residential was
ever filed with the DAR. In other words, there was no valid conversion. Moreover, public respondents allege that the instant petition was prematurely
filed because the case instituted by SAMBA against petitioners before the DAR Regional Adjudicator has not yet terminated. Respondents conclude,
as a consequence, that petitioners failed to fully exhaust administrative remedies available to them before coming to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational Clearances as well as the Development Permits
granted petitioners for Phases I, II and III of the Antipolo Hills Subdivision reveals that contrary to the claim of public respondents, petitioners NATALIA
and EDIC did in fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development Corporation, the agency tasked to oversee the
implementation of the development of the townsite reservation, before applying for the necessary permits from the Human Settlements Regulatory
Commission. 10 And, in all permits granted to petitioners, the Commission
stated invariably therein that the applications were in "conformance" 11 or "conformity" 12 or "conforming" 13 with the implementing Standards, Rules
and Regulations of P.D. 957. Hence, the argument of public respondents that not all of the requirements were complied with cannot be sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval from DAR. The NATALIA properties were within
the areas set aside for the Lungsod Silangan Reservation. Since Presidential Proclamation No. 1637 created the townsite reservation for the purpose
of providing additional housing to the burgeoning population of Metro Manila, it in effect converted for residential use what were erstwhile agricultural
lands provided all requisites were met. And, in the case at bar, there was compliance with all relevant rules and requirements. Even in their applications
for the development of the Antipolo Hills Subdivision, the predecessor agency of HLURB noted that petitioners NATALIA and EDIC complied with all
the requirements prescribed by P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and condominiums in general. On the other hand,
Presidential Proclamation No. 1637 referred only to the Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory
construction that between a general law and a special law, the latter prevails. 14

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

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides that the CARL shall "cover, regardless of tenurial
arrangement and commodity produced, all public and private agricultural lands." As to what constitutes "agricultural land," it is referred to as "land
devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land." 16 The deliberations
of the Constitutional Commission confirm this limitation. "Agricultural lands" are only those lands which are "arable and suitable agricultural lands"
and "do not include commercial, industrial and residential lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision cannot in any language be considered as "agricultural
lands." These lots were intended for residential use. They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan
Reservation. Even today, the areas in question continued to be developed as a low-cost housing subdivision, albeit at a snail's pace. This can readily
be gleaned from the fact that SAMBA members even instituted an action to restrain petitioners from continuing with such development. The enormity
of the resources needed for developing a subdivision may have delayed its completion but this does not detract from the fact that these lands are still
residential lands and outside the ambit of the CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include lands previously converted to non-agricultural uses
prior to the effectivity of CARL by government agencies other than respondent DAR. In its Revised Rules and Regulations Governing Conversion of
Private Agricultural Lands to Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus —

. . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A. 6657 and not classified as mineral or forest
by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans
and zoning ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its preceding competent
authorities prior to 15 June 1988 for residential, commercial or industrial use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such conversion. It was therefore error to include the
undeveloped portions of the Antipolo Hills Subdivision within the coverage of CARL.

Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform, noted in an Opinion 19 that lands covered by
Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part, having been reserved for townsite purposes "to be developed as
human settlements by the proper land and housing agency," are "not deemed 'agricultural lands' within the meaning and intent of Section 3 (c) of R.A.
No. 6657. " Not being deemed "agricultural lands," they are outside the coverage of CARL.

Anent the argument that there was failure to exhaust administrative remedies in the instant petition, suffice it to say that the issues raised in the case
filed by SAMBA members differ from those of petitioners. The former involve possession; the latter, the propriety of including under the operation of
CARL lands already converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter-protests, this after sitting it out for almost a year. Given
the official indifference, which under the circumstances could have continued forever, petitioners had to act to assert and protect their interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in issuing the assailed Notice of Coverage of 22
November 1990 by of lands over which they no longer have jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November 1990 by virtue of which undeveloped portions of the
Antipolo Hills Subdivision were placed under CARL coverage is hereby SET ASIDE.

SO ORDERED.

G.R. No. 86186 May 8, 1992

RAFAEL GELOS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ERNESTO ALZONA, respondents.

CRUZ, J.:

The Court is asked to determine the real status of the petitioner, who claims to be a tenant of the private respondent and entitled to the benefits of
tenancy laws. The private respondent objects, contending that the petitioner is only a hired laborer whose right to occupy the subject land ended with
the termination of their contract of employment.

The subject land is a 25,000 square meter farmland situated in Cabuyao, Laguna, and belonging originally to private respondent Ernesto Alzona and
his parents in equal shares. On July 5, 1970, they entered into a written contract with petitioner Rafael Gelos employing him as their laborer on the
land at the stipulated daily wage of P5.00. 1 On September 4, 1973, after Alzona had bought his parents' share and acquired full ownership of the
land, he wrote Gelos to inform him of the termination of his services and to demand that he vacate the property. Gelos refused and continued working
on the land.

On October 1, 1973, Gelos went to the Court of Agrarian Relations and asked for the fixing of the agricultural lease rental on the property. He later
withdrew the case and went to the Ministry of Agrarian Reform, which granted his petition. For his part, Alzona filed a complaint for illegal detainer
against Gelos in the Municipal Court of Cabuyao, but this action was declared "not proper for trial" by the Ministry of Agrarian Reform because of the
existence of a tenancy relationship between the parties. Alzona was rebuffed for the same reason when he sought the assistance of the Ministry of
Labor and later when he filed a complaint with the Court of Agrarian Relations for a declaration of non-tenancy and damages against Gelos. On
appeal to the Office of the President, however, the complaint was declared proper for trial and so de-archived and reinstated.

After hearing, the Regional Trial Court of San Pablo City (which had taken over the Court of Agrarian Relations under PB 129) rendered a decision
dated April 21, 1987, dismissing the complaint. 2 It found Gelos to be a tenant of the subject property and entitled to remain thereon as such. The
plaintiff was also held liable in attorney's fees and costs.

The decision was subsequently reversed by the Court of Appeals. In its judgment promulgated on November 25, 1988, 3 it held that Gelos was not a
tenant of the land in question and ordered him to surrender it to Alzona. He was also held liable for the payment of P10,000.00 as attorney's fees and
the costs of the suit.
The basic question the petitioner now raises before the Court is essentially factual and therefore not proper in a petition for review under Rule 45 of
the Rules of Court. Only questions of law may be raised in this kind of proceeding. The settled rule is that the factual findings of the Court of Appeals
are conclusive on even this Court as long as they are supported by substantial evidence. The petitioner has not shown that his case comes under
any of those rare exceptions on such findings may be validly reversed by this Court.

It is true that in Talavera v. Court of Appeals, 4 we held that a factual conclusion made by the trial court that a person is a tenant farmer, if it is
supported by the minimum evidence demanded by law, is final and conclusive and cannot be reversed by the appellate tribunals except for compelling
reasons. In the case at bar, however, we find with the respondent court that there was such a compelling reason. A careful examination of the record
reveals that, indeed, the trial court misappreciated the facts when it ruled that the petitioner was a tenant of the private respondent.

The circumstance that the findings of the respondent court do not concur with those of the trial court does not, of course, call for automatic reversal
of the appellate court. Precisely, the function of the appellate court is to review and, if warranted, reverse the findings of the trial court. Disagreement
between the two courts merely calls on us to make a specially careful study of their respective decisions to determine which of them should be
preferred as more conformable to the facts at hand.

The Court has made this careful study and will sustain the decision of the respondent court.

The contract of employment dated July 5, 1970, written in Tagalog and entitled "Kasunduan ng Upahang Araw," reads pertinently as follows:

1. Ang Unang Panig ay siyang may-ari at nagtatangkilik ng isang lagay na lupa, sinasaka, na tumatayo sa Nayon ng Baclaran,
Cabuyao, Laguna, na siyang gagawa at sasaka sa lupa, samantalang ang Ikalawang Panig ay magiging upahan at katulong sa
paggawa ng lupa.

2. Ang Unang Panig ay gustong ipagpatuloy ang pagbubungkal at paggawa ng bukid na binabanggit sa itaas at ang Ikalawang
Panig ay may ibig na magpaupa sa paggawa sa halagang P5.00 sa bawat araw, walong oras na trabaho gaya ng mga
sumusunod: Patubigan ng linang; pagpapahalabas ng mga pilapil; pagpapaaldabis sa unang araw ng pag-aararo; pagpapalinis
ng damo sa ibabaw ng pilapil; pagpapakamot (unang pagpapasuyod), pagpapahalang at pagpapabalasaw (ikalawa't ikatlong
pagpapasuyod); isang tao sa pagsasabog ng abono una sa pagpapantay ng linang; bago magtanim; isang tao sa pagaalaga ng
dapog; upa sa isang tao ng magbobomba ng gamot laban sa pagkapit ng mga kulisap (mayroon at wala); sa nag-we-weeder;
upa sa mga tao na maggagamas at magpapatubig ng palay; magsasapaw ng mga pilapil at iba pa.

3. Ang Unang Panig at ang Ikalawang Panig ay nagkasundo na ang huli ay gagawa sa bukid ayon sa nabanggit sa itaas bilang
katulong at upahan lamang. Ang Unang Panig bukod sa sila ang gagawa at magsasaka ay maaaring umupa ng iba pang tao
manggagawa sa upahang umiiral sang-ayon sa batas katulad ng pag-aararo, pagpapahulip, pagpapagamas, pagbobomba,
pagweweeder, pagsasabog ng abono, pagbobomba ng gamot, pagpapatubig at iba pang mga gawain. Maaaring alisin ang
Ikalawang Panig sa pagpapatrabaho sa ano mang oras ng Unang Panig.

4. Ipinatatanto ng Ikalawang Panig na siya ay hindi kasama sa bukid kundi upahan lamang na binabayaran sa bawa't araw ng
kanyang paggawa sa bukid na nabanggit.

It is noted that the agreement provides that "ang Ikalawang Panig (meaning Gelos) ay may ibig na magpaupa sa paggawa sa halagang P5.00 sa
bawa't araw, walong oras na trabaho" (The Second Party desires to lease his services at the rate of P5.00 per day, eight hours of work) and that
"Ipinatatanto ng Ikalawang Panig na siya ay hindi kasama sa bukid kundi upahan lamang na binabayaran sa bawa't araw ng kanyang paggawa sa
bukid na nabanggit.'' (The Second Party makes it known that he is not a farm tenant but only a hired laborer who is paid for every day of work on the
said farm.)

These stipulations clearly indicate that the parties did not enter into a tenancy agreement but only a contract of employment. The agreement is a
lease of services, not of the land in dispute. This intention is quite consistent with the undisputed fact that three days before that agreement was
concluded, the former tenant of the land, Leocadio Punongbayan, had executed an instrument in which he voluntarily surrendered his tenancy rights
to the private respondent. 5 It also clearly demonstrates that, contrary to the petitioner's contention, Alzona intended to cultivate the land himself
instead of placing it again under tenancy.

The petitioner would now disavow the agreement, but his protestations are less than convincing. His wife's testimony that he is illiterate is belied by
his own testimony to the contrary in another proceeding. 6 Her claim that they were tricked into signing the agreement does not stand up against the
testimony of Atty. Santos Pampolina, who declared under his oath as a witness (and as an attorney and officer of the court) that he explained the
meaning of the document to Gelos, who even read it himself before signing it. 7 Atty. Pampolina said the agreement was not notarized because his
commission as notary public was good only for Manila and did not cover Laguna, where the document was executed. 8 At any rate, the lack of
notarization did not adversely affect the veracity and effectiveness of the agreement, which, significantly, Gelos and his wife do not deny having
signed.

Gelos points to the specific tasks mentioned in the agreement and suggests that they are the work of a tenant and not of a mere hired laborer. Not
so. The work specified is not peculiar to tenancy. What a tenant may do may also be done by a hired laborer working under the direction of the
landowner, as in the case at bar. It is not the nature of the work involved but the intention of the parties that determines the relationship between
them.

As this Court has stressed in a number of cases, 9 "tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the
land. It is also a legal relationship. The intent of the parties, the understanding when the farmer is installed, and as in this case, their written
agreements, provided these are complied with and are not contrary to law, are even more important."

Gelos presented receipts 10 for fertilizer and pesticides he allegedly bought and applied to the land of the private respondent, but the latter insists that
it was his brother who bought them, being an agriculturist and in charge of the technical aspect of the farm. Moreover, the receipts do not indicate to
which particular landholding the fertilizers would be applied and, as pointed out by the private respondent, could refer to the other parcels of land
which Gelos was tenanting.
The petitioner's payment of irrigation fees from 1980 to 1985 to the National Irrigation Administration on the said landholding is explained by the fact
that during the pendency of the CAR case, the Agrarian Reform Office fixed a provisional leasehold rental after a preliminary finding that Gelos was
the tenant of the private respondent. As such, it was he who had to pay the irrigation fees. Incidentally, Section 12, subpar. (r) of PD 946 provides
that the Secretary's determination of the tenancy relationship is only preliminary and cannot be conclusive on the lower court.

It is noteworthy that, except for the self-serving testimony of the petitioner's wife, the records of this case are bereft of evidence regarding the sharing
of harvest between Gelos and Alzona. No less importantly, as the Court of Appeals observed, the petitioner has not shown that he paid rentals on
the subject property from 1970 to 1973, before their dispute arose.

A tenant is defined under Section 5(a) of Republic Act No. 1199 as a person who himself and with the aid available from within his immediate farm
household cultivates the land belonging to or possessed by another, with the latter's consent, for purposes of production, sharing the produce with
the landholder under the share tenancy system, or paying to the landholder a price-certain or ascertainable in produce or in money or both, under the
leasehold tenancy system. (Emphasis supplied)

For this relationship to exist, it is necessary that: 1) the parties are the landowner and the tenant; 2) the subject is agricultural land; 3) there is consent;
4) the purpose is agricultural production; 5) there is personal cultivation; and 6) there is sharing of harvest or payment of rental. In the absence of any
of these requisites, an occupant of a parcel of land, or a cultivator thereof, or planter thereon, cannot qualify as a de jure tenant. 11

On the other hand, the indications of an employer-employee relationship are: 1) the selection and engagement of the employee; 2) the payment of
wages; 3) the power of dismissal; and 4) the power to control the employee's
conduct –– although the latter is the most important element. 12

According to a well-known authority on the subject, 13 tenancy relationship is distinguished from farm employer-farm worker relationship in that: "In
farm employer-farm worker relationship, the lease is one of labor with the agricultural laborer as the lessor of his services and the farm employer as
the lessee thereof. In tenancy relationship, it is the landowner who is the lessor, and the tenant the lessee of agricultural land. The agricultural worker
works for the farm employer and for his labor be receives a salary or wage regardless of whether the employer makes a profit. On the other hand, the
tenant derives his income from the agricultural produce or harvest."

The private respondent, instead of receiving payment of rentals or sharing in the produce of the land, paid the petitioner lump sums for specific kinds
of work on the subject lot or gave him vales, or advance payment of his wages as laborer thereon. The petitioner's wife claims that Alzona made her
husband sign the invoices all at one time because he allegedly needed them to reduce his income taxes. Even assuming this to be true, we do not
think that made the said payments fictitious, especially so since the petitioner never denied having received them.

The other issue raised by the petitioner, which is decidedly legal, is easily resolved. There being no tenancy relationship, the contention that the
private respondent's complaint has prescribed under Section 38 of R.A. 3844 must also fail. That section is not applicable. It must be noted that at
the very outset, Alzona rejected the petitioner's claim of agricultural tenancy and immediately instituted his action for unlawful detainer in accordance
with Section 1, Rule 70 of the Rules of Court. As it happened, the said case was held not proper for trial by the Ministry of Agrarian Reform. He then
resorted to other remedies just so he could recover possession of his land and, finally, in 1979, he yielded to the jurisdiction of the defunct Court of
Agrarian Relations by filing there an action for declaration of non-tenancy. The action, which was commenced in 1979, was within the ten-year
prescriptive period provided under Article 1144 of the Civil Code for actions based on a written contract. *

The Court quotes with approval the following acute observations made by Justice Alicia Sempio-Diy:

It might not be amiss to state at this juncture that in deciding this case in favor of defendant, the lower court might have been
greatly influenced by the fact that defendant is a mere farmer who is almost illiterate while plaintiff is an educated landlord, such
that it had felt that it was its duty to be vigilant for the protection of defendant's interests. But the duty of the court to protect the
weak and the underprivileged should not be carried out to such an extent as to deny justice to the landowner whenever truth and
justice happen to be on his side. Besides, defendant's economic position vis a visthe plaintiff does not necessarily make him the
underprivileged party in this case, for as testified by plaintiff which defendant never denied, the small land in question was the
only landholding of plaintiff when he and his father bought the same, at which time he was just a lowly employee who did not
even have a house of his own and his father, a mere farmer, while defendant was the agricultural tenant of another piece of land
and also owns his own house, a sari sari store, and a caritela. Plaintiff also surmised that it was only after defendant had been
taken into its wings by the Federation of Free Farmers that he started claiming to be plaintiff's agricultural tenant, presumably
upon the Federation's instigation and advice. And we cannot discount this possibility indeed, considering that during the early
stages of the proceedings this case, defendant even counter-proposed to plaintiff that he would surrender the land in question to
the latter if plaintiff would convey to him another piece of land adjacent to the land in question, almost one ha. in area, that plaintiff
had also acquired after buying the land in question, showing that defendant was not as ignorant as he would want the Court to
believe and had the advice of people knowledgeable on agrarian matters.

This Court has stressed more than once that social justice –– or any justice for that matter –– is for the deserving, whether he be a millionaire in his
mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are called upon to tilt the balance in favor of the poor, to whom the
Constitution fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because they are poor, or to reject the
rich simply because they are rich, for justice must always be served, for poor and rich alike, according to the mandate of the law.

WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED and the petition is DENIED, with costs against the petitioner. It is so
ordered.
G.R. No. L-20700 February 27, 1969

FIDEL TEODORO, petitioner,

vs.
FELIX MACARAEG and COURT OF AGRARIAN RELATIONS, Second Regional District, Sala
II, respondents.

CASTRO, J.:

Before us for review, upon a petition for certiorari, are the decision of the respondent Court of Agrarian Relations
of September 7, 1962 in CAR case 558-Gba. 68 (Nueva Ecija), ordering the herein petitioner Fidel Teodoro to
reinstate the herein private respondent Felix Macaraeg (the petitioner in the agrarian court) to his "former
landhoding ... and to keep him as the true and lawful tenant in accordance with law," and the resolution of the
same court of November 27, 1962 condemning Teodoro to pay or deliver to Macaraeg as damages "82 cavans of
palay or its equivalent value in the amount of P820.00 computed at the rate of P10.00 per cavan, plus interest at
10% until fully paid."

We turn to the factual milieu.

On June 7, 1961 Macaraeg filed a petition with the Court of Agrarian Relations (Second Regional District, sala II,
Guimba, Nueva Ecija) praying, inter alia, that (1) an interlocutory order be issued to restrain Teodoro and Jose
Niegos (the respondents below), from ejecting him from his landholding pending resolution of his petition; and (2)
after due trial, he be maintained as the lawful tenant in the disputed landholding.
Macaraeg alleged that he is a leasehold tenant of Teodoro cultivating a farmholding situated in the municipality of
Talugtug, Nueva Ecija, of an area of four (4) hectares devoted to rice culture, and that he has worked said land
"as a tenant for the last seven years"; that on March 2, 1961 he received a letter from Teodoro and his wife advising
him that the aforesaid landholding will be given to another tenant, on the pretext that he (Macaraeg) "is contracting
be a tenant of another in said landholding"; that forthwith, Teodoro placed a new tenant, Jose Niegos, in the
disputed land; that subsequently, Niegos repeatedly forbade him from working on said riceland; that in order to
avoid trouble, he refrained from forcibly entering the landholding, but with the advent of the planting season, it
became imperative that the agrarian court order his reinstatement and restrain Teodoro and Niegos from
committing further acts of dispossession.

In his answer with counterclaim dated June 19, 1961, Teodoro categorically denied that Macaraeg was his tenant,
claiming that "ever since he became the owner of around 39 hectares of riceland in Kalisitan, Talugtug, N. Ecija,
he had always leased all of it under civil lease and he had never given any portion of it under tenancy." He further
alleged that after the expiration of his lease contract with Macaraeg in January, 1961, his wife twice notified
Macaraeg to renew his contract for the then incoming agricultural year 1961-62, but the latter "verbally told Mrs.
Teodoro that he was no longer interested to work on the land and he was giving it up as he had left the place
already." Teodoro also claims that it was only after Macaraeg had abandoned the farmland that he decided to
lease it to Niegos.

On his part, Niegos seasonably answered, disclaming any knowledge that Macaraeg is the tenant of Teodoro, and
averring that he entered the landholding in good faith clothed with the proper authority from the other respondent
(Teodoro) and with the consent and confirmity of the petitioner (Macaraeg) who allowed him to work on the same";
and that Macaraeg "has no more interests in the cultivation of the landholding as could be gleaned from his
actuations, like the failure to clean the land during the months of March and April, and his failure to prepare his
seed bed in the month of May which is the period for broadcasting seedling in the community".

On February 6, 1962, when the hearing of the present controversy was nearing completion in the respondent
agrarian court but before the case was submitted for decision, Macaraeg filed a "supplemental petition", claiming
damages as a a result of his dispossession. Said petition was given due course by the court commissioner and
the requisite hearing was set for March 9, 1962. Both Teodoro and Niegos interposed their respective answers,
identically asserting that the same was filed out of time and that the failure of Macaraeg to claim earlier his alleged
damages amounted to a fatal neglect which could no longer be cured at that very late stage of the proceedings.
Nonetheless, hearing on the said petition was disclosed that as "a result of his (Macaraeg's) ejectment, he became
destitute" since he had no "income except from those derived from transplanting and reaping wherein he earned
the amount of P30.00". It was further proved that "for the aqricultural year 1961-62, Jose Niegos realized a gross
harvest of 110 cavans out of which he paid his rental to Fidel Teodoro in the amount of 42 cavans and 23 kilos."

On September 7, 1962 the decision under review was rendered, with the following dispositive portion:

IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in favor of

petitioner Felix Macaraeg and against respondents Fidel Teodoro and Jose Niegos in the tenor and
disposition hereinbelow provided, to wit:

1. Jose Niegos is hereby ordered to vacate the landholding in question with an approximate area of four
(4) hectares, situated at Barrio Kalisitan, Talugtug Nueva Ecija, in favor of herein petitioner and to refrain
from molesting or in any manner disturbing his peaceful possession and cultivation thereof, subject to the
condition that said respondent shall have harvested and threshed his crop which he planted for the current
agricultural year;

2. Conformably with the preceding paragraph, Fidel Teodoro is hereby ordered to reinstate said petitioner
to his former landholding aforestated and to keep him as the true and lawful tenant in accordance with law;

3. Declaring Exhibit A as a leasehold tenancy contract between the parties for the agricultural year 1960-
61 as the term is understood under our tenancy law; as a consequence hereof, Exhibit 4-Teodoro and
Exhibit 5-Niegos, i.e. contract of lease between Fidel Teodoro and Jose Niegos is hereby declared void
and of no legal effect; and

4. Dismissing petitioner's claim for damages as embodied in his supplemental petition.

Teodoro and Niegos filed separate motions for reconsideration which were denied by the respondent agrarian
court in its resolution of November 27, 1962. However, in the same resolution, the court a quo reconsidered, upon
motion of Macaraeg, its ruling denying the latter's prayer for damages, thus:
 With respect to petitioner's claim for damages as embodied in his supplemental petition, wherein evidence
was adduced in support thereof, we believe that its admission is in accordance with Section 2, Rule 17 of
the Rules of Court of the Philippines, same not being for the purpose of delaying the proceedings. And,
the fact that the Court of Agrarian Relations shall not be bound strictly by the technical rules of evidence
but "shall act according to justice and equity and substantial merits of the case", we believe that the
evidence to support the claim for damages received during the hearings before the court commissioner is
meritorious (Secs. 10 and 11 RA 1267, as amended). Hence, petitioner is entitled to recover damages
claimed by him from his landholder in the amount of 85 cavans of palay which is equal to the two years
rental of his landholding less his earnings during the same period in the amount of P30.00 only or is
equivalent to 3 cavans of palay. In fine, Fidel Teodoro is liable to pay to petitioner the amount of 82 cavans
of palay or its cash value of P820.00, computed at P10.00 per cavan plus interest at 10% until fully paid.

After Teodoro's motion to reconsider the foregoing resolution was denied, he interposed on January 5, 1963 the
present petition, imputing to the court the following errors:

1. In holding that Macaraeg became a tenant of Teodoro by virtue of the "Contract of Lease" which they
executed in April, 1960;

2. Assuming that the foregoing contract was in effect a leasehold tenancy agreement making Macaraeg a
tenant of Teodoro in not finding the former guilty of abandonment, an act which terminated their tenancy
relation; and

3. In condemning Teodoro to pay damages to Macaraeg for the alleged dispossession, despite the fact
that the claim for damages embodied in the abovementioned "Supplemental Petition" below were about
to be terminated.

The pertinent provisions of the disputed "Contract of Lease" between Teodoro and Macaraeg read as follows:

That the LESSOR is the registered owner of a certain parcel of land situated at Talugtug, Nueva Ecija,
containing an area of THIRTY NINE (39) HECTARES, more or less;

That for and in consideration of the rental of Nine (9) cavans of palay per hectare for one agricultural year,
the LESSOR hereby lets and leases and the LESSEE hereby accepts an undivided portion 4 ½
Hectares of the abovementioned property under the following terms and conditions:

1. That this contract of lease shall only be for the agricultural year 1960-61;

2. That the LESSEE shall give a guaranty to answer for the payment of the lease consideration of this
contract;

3. That the rental of 38.7 cavans of palay per hectare shall be paid unto the LESSOR not later than
January, 1961;

4. That the corresponding rental must be brought to the Poblacion of Muñoz, Nueva Ecija, to be deposited
to any bonded Warehouse at the expense of the LESSEE and in the name of the LESSOR;

5. That the rental must be of the same variety as that produced by the LESSEE;

6. That the LESSOR shall pay for the real property taxes corresponding to the property leased;

7. That violation of any of the terms of this contract shall be sufficient ground to terminate the same with
damages against the guilty party;

8. That the property leased shall be used or utilized for agricultural enterprise only;

9. That in case of default on the part of the LESSEE to pay the lease consideration when the same
becomes due and payable and the collection for the same reaches the court, the LESSEE hereby binds
himself to pay the cost of the suit including reasonable attorney's fees. (Emphasis supplied)

I. Teodoro contends that the language and tenor of the aforesaid contract clearly manifest the intention of the
parties to enter into an ordinary civil lease contract, not a leasehold tenancy agreement as alleged by Macaraeg
and sustained by the agrarian court. To start with, Teodoro stresses, the parties denominated the said covenant
as a "Contract of Lease", which assigned title discloses their mutual intention to execute an ordinary lease contract,
for, otherwise, if they had intended to create a leasehold tenancy relation, they could have accordingly captioned
their agreement "with the word tenancy or some other word of similar import". Moreover, Teodoro points out that
"in the contract of lease in question it is significant to note that the words landlord and tenant were conspicuous
by their complete absence".

The foregoing stance assumed by Teodoro is patently untenable, in the face of the principal features and
stipulations of the contract in controversy and the pertinent provisions of existing law on leasehold tenancy. It
bears emphasis that the title, label or rubric given to a contract cannot be used to camouflage the real import of
an agreement as evinced by its main provisions. Moreover, it is basic that a contract is what the law defines it to
be, and not what it is called by the contracting parties. 1

As correctly expressed by the respondent court, "viewed from the four corners of Exhibit A, we have no doubt that
the leasehold tenancy contract entered into between petitioner (Macaraeg) and Fidel Teodoro is a pure and simple
leasehold tenancy contract as the term is understood under our tenancy laws." This observation of the agrarian
court finds anchor in the pertinent provision of the Agricultural Tenancy Act. Thus, section 4 of Rep. Act 1199, as
amended by Rep. Act 2263, provides that

Leasehold tenancy exists when a person who, either personally or with the aid of labor available from
members of his immediate farm household, undertaken to cultivate a piece of agricultural land susceptible
of cultivation by a single person together with members of his immediate farm household, belonging to a
legally possessed by another in consideration of a fixed amount in money or in produced or in both.

Furthermore, section 42 of the Agricultural Tenancy Act defines a landlord-lessor as

Any person, natural or judicial, either as owner, lessee, usufructuary or legal possessor of agricultural land,
who lets, leases or rents to another said property for purposes of agricultural production and for a price
certain of ascertainable either in amount of money or produced;

while a tenant-lessee is defined as

any person who, with the consent of the former (landlord-lessor), tills, cultivates or operates said land,
susceptible of cultivation by one individual, personally or with the aid of labor available from among his
own immediate farm household.

Gleaned from the foregoing provisions, the following could be synthesized as the principal elements of a lease-
hold tenancy contract or relation:

1. The object of the contract or the relationship is an agricultural land which is leased or rented for the
purpose of agricultural production;

2. The size of the landholding must be such that it is susceptible of personal cultivation by a single
person with assistance from the members of his immediate farm household;

3. The tenant-lessee must actually and personally till, cultivate or operate said land, solely or with the aid
of labor from his immediate farm household; and

4. The landlord-lessor, who is either the lawful owner or the legal possessor of the land, leases the same
to the tenant-lessee for a price certain or ascertainable either in a amount of money or produce.

Reverting to the controverted "Contract of Lease", we are of the consensus that it indubitably contains the forgoing
essential elements of a leasehold tenancy agreement.

The landholding in dispute is unmistakably an agricultural land devoted to agricultural production. More
specifically, the parties stipulated that "the property leased shall be used or utilized for agricultural enterprise only".
(Emphasis supplied). Furthermore, the parties also agreed that the farmland must be used for rice production as
could be inferred from the stipulation that "the rental of nine (9) cavans of palay per hectare for one agricultural
year ... must be of the same variety (of palay) as that produced by the LESSEE". (Emphasis supplied)
The land is definitely susceptible of cultivation by a single person as it is of an area of only four and A half (4-½)
hectares. This Court has held 2 that even a bigger area may be cultivated personally by the tenant, singly or with
the help of the members of his immediate farm household.

From the stipulation that "the rental must be of the same variety as that produced by the LESSEE", it can
reasonably be inferred that the intention of the parties was that Macaraeg personally work the land, which he did
as found by the Agrarian Court, thus: "In the instant case, petitioner (Macaraeg) cultivated the
landholding belonging to said respondent (Teodoro) for the agricultural year 1960-61 in consideration of a fixed
annual rental." (Emphasis supplied) Moreover, there is no evidence that Macaraeg did not personally cultivate the
land in dispute. Neither did Teodoro allege, much less prove, that Macaraeg availed of outside assistance in the
cultivation of the said riceland.

Teodoro is the registered owner of the disputed landholding and he delivered the possession thereof to Macaraeg
in consideration of a rental certain to be paid in produce. Evidently, there was a valid leasehold tenancy agreement.
Moreover, the provision that the rental be accounted in terms of produce — 9 cavans per hectare — is an
unmistakable earmark, considering the other stipulations, that the parties did actually enter into a leasehold
tenancy relation.

Teodoro further argues, however, that the aforesaid "Contract of Lease" cannot possibly be construed as
establishing a leasehold tenancy relation because the parties themselves ignored and repudiated the very essence
of tenancy — security of tenure — when they stipulated that "this agreement shall only be for the agricultural year
1960-61".

This argument is unacceptable. The mere fact that the parties fixed and limited the duration of their lease contract
to only one agricultural year, does not remove the relationship which they created from the purview of leasehold
tenancy, considering the general import of their agreement which irreversibly leads to and clearly justifies tenancy
coverage. It is fundamental that the tenant-lessee's security of tenure subsists notwithstanding the termination of
the contract which initially established the tenancy relation. In the language of the law, the "expiration of the period
of the contract as fixed by the parties ... does not of itself extinguish the relationship". 3 This is a "practical
consequence of the distinction between the tenancy contract which is fixed by the parties, and the tenancy
relationship which is maintained and governed by law". 4 Furthermore, section 49 of the Agricultural Tenancy Act
provides that

Notwithstanding any agreement or provision of law as to the period of future surrender of the land, in all
cases where land devoted to any agricultural purpose is held under any system of tenancy, the tenant
shall not be dispossessed of his holdings by the landholder except for any of the causes hereinafter
enumerated and only after the same has been proved before and the dispossession is authorized bye the
court." (Emphasis supplied)

The abovecited provision does not permit the parties to stipulate at what future time the tenant shall leave or
surrender the land. Thus, this Court has held 5 that an agreement whereby the tenant was required to return to the
landlord his landholding after one crop year cannot justify the tenant's dispossession after the said period because
such agreement is expressly proscribed by law.

Still vehemently contending that he never intended to enter into any tenancy relation with Macaraeg, Teodoro
finally argues that construing the abovementioned "Contract of Lease" as a leasehold tenancy agreement would
amount to a judicial negation of his freedom to contract.

Needless to stress, this Court frowns upon and rejects any attempt to nullify the legitimate exercise of the right to
contract. We agree with Teodoro that as a landholder he has full liberty to enter into a civil lease contract covering
his property. What we want to indelibly impress, however, is that once a landowner enters into a contract of lease
whereby his land is to be devoted to agricultural production and said landholding is susceptible of personal
cultivation by the lessee, solely or with help of labor coming from his immediate farm household, then such contract
is of the very essence of a leasehold agreement, and perforce comes under the direct coverage of the tenancy
laws. Otherwise, it would be easy to subvert, under the guise of the liberty to contract, the intendment of the law
of protecting the underprivileged and ordinarily credulous farmer from the unscrupulous schemes and pernicious
practices of the landed gentry.

II. We now come to the second assignment of error. Teodoro posits that granting the establishment of a leasehold
tenancy relation between him and Macaraeg by virtue of the aforesaid "Contract of Lease", the agrarian court
nevertheless erred in not finding Macaraeg guilty of abandonment, an act which terminates the tenancy relation
and justifies the ejectment of the tenant. In support of his thesis, Teodoro points out that Macaraeg committed a
positive act of abandonment when he offered to vacate his leasehold in favor of a certain Luciano Claus, and only
after "he could not have his own way of placing Luciano Claus as his successor" did he try to "recover the land
holding". Assuming the veracity of the foregoing allegation, a tenant's offer or intention to surrender his hold on
the condition that the person named by him should be accepted as his successor, does not of itself constitute
abandonment of his farmland.

"The word 'abandon', in its ordinary sense, means to forsake entirely; to forsake or renounce utterly. The
dictionaries trace this word to the root idea of 'putting under a ban'. The emphasis is on the finality and the publicity
with which some thing or body is thus put in the control of another, and hence the meaning of giving up absolutely,
with intent never again to resume or claim one's rights or interests." 6 In other words, the act of abandonment
constitutes actual, absolute and irrevocable desertion of one's right or property. In the case at bar, Macaraeg
merely intended to vacate his leasehold possession on the condition that a certain Claus be taken as his
successor. Hence, his act did not constitute desertion of his leasehold as it was a mere intended surrender of the
same. And as correctly espoused by the counsel for the respondent court, it is "only through the actual surrender
of the land that tenancy relation terminates; no amount of intention to surrender severs the relationship".
Furthermore, the said act of Macaraeg was not an absolute renunciation of his leasehold possession, as it was in
fact clearly conditional.

However, Teodoro also claims, with characteristic certitude that Macaraeg did actually abandon work on the land
in dispute and that even the decision under review contains a finding to this effect. We find no statement in the
agrarian court's decision sustaining Teodoro's view. On the contrary, we perceive truth in the respondent court's
counsel's manifestation that

The only times that the tenant herein did not work the land were (1) during the time it was undergoing its
regular dry season fallow, and, ... (2) after he was prohibited from plowing the land by a certain Niegos,
an agent of petitioner. Failure to cultivate during the dry season fallow definitely does not amount to
abandonment (Cf. De la Cruz vs. Asociacion Zangera Casilan et al., 83 Phil. 214). Likewise, failure to
cultivate the land by reason of the forcible prohibition to do so by a third party cannot also amount to
abandonment, for abandonment presupposes free will.

Anent the charge of abandonment, it is also pertinent to note that four days after Macaraeg received a letter from
Teodoro and his wife advising him that the landholding in question will be given to another tenant, he lost no time
in inquiring from the Tenancy Mediation Commission at Cabanatuan City about his rights as a leasehold tenant. It
would appear therefore that Macaraeg's immediate reaction to his landlord's design to dispossess him negates
the act of abandonment imputed to him.

Moreover, Teodoro's pretension that Macaraeg had abandoned the disputed landholding was squarely rejected
by the agrarian court, thus:

In the instant case, while petitioner had intentions to surrender his landholding to respondent after the
harvest for the agricultural (year) 1960-61 which led the latter to advise the former not to give his
landholding to Luciano Claus, yet that surrender did not materialize because said petitioner had apparently
changed his mind. For as early as March 6, 1961, petitioner went to the Office of the Tenancy Mediation
Commission, Cabanatuan City for consultation. As a matter of fact, said Commission wrote a letter to Fidel
Teodoro and his wife advising them to enjoin their overseer, Benito Ismael, from ejecting petitioner.

During the intervening period, Fidel Teodoro and his wife entered into another lease contract of tenancy
with Jose Niegos. For this reason, Mariano Niegos, son of Jose Niegos, prevented petitioner from plowing
his landholding when he found him in the premises on June 1, 1961. However, notwithstading this incident,
Fidel Teodoro opened the door for negotiations. In fact, as late as June 23, 1961, when petitioner went to
the house of Fidel Teodoro in Manila, a conference was set for that purpose at the house of Benito Ismael
in Muñoz, Nueva Ecija which did not take place because of the absence of petitioner. Under these
circumstances, it appears to our mind that while negotiations for settlement were still pending,
yet petitioner has not, in truth and in fact, surrendered his landholding. (Emphasis supplied)

We are not at liberty to reverse the foregoing finding of fact in the absence of any proof that it is unfounded or was
arbitrarily arrived at or that the Court had failed to consider important evidence to the contrary. 7 This Court has
consistently ruled that the findings of fact of the Court of Agrarian Relations will not be disturbed on appeal where
there is substantial evidence to support them. 8 In the case at bar, the finding of fact by the by the respondent court
anent the issue of abandonment rests on substantial evidence.
III. Toward the end of the proceedings in the respondent court, Macaraeg interposed a pleading which he
denominated "supplemental petition", wherein he asked for damages as a result of his dispossession. The said
"supplemental petition" was given due course by the hearing commissioner and Macaraeg was allowed to present
evidence in support thereof. On the basis of the evidence thus adduced, the respondent court awarded damages
to Macaraeg as decreed in its abovementioned resolution of November 27, 1962.

Teodoro maintains that the respondent court erred in admitting the said "supplemental pleading" on the basis of
section 2, Rule 17 (now section 3 of Rule 10 of the Revised Rules of Court) which exclusively pertains to
amendment of pleadings, and has nothing to do with the interposition of supplemental pleadings which is
separately governed by section 5 of Rule 17 (now section 5 of Rule 10). Teodoro avers, moreover, that since
Macaraeg filed his claim for damages only when the hearing below was about to end, his inaction must be
considered as a waiver of such claim or that he should be considered guilty of fatal negligence.

In resolving this last assignment of error, attentions must be centered on the liberal policy which frees the Court
of Agrarian Relations from the fetters of formalistic procedure. As aptly observed in one case,9

Social justice would be a meaningless term if in a situation like the present, an element of rigidity would
be affixed to procedure precepts and made to cover the matter. Flexibility should not be ruled out.
Precisely, what is sought to be accomplished, by such a fundamental principle expressly so declared by
the Constitution (Art. II, sec. 5) is the effectiveness of the community's effort to assist the economically
underprivileged. For under existing conditions, without such succor and support, they might not, unaided,
be able to secure justice for themselves....

Moreover, there is equally the obligation on the part of the State to afford protection to labor. The
responsibility is incumbent then, not only on the legislative and executive branches but also on the
judiciary, to translate this pledge into a living reality. The present case is an appropriate occasion for the
discharge of such a trust. To preclude relief under the circumstances herein disclosed would be to fail to
submit to the dictates of a plain constitutional duty. That we should not allow to happen.

Since the abovementioned "supplemental pleading" was filed without intent to delay the proceedings, the agrarian
court exercised sound discretion in giving it due course in order that "the real matter in dispute and all matters in
the action in dispute between the parties may, as far as possible, be completely determined in a single proceeding".
Moreover Teodoro has no reason to complain, for he was accorded every opportunity to controvert Macaraeg's
claim for damages, but apparently he did not, as in fact he does not here traverse the substantiality of the award. lawphi1.nêt

Significantly, the Court of Agrarian Relations is not restricted to the specific relief claimed or demanding made by
the parties to the dispute, but may include in the order or decision any matter or determination which may be
deemed necessary and expedient for the purpose of settling the dispute or of preventing further disputes, provided
said matter for determination has been established by competent evidence during the hearing". 10 In words, the
respondent court could have determined Macaraeg's claim for damages even without his "supplemental petition",
provided there was proof to substantiate such claim (and such requisite evidence was not wanting). Hence if the
agrarian court could, have awarded damages in favor of Macaraeg even in the absence of a specific prayer; then
there is no conceivable reason to bar the respondent court from granting the same with the interposition of the
aforesaid "supplemental petition" which explicitly and unmistakeably prays for damages resulting from Macaraeg's
dispossession.

We hasten to modify however, the award of damages in so far as it deducts from the total amount recoverable by
Macaraeg the sum of P30 or its equivalent of 3 cavans of palay, representing his earnings during the period of his
unlawful ejectment. This part of the award contravenes section 27(1) of the Agricultural Tenancy Act which makes
the erring landlord "liable to the tenant for damages to the extent of the landholder's participation in the harvest in
addition to the tenant's right under Section twenty-two of this Act". And section 22(1) provides that the "tenant shall
be free to work elsewhere whenever the nature of his farm obligations warrants his temporary absence from his
holdings". Consequently, Macaraeg's measly earning of P30 during the period of his dispossession should not be
deducted from the total amount of damages due to him. Interpreting the abovecited section 27(1) in relation to
section 22(1), this Court, speaking through Mr. Justice J.B.L. Reyes held that

The earnings of the tenants during the period of unlawful ejectment are not now deductible from the award
of damages. In the case of Potenciano vs. Estefani L-7690, promulgated on 27 July 1955, this Court, on
grounds of equity, ruled to deduct such income but said case was decided under the prior law, Act 4054.
The above-quoted Section 27(1) of Republic Act No. 1199, as amended, which is the one applicable to
the present case, not only provides for a quantum of damages to the tenant, based on the landlord's share
in the harvest, but adds thereto his right under section 22, which states:
 (1) the tenant shall be free to work elsewhere whenever the nature of his farm obligations warrants
his temporary absence from his holdings.

This right, although already granted under section 20 of Act 4054, was not then a right additional to the
recovery of damages consequent to unlawful dismissal, but under Republic Act 1199, as amended, it is to
be added to the damages recoverable.11

ACCORDINGLY, the decision and resolution under review are hereby affirmed, with the sole modification that the
earnings of the herein respondent during the period of his dispossession shall not be deducted from the award of
damages. Cost against the petitioner.

G.R. No. 85611 April 6, 1990

VICTORIANO ZAMORAS, petitioner,

vs.
ROQUE SU, JR., ANITA SU HORTELLANO and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

GRIÑO-AQUINO, J.:

The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant of the
private respondents.

The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of his coconut
land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in Su's name, and of
assigning portions to be worked by tenants, supervising the cleaning, planting, care and cultivation of the land, the
harvesting of coconuts and selling of the copra. As compensation, Su paid Zamoras a salary of P2,400 per month
plus one-third (1/3) of the proceeds of the sales of copra which normally occurred every two months. Another one-
third of the proceeds went to the tenants and the other third to Su. This system of sharing was regularly observed
up to September, 1981. As the coconut plantation yielded an average harvest of 21,000 nuts worth P18,900, based
on the current market price of P3 per kilo, Zamoras' share amounted to P6,300 every two months.

In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su
Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was outstanding"
(p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that he was being laid-off temporarily
until Su could obtain a loan from the Development Bank of the Philippines with which to pay Anita. However,
Zamoras was not allowed anymore to work as overseer of the plantation. Without his knowledge and consent,
Hortellano harvested the coconuts without giving him his one-third share of the copra sales.

On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and Employment in
Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal termination and breach of
contract with damages of not less than P75,600 as his uncollected share of the copra sales from September 15,
1981 to August 1983.

The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case submitted the
following findings which were adopted by the Labor Arbiter

The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue Extension,
Lahug, Cebu City and at the same time an employee in the government up to the present, while the land wherein
the complainant herein was employed by the respondent as overseer of the land since 1957 up to and until his
termination from the service sometime in September 1981 without just cause or causes duly authorized by law
and after due process. That to prove that complainant was the overseer of the land owned by the respondent are
the sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa Arocha, and Wilfredo Bernaldes who
are presently working as tenants of the respondent. That the three witnesses testified that they knew the
complainant personally who has been working as overseer of the land because it was through him, the
complainant, that they were allowed to work and/or occupy the land as tenants ever since up to the present. In
fact, they further declared that they do not know personally the owner of the land and besides, they have not seen
personally the said owner as their dealing were directly done thru the complainant. That they always received their
share of the produce from the complainant for every two months up to 1981.

xxx xxx xxx

It is very clear in the evidence of record that complainant was an employee of the respondent. This fact is even
admitted by the respondent in his answer by way of controverting the claim of the complainant. (pp. 44-45, Rollo.)

On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the respondent's
plantation, was a regular employee whose services were necessary and desirable to the usual trade or business
of his employer. The Labor Arbiter held that the dismissal of Zamoras was without just cause, hence, illegal. The
private respondents were ordered to reinstate him to his former position as overseer of the plantation and to pay
him backwages equivalent to P31,975.83 in the event that he opted not to be reinstated or that his reinstatement
was not feasible.

The private respondents appealed to the National Labor Relations Commission, alleging that the Labor Arbiter
erred:

1. in disregarding respondents' evidence (a financial report showing the yearly copra sales from 1973 to
1977), proving that complainant's one-third share of the copra sales amounted to P5,985.16 only and not
P6,300 per harvest;

2. in not holding that the complainant can no longer be reinstated for he is already dead; and

3. in not finding that no employer-employee relationship existed between the parties.

On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right to control
test used in determining the existence of an employer-employee relationship is unavailing in the instant case and
that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo), because such functions as
introducing permanent improvements on the land, assigning portions to tenants, supervising the cleaning, planting,
care and cultivation of the plants, and deciding where and to whom to sell the copra are attributes of a landlord-
tenant relationship, hence, jurisdiction over the case rests with the Court of Agrarian Relations.

Zamoras filed this petition, assailing the NLRC's decision.

There is merit in the petition.

The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported by
the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut plantation.
As overseer, Zamoras hired the tenants and assigned their respective portions which they cultivated under
Zamoras' supervision. The tenants dealt directly with Zamoras and received their one-third share of the copra
produce from him. The evidence also shows that Zamoras, aside from doing administrative work for Su, regularly
managed the sale of copra processed by the tenants. There is no evidence that Zamoras cultivated any portion of
Su's land personally or with the aid of his immediate farm household. In fact the respondents never raised the
issue of tenancy in their answer.

Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from within
his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for
purposes of production, sharing the produce with the landholder or for a price certain or ascertainable in produce
or in money or both, under the leasehold tenancy system" (Matienzo vs. Servidad, 107 SCRA 276). Agricultural
tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or legally
possessed by another for the purpose of production through the labor of the former and of the members of his
immediate farm household in consideration of which the former agrees to share the harvest with the latter or to
pay a price certain or ascertainable, whether in produce or in money, or both" (Sec. 3, R.A. No. 1199; 50 O.G.
4655-56; Miguel Carag vs. CA, et al., 151 SCRA 44).

The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the
subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is agricultural
production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between landlord
and tenant (Antonio Castro vs. CA and De la Cruz, G.R. L-34613, January 26, 1989; Tiongson vs. CA, 130 SCRA
482; Guerrero vs. CA, 142 SCRA 138).

The element of personal cultivation of the land, or with the aid of his farm household, essential in establishing a
landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su and Zamoras (Co vs. IAC,
162 SCRA 390; Graza vs. CA, 163 SCRA 39), for Zamoras did not cultivate any part of Su's plantation either by
himself or with the help of his household.

On the other hand, the following circumstances are indicative of an employer-employee relationship between
them:

1. Zamoras was selected and hired by Su as overseer of the coconut plantation.

2. His duties were specified by Su.

3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should
sell the copra produced from the plantation.

4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as
compensation for managing the plantation.

Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations, that has
jurisdiction to try and decide Zamora's complaint for illegal dismissal (Art. 217, Labor Code; Manila Mandarin
Employees Union vs. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags Industries, et al. vs. NLRC, et al.,
69 SCRA 242).

WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an employee
of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is entitled to
reinstatement with backwages, but because he is dead and may no longer be reinstated, the private respondents
are ordered to pay to his heirs the backwages due him, as well as his share of the copra sales from the plantation
for a period of three (3) years from his illegal dismissal in September, 1981, plus separation pay in lieu of
reinstatement. Costs against the private respondents.

SO ORDERED.