Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 78742 July 14, 1989

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ,

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

G.R. No. 79310 July 14, 1989

ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,

HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.

G.R. No. 79744 July 14, 1989

INOCENTES PABICO, petitioner,

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

G.R. No. 79777 July 14, 1989

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

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

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life
on his way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules
flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their
struggle. This happened several times to Hercules' increasing amazement. Finally, as they
continued grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never die
as long as any part of his body was touching his Mother Earth. Thus forewarned, Hercules then held
Antaeus up in the air, beyond the reach of the sustaining soil, and crushed him to death.

Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the
powerful Antaeus weakened and died.

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

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

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

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

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

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

The people power revolution of 1986 did not change and indeed even energized the thrust for
agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228,
declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the
valuation of still unvalued lands covered by the decree as well as the manner of their payment. This
was followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a comprehensive
agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took over
legislative power from the President and started its own deliberations, including extensive public
hearings, on the improvement of the interests of farmers. The result, after almost a year of spirited
debate, was the enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This law, while considerably
changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4

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

G.R. No. 79777

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

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

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

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

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

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

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

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

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

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

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

G.R. No. 79310

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

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

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

Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost
of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
wealth received through the Presidential Commission on Good Government and such other sources
as government may deem appropriate. The amounts collected and accruing to this special fund shall
be considered automatically appropriated for the purpose authorized in this Proclamation the amount
appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated
expropriation has yet to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just compensation as it
is traditionally understood, i.e., with money and in full, but no such payment is contemplated in
Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to be established by the government,
which shall be based on the owner's declaration of current fair market value as provided in Section 4
hereof, but subject to certain controls to be defined and promulgated by the Presidential Agrarian
Reform Council." This compensation may not be paid fully in money but in any of several modes that
may consist of part cash and part bond, with interest, maturing periodically, or direct payment in
cash or bond as may be mutually agreed upon by the beneficiary and the landowner or as may be
prescribed or approved by the PARC.

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

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

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

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

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

In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality
in favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as
explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general survey on the people's
opinion thereon are not indispensable prerequisites to its promulgation.

On the alleged violation of the equal protection clause, the sugar planters have failed to show that
they belong to a different class and should be differently treated. The Comment also suggests the
possibility of Congress first distributing public agricultural lands and scheduling the expropriation of
private agricultural lands later. From this viewpoint, the petition for prohibition would be premature.

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

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

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

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

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

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

G.R. No. 79744

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

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

The petitioner now argues that:

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

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

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

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

The petitioner also invokes his rights not to be deprived of his property without due process of law
and to the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of
the Constitution. He likewise argues that, besides denying him just compensation for his land, the
provisions of E.O. No. 228 declaring that:
 Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972
shall be considered as advance payment for the land.

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

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

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

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

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

G.R. No. 78742

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

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

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be

ejected or removed from his farmholding until such time as the respective rights of
the tenant- farmers and the landowner shall have been determined in accordance
with the rules and regulations implementing P.D. No. 27.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

II

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

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

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

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

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

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

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

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

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

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

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

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

Whenever a duty is imposed upon a public official and an unnecessary and

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

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

III

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

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

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

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

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

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

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

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

For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S
Supreme Court sustained the respondent's Landmarks Preservation Law under which the owners of
the Grand Central Terminal had not been allowed to construct a multi-story office building over the
Terminal, which had been designated a historic landmark. Preservation of the landmark was held to
be a valid objective of the police power. The problem, however, was that the owners of the Terminal
would be deprived of the right to use the airspace above it although other landowners in the area
could do so over their respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central Terminal which it
said would "undoubtedly mitigate" the loss caused by the regulation. This "fair compensation," as he
called it, was explained by Prof. Costonis in this wise:

In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized
to transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark — the rights which would have been exhausted by the 59-
story building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on
neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its
losses at the Terminal site by constructing or selling to others the right to construct larger, hence
more profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation, it becomes necessary to
deprive such owners of whatever lands they may own in excess of the maximum area allowed, there
is definitely a taking under the power of eminent domain for which payment of just compensation is
imperative. The taking contemplated is not a mere limitation of the use of the land. What is required
is the surrender of the title to and the physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer-beneficiary. This is definitely an exercise not of the
police power but of the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent domain, the several
measures before us are challenged as violative of the due process and equal protection clauses.

The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many
bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits finally
agreed upon are, curiously enough, not being questioned in these petitions. We therefore do not
discuss them here. The Court will come to the other claimed violations of due process in connection
with our examination of the adequacy of just compensation as required under the power of
expropriation.

The argument of the small farmers that they have been denied equal protection because of the
absence of retention limits has also become academic under Section 6 of R.A. No. 6657.
Significantly, they too have not questioned the area of such limits. There is also the complaint that
they should not be made to share the burden of agrarian reform, an objection also made by the
sugar planters on the ground that they belong to a particular class with particular interests of their
own. However, no evidence has been submitted to the Court that the requisites of a valid
classification have been violated.

Classification has been defined as the grouping of persons or things similar to each other in certain
particulars and different from each other in these same particulars. 31 To be valid, it must conform to
the following requirements: (1) it must be based on substantial distinctions; (2) it must be germane to
the purposes of the law; (3) it must not be limited to existing conditions only; and (4) it must apply
equally to all the members of the class. 32 The Court finds that all these requisites have been met by
the measures here challenged as arbitrary and discriminatory.

Equal protection simply means that all persons or things similarly situated must be treated alike both
as to the rights conferred and the liabilities imposed. 33 The petitioners have not shown that they
belong to a different class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the burden of implementing
land reform must be rejected. There is a substantial distinction between these two classes of owners
that is clearly visible except to those who will not see. There is no need to elaborate on this matter.
In any event, the Congress is allowed a wide leeway in providing for a valid classification. Its
decision is accorded recognition and respect by the courts of justice except only where its discretion
is abused to the detriment of the Bill of Rights.

It is worth remarking at this juncture that a statute may be sustained under the police power only if
there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the
public generally as distinguished from those of a particular class require the interference of the State
and, no less important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be examined is the validity of the method employed
to achieve the constitutional goal.

One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the strongest
moral conviction or the most urgent public need, subject only to a few notable exceptions, will
excuse the bypassing of an individual's rights. It is no exaggeration to say that a, person invoking a
right guaranteed under Article III of the Constitution is a majority of one even as against the rest of
the nation who would deny him that right.

That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.

This brings us now to the power of eminent domain.

IV

Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the State
over the interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored justification, as in the
case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed
no power is absolute). The limitation is found in the constitutional injunction that "private property
shall not be taken for public use without just compensation" and in the abundant jurisprudence that
has evolved from the interpretation of this principle. Basically, the requirements for a proper exercise
of the power are: (1) public use and (2) just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should
first distribute public agricultural lands in the pursuit of agrarian reform instead of immediately
disturbing property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not
correct to say that only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the decision to redistribute private
agricultural lands in the manner prescribed by the CARP was made by the legislative and executive
departments in the exercise of their discretion. We are not justified in reviewing that discretion in the
absence of a clear showing that it has been abused.

A becoming courtesy admonishes us to respect the decisions of the political departments when they
decide what is known as the political question. As explained by Chief Justice Concepcion in the case
of 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.

EN BANC

[G.R. No. 127876. December 17, 1999]

ROXAS & CO., INC., petitioner, vs. THE HONORABLE COURT OF

APPEALS, DEPARTMENT OF AGRARIAN REFORM, SECRETARY
OF AGRARIAN REFORM, DAR REGIONAL DIRECTOR FOR
REGION IV, MUNICIPAL AGRARIAN REFORM OFFICER OF
NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN
REFORM ADJUDICATION BOARD, respondents.

DECISION
PUNO, J.:

This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the
validity of the acquisition of these haciendas by the government under Republic Act No. 6657, the
Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three
haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in the Municipality of
Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in area and is registered under Transfer
Certificate of Title (TCT) No. 985. This land is covered by Tax Declaration Nos. 0465, 0466,
0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050 hectares in area, registered under TCT No.
924 and covered by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda Caylaway is 867.4571
hectares in area and is registered under TCT Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then President Corazon C.
Aquino. In February 1986, President Aquino issued Proclamation No. 3 promulgating a
Provisional Constitution. As head of the provisional government, the President exercised
legislative power until a legislature is elected and convened under a new Constitution.[1] In the
exercise of this legislative power, the President signed on July 22, 1987, Proclamation No. 131
instituting a Comprehensive Agrarian Reform Program and Executive Order No. 229 providing
the mechanisms necessary to initially implement the program.
 On July 27, 1987, the Congress of the Philippines formally convened and took over legislative
power from the President.[2] This Congress passed Republic Act No. 6657, the Comprehensive
Agrarian Reform Law (CARL) of 1988. The Act was signed by the President on June 10, 1988
and took effect on June 15, 1988.
Before the laws effectivity, on May 6, 1988, petitioner filed with respondent DAR a voluntary
offer to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229. Haciendas Palico and
Banilad were later placed under compulsory acquisition by respondent DAR in accordance with
the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal Agrarian Reform
Officer (MARO) of Nasugbu, Batangas, sent a notice entitled Invitation to Parties to
petitioner. The Invitation was addressed to Jaime Pimentel, Hda. Administrator, Hda.
Palico.[3] Therein, the MARO invited petitioner to a conference on October 6, 1989 at the DAR
office in Nasugbu to discuss the results of the DAR investigation of Hacienda Palico, which was
scheduled for compulsory acquisition this year under the Comprehensive Agrarian Reform
Program.[4]
On October 25, 1989, the MARO completed three (3) Investigation Reports after investigation
and ocular inspection of the Hacienda. In the first Report, the MARO found that 270 hectares under
Tax Declaration Nos. 465, 466, 468 and 470 were flat to undulating (0-8% slope) and actually
occupied and cultivated by 34 tillers of sugarcane.[5] In the second Report, the MARO identified
as flat to undulating approximately 339 hectares under Tax Declaration No. 0234 which also had
several actual occupants and tillers of sugarcane;[6] while in the third Report, the MARO found
approximately 75 hectares under Tax Declaration No. 0354 as flat to undulating with 33 actual
occupants and tillers also of sugarcane.[7]
On October 27, 1989, a Summary Investigation Report was submitted and signed jointly by
the MARO, representatives of the Barangay Agrarian Reform Committee (BARC) and Land Bank
of the Philippines (LBP), and by the Provincial Agrarian Reform Officer (PARO). The Report
recommended that 333.0800 hectares of Hacienda Palico be subject to compulsory acquisition at
a value of P6,807,622.20.[8] The following day, October 28, 1989, two (2) more Summary
Investigation Reports were submitted by the same officers and representatives. They
recommended that 270.0876 hectares and 75.3800 hectares be placed under compulsory
acquisition at a compensation of P8,109,739.00 and P2,188,195.47, respectively.[9]
On December 12, 1989, respondent DAR through then Department Secretary Miriam D.
Santiago sent a Notice of Acquisition to petitioner. The Notice was addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila.[10]
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were subject to
immediate acquisition and distribution by the government under the CARL; that based on the
DARs valuation criteria, the government was offering compensation of P3.4 million for 333.0800
hectares; that whether this offer was to be accepted or rejected, petitioner was to inform the Bureau
of Land Acquisition and Distribution (BLAD) of the DAR; that in case of petitioners rejection or
failure to reply within thirty days, respondent DAR shall conduct summary administrative
proceedings with notice to petitioner to determine just compensation for the land; that if petitioner
accepts respondent DARs offer, or upon deposit of the compensation with an accessible bank if it
rejects the same, the DAR shall take immediate possession of the land.[11]
Almost two years later, on September 26, 1991, the DAR Regional Director sent to the LBP
Land Valuation Manager three (3) separate Memoranda entitled Request to Open Trust Account.
Each Memoranda requested that a trust account representing the valuation of three portions of
Hacienda Palico be opened in favor of the petitioner in view of the latters rejection of its offered
value.[12]
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of
Haciendas Palico and Banilad from agricultural to non-agricultural lands under the provisions of
the CARL.[13] On July 14, 1993, petitioner sent a letter to the DAR Regional Director reiterating
its request for conversion of the two haciendas.[14]
Despite petitioners application for conversion, respondent DAR proceeded with the
acquisition of the two Haciendas. The LBP trust accounts as compensation for Hacienda Palico
were replaced by respondent DAR with cash and LBP bonds.[15] On October 22, 1993, from the
mother title of TCT No. 985 of the Hacienda, respondent DAR registered Certificate of Land
Ownership Award (CLOA) No. 6654. On October 30, 1993, CLOAs were distributed to farmer
beneficiaries.[16]
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu, Batangas,
sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas[17]
The MARO informed Pimentel that Hacienda Banilad was subject to compulsory acquisition
under the CARL; that should petitioner wish to avail of the other schemes such as Voluntary Offer
to Sell or Voluntary Land Transfer, respondent DAR was willing to provide assistance thereto.[18]
On September 18, 1989, the MARO sent an Invitation to Parties again to Pimentel inviting
the latter to attend a conference on September 21, 1989 at the MARO Office in Nasugbu to discuss
the results of the MAROs investigation over Hacienda Banilad.[19]
On September 21, 1989, the same day the conference was held, the MARO submitted two (2)
Reports. In his first Report, he found that approximately 709 hectares of land under Tax
Declaration Nos. 0237 and 0236 were flat to undulating (0-8% slope). On this area were discovered
162 actual occupants and tillers of sugarcane.[20] In the second Report, it was found that approximately 235
hectares under Tax Declaration No. 0390 were flat to undulating, on which were 92 actual occupants and tillers of
sugarcane.[21]

The results of these Reports were discussed at the conference. Present in the conference were
representatives of the prospective farmer beneficiaries, the BARC, the LBP, and Jaime Pimentel
on behalf of the landowner.[22] After the meeting, on the same day, September 21, 1989, a Summary
Investigation Report was submitted jointly by the MARO, representatives of the BARC, LBP, and
the PARO. They recommended that after ocular inspection of the property, 234.6498 hectares
under Tax Declaration No. 0390 be subject to compulsory acquisition and distribution by
CLOA.[23] The following day, September 22, 1989, a second Summary Investigation was submitted
by the same officers. They recommended that 737.2590 hectares under Tax Declaration Nos. 0236
and 0237 be likewise placed under compulsory acquisition for distribution.[24]
On December 12, 1989, respondent DAR, through the Department Secretary, sent to petitioner
two (2) separate Notices of Acquisition over Hacienda Banilad. These Notices were sent on the
same day as the Notice of Acquisition over Hacienda Palico. Unlike the Notice over Hacienda
Palico, however, the Notices over Hacienda Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila.[25]
Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190 hectares
and P4,428,496.00 for 234.6498 hectares.[26]
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation Manager
a Request to Open Trust Account in petitioners name as compensation for 234.6493 hectares of
Hacienda Banilad.[27] A second Request to Open Trust Account was sent on November 18, 1991
over 723.4130 hectares of said Hacienda.[28]
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40
and P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for petitioners
land in Hacienda Banilad.[29]
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988 before
the effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares and is covered by
four (4) titlesTCT Nos. T-44662, T-44663, T-44664 and T-44665. On January 12, 1989,
respondent DAR, through the Regional Director for Region IV, sent to petitioner two (2) separate
Resolutions accepting petitioners voluntary offer to sell Hacienda Caylaway, particularly TCT
Nos. T-44664 and T-44663.[30] The Resolutions were addressed to:
Roxas & Company, Inc.
7 Flr. Cacho- Gonzales Bldg.
th

Aguirre, Legaspi Village

Makati, M. M.[31]
On September 4, 1990, the DAR Regional Director issued two separate Memoranda to the
LBP Regional Manager requesting for the valuation of the land under TCT Nos. T-44664 and T-
44663.[32] On the same day, respondent DAR, through the Regional Director, sent to petitioner a
Notice of Acquisition over 241.6777 hectares under TCT No. T-44664 and 533.8180 hectares
under TCT No. T-44663.[33] Like the Resolutions of Acceptance, the Notice of Acquisition was
addressed to petitioner at its office in Makati, Metro Manila.
 Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent a
letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway. The
Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the reclassification of Hacienda
Caylaway from agricultural to non-agricultural. As a result, petitioner informed respondent DAR
that it was applying for conversion of Hacienda Caylaway from agricultural to other uses.[34]
In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that a
reclassification of the land would not exempt it from agrarian reform. Respondent Secretary also
denied petitioners withdrawal of the VOS on the ground that withdrawal could only be based on
specific grounds such as unsuitability of the soil for agriculture, or if the slope of the land is over
18 degrees and that the land is undeveloped.[35]
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993, petitioner
filed its application for conversion of both Haciendas Palico and Banilad.[36] On July 14, 1993,
petitioner, through its President, Eduardo Roxas, reiterated its request to withdraw the VOS over Hacienda Caylaway
in light of the following:

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

Agriculture, Region 4, 4 Floor, ATI (BA) Bldg., Diliman, Quezon City dated March
th

1, 1993 stating that the lands subject of referenced titles are not feasible and
economically sound for further agricultural development.

2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the

Zoning Ordinance reclassifying areas covered by the referenced titles to non-
agricultural which was enacted after extensive consultation with government agencies,
including [the Department of Agrarian Reform], and the requisite public hearings.

3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas dated March 8,

1993 approving the Zoning Ordinance enacted by the Municipality of Nasugbu.

4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal
Planning & Development, Coordinator and Deputized Zoning Administrator
addressed to Mrs. Alicia P. Logarta advising that the Municipality of Nasugbu,
Batangas has no objection to the conversion of the lands subject of referenced titles to
non-agricultural.[37]

On August 24, 1993, petitioner instituted Case No. N-0017-96-46 (BA) with respondent DAR
Adjudication Board (DARAB) praying for the cancellation of the CLOAs issued by respondent
DAR in the name of several persons. Petitioner alleged that the Municipality of Nasugbu, where
the haciendas are located, had been declared a tourist zone, that the land is not suitable for
agricultural production, and that the Sangguniang Bayan of Nasugbu had reclassified the land to
non-agricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case involved the
prejudicial question of whether the property was subject to agrarian reform, hence, this question
should be submitted to the Office of the Secretary of Agrarian Reform for determination.[38]
 On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484. It
questioned the expropriation of its properties under the CARL and the denial of due process in the
acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by the MARO on
November 8, 1993.
Petitioners petition was dismissed by the Court of Appeals on April 28, 1994.[39] Petitioner moved
for reconsideration but the motion was denied on January 17, 1997 by respondent court. [40]

Hence, this recourse. Petitioner assigns the following errors:

A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING

THAT PETITIONERS CAUSE OF ACTION IS PREMATURE FOR FAILURE TO
EXHAUST ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS ACTS, THE IRREPARABLE DAMAGE
CAUSED BY SAID ILLEGAL ACTS, AND THE ABSENCE OF A PLAIN,
SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF
LAWALL OF WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.

B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING

THAT PETITIONERS LANDHOLDINGS ARE SUBJECT TO COVERAGE
UNDER THE COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF
THE UNDISPUTED FACT THAT PETITIONERS LANDHOLDINGS HAVE
BEEN CONVERTED TO NON-AGRICULTURAL USES BY PRESIDENTIAL
PROCLAMATION NO. 1520 WHICH DECLARED THE MUNICIPALITY OF
NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE ZONING
ORDINANCE OF THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING
CERTAIN PORTIONS OF PETITIONERS LANDHOLDINGS AS NON-
AGRICULTURAL, BOTH OF WHICH PLACE SAID LANDHOLDINGS
OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR AT THE VERY LEAST
ENTITLE PETITIONER TO APPLY FOR CONVERSION AS CONCEDED BY
RESPONDENT DAR.

C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED

TO DECLARE THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR
FAILURE TO OBSERVE DUE PROCESS, CONSIDERING THAT
RESPONDENTS BLATANTLY DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER
AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE
ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED
TO RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY
DEPRIVED OF ITS PROPERTY WITHOUT JUST COMPENSATION,
CONSIDERING THAT PETITIONER WAS NOT PAID JUST COMPENSATION
BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF ITS LANDHOLDINGS
THROUGH THE ISSUANCE OF CLOAS TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657.[41]

The assigned errors involve three (3) principal issues: (1) whether this Court can take
cognizance of this petition despite petitioners failure to exhaust administrative remedies; (2)
whether the acquisition proceedings over the three haciendas were valid and in accordance with
law; and (3) assuming the haciendas may be reclassified from agricultural to non-agricultural,
whether this court has the power to rule on this issue.

I. Exhaustion of Administrative Remedies.

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

II. The Validity of the Acquisition Proceedings Over the Haciendas.

Petititioners allegation of lack of due process goes into the validity of the acquisition
proceedings themselves. Before we rule on this matter, however, there is need to lay down the
procedure in the acquisition of private lands under the provisions of the law.

A. Modes of Acquisition of Land under R. A. 6657

Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL), provides
for two (2) modes of acquisition of private land: compulsory and voluntary. The procedure for the
compulsory acquisition of private lands is set forth in Section 16 of R.A. 6657, viz:

Sec. 16. Procedure for Acquisition of Private Lands. --. For purposes of acquisition of
private lands, the following procedures shall be followed:

a) After having identified the land, the landowners and the beneficiaries, the
DAR shall send its notice to acquire the land to the owners thereof, by personal
delivery or registered mail, and post the same in a conspicuous place in the
municipal building and barangay hall of the place where the property is located. Said
notice shall contain the offer of the DAR to pay a corresponding value in accordance
with the valuation set forth in Sections 17, 18, and other pertinent provisions hereof.

b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative shall
inform the DAR of his acceptance or rejection of the offer.

c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30) days after he executes and delivers a deed
of transfer in favor of the Government and surrenders the Certificate of Title and other
muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land requiring the
landowner, the LBP and other interested parties to submit evidence as to the just
compensation for the land, within fifteen (15) days from receipt of the notice. After
the expiration of the above period, the matter is deemed submitted for decision. The
DAR shall decide the case within thirty (30) days after it is submitted for decision.

e) Upon receipt by the landowner of the corresponding payment, or, in case of

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

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

In the compulsory acquisition of private lands, the landholding, the landowners and the farmer
beneficiaries must first be identified. After identification, the DAR shall send a Notice of
Acquisition to the landowner, by personal delivery or registered mail, and post it in a conspicuous
place in the municipal building and barangay hall of the place where the property is located. Within
thirty days from receipt of the Notice of Acquisition, the landowner, his administrator or
representative shall inform the DAR of his acceptance or rejection of the offer. If the landowner
accepts, he executes and delivers a deed of transfer in favor of the government and surrenders the
certificate of title. Within thirty days from the execution of the deed of transfer, the Land Bank of
the Philippines (LBP) pays the owner the purchase price. If the landowner rejects the DARs offer
or fails to make a reply, the DAR conducts summary administrative proceedings to determine just
compensation for the land. The landowner, the LBP representative and other interested parties may
submit evidence on just compensation within fifteen days from notice. Within thirty days from
submission, the DAR shall decide the case and inform the owner of its decision and the amount of
just compensation. Upon receipt by the owner of the corresponding payment, or, in case of
rejection or lack of response from the latter, the DAR shall deposit the compensation in cash or in
LBP bonds with an accessible bank. The DAR shall immediately take possession of the land and
cause the issuance of a transfer certificate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer beneficiaries. Any party may
question the decision of the DAR in the regular courts for final determination of just compensation.
The DAR has made compulsory acquisition the priority mode of land acquisition to hasten the
implementation of the Comprehensive Agrarian Reform Program (CARP).[46] Under Section 16 of
the CARL, the first step in compulsory acquisition is the identification of the land, the landowners
and the beneficiaries. However, the law is silent on how the identification process must be
made. To fill in this gap, the DAR issued on July 26, 1989 Administrative Order No. 12,
Series of 1989, which set the operating procedure in the identification of such lands. The
procedure is as follows:
 II. OPERATING PROCEDURE

A. The Municipal Agrarian Reform Officer, with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the CARP in his area of
responsibility. The masterlist shall include such information as required under the attached
CARP Masterlist Form which shall include the name of the landowner, landholding area,
TCT/OCT number, and tax declaration number.
2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the landowners
have already filed applications to avail of other modes of land acquisition. A case folder shall
contain the following duly accomplished forms:
a) CARP CA Form 1MARO Investigation Report
b) CARP CA Form 2-- Summary Investigation Report of Findings and Evaluation
c) CARP CA Form 3Applicants Information Sheet
d) CARP CA Form 4Beneficiaries Undertaking
e) CARP CA Form 5Transmittal Report to the PARO

The MARO/ BARC shall certify that all information contained in the above-
mentioned forms have been examined and verified by him and that the same are true
and correct.

3. Send a Notice of Coverage and a letter of invitation to a conference/ meeting to the

landowner covered by the Compulsory Case Acquisition Folder.Invitations to the said
conference/ meeting shall also be sent to the prospective farmer-beneficiaries, the BARC
representative(s), the Land Bank of the Philippines (LBP) representative, and other
interested parties to discuss the inputs to the valuation of the property. He shall discuss
the MARO/ BARC investigation report and solicit the views, objection, agreements or
suggestions of the participants thereon. The landowner shall also be asked to indicate his
retention area. The minutes of the meeting shall be signed by all participants in the
conference and shall form an integral part of the CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to him by his MAROs.
2. Immediately upon receipt of a case folder, compute the valuation of the land in accordance
with A.O. No. 6, Series of 1988.[47] The valuation worksheet and the related CACF
valuation forms shall be duly certified correct by the PARO and all the personnel who
participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO through ocular inspection and
verification of the property. This ocular inspection and verification shall be mandatory when
the computed value exceeds 500,000 per estate.
 4. Upon determination of the valuation, forward the case folder, together with the duly
accomplished valuation forms and his recommendations, to the Central Office. The LBP
representative and the MARO concerned shall be furnished a copy each of his report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO, review, evaluate and
determine the final land valuation of the property covered by the case folder. A summary
review and evaluation report shall be prepared and duly certified by the BLAD Director and
the personnel directly participating in the review and final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized representative, a Notice of
Acquisition (CARP CA Form 8) for the subject property. Serve the Notice to the landowner
personally or through registered mail within three days from its approval. The Notice shall
include, among others, the area subject of compulsory acquisition, and the amount of just
compensation offered by DAR.
3. Should the landowner accept the DARs offered value, the BLAD shall prepare and submit to
the Secretary for approval the Order of Acquisition. However, in case of rejection or non-
reply, the DAR Adjudication Board (DARAB) shall conduct a summary administrative
hearing to determine just compensation, in accordance with the procedures provided under
Administrative Order No. 13, Series of 1989. Immediately upon receipt of the DARABs
decision on just compensation, the BLAD shall prepare and submit to the Secretary for
approval the required Order of Acquisition.
4. Upon the landowners receipt of payment, in case of acceptance, or upon deposit of payment in
the designated bank, in case of rejection or non-response, the Secretary shall immediately
direct the pertinent Register of Deeds to issue the corresponding Transfer Certificate of Title
(TCT) in the name of the Republic of the Philippines. Once the property is transferred, the
DAR, through the PARO, shall take possession of the land for redistribution to qualified
beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform
Officer (MARO) keep an updated master list of all agricultural lands under the CARP in his area
of responsibility containing all the required information. The MARO prepares a Compulsory
Acquisition Case Folder (CACF) for each title covered by CARP. The MARO then sends the
landowner a Notice of Coverage and a letter of invitation to a conference/ meeting over the land
covered by the CACF. He also sends invitations to the prospective farmer-beneficiaries, the
representatives of the Barangay Agrarian Reform Committee (BARC), the Land Bank of the
Philippines (LBP) and other interested parties to discuss the inputs to the valuation of the property
and solicit views, suggestions, objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO)
who shall complete the valuation of the land. Ocular inspection and verification of the property by
the PARO shall be mandatory when the computed value of the estate exceeds P500,000.00. Upon
determination of the valuation, the PARO shall forward all papers together with his
recommendation to the Central Office of the DAR. The DAR Central Office, specifically, the
Bureau of Land Acquisition and Distribution (BLAD), shall review, evaluate and determine the
final land valuation of the property. The BLAD shall prepare, on the signature of the Secretary or
his duly authorized representative, a Notice of Acquisition for the subject property.[48] From this point,
the provisions of Section 16 of R.A. 6657 then apply. [49]

For a valid implementation of the CAR Program, two notices are required: (1) the Notice of
Coverage and letter of invitation to a preliminary conference sent to the landowner, the
representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to
DAR A. O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to the landowner under
Section 16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to
the conference, and its actual conduct cannot be understated. They are steps designed to comply
with the requirements of administrative due process. The implementation of the CARL is an
exercise of the States police power and the power of eminent domain. To the extent that the CARL
prescribes retention limits to the landowners, there is an exercise of police power for the regulation
of private property in accordance with the Constitution.[50] But where, to carry out such regulation,
the owners are deprived of lands they own in excess of the maximum area allowed, there is also a
taking under the power of eminent domain. The taking contemplated is not a mere limitation of
the use of the land. What is required is the surrender of the title to and physical possession of the
said excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary.[51] The
Bill of Rights provides that [n]o person shall be deprived of life, liberty or property without due
process of law.[52] The CARL was not intended to take away property without due process of
law.[53] The exercise of the power of eminent domain requires that due process be observed in the
taking of private property.
DAR A. O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was
amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1, Series of
1993. The Notice of Coverage and letter of invitation to the conference meeting were
expanded and amplified in said amendments.
DAR A. O. No. 9, Series of 1990 entitled Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition Pursuant to R.
A. 6657, requires that:

B. MARO

1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting documents.
2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares corresponding
VOCF/ CACF by landowner/ landholding.
3. Notifies/ invites the landowner and representatives of the LBP, DENR, BARC and prospective
beneficiaries of the schedule of ocular inspection of the property at least one week in advance.
4. MARO/ LAND BANK FIELD OFFICE/ BARC

a) Identify the land and landowner, and determine the suitability for
agriculture and productivity of the land and jointly prepare Field
Investigation Report (CARP Form No. 2), including the Land Use
Map of the property.
 b) Interview applicants and assist them in the preparation of the
Application For Potential CARP Beneficiary (CARP Form No. 3).

c) Screen prospective farmer-beneficiaries and for those found qualified,

cause the signing of the respective Application to Purchase and
Farmers Undertaking (CARP Form No. 4).

d) Complete the Field Investigation Report based on the result of the

ocular inspection/ investigation of the property and documents
submitted. See to it that Field Investigation Report is duly
accomplished and signed by all concerned.

5. MARO

a) Assists the DENR Survey Party in the conduct of a boundary/

subdivision survey delineating areas covered by OLT, retention,
subject of VOS, CA (by phases, if possible), infrastructures, etc.,
whichever is applicable.

b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned

or his duly authorized representative inviting him for a
conference.

c) Sends Invitation Letter (CARP Form No. 6) for a conference/ public

hearing to prospective farmer-beneficiaries, landowner,
representatives of BARC, LBP, DENR, DA, NGOs, farmers
organizations and other interested parties to discuss the following
matters:

Result of Field Investigation

Inputs to valuation

Issues raised

Comments/ recommendations by all parties concerned.

d) Prepares Summary of Minutes of the conference/ public hearing to be

guided by CARP Form No. 7.

e) Forwards the completed VOCF/CACF to the Provincial Agrarian

Reform Office (PARO) using CARP Form No. 8 (Transmittal
Memo to PARO).
 x x x.
DAR A. O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell (VOS)
and Compulsory Acquisition (CA) transactions involving lands enumerated under Section 7 of the
CARL.[54] In both VOS and CA transactions, the MARO prepares the Voluntary Offer to Sell Case
Folder (VOCF) and the Compulsory Acquisition Case Folder (CACF), as the case may be, over a
particular landholding. The MARO notifies the landowner as well as representatives of the LBP,
BARC and prospective beneficiaries of the date of the ocular inspection of the property at least
one week before the scheduled date and invites them to attend the same. The MARO, LBP or
BARC conducts the ocular inspection and investigation by identifying the land and landowner,
determining the suitability of the land for agriculture and productivity, interviewing and screening
prospective farmer beneficiaries. Based on its investigation, the MARO, LBP or BARC prepares
the Field Investigation Report which shall be signed by all parties concerned. In addition to the
field investigation, a boundary or subdivision survey of the land may also be conducted by a
Survey Party of the Department of Environment and Natural Resources (DENR) to be assisted by
the MARO.[55] This survey shall delineate the areas covered by Operation Land Transfer
(OLT), areas retained by the landowner, areas with infrastructure, and the areas subject to VOS
and CA. After the survey and field investigation, the MARO sends a Notice of Coverage to the
landowner or his duly authorized representative inviting him to a conference or public hearing with
the farmer beneficiaries, representatives of the BARC, LBP, DENR, Department of Agriculture
(DA), non-government organizations, farmers organizations and other interested parties. At the
public hearing, the parties shall discuss the results of the field investigation, issues that may be
raised in relation thereto, inputs to the valuation of the subject landholding, and other comments
and recommendations by all parties concerned. The Minutes of the conference/ public hearing
shall form part of the VOCF or CACF which files shall be forwarded by the MARO to the
PARO. The PARO reviews, evaluates and validates the Field Investigation Report and other
documents in the VOCF/ CACF. He then forwards the records to the RARO for another review.
DAR A. O. No. 9, Series of 1990 was amended by DAR A. O. No. 1, Series of 1993. DAR A.
O. No. 1, Series of 1993 provided, among others, that:
IV. OPERATING PROCEDURES:
"Steps Responsible Activity Forms/
Agency/Unit Document
(Requirements)
A. Identification and
Documentation
xxx
5 DARMO Issues Notice of Coverage to LO CARP
by personal delivery with proof of Form No.2
service, or by registered mail with
return card, informing him that his
property is now under CARP cover-
age and for LO to select his retention
area, if he desires to avail of his right
of retention; and at the same time in-
vites him to join the field investigation
to be conducted on his property which
should be scheduled at least two weeks
in advance of said notice.
A copy of said Notice CARP
shall be posted for at least Form No.17
one week on the bulletin
board of the municipal and barangay
halls where the property is located.
LGU office concerned notifies DAR
about compliance with posting requirement
thru return indorsement on CARP Form
No. 17.
6 DARMO Sends notice to the LBP, CARP
BARC, DENR Form No.3
representatives and
prospective ARBs of the schedule of
the field investigation to be conducted
on the subject property.
7 DARMO With the participation of CARP
BARC the LO, representatives of Form No.4
LBP the LBP, BARC, DENR Land Use
DENR and prospective ARBs, Map
Local Office conducts the investigation
on subject property to identify the landholding,
determines its suitability and productivity;
and jointly prepares the Field Investigation
Report (FIR) and Land Use Map. However,
the field investigation shall proceed even if the
LO, the representatives of the DENR and
prospective ARBs are not available provided,
they were given due notice of the time and date
of the investigation to be conducted. Similarly,
if the LBP representative is not available or could
not come on the scheduled date, the field
investigation shall also be conducted, after which
the duly accomplished Part I of CARP Form No. 4
shall be forwarded to the LBP representative for
validation. If he agrees to the ocular inspection report
of DAR, he signs the FIR (Part I) and accomplishes
Part II thereof.
In the event that there is a difference or variance
between the findings of the DAR and the LBP as
to the propriety of covering the land under CARP,
whether in whole or in part, on the issue of suitability
to agriculture, degree of development or slope, and
on issues affecting idle lands, the conflict shall be
resolved by a composite team of DAR, LBP, DENR
and DA which shall jointly conduct further investigation
thereon. The team shall submit its report of findings
which shall be binding to both DAR and LBP, pursuant
to Joint Memorandum Circular of the DAR, LBP, DENR
and DA dated 27 January 1992.
8 DARMO Screens prospective ARBS CARP
BARC and causes the signing of Form No. 5
the Application of
Purchase and Farmers' Undertaking (APFU).
9 DARMO Furnishes a copy of the CARP
duly accomplished FIR to Form No.
the landowner by personal 4
delivery with proof of service or registered
mail with return card and posts a copy thereof
for at least one week on the bulletin board of the
municipal and barangay halls where the property
is located.
LGU office concerned CARP
Notifies DAR about Form No.
compliance with posting 17
requirement thru return endorsement on
CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter
And/or segregation survey or
DENR delineating areas covered Segregation
Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope and above,
unproductive/ unsuitable to agriculture,
retention, infrastructure. In case of
segregation or subdivision survey, the
plan shall be approved by DENR-LMS.
C. Review and Completion of Documents.
11 DARMO Forwards VOCF/CACF CARP
to DARPO. Form No.
6
x x x."
DAR A. O. No. 1, Series of 1993, modified the identification process and increased the
number of government agencies involved in the identification and delineation of the land subject
to acquisition.[56] This time, the Notice of Coverage is sent to the landowner before the conduct of the field
investigation and the sending must comply with specific requirements. Representatives of the DAR Municipal Office
(DARMO) must send the Notice of Coverage to the landowner by personal delivery with proof of service, or by
registered mail with return card, informing him that his property is under CARP coverage and that if he desires to
avail of his right of retention, he may choose which area he shall retain. The Notice of Coverage shall also invite the
landowner to attend the field investigation to be scheduled at least two weeks from notice. The field investigation is
for the purpose of identifying the landholding and determining its suitability for agriculture and its productivity. A
copy of the Notice of Coverage shall be posted for at least one week on the bulletin board of the municipal and
barangay halls where the property is located. The date of the field investigation shall also be sent by the DAR
Municipal Office to representatives of the LBP, BARC, DENR and prospective farmer beneficiaries. The field
investigation shall be conducted on the date set with the participation of the landowner and the various
representatives. If the landowner and other representatives are absent, the field investigation shall proceed, provided
they were duly notified thereof. Should there be a variance between the findings of the DAR and the LBP as to whether
the land be placed under agrarian reform, the lands suitability to agriculture, the degree or development of the slope,
etc., the conflict shall be resolved by a composite team of the DAR, LBP, DENR and DA which shall jointly conduct
further investigation. The teams findings shall be binding on both DAR and LBP.After the field investigation, the
DAR Municipal Office shall prepare the Field Investigation Report and Land Use Map, a copy of which shall be
furnished the landowner by personal delivery with proof of service or registered mail with return card. Another copy
of the Report and Map shall likewise be posted for at least one week in the municipal or barangay halls where the
property is located.

Clearly then, the notice requirements under the CARL are not confined to the Notice of
Acquisition set forth in Section 16 of the law. They also include the Notice of Coverage first laid
down in DAR A. O. No. 12, Series of 1989 and subsequently amended in DAR A. O. No. 9, Series
of 1990 and DAR A. O. No. 1, Series of 1993. This Notice of Coverage does not merely notify the
landowner that his property shall be placed under CARP and that he is entitled to exercise his
retention right; it also notifies him, pursuant to DAR A. O. No. 9, Series of 1990, that a public
hearing shall be conducted where he and representatives of the concerned sectors of society may
attend to discuss the results of the field investigation, the land valuation and other pertinent
matters. Under DAR A. O. No. 1, Series of 1993, the Notice of Coverage also informs the
landowner that a field investigation of his landholding shall be conducted where he and the other
representatives may be present.

B. The Compulsory Acquisition of Haciendas Palico and Banilad

In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano, sent a
letter of invitation entitled Invitation to Parties dated September 29, 1989 to petitioner corporation,
through Jaime Pimentel, the administrator of Hacienda Palico.[57] The invitation was received on
the same day it was sent as indicated by a signature and the date received at the bottom left corner
of said invitation. With regard to Hacienda Banilad, respondent DAR claims that Jaime Pimentel,
administrator also of Hacienda Banilad, was notified and sent an invitation to the
conference. Pimentel actually attended the conference on September 21, 1989 and signed the
Minutes of the meeting on behalf of petitioner corporation.[58] The Minutes was also signed by the
representatives of the BARC, the LBP and farmer beneficiaries.[59] No letter of invitation was sent
or conference meeting held with respect to Hacienda Caylaway because it was subject to a
Voluntary Offer to Sell to respondent DAR.[60]
When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent to the
various parties the Notice of Coverage and invitation to the conference, DAR A. O. No. 12, Series
of 1989 was already in effect more than a month earlier. The Operating Procedure in DAR
Administrative Order No. 12 does not specify how notices or letters of invitation shall be sent to
the landowner, the representatives of the BARC, the LBP, the farmer beneficiaries and other
interested parties. The procedure in the sending of these notices is important to comply with
the requisites of due process especially when the owner, as in this case, is a juridical
entity. Petitioner is a domestic corporation,[61] and therefore, has a personality separate and distinct
from its shareholders, officers and employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the landowner
by personal delivery or registered mail. Whether the landowner be a natural or juridical person
to whose address the Notice may be sent by personal delivery or registered mail, the law does
not distinguish. The DAR Administrative Orders also do not distinguish. In the proceedings
before the DAR, the distinction between natural and juridical persons in the sending of notices
may be found in the Revised Rules of Procedure of the DAR Adjudication Board (DARAB).
Service of pleadings before the DARAB is governed by Section 6, Rule V of the DARAB Revised
Rules of Procedure. Notices and pleadings are served on private domestic corporations or
partnerships in the following manner:

Sec. 6. Service upon Private Domestic Corporation or Partnership.-- If the defendant

is a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent,
or any of its directors or partners.

Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14 provides:

Sec. 13. Service upon private domestic corporation or partnership.If the defendant is
a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier, agent,
or any of its directors.

Summonses, pleadings and notices in cases against a private domestic corporation before the
DARAB and the regular courts are served on the president, manager, secretary, cashier, agent or
any of its directors. These persons are those through whom the private domestic corporation or
partnership is capable of action.[62]
Jaime Pimentel is not the president, manager, secretary, cashier or director of petitioner
corporation. Is he, as administrator of the two Haciendas, considered an agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it reasonably certain
that the corporation will receive prompt and proper notice in an action against it. [63] Service must
be made on a representative so integrated with the corporation as to make it a priori supposable
that he will realize his responsibilities and know what he should do with any legal papers served
on him,[64] and bring home to the corporation notice of the filing of the action.[65] Petitioners
evidence does not show the official duties of Jaime Pimentel as administrator of petitioners
haciendas. The evidence does not indicate whether Pimentels duties is so integrated with the
corporation that he would immediately realize his responsibilities and know what he should do
with any legal papers served on him. At the time the notices were sent and the preliminary
conference conducted, petitioners principal place of business was listed in respondent DARs
records as Soriano Bldg., Plaza Cervantes, Manila,[66] and 7th Flr. Cacho-Gonzales Bldg., 101
Aguirre St., Makati, Metro Manila.[67] Pimentel did not hold office at the principal place of business
of petitioner. Neither did he exercise his functions in Plaza Cervantes, Manila nor in Cacho-
Gonzales Bldg., Makati, Metro Manila. He performed his official functions and actually resided
in the haciendas in Nasugbu, Batangas, a place over two hundred kilometers away from Metro
Manila.
Curiously, respondent DAR had information of the address of petitioners principal place of
business. The Notices of Acquisition over Haciendas Palico and Banilad were addressed to
petitioner at its offices in Manila and Makati. These Notices were sent barely three to four months
after Pimentel was notified of the preliminary conference. [68] Why respondent DAR chose to notify
Pimentel instead of the officers of the corporation was not explained by the said respondent.

Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the notices
and letters of invitation were validly served on petitioner through him, there is no showing that
Pimentel himself was duly authorized to attend the conference meeting with the MARO, BARC
and LBP representatives and farmer beneficiaries for purposes of compulsory acquisition of
petitioners landholdings. Even respondent DARs evidence does not indicate this authority. On the
contrary, petitioner claims that it had no knowledge of the letter-invitation, hence, could not have
given Pimentel the authority to bind it to whatever matters were discussed or agreed upon by the
parties at the preliminary conference or public hearing. Notably, one year after Pimentel was
informed of the preliminary conference, DAR A.O. No. 9, Series of 1990 was issued and this
required that the Notice of Coverage must be sent to the landowner concerned or his duly
authorized representative.[69]
Assuming further that petitioner was duly notified of the CARP coverage of its haciendas, the
areas found actually subject to CARP were not properly identified before they were taken over by
respondent DAR. Respondents insist that the lands were identified because they are all registered
property and the technical description in their respective titles specifies their metes and
bounds. Respondents admit at the same time, however, that not all areas in the haciendas were
placed under the comprehensive agrarian reform program invariably by reason of elevation or
character or use of the land.[70]The acquisition of the landholdings did not cover the entire expanse
of the two haciendas, but only portions thereof. Hacienda Palico has an area of 1,024 hectares and
only 688.7576 hectares were targetted for acquisition. Hacienda Banilad has an area of 1,050
hectares but only 964.0688 hectares were subject to CARP. The haciendas are not entirely
agricultural lands. In fact, the various tax declarations over the haciendas describe the landholdings
as sugarland, and forest, sugarland, pasture land, horticulture and woodland.[71]
Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically requires
that the land subject to land reform be first identified.The two haciendas in the instant case cover
vast tracts of land. Before Notices of Acquisition were sent to petitioner, however, the exact areas
of the landholdings were not properly segregated and delineated. Upon receipt of this notice,
therefore, petitioner corporation had no idea which portions of its estate were subject to
compulsory acquisition, which portions it could rightfully retain, whether these retained
portions were compact or contiguous, and which portions were excluded from CARP
coverage. Even respondent DARs evidence does not show that petitioner, through its duly
authorized representative, was notified of any ocular inspection and investigation that was to be
conducted by respondent DAR. Neither is there proof that petitioner was given the opportunity to
at least choose and identify its retention area in those portions to be acquired compulsorily. The
right of retention and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:

Section 6. Retention Limits.x x x.

The right to choose the area to be retained, which shall be compact or contiguous,
shall pertain to the landowner; Provided, however, That in case the area selected for
retention by the landowner is tenanted, the tenant shall have the option to choose
whether to remain therein or be a beneficiary in the same or another agricultural land
with similar or comparable features. In case the tenant chooses to remain in the
retained area, he shall be considered a leaseholder and shall lose his right to be a
beneficiary under this Act. In case the tenant chooses to be a beneficiary in another
agricultural land, he loses his right as a leaseholder to the land retained by the
landowner. The tenant must exercise this option within a period of one (1) year from
the time the landowner manifests his choice of the area for retention.

Under the law, a landowner may retain not more than five hectares out of the total area of his
agricultural land subject to CARP. The right to choose the area to be retained, which shall be
compact or contiguous, pertains to the landowner. If the area chosen for retention is tenanted, the
tenant shall have the option to choose whether to remain on the portion or be a beneficiary in the
same or another agricultural land with similar or comparable features.

C. The Voluntary Acquisition of Hacienda Caylaway

Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the subject
of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made on May 6,
1988,[72] before the effectivity of R.A. 6657 on June 15, 1988. VOS transactions were first
governed by DAR Administrative Order No. 19, series of 1989,[73] and under this order, all VOS
filed before June 15, 1988 shall be heard and processed in accordance with the procedure provided
for in Executive Order No. 229, thus:

III. All VOS transactions which are now pending before the DAR and for which no
payment has been made shall be subject to the notice and hearing requirements
provided in Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section
II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229.

"x x x."
Section 9 of E.O. 229 provides:

Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural lands it
deems productive and suitable to farmer cultivation voluntarily offered for sale to it at
a valuation determined in accordance with Section 6. Such transaction shall be exempt
from the payment of capital gains tax and other taxes and fees.

Executive Order 229 does not contain the procedure for the identification of private land as
set forth in DAR A. O. No. 12, Series of 1989. Section 5 of E.O. 229 merely reiterates the
procedure of acquisition in Section 16, R.A. 6657. In other words, the E.O. is silent as to the
procedure for the identification of the land, the notice of coverage and the preliminary conference
with the landowner, representatives of the BARC, the LBP and farmer beneficiaries. Does this
mean that these requirements may be dispensed with regard to VOS filed before June 15,
1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land, landowner
and beneficiaries of the land subject to agrarian reform be identified before the notice of
acquisition should be issued.[74] Hacienda Caylaway was voluntarily offered for sale in 1989. The
Hacienda has a total area of 867.4571 hectares and is covered by four (4) titles. In two separate
Resolutions both dated January 12, 1989, respondent DAR, through the Regional Director,
formally accepted the VOS over two of these four titles.[75] The land covered by the two titles has
an area of 855.5257 hectares, but only 648.8544 hectares thereof fell within the coverage of R.A.
6657.[76] Petitioner claims it does not know where these portions are located.
Respondent DAR, on the other hand, avers that surveys on the land covered by the four titles
were conducted in 1989, and that petitioner, as landowner, was not denied participation
therein. The results of the survey and the land valuation summary report, however, do not indicate
whether notices to attend the same were actually sent to and received by petitioner or its duly
authorized representative.[77] To reiterate, Executive Order No. 229 does not lay down the operating
procedure, much less the notice requirements, before the VOS is accepted by respondent
DAR. Notice to the landowner, however, cannot be dispensed with. It is part of administrative due
process and is an essential requisite to enable the landowner himself to exercise, at the very least,
his right of retention guaranteed under the CARL.

III. The Conversion of the three Haciendas.

It is petitioners claim that the three haciendas are not subject to agrarian reform because they
have been declared for tourism, not agricultural purposes.[78] In 1975, then President Marcos issued
Proclamation No. 1520 declaring the municipality of Nasugbu, Batangas a tourist zone. Lands in
Nasugbu, including the subject haciendas, were allegedly reclassified as non-agricultural 13 years
before the effectivity of R. A. No. 6657.[79] In 1993, the Regional Director for Region IV of the
Department of Agriculture certified that the haciendas are not feasible and sound for agricultural
development.[80]On March 20, 1992, pursuant to Proclamation No. 1520, the Sangguniang Bayan
of Nasugbu, Batangas adopted Resolution No. 19 reclassifying certain areas of Nasugbu as non-
agricultural.[81] This Resolution approved Municipal Ordinance No. 19, Series of 1992, the Revised
Zoning Ordinance of Nasugbu[82] which zoning ordinance was based on a Land Use Plan for
Planning Areas for New Development allegedly prepared by the University of the
Philippines.[83] Resolution No. 19 of the Sangguniang Bayan was approved by the Sangguniang
Panlalawigan of Batangas on March 8, 1993.[84]
Petitioner claims that Proclamation No. 1520 was also upheld by respondent DAR in 1991
when it approved conversion of 1,827 hectares in Nasugbu into a tourist area known as the Batulao
Resort Complex, and 13.52 hectares in Barangay Caylaway as within the potential tourist
belt. [85] Petitioner presents evidence before us that these areas are adjacent to the haciendas subject
of this petition, hence, the haciendas should likewise be converted.Petitioner urges this Court to
take cognizance of the conversion proceedings and rule accordingly.[86]
We do not agree. Respondent DARs failure to observe due process in the acquisition of
petitioners landholdings does not ipso facto give this Court the power to adjudicate over
petitioners application for conversion of its haciendas from agricultural to non-
agricultural. The agency charged with the mandate of approving or disapproving
applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure governing
the processing and approval of applications for land use conversion was the DAR A. O. No. 2,
Series of 1990. Under this A. O., the application for conversion is filed with the MARO where the
property is located. The MARO reviews the application and its supporting documents and conducts
field investigation and ocular inspection of the property. The findings of the MARO are subject to
review and evaluation by the Provincial Agrarian Reform Officer (PARO). The PARO may
conduct further field investigation and submit a supplemental report together with his
recommendation to the Regional Agrarian Reform Officer (RARO) who shall review the
same. For lands less than five hectares, the RARO shall approve or disapprove applications for
conversion. For lands exceeding five hectares, the RARO shall evaluate the PARO Report and
forward the records and his report to the Undersecretary for Legal Affairs. Applications over areas
exceeding fifty hectares are approved or disapproved by the Secretary of Agrarian Reform.
The DARs mandate over applications for conversion was first laid down in Section 4 (j) and
Section 5 (1) of Executive Order No. 129-A, Series of 1987 and reiterated in the CARL and
Memorandum Circular No. 54, Series of 1993 of the Office of the President. The DARs jurisdiction
over applications for conversion is provided as follows:
"A. The Department of Agrarian Reform (DAR) is mandated to approve or disapprove
applications for conversion, restructuring or readjustment of agricultural lands into non-
agricultural uses, pursuant to Section 4 (j) of Executive Order No. 129-A, Series of 1987.
"B. Section 5 (1) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority to approve
or disapprove applications for conversion of agricultural lands for residential, commercial,
industrial and other land uses.
 "C Section 65 of R. A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law
of 1988, likewise empowers the DAR to authorize under certain conditions, the conversion of
agricultural lands.
"D. Section 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the President,
provides that action on applications for land use conversion on individual landholdings shall
remain as the responsibility of the DAR, which shall utilize as its primary reference,
documents on the comprehensive land use plans and accompanying ordinances passed upon
and approved by the local government units concerned, together with the National Land Use
Policy, pursuant to R. A. No. 6657 and E. O. No. 129-A.[87]
Applications for conversion were initially governed by DAR A. O. No. 1, Series of 1990
entitled Revised Rules and Regulations Governing Conversion of Private Agricultural Lands and
Non-Agricultural Uses, and DAR A. O. No. 2, Series of 1990 entitled Rules of Procedure
Governing the Processing and Approval of Applications for Land Use Conversion. These A.O.s
and other implementing guidelines, including Presidential issuances and national policies related
to land use conversion have been consolidated in DAR A. O. No. 07, Series of 1997. Under this
recent issuance, the guiding principle in land use conversion is:

to preserve prime agricultural lands for food production while, at the same time,
recognizing the need of the other sectors of society (housing, industry and commerce)
for land, when coinciding with the objectives of the Comprehensive Agrarian Reform
Law to promote social justice, industrialization and the optimum use of land as a
national resource for public welfare.[88]

Land Use refers to the manner of utilization of land, including its allocation, development and
management. Land Use Conversion refers to the act or process of changing the current use of a
piece of agricultural land into some other use as approved by the DAR.[89] The conversion of agricultural
land to uses other than agricultural requires field investigation and conferences with the occupants of the land. They
involve factual findings and highly technical matters within the special training and expertise of the DAR. DAR A.
O. No. 7, Series of 1997 lays down with specificity how the DAR must go about its task. This time, the field
investigation is not conducted by the MARO but by a special task force, known as the Center for Land Use Policy
Planning and Implementation (CLUPPI- DAR Central Office). The procedure is that once an application for
conversion is filed, the CLUPPI prepares the Notice of Posting. The MARO only posts the notice and thereafter issues
a certificate to the fact of posting. The CLUPPI conducts the field investigation and dialogues with the applicants and
the farmer beneficiaries to ascertain the information necessary for the processing of the application. The Chairman of
the CLUPPI deliberates on the merits of the investigation report and recommends the appropriate action. This
recommendation is transmitted to the Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform.
Applications involving more than fifty hectares are approved or disapproved by the Secretary. The procedure does not
end with the Secretary, however.The Order provides that the decision of the Secretary may be appealed to the Office
of the President or the Court of Appeals, as the case may be, viz:

Appeal from the decision of the Undersecretary shall be made to the Secretary, and
from the Secretary to the Office of the President or the Court of Appeals as the case
may be. The mode of appeal/ motion for reconsideration, and the appeal fee, from
Undersecretary to the Office of the Secretary shall be the same as that of the Regional
Director to the Office of the Secretary.[90]
 Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself authority to resolve a controversy the jurisdiction over which is initially lodged with an
administrative body of special competence.[91] Respondent DAR is in a better position to
resolve petitioners application for conversion, being primarily the agency possessing the
necessary expertise on the matter. The power to determine whether Haciendas Palico,
Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of the CARL
lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of
due process in the acquisition proceedings does not give this Court the power to nullify the
CLOAs already issued to the farmer beneficiaries. To assume the power is to short-circuit
the administrative process, which has yet to run its regular course. Respondent DAR must
be given the chance to correct its procedural lapses in the acquisition proceedings. In
Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993.[92] Since then
until the present, these farmers have been cultivating their lands.[93] It goes against the basic
precepts of justice, fairness and equity to deprive these people, through no fault of their own,
of the land they till. Anyhow, the farmer beneficiaries hold the property in trust for the
rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over
the three haciendas are nullified for respondent DAR's failure to observe due process therein. In
accordance with the guidelines set forth in this decision and the applicable administrative
procedure, the case is hereby remanded to respondent DAR for proper acquisition proceedings and
determination of petitioner's application for conversion.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

HACIENDA LUISITA, G.R. No. 171101

INCORPORATED,
Petitioner,
Present:
LUISITA INDUSTRIAL PARK
CORPORATION and RIZAL CORONA, C.J.,
COMMERCIAL BANKING CARPIO,
CORPORATION, VELASCO, JR.,
Petitioners-in-Intervention, LEONARDO-DE CASTRO,
BRION,
- versus - PERALTA,*
BERSAMIN,
PRESIDENTIAL AGRARIAN DEL CASTILLO,
REFORM COUNCIL; SECRETARY ABAD,
NASSER PANGANDAMAN OF THE VILLARAMA, JR.,
DEPARTMENT OF AGRARIAN PEREZ,
REFORM; ALYANSA NG MGA MENDOZA, and
MANGGAGAWANG BUKID NG SERENO, JJ.
HACIENDA LUISITA, RENE
GALANG, NOEL MALLARI, and
JULIO SUNIGA[1] and his
SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and Promulgated:
WINDSOR ANDAYA, July 5, 2011
Respondents.
x-----------------------------------------------------------------------------------------x

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. 2005-32-01[16] and Resolution No. 2006-
34-01[17] issued on December 22, 2005 and May 3, 2006, respectively, as well as the
implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).[18]

The Facts

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

To facilitate the adverted sale-and-purchase package, the Philippine

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

That the lots comprising the Hacienda Luisita shall be subdivided

by the applicant-corporation and sold at cost to the tenants, should there
be any, and whenever conditions should exist warranting such action
under the provisions of the Land Tenure Act;[21]

As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacaleras interest in CAT.[22]

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

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

The defendants-appellants x x x filed a motion on April 13, 1988

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

1. Should TADECO fail to obtain approval of the stock

distribution plan for failure to comply with all the requirements for
corporate landowners set forth in the guidelines issued by the
[PARC]: or

2. If such stock distribution plan is approved by PARC,

but TADECO fails to initially implement it.

xxxx

WHEREFORE, the present case on appeal is hereby dismissed

without prejudice, and should be revived if any of the conditions as above
set forth is not duly complied with by the TADECO.[25]
Markedly, Section 10 of EO 229[26] allows corporate landowners, as an
alternative to the actual land transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of the corporation under a stock
ownership arrangement and/or land-to-share ratio.

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

SEC. 31. Corporate Landowners.Corporate landowners may

voluntarily transfer ownership over their agricultural landholdings to the
Republic of the Philippines pursuant to Section 20 hereof or to qualified
beneficiaries x x x.

Upon certification by the DAR, corporations owning agricultural

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

Corporations or associations which voluntarily divest a proportion

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

(a) In order to safeguard the right of beneficiaries who own shares

of stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;

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

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

(c) Any shares acquired by such workers and beneficiaries shall

have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries

shall be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
 If within two (2) years from the approval of this Act, the [voluntary]
land or stock transfer envisioned above is not made or realized or the plan
for such stock distribution approved by the PARC within the same period,
the agricultural land of the corporate owners or corporation shall be
subject to the compulsory coverage of this Act. (Emphasis added.)

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

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

Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr.,

and Paz C. Teopaco were the incorporators of HLI.[30]

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

As appearing in its proposed SDP, the properties and assets of Tadeco

contributed to the capital stock of HLI, as appraised and approved by the SEC, have
an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the
farm amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated
to 355,531,462 shares with a par value of PhP 1/share.[32]
 On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of the
proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of
Agreement (MOA),[33] was entered into by Tadeco, HLI, and the 5,848 qualified
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.,[35] which 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, 1989[38] 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. 89-12-2[40] dated November 21, 1989,
approved the SDP of Tadeco/HLI.[41]

At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master list/payroll
and non-master list members.

From 1989 to 2005, HLI claimed to have extended the following benefits to
the FWBs:

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

benefits

(b) 59 million shares of stock distributed for free to the FWBs;

(c) 150 million pesos (P150,000,000) representing 3% of the gross

produce;

(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of

500 hectares of converted agricultural land of Hacienda Luisita;

(e) 240-square meter homelots distributed for free;

(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80

hectares at 80 million pesos (P80,000,000) for the SCTEX;

(g) Social service benefits, such as but not limited to free

hospitalization/medical/maternity services, old age/death benefits
and no interest bearing salary/educational loans and rice sugar
accounts. [42]
 Two separate groups subsequently contested this claim of HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land
of the hacienda from agricultural to industrial use,[43] pursuant to Sec. 65 of RA
6657, providing:

SEC. 65. Conversion of Lands.After the lapse of five (5) years from
its award, when the land ceases to be economically feasible and sound for
agricultural purposes, or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial
purposes, the DAR, upon application of the beneficiary or the landowner,
with due notice to the affected parties, and subject to existing laws, may
authorize the reclassification, or conversion of the land and its disposition:
Provided, That the beneficiary shall have fully paid its obligation.

The application, according to HLI, had the backing of 5,000 or so FWBs,

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

On December 13, 1996, HLI, in exchange for subscription of 12,000,000

shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of
the converted area to the latter.[46] Consequently, HLIs Transfer Certificate of Title
(TCT) No. 287910[47] was canceled and TCT No. 292091[48] 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 sold[51] the entire 300 hectares to Luisita Industrial

Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the purpose
of developing an industrial complex.[52] As a result, Centennarys TCT No. 292091
was canceled to be replaced by TCT No. 310986[53] in the name of LIPCO.

From the area covered by TCT No. 310986 was carved out two (2) parcels,
for which two (2) separate titles were issued in the name of LIPCO, specifically: (a)
TCT No. 365800[54] and (b) TCT No. 365801,[55] covering 180 and four hectares,
respectively. TCT No. 310986 was, accordingly, partially canceled.

Later on, in a Deed of Absolute Assignment dated November 25, 2004,

LIPCO transferred the parcels covered by its TCT Nos. 365800 and 365801 to the
Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in
payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were
canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.

Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired by
the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex.
In absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco
ceded to HLI.[56]

Such, in short, was the state of things when two separate petitions, both
undated, reached the DAR in the latter part of 2003. In the first, denominated
as Petition/Protest,[57] respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory
Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had
failed to give them their dividends and the one percent (1%) share in gross sales, as
well as the thirty-three percent (33%) share in the proceeds of the sale of the
converted 500 hectares of land. They further claimed that their lives have not
improved contrary to the promise and rationale for the adoption of the SDOA. They
also cited violations by HLI of the SDOAs terms.[58] They prayed for a renegotiation
of the SDOA, or, in the alternative, its revocation.

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

HLI would eventually answer[61] the petition/protest of the Supervisory

Group. On the other hand, HLIs answer[62] to the AMBALA petition was contained
in its letter dated January 21, 2005 also filed with DAR.

Meanwhile, the DAR constituted a Special Task Force to attend to issues

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

After investigation and evaluation, the Special Task Force submitted its
Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict[64] dated September 22, 2005 (Terminal Report), finding that HLI has
not complied with its obligations under RA 6657 despite the implementation of the
SDP.[65] The Terminal Report and the Special Task Forces recommendations were
adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).[66]

Subsequently, Sec. Pangandaman recommended to the PARC Executive

Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of Hacienda
Luisita through the compulsory acquisition scheme. Following review, the PARC
Validation Committee favorably endorsed the DAR Secretarys recommendation
afore-stated.[67]

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

NOW, THEREFORE, on motion duly seconded, RESOLVED, as

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

RESOLVED, further, that the lands subject of the recalled/revoked

TDC/HLI SDO plan be forthwith placed under the compulsory coverage
or mandated land acquisition scheme of the [CARP].

APPROVED.[68]

A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 2005[69] 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 Coverage[71] which HLI
received on January 4, 2006.

Its motion notwithstanding, HLI has filed the instant recourse in light of what
it considers as the DARs hasty placing of Hacienda Luisita under CARP even before
PARC could rule or even read the motion for reconsideration.[72] As HLI later rued,
it can not know from the above-quoted resolution the facts and the law upon which
it is based.[73]
 PARC would eventually deny HLIs motion for reconsideration via Resolution
No. 2006-34-01 dated May 3, 2006.

By Resolution of June 14, 2006,[74] the Court, acting on HLIs motion, issued
a temporary restraining order,[75] enjoining 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 Group[79] and the AMBALA-Rene

Galang faction submitted their Comment/Opposition dated December 17, 2006.[80]

On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File
and Admit Attached Petition-In-Interventiondated 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 members[83] 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 Resolution[84]creating a Mediation Panel composed of
then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA
Justices Hector Hofilea and Teresita Dy-Liacco Flores, as members. Meetings on
five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were
conducted. Despite persevering and painstaking efforts on the part of the panel,
mediation had to be discontinued when no acceptable agreement could be reached.

The Issues

HLI raises the following issues for our consideration:

I.

WHETHER OR NOT PUBLIC RESPONDENTS PARC AND

SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER
AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR
RESCIND THE SDOA.
 II.

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

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

III.

WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR

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

IV.

WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE

PARTIES TO THE SDOA ARE NOW GOVERNED BY THE CORPORATION
CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x
x.

On the other hand, RCBC submits the following issues:

I.

RESPONDENT PARC COMMITTED GRAVE ABUSE OF

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

A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE

NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE THE
EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE
NAME OF PETITIONER-INTERVENOR RCBC.

B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-

INTERVENOR RCBC CANNOT BE PREJUDICED BY A
SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.

II.

THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE

OF COVERAGE DATED 02 JANUARY 2006 WERE ISSUED
WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS
RIGHT TO DUE PROCESS AS AN INNOCENT PURCHASER FOR
VALUE.

LIPCO, like RCBC, asserts having acquired vested and indefeasible rights
over certain portions of the converted property, and, hence, would ascribe on PARC
the commission of grave abuse of discretion when it included those portions in the
notice of coverage. And apart from raising issues identical with those of HLI, such
as but not limited to the absence of valid grounds to warrant the rescission and/or
revocation of the SDP, LIPCO would allege that the assailed resolution and the
notice of coverage were issued without affording it the right to due process as an
innocent purchaser for value. The government, LIPCO also argues, is estopped from
recovering properties which have since passed to innocent parties.

Simply formulated, the principal determinative issues tendered in the main

petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657;
(3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity or
propriety of such recall or revocatory action; and (5) corollary to (4), the validity of
the terms and conditions of the SDP, as embodied in the SDOA.

Our Ruling

I.

We first proceed to the examination of the preliminary issues before delving

on the more serious challenges bearing on the validity of PARCs assailed issuance
and the grounds for it.

Supervisory Group, AMBALA and their

respective leaders are real parties-in-interest

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

The SDOA no less identifies the SDP qualified beneficiaries as the

farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by
[HLI].[88] Galang, per HLIs own admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the definition of a real party-in-
interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to be
benefited or injured by the judgment in the suit or is the party entitled to the avails
of the suit.

The same holds true with respect to the Supervisory Group whose members
were admittedly employed by HLI and whose names and signatures even appeared
in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the
other 61 supervisors are certainly parties who would benefit or be prejudiced by the
judgment recalling the SDP or replacing it with some other modality to comply with
RA 6657.

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

Justice Bersamin: x x x I heard you a while ago that you were

conceding the qualified farmer beneficiaries of Hacienda Luisita were real
parties in interest?

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

Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly

allowed to represent themselves, their fellow farmers or their organizations in any
proceedings before the DAR. Specifically:

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

 xxxx

Responsible farmer leaders shall be allowed to represent

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

Clearly, the respective leaders of the Supervisory Group and AMBALA are
contextually real parties-in-interest allowed by law to file a petition before the DAR
or PARC.

This is not necessarily to say, however, that Galang represents AMBALA, for
as records show and as HLI aptly noted,[92] his petisyon filed with DAR did not carry
the usual authorization of the individuals in whose behalf it was supposed to have
been instituted. To date, such authorization document, which would logically
include a list of the names of the authorizing FWBs, has yet to be submitted to be
part of the records.

PARCs Authority to Revoke a Stock Distribution Plan

On the postulate that the subject jurisdiction is conferred by law, HLI

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

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

We have explained that every statute is understood, by implication, to contain

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

Gordon v. Veridiano II is instructive:

The power to approve a license includes by implication, even if

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

Following the doctrine of necessary implication, it may be stated that the

conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke or
recall the approval of the plan.

As public respondents aptly observe, to deny PARC such revocatory power

would reduce it into a toothless agency of CARP, because the very same agency
tasked to ensure compliance by the corporate landowner with the approved SDP
would be without authority to impose sanctions for non-compliance with it.[98] With
the view We take of the case, only PARC can effect such revocation. The DAR
Secretary, by his own authority as such, cannot plausibly do so, as the acceptance
and/or approval of the SDP sought to be taken back or undone is the act of PARC
whose official composition includes, no less, the President as chair, the DAR
Secretary as vice-chair, and at least eleven (11) other department heads.[99]

On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP has
been implemented would impair the contractual obligations created under the
SDOA.

The broad sweep of HLIs argument ignores certain established legal precepts
and must, therefore, be rejected.

A law authorizing interference, when appropriate, in the contractual relations

between or among parties is deemed read into the contract and its implementation
cannot successfully be resisted by force of the non-impairment guarantee. There is,
in that instance, no impingement of the impairment clause, the non-impairment
protection being applicable only to laws that derogate prior acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties.
Impairment, in fine, obtains if a subsequent law changes the terms of a contract
between the parties, imposes new conditions, dispenses with those agreed upon or
withdraws existing remedies for the enforcement of the rights of the
parties.[100] Necessarily, the constitutional proscription would not apply to laws
already in effect at the time of contract execution, as in the case of RA 6657, in
relation to DAO 10, vis--vis HLIs SDOA. As held in Serrano v. Gallant Maritime
Services, Inc.:
 The prohibition [against impairment of the obligation of contracts]
is aligned with the general principle that laws newly enacted have only
a prospective operation, and cannot affect acts or contracts already
perfected; however, as to laws already in existence, their provisions are
read into contracts and deemed a part thereof. Thus, the non-impairment
clause under Section 10, Article II [of the Constitution] is limited in
application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging or in
any manner changing the intention of the parties
thereto.[101] (Emphasis supplied.)

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

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

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

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

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

Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other hand,
RA 6657 is the special law on agrarian reform. As between a general and special
law, the latter shall prevailgeneralia specialibus non derogant.[105] Besides, the
present impasse between HLI and the private respondents is not an intra-corporate
dispute which necessitates the application of the Corporation Code. What private
respondents questioned before the DAR is the proper implementation of the SDP
and HLIs compliance with RA 6657. Evidently, RA 6657 should be the applicable
law to the instant case.

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

We are not persuaded.

Indeed, the provisions of the Corporation Code on corporate dissolution

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

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

Constitutional Issue

FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords

the corporation, as a mode of CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the fundamental right of farmers and
farmworkers under Sec. 4, Art. XIII of the Constitution.[106]

To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine, there is
stock certificate ownership of the farmers or farmworkers instead of them owning
the land, as envisaged in the Constitution. For FARM, this modality of distribution
is an anomaly to be annulled for being inconsistent with the basic concept of agrarian
reform ingrained in Sec. 4, Art. XIII of the Constitution.[107]

Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in this
regard to Sec. 3(a) of RA 6657 on the concept and scope of the term agrarian
reform. The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.

The instant challenge on the constitutionality of Sec. 31 of RA 6657 and

necessarily its counterpart provision in EO 229 must fail as explained below.
 When the Court is called upon to exercise its power of judicial review over,
and pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are first met,
to wit:

(1) there is an actual case or controversy;

(2) that the constitutional question is raised at the earliest possible

opportunity by a proper party or one with locus standi; and

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

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

While there is indeed an actual case or controversy, intervenor FARM,

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

It has been emphasized in a number of cases that the question of

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

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

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

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

It may be well to note at this juncture that Sec. 5 of RA 9700,[113] amending

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

It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and 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 unequivocalthe farmers and regular

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

Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec.

29 allows workers cooperatives or associations to collectively own the land, while
the second paragraph of Sec. 31 allows corporations or associations to own
agricultural land with the farmers becoming stockholders or members. Said
provisions read:

SEC. 29. Farms owned or operated by corporations or other

business associations.In the case of farms owned or operated by
corporations or other business associations, the following rules shall be
observed by the PARC.
 In general, lands shall be distributed directly to the individual
worker-beneficiaries.

In case it is not economically feasible and sound to divide the land,

then it shall be owned collectively by the worker beneficiaries who
shall form a workers cooperative or association which will deal with
the corporation or business association. x x x (Emphasis supplied.)

SEC. 31. Corporate Landowners. x x x

xxxx

Upon certification by the DAR, corporations owning agricultural lands

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

Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and

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

MR. NOLLEDO. And when we talk of the phrase to own directly, we

mean the principle of direct ownership by the tiller?
MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of collectively, we mean communal

ownership, stewardship or State ownership?

MS. NIEVA. In this section, we conceive of cooperatives; that is

farmers cooperatives owning the land, not the State.

MR. NOLLEDO. And when we talk of collectively, referring to farmers

cooperatives, do the farmers own specific areas of land where they only
unite in their efforts?

MS. NIEVA. That is one way.

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

MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng

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

xxxx

MR. TINGSON. x x x When we speak here of to own directly or

collectively the lands they till, is this land for the tillers rather than land
for the landless? Before, we used to hear land for the landless, but now the
slogan is land for the tillers. Is that right?

MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the
tillers. Ang ibig sabihin ng directly ay tulad sa implementasyon sa rice
and corn lands kung saan inaari na ng mga magsasaka ang lupang
binubungkal nila. Ang ibig sabihin naman ng collectively ay sama-
 samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon
sa Negros.[117] (Emphasis supplied.)

As Commissioner Tadeo explained, the farmers will work on the agricultural

land sama-sama or collectively. Thus, the main requisite for collective ownership of
land is collective or group work by farmers of the agricultural land. Irrespective of
whether the landowner is a cooperative, association or corporation composed of
farmers, as long as concerted group work by the farmers on the land is present, then
it falls within the ambit of collective ownership scheme.

Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a

commitment on the part of the State to pursue, by law, an agrarian reform program
founded on the policy of land for the landless, but subject to such priorities as
Congress may prescribe, taking into account such abstract variable as equity
considerations. The textual reference to a law and Congress necessarily implies that
the above constitutional provision is not self-executory and 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 States commitment to farmers and farmworkers
to advance their interests under the policy of social justice. The legislature, thru Sec.
31 of RA 6657, has chosen a modality for collective ownership by which the
imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.

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

This contention has no merit.

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

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

There is, thus, nothing unconstitutional in the formula prescribed by RA

6657. The policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR and
PARC to see to it the farmers should always own majority of the common shares
entitled to elect the members of the board of directors to ensure that the farmers will
have a clear majority in the board. Before the SDP is approved, strict scrutiny of the
proposed SDP must always be undertaken by the DAR and PARC, such that the
value of the agricultural land contributed to the corporation must always be more
than 50% of the total assets of the corporation to ensure that the majority of the
members of the board of directors are composed of the farmers. The PARC
composed of the President of the Philippines and cabinet secretaries must see to it
that control over the board of directors rests with the farmers by rejecting the
inclusion of non-agricultural assets which will yield the majority in the board of
directors to non-farmers. Any deviation, however, by PARC or DAR from the
correct application of the formula prescribed by the second paragraph of Sec. 31 of
RA 6675 does not make said provision constitutionally infirm. Rather, it is the
application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does
not trench on the constitutional policy of ensuring control by the farmers.

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

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

Although success is not guaranteed, a cooperative or a corporation stands in a

better position to secure funding and competently maintain the agri-business than
the individual farmer. While direct singular ownership over farmland does offer
advantages, such as the ability to make quick decisions unhampered by interference
from others, yet at best, these advantages only but offset the disadvantages that are
often associated with such ownership arrangement. Thus, government must be
flexible and creative in its mode of implementation to better its chances of
success. One such option is collective ownership through juridical persons
composed of farmers.

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

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

Consequently, before a statute or its provisions duly challenged are voided,

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

The wisdom of Congress in allowing an SDP through a corporation as an

alternative mode of implementing agrarian reform is not for judicial determination.
Established jurisprudence tells us that it is not within the province of the Court to
inquire into the wisdom of the law, for, indeed, We are bound by words of the
statute.[124]

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

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

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

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
workedor the so-called man daysis grossly onerous to the FWBs, as HLI, in the guise
of rotation, can unilaterally deny work to anyone. In elaboration of this ground,
PARCs Resolution No. 2006-34-01, denying HLIs motion for reconsideration of
Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the
entitlement of the original share beneficiaries;[125]

(4) The distribution/transfer of shares was not in accordance with the timelines
fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross sales
every year as production-sharing benefit on top of the workers salary; and

(6) Several homelot awardees have yet to receive their individual titles.
 Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons given
for the revocation of the SDP as unfounded.

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

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

The petition is not impressed with merit.

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

Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.It is the policy

of the State to pursue a Comprehensive Agrarian Reform Program
(CARP). The welfare of the landless farmers and farm workers will
receive the highest consideration to promote social justice and to move the
nation towards sound rural development and industrialization, and the
establishment of owner cultivatorship of economic-sized farms as the
basis of Philippine agriculture.
 To this end, a more equitable distribution and ownership of land,
with due regard to the rights of landowners to just compensation and to
the ecological needs of the nation, shall be undertaken to provide farmers
and farm workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity of
agricultural lands.
The agrarian reform program is founded on the right of farmers and
regular farm workers, who are landless, to own directly or collectively the
lands they till or, in the case of other farm workers, to receive a share of
the fruits thereof. To this end, the State shall encourage the just
distribution of all agricultural lands, subject to the priorities and retention
limits set forth in this Act, having taken into account ecological,
developmental, and equity considerations, and subject to the payment of
just compensation. The State shall respect the right of small landowners
and shall provide incentives for voluntary land-sharing. (Emphasis
supplied.)

Paragraph 2 of the above-quoted provision specifically mentions that a more

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

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

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

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

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

Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based,

infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.

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

SEC. 31. Corporate Landowners.Corporate landowners may

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

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

Upon certification by the DAR, corporations owning agricultural

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

Corporations or associations which voluntarily divest a proportion

of their capital stock, equity or participation in favor of their workers or
other qualified beneficiaries under this section shall be deemed to have
complied with the provisions of this Act: Provided, That the following
conditions are complied with:
 (a) In order to safeguard the right of beneficiaries who own shares
of stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;

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

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

(c) Any shares acquired by such workers and beneficiaries shall

have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries

shall be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.

The mandatory minimum ratio of land-to-shares of stock supposed to be

distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of RA
6657 refers to as that proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to
the companys total assets had been observed.

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

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

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

The appraised value of the agricultural land is PhP 196,630,000 and of HLIs
other assets is PhP 393,924,220. The total value of HLIs assets is, therefore, PhP
590,554,220.[132] The percentage of the value of the agricultural lands (PhP
196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which
represents the stockholdings of the 6,296 original qualified farmworker-
beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said
qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting
33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI
with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares
by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares
under the SDP are to be given to FWBs for free.

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

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

5. Even if only a part or fraction of the shares earmarked for

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

Also, no allegations have been made against HLI restricting the inspection of
its books by accountants chosen by the FWBs; hence, the assumption may be made
that there has been no violation of the statutory prescription under sub-paragraph (a)
on the auditing of HLIs accounts.
 Public respondents, however, submit that the distribution of the mandatory
minimum ratio of land-to-shares of stock, referring to the 118,391,976.85 shares
with par value of PhP 1 each, should have been made in full within two (2) years
from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said
law.[133]

Public respondents submission is palpably erroneous. We have closely

examined the last paragraph alluded to, with particular focus on the two-year period
mentioned, and nothing in it remotely supports the public respondents posture. In its
pertinent part, said Sec. 31 provides:

SEC. 31. Corporate Landowners x x x

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

Properly viewed, the words two (2) years clearly refer to the period within
which the corporate landowner, to avoid land transfer as a mode of CARP coverage
under RA 6657, is to avail of the stock distribution option or to have the SDP
approved. The HLI secured approval of its SDP in November 1989, well within the
two-year period reckoned from June 1988 when RA 6657 took effect.

Having hurdled the alleged breach of the agrarian reform policy under Sec. 2
of RA 6657 as well as the statutory issues, We shall now delve into what PARC and
respondents deem to be other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands

Contrary to the almost parallel stance of the respondents, keeping Hacienda

Luisita unfragmented is also not among the imperative impositions by the SDP, RA
6657, and DAO 10.

The Terminal Report states that the proposed distribution plan submitted in
1989 to the PARC effectively assured the intended stock beneficiaries that the
physical integrity of the farm shall remain inviolate. Accordingly, the Terminal
Report and the PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500 hectares of the hacienda.
In not too many words, the Report and the resolution view the conversion as an
infringement of Sec. 5(a) of DAO 10 which reads: a. that the continued operation of
the corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability.

The PARC is wrong.

In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of the
stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said
Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to
keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs stated
observation that the key phrase in the provision of Sec. 5(a) is viability of corporate
operations: [w]hat is thus required is not the agricultural land remaining intact x x x
but the viability of the corporate operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable even if the corporate agricultural
land does not remain intact or [un]fragmented.[134]
 It is, of course, anti-climactic to mention that DAR viewed the conversion as
not violative of any issuance, let alone undermining the viability of Hacienda
Luisitas operation, as the DAR Secretary approved the land conversion applied for
and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec.
65 of RA 6657 which reads:

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

On the 3% Production Share

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

Indeed, factual findings of administrative agencies are conclusive when

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

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

receives the 3% gross production share and that others alleged that they
received 30 million pesos still others maintain that they have not received
anything yet. Item No. 4 of the MOA is clear and must be followed. There
is a distinction between the total gross sales from the production of the
land and the proceeds from the sale of the land. The former refers to the
fruits/yield of the agricultural land while the latter is the land itself. The
phrase the beneficiaries are entitled every year to an amount
approximately equivalent to 3% would only be feasible if the subject is
the produce since there is at least one harvest per year, while such is not
the case in the sale of the agricultural land. This negates then the claim of
HLI that, all that the FWBs can be entitled to, if any, is only 3% of the
purchase price of the converted land.

Besides, the Conversion Order dated 14 August 1996 provides

that the benefits, wages and the like, presently received by the FWBs shall
not in any way be reduced or adversely affected. Three percent of the
gross selling price of the sale of the converted land shall be awarded to
the beneficiaries of the SDO. The 3% gross production share then is
different from the 3% proceeds of the sale of the converted land and, with
more reason, the 33% share being claimed by the FWBs as part owners of
the Hacienda, should have been given the FWBs, as stockholders, and to
which they could have been entitled if only the land were acquired and
redistributed to them under the CARP.

xxxx

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

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

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

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations

or business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:

SEC. 30. Homelots and Farmlots for Members of

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

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

SEC. 29. Farms Owned or Operated by Corporations or Other

Business Associations.In the case of farms owned or operated by
corporations or other business associations, the following rules shall be
observed by the PARC.

In general, lands shall be distributed directly to the individual

worker-beneficiaries.

In case it is not economically feasible and sound to divide the land,

then it shall be owned collectively by the 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 violatestwo (2) provisions of DAO
10. Par. 3 of the SDOA states:

3. At the end of each fiscal year, for a period of 30 years, the

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

Based on the above-quoted provision, the distribution of the shares of stock

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

Section 4. Stock Distribution Plan.The [SDP] submitted by the

corporate landowner-applicant shall provide for the distribution of
an equal number of shares of the same class and value, with the same
rights and features as all other shares, to each of the qualified
beneficiaries. This distribution plan in all cases, shall be at least
the minimum ratio for purposes of compliance with Section 31 of R.A.
No. 6657.
 On top of the minimum ratio provided under Section 3 of this
Implementing Guideline, the corporate landowner-applicant may
adopt additional stock distribution schemes taking into account
factors such as rank, seniority, salary, position and other
circumstances which may be deemed desirable as a matter of sound
company policy. (Emphasis supplied.)

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

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

Before anything else, it should be stressed that, at the time PARC approved
HLIs SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the 30-
year stock distribution program envisaged under the plan, FWBs who came in after
1989, new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
 Now then, by providing that the number of shares of the original 1989 FWBs
shall depend on the number of man days, HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had
given up their rights to the land that could have been distributed to them, suffered a
dilution of their due share entitlement. As has been observed during the oral
arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs.[141]Particularly:

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

Atty. Dela Merced: Yes, Your Honor.

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

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

Justice Abad: Right now, also the government, in a way, gave up

its right to own the land because that way the government takes own [sic]
the land and distribute it to the farmers and pay for the land, is that correct?

Atty. Dela Merced: Yes, Your Honor.

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

Atty. Dela Merced: Yes, Your Honor.

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

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

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

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

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

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

Atty. Dela Merced: None, Your Honor, I was referring, Your

Honor, to the original (interrupted)

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

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

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

Section 11. Implementation/Monitoring of Plan.The approved

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

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

To the Court, there is a purpose, which is at once discernible as it is practical,

for the three-month threshold. Remove this timeline and the corporate landowner
can veritably evade compliance with agrarian reform by simply deferring to absurd
limits the implementation of the stock distribution scheme.

The argument is urged that the thirty (30)-year distribution program is

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

HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously

misplaced as the said provision clearly deals with land distribution.

SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this

Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual
amortizations x x x.

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

Evidently, the land transfer beneficiaries are given thirty (30) years within
which to pay the cost of the land thus awarded them to make it less cumbersome for
them to pay the government. To be sure, the reason underpinning the 30-year
accommodation does not apply to corporate landowners in distributing shares of
stock to the qualified beneficiaries, as the shares may be issued in a much shorter
period of time.
 Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA
6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10 has
the force and effect of law and must be duly complied with.[143] The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-
12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided.

III.

We now resolve the petitions-in-intervention which, at bottom, uniformly

pray for the exclusion from the coverage of the assailed PARC resolution those
portions of the converted land within Hacienda Luisita which RCBC and LIPCO
acquired by purchase.

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

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

Under Sec. 44 of PD 1529 or the Property Registration Decree, every

registered owner receiving a certificate of title in pursuance of a decree of
registration and every subsequent purchaser of registered land taking a certificate of
title for value and in good faith shall hold the same free from all encumbrances
except those noted on the certificate and enumerated therein.[145]

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

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

x x x A purchaser in good faith is one who buys property of

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

In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of another
without notice that some other person has a right to or interest in such property; and
(2) that the purchaser pays a full and fair price for the property at the time of such
purchase or before he or she has notice of the claim of another.
 It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted land in
questionpurchasers in good faith for value entitled to the benefits arising from such
status.

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

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

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

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

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita
for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for
the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.[151] On
the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion en
pago to pay for a loan of PhP 431,695,732.10.

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

With the property in question having already passed to the hands of

purchasers in good faith, it is now of no moment that some irregularity
attended the issuance of the SPA, consistent with our pronouncement
in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals,
to wit:
 x x x the general rule that the direct result of a previous void
contract cannot be valid, is inapplicable in this case as it will
directly contravene the Torrens system of registration. Where
innocent third persons, relying on the correctness of the
certificate of title thus issued, acquire rights over the property,
the court cannot disregard such rights and order the
cancellation of the certificate. The effect of such outright
cancellation will be to impair public confidence in the certificate of
title. The sanctity of the Torrens system must be preserved;
otherwise, everyone dealing with the property registered under the
system will have to inquire in every instance as to whether the title
had been regularly or irregularly issued, contrary to the evident
purpose of the law.

Being purchasers in good faith, the Chuas already acquired

valid title to the property. A purchaser in good faith holds an
indefeasible title to the property and he is entitled to the protection of
the law.[152] x x x (Emphasis supplied.)

To be sure, the practicalities of the situation have to a point influenced Our

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

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang

Bayan of Tarlac favorably endorsing the 300-hectare industrial
estate project of LIPCO;

(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996

issued in accordance with the Omnibus Investments Code of 1987;

(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June

1997, approving LIPCOs application for a mixed ecozone and
 proclaiming the three hundred (300) hectares of the industrial land
as a Special Economic Zone;

(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang

Bayan of Tarlac, approving the Final Development Permit for the
Luisita Industrial Park II Project;

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

(f) DENR Environmental Compliance Certificate dated 01 October

1997 issued for the proposed project of building an industrial
complex on three hundred (300) hectares of industrial land;[156]

(g) Certificate of Registration No. 00794 dated 26 December 1997

issued by the HLURB on the project of Luisita Industrial Park II
with an area of three million (3,000,000) square meters;[157]
(h) License to Sell No. 0076 dated 26 December 1997 issued by the
HLURB authorizing the sale of lots in the Luisita Industrial Park II;

(i) Proclamation No. 1207 dated 22 April 1998 entitled Declaring

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

(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued

by the PEZA, stating that pursuant to Presidential Proclamation No.
1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has
been registered as an Ecozone Developer/Operator of Luisita
Industrial Park II located in San Miguel, Tarlac, Tarlac.

While a mere reclassification of a covered agricultural land or its inclusion in

an economic zone does not automatically allow the corporate or individual
landowner to change its use,[158] the reclassification process is a prima
facie indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-
(95) issued in 1996 by then DAR Secretary Garilao had effectively converted 500
hectares of hacienda land from agricultural to industrial/commercial use and
authorized their disposition.

In relying upon the above-mentioned approvals, proclamation and conversion

order, both RCBC and LIPCO cannot be considered at fault for believing that certain
portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside
the ambit of CARP. The PARC, and consequently DAR, gravely abused its
discretion when it placed LIPCOs and RCBCs property which once formed part of
Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed
Notice of Coverage.

As regards the 80.51-hectare land transferred to the government for use as part
of the SCTEX, this should also be excluded from the compulsory agrarian reform
coverage considering that the transfer was consistent with the governments exercise
of the power of eminent domain[159] 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 Bank[162] discussed the

effect to be given to a legislative or executive act subsequently declared invalid:
 x x x It does not admit of doubt that prior to the declaration of
nullity such challenged legislative or executive act must have been in force
and had to be complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience and
respect. Parties may have acted under it and may have changed their
positions. What could be more fitting than that in a subsequent litigation
regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, its existence as a
fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the government organ which has the
final say on whether or not a legislative or executive measure is valid, a
period of time may have elapsed before it can exercise the power of
judicial review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if there be no
recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: The actual
existence of a statute, prior to such a determination of
[unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects,with respect to
particular relations, individual and corporate, and particular conduct,
private and official. x x x

Given the above perspective and considering that more than two decades had
passed since the PARCs approval of the HLIs SDP, in conjunction with numerous
activities performed in good faith by HLI, and the reliance by the FWBs on the
legality and validity of the PARC-approved SDP, perforce, certain rights of the
parties, more particularly the FWBs, have to be respected pursuant to the application
in a general way of the operative fact doctrine.

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

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

The above conclusion is bolstered by the fact that in Sec. Pangandamans

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

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

Petitioner postulates that the operative fact doctrine is inapplicable

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

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

The argument of the Solicitor General is meritorious.

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

xxx xxx xxx

This doctrine was reiterated in the more recent case of City of

Makati v. Civil Service Commission, wherein we ruled that:

Moreover, we certainly cannot nullify the City

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

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

Petitioner contends that his arrest by virtue of Arrest Search and

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

We do not agree. In Taada, the Court addressed the possible effects

of its declaration of the invalidity of various presidential issuances.
Discussing therein how such a declaration might affect acts done on a
presumption of their validity, the Court said:
 . . .. In similar situations in the past this Court had
taken the pragmatic and realistic course set forth in Chicot
County Drainage District vs. Baxter Bank to wit:

The courts below have proceeded on the

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

xxx xxx xxx

Similarly, the implementation/enforcement of

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

The Chicot doctrine cited in Taada advocates that, prior to the

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

To reiterate, although the assailed Resolution No. 2005-32-01 states that it

revokes or recalls the SDP, what it actually revoked or recalled was the PARCs
approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was
actually declared null and void was an executive act, PARC Resolution No. 89-12-
2,[165] and 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 lands value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec.
31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August
14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary,
shall be liable to the FWBs for the price received for said lots. HLI shall be liable
for the value received for the sale of the 200-hectare land to LRC in the amount of
PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for
the sale of the 80.51-hectare SCTEX lot.

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

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

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

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

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

WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-

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

Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is

entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to him
or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute
additional shares to complete said prescribed number of shares at no cost to the FWB
within thirty (30) days from finality of this Decision. Other FWBs who do not belong
to the original 6,296 qualified beneficiaries are not entitled to land distribution and
shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3%
share in the proceeds of the sale of the 500-hectare converted land and the 80.51-
hectare SCTEX lot and homelots already received by the 10,502 FWBs, composed
of 6,296 original FWBs and 4,206 non-qualified FWBs, shall be respected with no
obligation to refund or return them.
Within thirty (30) days after determining who from among the original FWBs
will stay as stockholders, DAR shall segregate from the HLI agricultural land with
an area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-
12-2 the following: (a) the 500-hectare lot subject of the August 14, l996 Conversion
Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of the
SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual
lots that each FWB is entitled to under the CARP had he or she not opted to stay in
HLI as a stockholder. After the segregation process, as indicated, is done, the
remaining area shall be turned over to DAR for immediate land distribution to the
original qualified FWBs who opted not to remain as HLI stockholders.

The aforementioned area composed of 6,886.5-square meter lots allotted to

the FWBs who stayed with the corporation shall form part of the HLI assets.

HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out
of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary
Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-
hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500
paid by the government through the Bases Conversion Development Authority for
the sale of the 80.51-hectare lot used for the construction of the SCTEX road
network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP
750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of
the total gross sales from the production of the agricultural land and the 3% of the
proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating
to the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR
is ordered to engage the services of a reputable accounting firm approved by the
parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the
PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were
used or spent for legitimate corporate purposes. Any unspent or unused balance as
determined by the audit shall be distributed to the 6,296 original FWBs.
 HLI is entitled to just compensation for the agricultural land that will be transferred
to DAR to be reckoned from November 21, 1989 per PARC Resolution No. 89-12-
2. DAR and LBP are ordered to determine the compensation due to HLI.

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

SO ORDERED.

ASSOCIATION OF SMALL LANDOWNERS VS SEC. OF AGRARIAN

REFORM (1989)
30 Nov 2017

[175 SCRA 343; G.R. NO. L-78742; 14 JUL 1989] Constitutional Law| Police Power| Power of
Eminent Domain

FACTS:
The following are consolidated cases:
1. A petition alleging the constitutionality of PD No. 27, EO 228 and 229 and RA 6657. Subjects of the
petition are a 9-hectare and 5 hectare Riceland worked by four tenants. Tenants were declared full
owners by EO 228 as qualified farmers under PD 27. The petitioners now contend that President
Aquino usurped the legislature‘s power.
2. A petition by landowners and sugar planters in Victoria‘s Mill Negros Occidental against Proclamation
131 and EO 229. Proclamation 131 is the creation of Agrarian Reform Fund with initial fund of
P50Billion.
3. A petition by owners of land which was placed by the DAR under the coverage of Operation Land
Transfer.
4. A petition invoking the right of retention under PD 27 to owners of rice and corn lands not exceeding
seven hectares.
ISSUE:
Whether the aforementioned EO‘s, PD, and RA were constitutional.

HELD:
The promulgation of PD 27 by President Marcos was valid in exercise of Police power and
eminent domain.
The power of President Aquino to promulgate Proc. 131 and EO 228 and 229 was authorized
under Sec. 6 of the Transitory Provisions of the 1987 Constitution. Therefore it is a valid
exercise of Police Power and Eminent Domain

RA 6657 is likewise valid. The carrying out of the regulation under CARP becomes necessary to
deprive owners of whatever lands they may own 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 and the physical possession of said excess and all beneficial
rights accruing to the owner in favour of the farmer-beneficiary.

The Court declares that the content and manner of the just compensation provided for in 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.
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC. VS.
SECRETARY OF AGRARIAN REFORM, 175 SCRA 343, G.R. NO. 78742, G.R.
NO. 79310, G.R. NO. 79744, G.R. NO. 79777 JULY 14, 1989 — JUSTICE
ISAGANI CRUZ, PONENTE
SHARE THIS:

Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council

(PARC), et al., G.R. No. 171101, July 5, 2011
DECISION

VELASCO, JR., J.:

I. THE FACTS

In 1958, the Spanish owners of Compañia General de Tabacos de Filipinas (Tabacalera) sold
Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of the hacienda, to the Tarlac
Development Corporation (Tadeco), then owned and controlled by the Jose Cojuangco Sr. Group.
The Central Bank of the Philippines assisted Tadeco in obtaining a dollar loan from a US bank. Also,
the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the peso price component of the
sale, with the condition that “the lots comprising the Hacienda Luisita be subdivided by the applicant-
corporation and sold at cost to the tenants, should there be any, and whenever conditions should exist
warranting such action under the provisions of the Land Tenure Act.” Tadeco however did not comply
with this condition.

On May 7, 1980, the martial law administration filed a suit before the Manila RTC against
Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR)
so that the land can be distributed to farmers at cost. Responding, Tadeco 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. The Manila RTC rendered judgment ordering Tadeco
to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the CA.

On March 17, 1988, during the administration of President Corazon Cojuangco Aquino, the
Office of the Solicitor General moved to withdraw the government’s case against Tadeco, et al. The
CA dismissed the case, subject to the PARC’s approval of Tadeco’s proposed stock distribution plan
(SDP) in favor of its farmworkers. [Under EO 229 and later RA 6657, Tadeco had the option of availing
stock distribution as an alternative modality to actual land transfer to the farmworkers.] On August 23,
1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as vehicle to facilitate stock
acquisition by the farmworkers. For this purpose, Tadeco 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.

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 (SODP). On May 11, 1989, the SDOA was formally entered into by Tadeco, HLI, and the
5,848 qualified FWBs. This attested to by then DAR Secretary Philip Juico. The SDOA embodied the
basis and mechanics of HLI’s SDP, which was eventually approved by the PARC after a follow-up
referendum conducted by the DAR on October 14, 1989, in which 5,117 FWBs, out of 5,315 who
participated, opted to receive shares in HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda
from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the application
on August 14, 1996, subject to payment of three percent (3%) of the gross selling price to the FWBs
and to 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.
Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial Park
Corporation (LIPCO), which used it in developing an industrial complex. From this area was carved
out 2 parcels, for which 2 separate titles were issued in the name of LIPCO. Later, LIPCO transferred
these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in payment of LIPCO’s
PhP431,695,732.10 loan obligations to RCBC. LIPCO’s titles were cancelled and new ones were
issued to RCBC. Apart from the 500 hectares, another 80.51 hectares were later detached from
Hacienda Luisita and acquired by the government as part of the Subic-Clark-Tarlac Expressway
 (SCTEX) complex. Thus, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to
HLI.

Such, was the state of things when two separate petitions reached the DAR in the latter part
of 2003. The first was filed by the Supervisory Group of HLI (Supervisory Group), praying for a
renegotiation of the SDOA, or, in the alternative, its revocation. The second petition, praying for the
revocation and nullification of the SDOA and the distribution of the lands in the hacienda, was filed
by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA). The DAR then constituted
a Special Task Force (STF) to attend to issues relating to the SDP of HLI. After investigation and
evaluation, the STF found that HLI has not complied with its obligations under RA 6657 despite the
implementation of the SDP. On December 22, 2005, the PARC issued the assailed Resolution No.
2005-32-01, recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that the subject lands
be forthwith placed under the compulsory coverage or mandated land acquisition scheme of the
CARP.

From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI
also filed a petition before the Supreme Court 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. PARC would eventually deny HLI’s motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.

II. THE ISSUES

(1) Does the PARC possess jurisdiction to recall or revoke HLI’s SDP?

(2) [Issue raised by intervenor FARM (group of farmworkers)] Is Sec. 31 of RA 6657, which allows stock
transfer in lieu of outright land transfer, unconstitutional?

(3) Is the revocation of the HLI’s SDP valid? [Did PARC gravely abuse its discretion in revoking the subject
SDP and placing the hacienda under CARP’s compulsory acquisition and distribution scheme?]

(4) Should those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired
by purchase be excluded from the coverage of the assailed PARC resolution? [Did the PARC gravely
abuse its discretion when it included LIPCO’s and RCBC’s respective properties that once formed part
of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of
Coverage?]
III. THE RULING

[The Court DENIED the petition of HLI and AFFIRMED the PARC resolution placing the lands
subject of HLI’s SDP under compulsory coverage on mandated land acquisition scheme of the CARP,
with the MODIFICATION that the original 6,296 qualified FWBs were given the option to remain as
stockholders of HLI. It also excluded from the mandatory CARP coverage that part of Hacienda Luisita
that had been acquired by RCBC and LIPCO.]

(1) YES, the PARC has jurisdiction to revoke HLI’s SDP under the doctrine of necessary
implication.

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. 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.

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. 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.

(2) NO, Sec. 31 of RA 6657 is not unconstitutional. [The Court actually refused to pass upon
the constitutional question because it was not raised at the earliest opportunity and because the
resolution thereof is not the lis mota of the case. Moreover, the issue has been rendered moot and
academic since SDO is no longer one of the modes of acquisition under RA 9700.]

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.

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. 31 of RA
6657 as early as November 21, 1989 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 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.

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. If some
other grounds exist by which judgment can be made without touching the constitutionality of a law,
such recourse is favored.

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, 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.
 (3) YES, the revocation of the HLI’s SDP valid. [NO, the PARC did NOT gravely abuse its
discretion in revoking the subject SDP and placing the hacienda under CARP’s compulsory
acquisition and distribution scheme.]

The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLI’s
stock distribution violate DAO 10 because 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; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is contrary to what Sec. 11 of
DAO 10 prescribes.

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.

[I]t 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.

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.

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 [because of violations of] 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.
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.

(4) YES, those portions of the converted land within Hacienda Luisita that RCBC and
LIPCO acquired by purchase should be excluded from the coverage of the assailed PARC
resolution.

[T]here 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.

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.

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 PhP750 million
pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a Deed of Absolute Assignment
dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way
of dacion en pago to pay for a loan of PhP431,695,732.10.

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.
 [The Court went on to apply the operative fact doctrine to determine what should be done in
the aftermath of its disposition of the above-enumerated issues:

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. 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.

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. 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.]

[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.]