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EN BANC

G.R. No. L-34586 April 2, 1984


HOSPICIO NILO, petitioner,
vs.
HONORABLE COURT OF APPEALS and ALMARIO
GATCHALIAN, respondents.
G.R. No. L-36625 April 2, 1984
FORTUNATO CASTRO, petitioner,
vs.
JUAN CASTRO, respondent.
Lavides Law Office for petitioner.
The Solicitor General for respondents.

GUTIERREZ, JR., J.:+.wph!1


Under Section 36 (1) of Republic Act No. 3844, the Agricultural Land Reform
Code, a landowner may eject an agricultural lessee or tenant on the ground
that the owner shall personally cultivate the land himself. On September 10,
1971, Republic Act No. 6389, in amending Republic Act No. 3844, eliminated
personal cultivation as a ground for the ejectment of the tenant or leaseholder.
The issue in these cases is whether or not the amendment in R.A. 6389 should
be given retroactive effect to cover cases that were filed during the effectivity
of the repealed provision.
G.R. NO. L-34586 This is a petition for review on certiorari of the Court of
Appeals' decision ruling that Republic Act No. 6389 has no retroactive effect.
Respondent Almario Gatchalian is the owner of a parcel of riceland at Barrio
San Roque, San Rafael, Bulacan with an area of two (2) hectares covered by
Transfer Certificate of Title No. T-76791 of the Registry of Deeds of Bulacan.
Petitioner Hospicio Nilo has been the agricultural share-tenant of Gatchalian
since agricultural year 1964-65.
On February 22, 1967, petitioner filed a petition in C.A.R. Case No. 1676 with
the Court of Agrarian Relations electing the leasehold system. On March 7,

1968, Gatchalian flied an ejectment suit against petitioner on the ground of


personal cultivation under Sec. 36 (1) of Republic Act No. 3844 which
provides:t.hqw
SEC. 36. Possession of Landholding, Exceptions.
Notwithstanding any agreement as to the period or future
surrender of the land, an agricultural lessee shall continue in
the enjoyment and possession of his landholding except when
his dispossession has been authorized by the Court in a
judgment that is final and executory if after due hearing it is
shown that:
(1) The agricultural lessor-owner or a member of the
immediate family will personally cultivate the landholding or
will convert the landholding, if suitably located, into residential
factory, hospital or school site or other useful non-agricultural
purposes ...
Nilo alleged by way of affirmative defense that the ejectment suit was but an
act of reprisal and retaliation because he elected the leasehold system,
The two cases were heard jointly since they involved Identical landholding and
parties. The Court of Agrarian Relations found that there was a bona
fide intention to cultivate the land personally. The petitioner appealed to the
respondent Court of Appeals which affirmed the decision of the Court of
Agrarian Relations. The Court found no justification to unduly interfere with the
desire of Gatchalian to personally cultivate his own land.
The petitioner filed a motion for reconsideration contending that "personal
cultivation as a ground for ejectment of an agricultural lessee has been
eliminated under Republic Act No. 6389". The latter law which took effect on
September 10, 1971 now provides:t.hqw
(1) The landholding is declared by the department head upon
recommendation of the National Planning Commission to be
suited for residential commercial, industrial or some other
urban purposes ....
The respondent Court of Appeals denied the motion resolving that Republic Act
No. 6389 has no retroactive application.
G.R. NO. L-36625 This is an appeal raised by petitioner Fortunato Castro to
the Court of Appeals from the decision of the Court of Agrarian Relations
dismissing his complaint for the ejectment of his tenant, respondent Juan

Castro, on the ground of personal cultivation. The landowner wants to


personally cultivate the land owned by him located in Pulilan, Bulacan with an
area of 6,941 square meters. Petitioner Fortunato Castro questioned the
constitutionality of Section 7 of Republic Act No. 6389 which amended Section
36(l) of Republic Act No. 3844. The Court of Appeals certified the appeal to this
Court on the ground that the issue of the constitutionality of Republic Act No.
6389 fails squarely within the exclusive jurisdiction of the Supreme Court.
The complaint in this case was filed by the petitioner with the Court of
Agrarian Relations. The petitioner asked for the ejectment of his tenant Juan
Castro. The latter in his answer alleged that the petitioner was not the owner
of the landholding in question and that assuming the petitioner was the owner,
he is nevertheless not qualified and fit to personally cultivate said landholding
as he spends most of his time in mahjong sessions and in cockpits.
After the enactment of Republic Act No. 6389 on September 10, 1971, the
respondent moved for the dismissal of petitioner's complaint on the ground
that the new law eliminated personal cultivation by the landowmer as a
ground for the ejectment of an agricultural tenant. The Court of Agrarian
Relations dismissed the complaint. A motion for reconsideration was denied.
The petitioner appealed to the Court of Appeals alleging that: (1) the trial
court erred in considering that Sec. 7 of Republic Act No. 6389 which amended
Sec. 36 (1) of Republic Act No. 3844 has a retroactive effect on an cases for
ejectment of an agricultural lessee 'from his landholding on the ground of
personal cultivation even if the said cases were filed long before the approval
of the said Act; and (2) the trial court erred in not considering that Sec. 7 of
Republic Act No. 6389 is unconstitutional which point was raised by appellant
in his opposition to appellee's motion to dismiss the complaint and his motion
for reconsideration of the order dated December 17, 1971.
Since both cases involve the same issue of retroactivity, we shall resolve them
together.
The issue of whether or not Section 7 of Republic Act No. 6389 which amended
Section 36 (1) of Republic Act No. 3844, repealing as a consequence "personal
cultivation" as a cause for dispossession, should be given retroactive effect
has spawned controversy. In Arambulo v. Conicon (CA-G.R. No. 46727-R,
January 6, 1972) andPalpalatoc v. Pescador (CA-G.R. No. SP-00089-R, February
22, 1972), the Court of Appeals held that the deletion of personal cultivation
as a cause for ejectment has retroactive application affecting even those
cases pending in courts. The Arambulo case was elevated to the Supreme
Court on certiorari but was denied in a minute resolution "for lack of merit"
(G.R. No. L-34816, March 14, 1972).
In other cases, however, the Court of Appeals held that Republic Act No. 6389
has no retroactive effect. InLorenzo v. Lorenzo (CA-G.R. No. 46842-R,

September 4, 1971), the Court made a categorical statement that Republic Act
No. 6389 has no retroactive effect. There are other cases where the appellate
court split into two camps.
In resolving the controversy, we first apply established rules of statutory
construction.
Article 3 of the old Civil Code (now Article 4 of the New Civil Code) provides
that: "Laws shall not have a retroactive effect unless therein otherwise
provided." According to this provision of law, in order that a law may have
retroactive effect it is necessary that an express provision to this effect be
made in the law, otherwise nothing should be understood which is not
embodied in the law. Furthermore, it must be borne in mind that a law is a rule
established to guide our actions with no binding effect until it is enacted,
wherefore, it has no application to past times but only to future time, and that
is why it is said that the law looks to the future only and has no retroactive
effect unless the legislator may have formally given that effect to some legal
provisions (Lopez and Lopez v. Crow, 40 Phil. 997).
As early as 1913, this Court with Justice Moreland as ponente announced:t.
hqw
The Act contains, as is seen, no express words giving it a
retrospective or retroactive effect, nor is there anything found
therein which indicates an intention to give it such an effect.
Its effect is, rather, by clear intendment, prospective.
It is a rule of statutory construction that all statutes are to be
construed as having only a prospective operation unless the
purpose and intention of the Legislature to give them a
retrospective effect is expressly declared or is necessarily
implied from the language used. In every case of doubt, the
doubt must be solved against the retrospective effect. The
cases supporting this rule are almost without number.
In the case of Reynold v. M'Arthur (2 Pet., 416, 434), it was
said that
It is a principle which has always been held sacred in the
United States, that laws by which human action is to be
regulated, look forward not backward; and are never to be
construed retrospectively, unless the language of the Act shall
render such construction indispensable.

In the case of Leate v. St. Louis State Bank (115 Mo., 184), it
was held that
In construing statutes in regard to whether their action is to be
prospective or retrospective, all the adjudicated cases and all
the text-writers with unbroken uniformity unite in declaring
'that they are to operate prospectively and not otherwise
unless the intent that they are to operate in such an unusual
way, to wit, retrospectively, is manifested on the face of the
statute in a manner altogether free from ambiguity.
The case of Berdan v. Van Riper (16 N.J.L., 7) holds that where
a statute is susceptible of construction as both prospective
and retrospective, the former construction will be adopted, but
especially if the retrospective operation will work injustice to
anyone. ... (de Montilla v. La Corporacion de PP. Agustinos;
Ancajas v. Jakosalem, 24 Phil. 220).
The doctrine of non-retroactivity was reiterated in the case of Segovia v.
Noel (47 Phil. 543). Thus t.hqw
A sound canon of statutory construction is that a statute
operates prospectively only and never retroactively, unless the
legislative intent to the contrary is made manifest either by
the express terms of the statute or by necessary implication.
Following the lead of the United States Supreme Court and
putting the rule more strongly, a statute ought not to receive a
construction making it act retroactively, unless the words used
are so clear, strong, and imperative that no other meaning can
be annexed to them, or unless the intention of the legislature
cannot be otherwise satisfied. No court will hold a statute to
be retroactive when the legislature has not said so. ... (Farrel v.
Pingree (1888), 5 Utah, 443; 16 Pac., 843; Greer v. City of
Asheville [1894], 114 N. C., 495; United States Fidelity &
Guaranty Co. v. Struthers Wells Co. [1907], 209 U.S., 306;)
An earlier opinion to the same effect is In re Will of Riosa (39 Phil. 23). This is
still the rule and it has stood the test of time (Asiatic Petroleum Co. v. Llanes,
49 Phil. 466; De Mesa v. Collector of Internal Revenue, 53 Phil. 342; Hosana v.
Diomano, 56 Phil. 741; China Insurance & Surety Co. v. Judge of lst Inst. of
Manila, 63 Phil. 320; La Paz Ice Plant & Cold Storage Co., Inc. v. Bordman and
Iloilo Commercial & Ice Co., 65 Phil. 401; The Manila Trading & Supply Co. v.
Santos, 66 Phil. 237; La Previsora Filipina v. Ledda, 66 Phil. 573; Tolentino v.
Alzate, 98 Phil. 781; Tolentino v. Angeles, 99 Phil. 309; Tamayo v. Manila Hotel
Co., 101 Phil. 810; Valencia v. Hon. Jose T. Surtida, 2 SCRA 622; Buyco v. PNB,
2 SCRA 682; Billiones v. Court of Industrial Relations and Villardo v. Court of

Industrial Relations, 14 SCRA 676; Lazaro v. Commissioner of Customs, 17


SCRA 36; Universal Corn Products, Inc. v. Rice and Corn Board, 20 SCRA 1048;
Cebu Portland Cement Co. v. Collector of Internal Revenue, 25 SCRA 789).
A restatement of the doctrine was made in the case of Espiritu v. Cipriano (55
SCRA 533.) Thus t.hqw
xxx xxx xxx
... Well-settled is the principle that while the Legislature has
the power to pass retroactive laws which do not impair the
obligation of contracts, or affect injuriously vested rights, it is
equally true that statutes are not to be construed as intended
to have a retroactive effect so as to affect pending
proceedings, unless such intent is expressly declared or clearly
and necessary implied from the language of the enactment. ...
(Jones v. Summers, 105 Cal. App. 51, 286 Pac. 1093; U.S. v.
Whyel 28 F (2d) 30.)
The general rule therefore, is that statutes have no retroactive effect unless
otherwise provided therein (Philippine Virginia Tobacco Administration v.
Gonzales, 92 SCRA 172). To exemplify this doctrine, in Salcedo v. Court of
Appeals (81 SCRA 408), we held that Republic Act No. 2260 or the Civil Service
Act of 1959 has no retroactive effect. In Padasas v. Court of Appeals (82 SCRA
250), we held that the Agricultural Land Reform Code or Republic Act No. 3844
must be enforced prospectively and not retroactively and therefore, the rights
created, granted, or recognized therein such as the right of redemption
accrued upon the enactment of said legislation and may be exercised
thereafter in appropriate cases. In Jacinto v. Court of Appeals (87 SCRA 263)
reiterated inCastro v. Court of Appeals (99 SCRA 722) and in Baltazar v. Court
of Appeals (104 SCRA 619), we held that Presidential Decrees Nos. 27, 316,
and 946 cannot be applied retroactively.
More important than resort to statutory construction in determining the issue
of retroactivity is the ascertainment of the objectives sought to be realized by
the Code of Agrarian Reforms.
In the declaration of policy in Republic Act No. 6389, the applicable objectives
are:t.hqw
xxx xxx xxx
(2) To achieve a dignified existence for the sman farmers free
from pernicious institutional restraints and practices;

xxx xxx xxx


(6) To make the small farmers more independent, self-reliant
and responsible citizens and a source of genuine strength in
our democratic society.
It is the legislature which determines the policy objectives of reform
legislation.
This Court would be thwarting and not promoting the objectives of Congress if
we rule against the small landowners in this case. The national goal of having
independent and self reliant farmers tilling their own small landholdings would
not be achieved if persons who own only two hectares or 6,941 square meters
of land as in the instant cases cannot be allowed to work their land themselves
but must be compelled to perpetuate a lessor-lessee relationship. The desire
of Congress to achieve a "dignified existence for the small farmers" is not
served if two families one landowner and one tenant must share the
measly produce from 6,941 square meters of land. Land reform and agrarian
reform were intended to equalize opportunities for land ownership, to enable a
diffusion and sharing of wealth and not a sharing of poverty or a
fragmentation of tenanted farms into non-economic sizes.
We are aware of the deliberations and debates in Congress on Republic Act No.
6389. We stated in Aisporna v. Court of Appeals (108 SCRA 481).t.hqw
That it was the intention of the legislature in amending
paragraph (1), sec. 36 of R.A. 3844 to deprive the landowner
of the right to eject his tenant on the ground that the former
would personally cultivate the land and also to abate cases
brought by the landowner to eject the tenant on the same
grounds which were still pending at the time of the passage of
the amendatory act, is clear and evident from the
deliberations and debate of Congress when Republic Act 6389
was being deliberated, as published in the Senate Journal ....
This Aisporna case is, however, notably distinct from the two cases now before
us. In Aisporna, the court ordered the petitioner tenant ejected on the ground
of personal cultivation by the landowner. The court order became final and
executory. One year after his ejectment, Aisporna availed himself of his
remedies under the law and filed a case for reinstatement with damages
alleging that the owner failed to cultivate the land himself. The trial court ruled
in favor of Aisporna. However, on appeal, the Court of Appeals reversed the
decision stating that during the pendency of the action for reinstatement, the
law was amended and personal cultivation as a ground to eject a tenant was
removed. The appellate court opined that with the abolition of personal

cultivation as a basis for ejectment, the corollary proviso on


reinstatement:t.hqw
... Provided, further, That should the landholder not cultivate
the land himself for three years or fail to substantially carry
out such conversion within one year after the dispossession of
the tenant, it shall be presumed that he acted in bad faith and
the tenant shall have the right to demand possession of the
land and recover damages for any loss incurred by him
because of said dispossession.
was also eliminated.
The issue in Aisporna was the right of the tenant to recover his status vis-a-vis
the landholding from whence he was ejected. To sustain the appellate decision
would have resulted in a plain case of injustice to the tenant and a
condonation of bad faith. Our pronouncements on retroactivity dealt with this
issue alone and to the extent that the Aisporna decision may be interpreted as
covering factual situations similar to the two cases now before us, to that
extent we make it clear that it does not do so.
It is true that during the debates on the bill which was later enacted into
Republic Act No. 3844, there were statements on the floor that "the owner will
lose the right to eject after the enactment of this measure" even in cases
where the owner has not really succeeded yet in ejecting the tenants (Senate
Journal, Nos. 43 and 44, March 30 and 31, 1971, 2nd Regular Session 7th
Congress). Nonetheless and inspite of these remarks, Congress failed to
express an intention to make Republic Act No. 6389 retroactive and to cover
ejectment cases on the ground of personal cultivation then pending
adjudication by the courts.t.hqw
... In the interpretation of a legal document, especially a
statute, unlike in the interpretation of an ordinary written
document, it is not enough to obtain information as to the
intention or meaning of the author or authors, but also to see
whether the intention or meaning has been expressed in such
a way as to give it legal effect and validity. In short, the
purpose of the inquiry, is not only to know what the author
meant by the language he used, but also to see that the
language used sufficiently expresses that meaning. The legal
act, so to speak, is made up of two elements-an internal and
an external one; it originates in intention and is perfected by
expression. Failure of the latter may defeat the former. (59
C.J.S. 1017; Manila Jockey Club, Inc. v. Games and Amusement
Board, 107 Phil. 151).

In the case of Manila Jockey Club, Inc. v. Games and Amusements Board,
supra, we held that legislative debates are expressive of the views and
motives of individual members and are not always safe guides and, hence,
may not be resorted to, in ascertaining the meaning and purpose of the
lawmaking body. It is impossible to determine with certainty what construction
was put upon an act by the members of the legislative body that passed the
bill, by resorting to the speeches of the members thereof. Those who did not
speak, may not have agreed with those who did; and those who spoke, might
differ from each other (Sutherland on Statutory Construction, 499-501; Ramos
vs. Alverez, 97 Phil. 844).
There have been cases in the past where we adhered to this doctrine. Thus,
we held that individual statements made by Senators on the floor of the
Senate do not necessarily reflect the view of the Senate. Much less do they
indicate the intent of the House of Representatives (Casco Phil. Chem. Co., Inc.
v. Gimenez, 7 SCRA 347; Resins, Inc. v. Auditor General, 25 SCRA 754).
Accordingly, they are not controlling in the interpretation of the law in question
(Phil. Assn. of Government Retirees, Inc. v. GSIS, 14 SCRA 610). Some
statements may be deemed to be a mere personal opinion of the legislator
(Mayon Motors, Inc. vs. Acting Com. of Internal Revenue, 1 SCRA 918).
The interpretation of statutes is for the courts. And the courts are not
necessarily bound by one legislator's opinion, expressed in Congressional
debates, concerning the apPlication of existing laws (Song Kiat Chocolate
Factory vs. Central Bank of the Phils., 102 Phil. 477).
The petitioner-tenant in G.R. No. L-34586 contends that since Republic Act No.
6389 is a social legislation and passed under the police power of the State, it
should be liberally interpreted in favor of the tenants.
We agree with the petitioner-tenant that the law in question is social
legislation. But social justice is not for tenants alone. The disputed land in L36625 is only 6,941 square meters. The area of the land in L-34586 is slightly
bigger, about two (2) hectares. A person with only one or two hectares of land
to his name is equally deserving of social justice.
A majority of the landowners affected by the appeal of personal cultivation" as
a ground for the ejectment of a tenant own small landholdings. The records of
Senate Bill No. 478 which eventually became Republic Act No. 6389 reveal
that the repeal has affected an estimated 75% of landowners in the country
who own tenanted lands of less than 3 hectares, 40% of those who own 5
hectares or less and 96% of landowners who own an area of less than 10
hectares each.

Many of these landowners who filed actions for ejectment on this ground are
retirees who have opted to leave the stresses and strains of city life and to
return to their home towns to personally cultivate their small landholdings.
They are teachers, clerks, nurses, and other hardworking and frugal people
who in a lifetime of sacrifice gathered their pitiful little savings and purchased
small farms to supplement the inadequate pensions from the Government
Service Insurance System or the Social Security System. The owners of the
lots in these cases had the bona fideintention to personally cultivate their
lands as proven and found by the trial courts. To hold that they can no longer
eject their tenants because of Republic Act No. 6389 would deprive them of
their right to enjoy their property which they had already asserted before the
statute was passed. Precisely, the legislators, in providing "personal
cultivation" as a ground to eject tenants intended to encourage and attract the
landowners to go to their respective provinces and till their own lands.
Unfortunately, the ground of "personal cultivation" was abused and used as a
pretext to eject the tenant and this led to the amendatory law.
This unfortunate consequence should not work an injustice upon those small
landowners proven to have the bona fide intention to personally cultivate their
lands. In Gonzales v. GSIS (107 SCRA 492), we held that:t.hqw
It should also be borne in mind that Republic Act No. 3844,
then known as the Agricultural land Reform Code, is a social
legislation whose implementation has been made more
imperative by Section 6, Article 11 of the 1973 Constitution. It
is designed to promote economic and social Stability. It must
be interpreted liberally to give full force and effect to its clear
intent. This liberality in interpretation, however, should not
accrue solely in favor of actual tillers of the land, the tenantfarmers, but should extend to landowners as well, especially
those owning ,"small landholdings", by which is meant
landholdings of 24 hectares and less than 24 hectares. These
landowners constitute part of the economic Middle class which
the Government is trying to build. They deserve as much
consideration as the tenants themselves in order not to create
an economic dislocation, were tenants solely favored but this
particular group of landowners impoverished. (See "Whereas",
clauses of LOI No. 143).
In Cabatan v. Court of Appeals (95 SCRA 323), we similarly held that:t.
hqw
... the reliance by the tenants-lessees on"social justice"as a
reason to support the continuance of an unjust and inequitable
rental rate is not only improper but would countenance and
perpetuate an injustice against the landholder-lessor. This, the

constitutional precept of "social justice" was never meant to


do.
xxx xxx xxx
Social justice as thus defined and in its true meaning is not
meant to countenance, much less perpetuate, an injustice
against any group-not even as against landholders. For the
landholders as a component unit or element in our agroindustrial society are entitled to 'equal justice under law' which
our courts are, above everything else, under mandate of the
Constitution to dispense fairly, without fear nor favor.
xxx xxx xxx
... A cursory study of the long line of decisions on social justice
will readily reveal, however, that the concept has been fleshed
out-the principle, conceptualized as Justice Laurel enjoined
in the celebrated case of Calalang vs. Williams not thru
mistaken sympathy for or misplaced antipathy against any
group whether labor or capital, landlord or tenant but
evenhandedly and fairly, thru the observance of the principle
of "equal justice under law," for all and each and every
element of the body politic." (Eg. Calalang vs. Williams, 70
Phil. 726 (1940) cited, supra; Guido vs. Rural Progress
Administration, 47 O.G. 1848, (1949) 84 Phil. 847, a
reconciliation between conflicting claims of social justice and
protection to property and rights; Militona Estate Inc. vs. De
Guzman, et al., No. L-11912 (1959), 105 Phil. 1296
(unreported).
In Dequito v. Llamas, (66 SCRA 504) we ruled that the petitioner-tenant ought
to know that if he has rights to protection as a tenant, the landowner has also
rights under the law. The protective mantle of social justice cannot be utilized
as an instrument to hoodwink courts of justice and undermine the rights of
landowners on the plea of helplessness and heartless exploitation of the
tenant by the landowner.
Our decision to deny retroactive effect to the amendatory provision gains
added strength from later developments.
Under the 1973 Constitution, it is even more emphasized that property
ownership is impressed with a social function. This means that the owner has
the obligation to use his property not only to benefit himself but society as
well. Hence, the Constitution provides under Section 6 of Article II that in the

promotion of social justice, the State "shall regulate the acquisition,


ownership, use, enjoyment, and disposition of private property, and equitably
diffuse property ownership and profits." The Constitution also ensures that the
worker shall have a just and living wage which should assure for himself and
his family an existence worthy of human dignity and give him opportunities for
a better life (Sections 7 and 9, Article II) (Alfanta vs, Noe, 53 SCRA 76; Almeda
vs. Court of Appeals, 78 SCRA 194).
In line with the above mandates, this Court upheld the constitutionality of
Presidential Decree No. 27, which decrees the emancipation of tenants from
the bondage of the soil and transferred to them the ownership of the land they
till, in Gonzales v. Estrella (91 SCRA 294). We noted the imperative need for
such a decree in Chavez v. Zobel (55 SCRA 26). We held in the latter case that
"on this vital policy question, one of the utmost concern, the need for what for
some is a radical solution in its pristine sense, one that goes at the root, was
apparent. Presidential Decree No. 27 was thus conceived. ... There is no doubt
then, as set forth expressly therein, that the goal is emancipation. What is
more, the decree is now part and parcel of the law of the land according to the
present Constitution."
Significantly, P.D. No. 27, which decrees the emancipation of the tenant from
the bondage of the soil, transfers to him the ownership of the land he tills, and
provides instruments and mechanisms therefor, has recognized personal
cultivation as a ground for retention and, therefore, exemption from the land
transfer decree. Personal cultivation cannot be effected unless the tenant
gives up the land to the owner.
Presidential Decree No. 27 provides:t.hqw
In all cases, the landowner may retain an area of not more
than seven (7) hectares if such landowner is cultivating such
area or will now cultivate it.
The redistribution of land, restructuring of property ownership,
democratization of political power, and implementation of social justice do not
require that a landowner should be deprived of everything he owns and that
even small parcels as in these two cases now before us may not be worked by
the owner himself. The evil sought to be remedied by agrarian reform is the
ancient anachronism where one person owns the land while another works on
it. The evil is not present in cases of personal cultivation by the owner.
Taking over by the landowner is subject to strict requirements. In addition to
proof of ownership and the required notices to the tenant, the bonafide intention to cultivate must be proved to the satisfaction of the court. And

as earlier stated, the tenant is Protected in case the owner fails to cultivate
the land within one year or to work the land himself for three years.

land's productivity will decisively improve the people's


livelihood and promote political and social stability.

The seven hectares retention under P.D. No. 27 is applicable only to


landowners who do not own other agricultural lands containing an aggregate
of more than seven hectares or lands used for residential commercial industry
or other urban purposes where they derive adequate income to support
themselves and their families. (Letter of Instruction No. 472 dated October 21,
1976).

And, of course, Section 12 of Article XIV specifically mandates that "the State
shad formulate and implement an agrarian reform program aimed at
emancipating the tenant from the bondage of the soil and achieving the goals
enunciated in this Constitution." At any rate, there is no need to pass upon the
constitutional issue for the purpose of resolving the narrow question of
retroactivity of the questioned provision.

To Support his petition, Fortunate Castro in L-36625 asserts that Section 7 of


Republic Act No. 6389 is unconstitutional

WHEREFORE, the petition in G.R. No. L-34586 is denied for lack of merit and
the questioned decision of the Court of Appeals is aimed. In G.R. No. L-36625,
the questioned order of the lower court is set aside and the case is remanded
to the Regional Trial Court of Bulacan for trial on the merits.

The amended provision reads:t.hqw


xxx xxx xxx
(1) The landholding is declared by the department head upon
rommendation of the National Planning Commission to be
suited for residential commercial industrial or some other
urban purposes: Provided, That the agricultural lessee shag be
entitled to disturbance compensation equivalent to five times
the average of the gross harvests on his landholding during
the last five preceding calendar years.
. There appears to be nothing unconstitutional in the above provision. If Mr.
Castro is challenging agrarian reform itself, then his challenge is puerile if not
hopeless. We ruled in Vda, de Genuino v. Court of Agrarian Relations (22 SCRA
792) that the Agricultural Land Reform Code is valid and justified. In Paulo v.
Court of Appeals (54 SCRA 253) we ruled:t.hqw
... Land Reform which is now transforming the rural existence
of the farmers, has become more imperative in view of the
provisions of the New Constitution. Thus Section 6, Article II
thereof directs that 'the State shag promote social justice to
insure the dignity, welfare and security of all the people,' and
for the attainment of this end, directs that 'the State shall
regulate the acquisition, ownership, use, enjoyment, and
diffuse of private property, and equitably diffuse ownership
and profits.' Section 6, Article XVII of the Transitory Provisions
provides that the implementation of declared agrarian reforms'
shall be given priority. There is no question that the massive
overhaul of the system of land ownership by the transfer to
the tenants of the ownership of the land they till and the grant
to them of the instruments and mechanisms to increase their

SO ORDERED.1wph1.t

FIRST DIVISION

G.R. No. L-40191 May 27, 1981


ANGEL BALTAZAR, petitioner,
vs.
COURT OF APPEALS (Seventh Division) and FLORA L.
ESGUERRA, respondents.

MELENCIO-HERRERA, J.:
By this petition, Angel Baltazar seeks a review of the Decision of respondent
Court of Appeals, 1 promulgated on 22 October 1974 (in CA-G. R. No. 46454-R,
"Flora L. Esguerra vs. Angel Baltazar") dismissing the ejectment suit against a
tenant filed by a landowner who wanted to convert her land into a residential
subdivision, but denying to the tenant the right of redemption, premised upon
the retroactive application of Presidential Decrees Nos. 27 and 316.
The antecedents of the case disclose that since 1912, petitioner Angel
Baltazar was the share tenant over two (2) parcels of riceland (Lots Nos. 1242
and 6) covered by Transfer Certificates of Title Nos. 74177 and 74161, with
corresponding areas of 19,841 and 14,984 square meters, respectively, both
located at barrio Salacot San Miguel, Bulacan. The front portion of Lot No.
1242, stretching along the National Highway, became a residential area since
the Japanese Occupation. Petitioner, however, continued to possess as tenant,
the rear and greater portion of this lot and Lot No. 6. He became an
agricultural lessee during the agricultural year 1968-69.
The two lots were originally owned by Emiliano Tecson, who transferred
ownership to Salud B. Calderon before the Japanese Occupation. On 6 March
1969, Salud Calderon sold the two parcels of land to private respondent Flora
L. Esguerra for P4,608.32. As the new owner, private respondent caused the
cancellation of the former titles and the issuance in her name of Transfer
Certificate of Title No. 108665 in lieu of TCT No. 74161, and Transfer Certificate
of Title No. 108666 to replace TCT No 74177. Six months later, or on 26
September 1969, private respondent caused the subdivision of Lot No. 1242
covered by TCT No. 108666 into ten (10) lots comprising lots Nos. 1242-A to
1242-J and the issuance of TCT Nos. 117623 to 117632, all derived from TCT
No. 108666. Lots 1242-A to 1242-1, with approximately 300 square meters
each, occupy the portion of the landholding fronting the national road which
had since become a residential area and for which TCT Nos. 117623 to 117631
were issued. The tenth lot, Lot No. 1242-J, with an area of 17,121 square
meters, covered by TCT No. 117632, corresponds to the rear portion of the
landholdings over which petitioner continued with his possession and tenancy.

To pursue her plan to convert the entire landholding into residential lots,
private respondent instituted on 24 December 1969 a Complaint for Ejectment
against petitioner before the Court of Agrarian Relations, 5th Regional District,
Branch 1A, Baliuag, Bulacan. The Complaint substantially alleged that the
portions being tenanted by petitioner (defendant therein) particularly, Lot
1242-J covered by TCT No 117632, with an area of 17,121 square meters
(derived from TCT No. 108666), and the lot covered by TCT No. 108665 with an
area of 14,984 square meters, or a combined area of approximately 3.2
hectares, are all suited for subdivision into residential lots, and thus sought the
ejectment of petitioner from the entire landholdings tenanted by him. Lots
Nos. 1242-A to 1242-1, or the residential lots, were already excluded from the
Complaint.
Answering, petitioner interposed the special and affirmative defenses that the
two (2) parcels of land in question were sold by the former landowner, Salud B.
Calderon, to private respondent without complying with the notice
requirement of Section 11 of Republic Act No. 3844 (the Agricultural Land
Reform Code); that these lots were registered in violation of Section 13 of the
same law, which requires the vendor, as a prerequisite to registration, to
execute an affidavit that he has given written notice pursuant to Section 11
thereof, or that the land is not cultivated by an agricultural lessee; that private
respondent filed this action without giving petitioner the required notice under
Section 36 of the same Code; that the landholdings in question are not
suitable for homesite, and that the attempt to dispossess him was in bad faith.
By way of counterclaim, petitioner tendered and deposited with the Court of
Agrarian Relations the sum of P5,000.00 to cover the purchase price of
P4,608.32, in the exercise of his right of redemption under ejection 12 of the
Agrarian Code.
Pending final determination of the case, petitioner filed on 26 January 1970 a
"Motion for an Interlocutory Order", followed about two weeks later with an
Amended Verified Motion, to direct private respondent to maintain petitioner in
the lawful possession and cultivation of the landholdings in question.
Upon hearing, petitioner testified and declared, inter alia, that on 27 February
1970 private respondent had begun to bulldoze the land resulting in the
removal of the dikes and the destruction of rice paddies that roads had
actually been constructed on the subject land; with some gravel and sand
already delivered; and that monuments were being planted on the land.
Petitioner also presented in Court the Resolution of the Municipal Council of
San Miguel, Bulacan, dated 20 February 1970 (Exhibit "A"), denying private
respondent's application for conversion of the subject land into a subdivision
on the ground that the land was under the possession of a tenant and there
was a pending suit before the Court of Agrarian Relations wherein said tenant
was a party.

The lower Court issued the interlocutory Order on 5 March 1970 enjoining
private respondent from committing acts of dispossession against petitioner,
or otherwise from disturbing him in his possession and cultivation of these
landholdings pending the final determination of the case and until further
orders.
After trial on the merits, the Court a quo rerdered its Decision on 20 August
1970, upholding petitioner's right to exercise redemption but excluding the
lots considered to have become residential land. The dispositive portion of the
judgment reads: 1wph1.t
WHEREFORE, judgment is hereby rendered:
(1) Dismissing plaintiff's complaint;
(2) Making the interlocutory order of this Court dated March
permanent in character. The bond of P5,000-00 filed by
defendant as a condition for the issuance of the said Order is
hereby cancelled and ordered returned to him;
(3) Ordering plaintiff to convey unto defendant for the
consideration of P4,608.32 which amount is already covered
by the sum of P5,000-00 deposited with the Court, the real
properties described in Transfer Certificates of Title Nos. T108665 and TCT 117632 of the Register of Deeds for the
province of Bulacan;
(4) Ordering the Clerk of this Court to return to defendant the
excess amount of P391.68 from the said deposit of P5,000.00
made by defendant on January 29, 1970, upon proper receipt:
and
(5) for the purpose of implementing this decision the Clerk of
this Court is hereby authorized, at the proper time, to detach
from the records of this case Oficial Receipt No. H-8625119
dated January 29, 1970, denominated as Exhibit '10'.
The parties' other claims or counterclaims are hereby
dismissed.
No Pronouncement as to cost.
The Motion for Intervention filed on 4 September 1970 by private respondents
husband, Alejandro Esguerra, and the motion dated 16 September 1970 to
allow intervention filed by private respondent herself, were both denied.

Upon elevation of the case respondent Court of Appeals on May 1971,


docketed therein as CA-G. R. No. 46454-R, private respondent stressed that
the lower Court committed three errors, viz.: (1) in denying Alejandro
Esguerra's Motion to Intervene; (2) in ordering private respondent to convey
the lands in question to the petitioner, contrary to Section 14 of Republic Act
No. 3844; and (3) in issuing with grave abuse of discretion the Order of 5
March 1970 restraining private respondent and her agents from carrying out
her conversion plans.
In disposing of the appeal, respondent Court observed that the issues of fact
and law can no longer be resolved in accordance with the law then in force,
and on the basis of the recorded evidence in view of the status quoprovisions
of Presidential Decrees Nos. 27 and 316 and their implementing Rules and
Regulations. Premised on this theory, respondent Appellate Court promulgated
its Decision on 22 October 1974, with the following decretal
portion: 1wph1.t
WHEREFORE, the instant suit for ejecment is DISMISSED, and it
is hereby ordered that the redemption money deposited in
defendant-appellee with he court t below be returned to him.
In tile meantime, pending the promulgation of the rules and
regulations implementing Presidential Decree No. 27, the
plaintiff and the defendant should maintain the status quo,
that is, the leasehold relationship as landholder and
agricultural lessee, the latter to continue to pay the plaintiff
lease rentals under the leasehold arrangement existing as of
October 21, 1972. No costs.
SO ORDERED.
The Motion for Reconsideration, praying that petitioner be allowed to exercise
the right of redemption was denied by respondent Court in its Resolution of 17
January 1975, but at the same time, it ordered the denial to be 1wph1.t
without prejudice to the right of the defendant to exercise the
right of redemption, should the National Development
Authority, to be created by his Excellency, find that the land
now in question is not suitable for residential, commercial,
industrial or non-agricultural purposes.
With leave of Court, petitioner filed on 6 February 1975 a second Motion for
Reconsideration, which met a similar fate on 18 February 1975.

Following the denial, the instant Petition for Review on certiorari was filed with
us on 24 February 1975. Petitioner claims that respondent Court
erred. 1wph1.t
I. ... in giving retroactive effect to Presidential Decrees Nos. 27
and 316 thereby avoiding the principal issues raised before it;
and
II. ... in not affirming the lower Court's finding that petitioner
had properly exercised his right of redemption under the
Agricultural Land Reform Code, Republic Act No. 3844.
We gave the Petition due course on 13 May 1975, after reconsidering our
initial denial on 5 March 1975. After both parties had filed their respective
memoranda, the case was submitted for decision on 5 August 1976.
About a year later, on 10 August 1977, private respondent filed an Omnibus
Motion requesting us to order the petitioner herein, who, allegedly, has been
unlawfully withholding the lease rentals due the private respondent, to deliver
or deposit in a reputable bonded warehouse the lease rentals for the period
commencing 1969 up to 1977, inclusive, corresponding to the total yearly
harvest of 510 cavans, or the total equivalent amount of P30,600.00. Two
similar Motions were successively filed by private respondent on 10 December
1977 and 30 May 1980.
Required to comment thereon, petitioner strongly opposed the grant of these
motions contending that it would be equivalent to: 1wph1.t
xxx xxx xxx
b. Placing into the hands of one who does not at the moment
need it most, materials so vital to survival and of a volume or
of such value that Petitioner cannot at the snap of the finger
simply produce without calling upon a miracle to happen, or
without asking for some time during which he shall have to
work himself to the bone producing what the Respondent
would want to require, and at the age of 88 years; placing into
the hands of one who could well afford to wait for more than
ten (10) years now without feeling the absence of any 'rentals'
from Petitioner because of her many and varied sources of
income;
c. Overlooking the problems of recovery of any rental paid,
should Petitioner, because of the merits of his case, be
favoured by a Decision of this Honorable Supreme Court; and

d. Setting aside the Government's program of social justice


which puts a premium upon the upliftment of the condition of
the poor. 2
We deferred action on those Motions until decision on the merits.
The first issue to be resolved is the propriety of respondent Court's ruling
according retroactive application to Presidential Decrees Nos. 27 and 316 and
their implementing circulars, to a case pending before it long before these
decrees took effect.
To obtain the proper perspective, the recital of pertinent dates in apropos The
Code of Agrarian Reforms (RA 3844) took effect on August 22, 1963. The
Ejectment Case was instituted before the Court of Agrarian Relations on 24
December 1969, which Court rendered its Decision on 20 August 1970.
Republic Act No. 6389, which amended the Code of Agrarian Reforms was
approved on 10 September 1971. Presidential Decree No. 1971, decreeing the
emancipation of tenants from the bondage of the soil and transferring to them
ownership of the land they till, was promulgated on 21 October 1972.
Presidential Decree No. 316 prohibiting the ejectment of tenant-tillers from
farmholdings devoted to rice and corn pending promulgation of rules and
regulations implementing PD No. 27, and requiring the maintenance of the
status quo in relations between tenant farmers and landowners, was issued on
22 October 1973. The Court of Appeals rendered the judgment under review
on 22 October 1974.
It will thus be seen that the action was instituted on 24 December 1969, long
before Presidential Decrees Nos. 27 and 316 took effect on 21 October 1972
and 22 October 1973, respectively. Decision was rendered by the trial Court on
20 August 1970, also prior to the effectivity of said decrees. The case had
been pending before the Court of Appeals since 1970, again prior to the
promulgation of said Decrees, although its Decision was rendered after their
enactment.
It is a fundamental postulate in statutory construction that "laws shall have no
retroactive effect, unless the contrary is provided." 3 This rule has been
consistently applied in a long line of cases wherein we categorically
pronounced that a statute operates prospectively and never retroactively
unless the legislative intent to the contrary is made manifest either by express
terms of the statute or by necessary implication. 4 Similarly, in the case
of Espiritu vs. Cipriano, 5 we declared: 1wph1.t
Well-settled is the principle that While the Legislature has the
power to pass retroactive laws which do not impair the
obligation of contracts, or affect injuriously vested rights, it is

equally true thatstatutes are not to be construed as intended


to have a retroactive effect so as to affect pending
proceedings, unless such intent is expressly declared or
clearly and necessarily implied from the language of the
enactment (Emphasis supplied).
There being no express nor clearly implied authorization embodied in PD Nos.
27 and 316 allowing retrospective application, prospective construction is
called for.
More recent rulings of this Tribunal have likewise ruled that Presidential
Decrees Nos. 27 and 316 cannot be applied retroactively in Castro, et al., vs.
Court of Appeals, et al., G. R. No. L-44727, September 11, 1980, this Court,
speaking through Mr. Justice Felix V. Makasiar, held: 1wph1.t
Moreover, petitioners have made the fatal error of invoking the
provisions of Presidential Decrees Nos. 27, 316 and 946; for,
this Court has already ruled that said decrees cannot be
applied retroactively and that they can only apply to bona fide
tenants.
In Cabatan vs. Court of Appeals, et al. 95 SCRA 323, 345 (1980)- Mr. Justice
Guillermo Santos wrote the opinion for the Court thus: 1wph1.t
Further, on petitioner's contention that the cases should have
been dismissed for lack of jurisdiction on the ground of the
absence of a certification of triability by the Ministry of
Agrarian Reform the records show that the cases were
initiated in the CAR in 1971. Pres. Decrees Nos. 316 and 583
invoked by the petitioners in assailing the CAR'S exercise of
jurisdiction over the cases and deciding the same were
promulgated only on October 21, 1972 and October 22, 1973,
respectively. it is a fundamental postulate that once a court
has taken jurisdiction over a case, its authority can not be
affected adversely by a subsequent statute prescribing a
precondition before the Court may take cognizance of the
case.
In the earlier case of Jacinto vs. Court of Appeals, et al., 87 SCRA 263, 274
(1978). penned by Mr. Justice Felix Q. Antonio also cited in the Castro
case, supra, we ruled: 1wph1.t
Neither can We find merit in petitioner's claims that with the
advent of Presidential Decree No. 27, he has become the
owner of the land. Firstly, said decree applies only in favor of

bona fide tenants. It cannot be denied, however, that at the


time of the promulgation of Presidential Decree No. 27
(October 21, 1972), the Appellate Court has already its
judgment finding that the tenancy relationship between
petitioner and private respondent had been extinguished.
Secondly, the decree cannot operate retroactively in favor of
petitioner who had surrendered one-half of the land in July
1966 and, by virtue of a Writ of Preliminary Mandatory
Injunction issued by the Court of Agrarian Relations, was
dispossessed of the other half in February 1967. ...
And in Padasas vs. Court of Appeals, et al., 6 referring to the retroactivity of
the Agricultural Land Reform Code, also a social legislation aimed at making
small farmers more independent, self-reliant and responsible citizens, with Mr.
Justice Juvenal K. Guerrero as ponente, this Court succinctly said: 1wph1.t
The Agricultural Land Reform Code (Rep. Act 3844) was
enacted and took effect on August 8, 1963. This law must be
enforced prospectively and not retroactively and, therefore,
whatever rights created, granted or recognized therein such as
the right of redemption accrued upon the enactment of this
legislation and may be exercised thereafter in appropriate
cases.
But even if applied retroactively, PD Nos. 27 and 316 will find no application
considering that ejectment proceedings herein were not filed to harass the
tenant but to convert the land into a subdivision, a reason perfectly valid
under the laws then in force. Besides, under the facts of the case, to maintain
the status quo or the leasehold relationship, as ruled by respondent Court of
Appeals, would prove more prejudicial to petitioner, because by allowing him
the right of redemption he becomes an independent owner of the land,
whereas, if thestatus quo is maintained he becomes a perpetual agricultural
lessee bound to pay rentals to the landowner. In other words, the fundamental
policy objectives of our agrarian laws, inclusive of PD 27 and 316, are
achieved and upheld by according to petitioner the right to redeem, a vested
right which he had acquired under the Code of Agrarian Reforms and of which
he cannot be deprived by subsequent legislation. 7
Accordingly, contrary to its opinion, there would have been no impediment on
the part of respondent Court to resolve once and for all the issues on the
merits of the case brought before it on the basis of the laws or statutes then in
force without need of awaiting the promulgation of the rules and regulations
implementing Presidential Decrees Nos. 27 and 316.
Which brings us to the second issue. Reverting to the recital of dates earlier
given, it is again clear that it is Republic Act No. 3844, which took effect on 22

August 1963, prior to its amendment by Republic Act No. 6839 on 10


September 1971, that should govern the relationship between the contending
parties and which should determine whether or not the trial Court's findings
that petitioner had properly exercised his right of redemption is correct.
Section 11 of the original text of the Agrarian Code provided: 1wph1.t
Sec. 11. Lessees' Right of Pre-emption In case the
agricultural lessor decides to sell the landholding, the
agricultural lessee shall have the preferential right to buy the
same under reasonable terms and conditions; ... The right of
pre- emption under this Section may be exercised within
ninety days from notice in writing, which shall be served by
the owner on all lessees affected.
We find as established that the subject landholdings were sold by the former
owner, Salud B. Calderon, to private respondent without complying with the
notice requirement set forth in the provision just quoted. Neither was the
Affidavit regarding written notice requirement of the vendor prior to
registration complied with. 1wph1.t
Sec. 13. Affidavit Required in Sale of Land Subject to Right of
Pre-emption. No deed of sale of agricultural land under
cultivation by an agricultural lessee or lessees shall be
recorded in the Registry of Property unless accompanied by an
affidavit of the vendor that he has given the written notice
required in Section eleven of this Chapter or that the land is
not worked by an agricultural lessee.
Private respondent herself failed to give the required notice under section 36
(1) of the same Code prior to the filing of ejectment proceedings. 1wph1.t
Sec. 36. Possession of Landholding; Exceptions.
Notwithstanding any agreement as to the period or future
surrender of the land, an agricultural lessee shall continue in
the enjoyment and possession of his landholding except when
his dispossession has been authorized by the Court in a
judgment that is final and executory if after due hearing it is
shown that:
(1) The agricultural lessor-owner or a member of his
immediate family will personally cultivate the landholding or
will convert the landholding, if suitably located, into
residential, factory, hospital or school site or other usefull nonagricultural purposes: Provided, That the agricultural lessee

shall be entitled to disturbance compensation equivalent to


five years rental on his landholding in addition to his rights
under Sections twenty-five and thirty-four, except when the
land owned and leased by the agricultural lessor is not more
than five hectares, in which case instead of disturbance
compensation the lessee may be entitled to an advanced
notice of at least one agricultural year before ejectment
proceedings are filed against him. Provided, further, That
should the landholder not cultivate the land himself for three
years or fail to substantially carry out such conversion within
one year after the dispossession of the tenant, it shall be
presumed that he acted in bad faith and the tenant shall have
the right to demand possession of the land and recover
damages for any loss incurred by him because of said
dispossession; (Emphasis supplied)
Considering that petitioner could not exercise his right of pre- emption for lack
of notice and the sale was consummated, he must be held to be entitled to the
lawful exercise of his right of redemption allowed under Section 12 of the
same Code, which in its original text, read: 1wph1.t
Sec. 12. Lessee's Right of Redemption. In case the
landholding is sold to a third person without the knowledge of
the agricultural lessee, the latter shall have the right to
redeem the same at a reasonable price and consideration:
Provided, That the entire landholding sold must be
redeemed: ... The right, of redemption under this Section may
be exercised within two years from the registration of the sale,
and shall have priority over any other right of legal
redemption.
The exercise of the right of redemption to be valid must be in accordance with
law. The timely exercise of the legal redemption right requires either tender of
the price or valid consignation thereof within the prescribed redemption period
of two (2) years (180 days under the new law. from notice in writing served by
the vendee on all lessees and the Department of Agrarian Reforms) from the
registration of the sale. 8
Absent any written notice of sale served on petitioner, upon the registration of
the sale of the landholdings in question on 10 March 1969, petitioner's right to
redeem ripened on said date. When petitioner filed on 29 January 1970 his
Answer to the Complaint with Counterclaim for redemption, simultaneously, he
deposited in Court the amount of P5,000.00 covering the full purchase price of
P4,608.32 paid by the private respondent to the former owner of the subject
landholdings. Thus, petitioner had seasonably exercised his redemption right

and had fully complied with all the requirements to entitle him to redeem the
land holding sold to private respondent.
In her attempt to defeat petitioner rights of redemtion, private respondent
invoked the provision of section 14 of the code of Agrarian Reforms which
originally provided as follow:1wph1.t
Sec. 14. Right of Pre-emption and Redemption Not Applicable
to Land to be Converted into Resendential, Industrial and
Similar Purposes. The right of pre-emption and redemption
granted under section eleven and twelve of this Chapter
cannot be exercised over landholdings suitably located which
the owner bought or holds for conversion into residential,
commercial, industrial or other similar non-agricultural
purposes; Provided, however. That the conversion be in good
faith and is substantially carried out within one year from the
date of sale. Should the owner fail to comply with the above
condition, the agricultural lessee shall have the right to
repurchase under reasonable terms and conditions said
landholding from said owner within one year after the
aforementioned period for conversion has expired: Provide,
however, That the tenure of one year shall cease to run from
the time the agricultural lessee petitions the land Authority to
acquire the land under the provisions of Paragraph I I of
Section fifty-one.
Parenthetically, section 14 above quoted has been repealed by Section 3 of
Republic Act No. 6389 approved on 10 Semtember 1971.
Harmonizing the foregoing provision together with section 36, supra, even if a
landowner desires to convert under section 14, a lessee possesses the right to
be secured in his tenure until a just cause for his dispossession is proved and
his ejectment is authorized by the Court. The right of a lessee to pre-empt or
redeem a landholding cannot be exercised if the owner bought or holds the
land for residential purposes. However, the limitation to the lessee's right to
pre-empt or redeem is conditioned upon the fulfillment by the landowner of
the following requisites: (1) that the property is suitably located; (2) that the
conversion be in good faith; and (3) that the conversion is substancially
carried out within one year from the date of sale. 9 These conditions must
concur, otherwise, the land is subject to redemption by a tenant.
The trial Court found that the foregoing requisites had not been fulfilled by
private respondent. The latter had not proven suitability. Petitioner was
admittedly the agricultural lessee of the lands from which he was being sought
to be ejected. Private respondent had no approved plan of subdivision. She did
not have the approval of the proper authorities to convert the properties into a

subdivision, nor had the construction been readied. 10 The trial Court also
found that there was some measure of bad faith on the part of private
respondent in seeking the dispossession of petitioner, and that no substantial
conversion had been undertaken by private respondents. In the words of the
trial Court: 1wph1.t
Plaintiff filed this action for dispossession of defendant on the
ground of conversion of the properties in question into a
subdivision on December 24, 1969. At this time, the
landholding in question was still agricultural rice land and
defendant was in possession thereof in the concept of
agricultural lessee. At the time also, it appears that plaintiff
had no approved plan of subdivision, she did not have the
approval of the Municipal Council of San Miguel, Bulacan to
convert these properties into a subdivision and the
construction had not even been readied. It was the ninth
month of her ownership of the landholdings in question and
barely three months from the expiry date of the one-year
period within which she had to convert the land into a
subdivision in accordance with Sec. 14, Republic Act No. 3844.
In spite of the lack of plans and absence of approval of
authorities concerned and during the pendency of this case,
plaintiff on February 27, 1970 caused the bulldozing of
defendant's landholdings, the construction of roads and
gutters and the filling of portions of the land with sand. All
these facts show that there was no manifest intention on the
part of plaintiff to seriously convert the landholdings in
question into a subdivision until she was virtually forced to do
so when defendant exercised his right to redeem the
properties through his counterclaim and the Municipal Council
of San Miguel, Bulacan, disapproved her application for
conversion. And it may be added, plaintiff's aborted and vain
conversion of the land beginning February 27, 1969 was an
attempt to beat the deadline set by law within which she had
to convert the land. Plaintiff's pretension that the construction
had to be rushed because of the need for the access road to
the new parish church of Salacot located in the property at the
rear of the landholdings in question cannot be given credence
because there is no satisfactory evidence to show that in fact
a parish church is existing or at least under construction and
that plaintiff had actually donated the access road to the
parish. Besides, we find it strange that after donating the road
bed plaintiff at her own expense should undertake the
construction of the road itself and in the process transform the
ricelands in question into a residential subdivision. The

foregoing facts also reveal some measure of bad faith on the


part of plaintiff in seeking dispossession of defendant. 11
We find no reason to disturb the aforequoted findings. They are supported by
substantial evidence and are well-nigh conclusive on an appellate Tribunal. 12
Under the circumstances, the right of redemption by petitioner must be
sustained. Specially considering that the rights of pre- emption and
redemption were the means prescribed by the Code of Agrarian Reforms to
implement the declared policy of the State to establish ownershipcultivatorship and to promote the upliftment of the dignity of the small farmers
free from pernicious institutional restraints and practices. Furthermore, it is the
objective of the agrarian law to inculcate in every tenant-farmer an
independent and self-reliant existence that would help him become a strong
and responsible citizen of our democratic society and actively play his role in
nation building. 13
Petitioner is reminded, however, of the limitations to his land rights enunciated
in section 62 of the same Code: 1wph1.t
Sec. 62. Limitation on Land Rights. Except in case of
hereditary succession by one heir, landholdings acquired
under this Code may not be resold, mortgaged, encumbered,
or transferred until after the lapse of ten years from the date
of full payment and acquisition and after such ten-year period,
any transfer, sale or disposition may be made only in favor of
persons qualified to acquire economic family-size farm units in
accordance with the provisions of this Code: ...
The last point to consider is private respondent's Omnibus Motion, reiterated
three times, which prayed that the share or rentals allegedly due her from the
date of commencement of this suit up to the date of filing of said Motion, be
delivered to private respondent, or deposited in a bonded warehouse.
Considering, however, that petitioner had validly and promptly exercised his
right of redemption according to law as far back as 1970, private respondent's
claim for rentals must fail. Petitioner cannot be compelled to pay rentals for
the use of the landholdings of which he is deemed the owner-cultivator from
the time he fully paid the reasonable price of the parcels of land redeemed by
him by consigning in Court the amount covering the full purchase price. There
being no opposition on the part of private respondent as to the redemption
price, we, therefore, hold the same to be the reasonable price of the
landholdings redeemed.

Incidentally, during the pendency of this case, private respondent landowner


did not take advantage of the amendment introduced by Republic Act 6389 to
section 36 (1) of the Code of Agrarian Reforms (approved on 10 September
1971) to have her landholdings declared suited for residential purposes, as
she claims, which could have been a ground for dispossession of a tenant
upon payment of disturbance compensation and previous authorization by the
Court after due hearing.
WHEREFORE, we hereby set aside the Decision of respondent Court of Appeals
promulgated on 22 October 1974 and its Resolutions dated 17 January 1975
and 18 February 1975, and enter judgment affirming the Decision of the Court
of Agrarian Relations dated August 20, 1970.
Private respondent is hereby directed to accept the consignated price and
execute a deed of conveyance in favor of petitioner, Angel Baltazar, of the real
properties specified in the judgment of the trial Court, within thirty (30) days
from the finality of this judgment. Should private respondent fail to execute
the deed of conveyance within the period specified herein, the Clerk of Court
of the Court of Agrarian Relations is hereby directed to execute such deed of
conveyance.
No pronouncement as to costs.
SO ORDERED.

EN BANC
G.R. No. L-25326 May 29, 1970
IGMIDIO HIDALGO and MARTINA ROSALES, petitioners,
vs.
POLICARPIO HIDALGO, SERGIO DIMAANO, MARIA ARDE, SATURNINO
HIDALGO, BERNARDINA MARQUEZ, VICENTE DIMAANO, ARCADIA
DIMAANO, TEODULA DIMAANO, THE REGISTER OF DEEDS and THE
PROVINCIAL ASSESSOR OF THE PROVINCE OF BATANGAS, respondents.
G.R. No. L-25327 May 29, 1970
HILARIO AGUILA and ADELA HIDALGO, petitioners,
vs.
POLICARPIO HIDALGO, SERGIO DIMAANO, MARIA ARDE, SATURNINO
HIDALGO, BERNARDINA MARQUEZ, VICENTE DIMAANO, ARCADIA
DIMAANO, TEODULA DIMAANO, THE REGISTER OF DEEDS and THE
PROVINCIAL ASSESSOR OF THE PROVINCE OF BATANGAS, respondents.
Jose O. Lara for petitioners.
Pedro Panganiban y Tolentino for respondents.

TEEHANKEE, J.:
Two petitions for review of decisions of the Court of Agrarian Relations
dismissing petitioners' actions as sharetenants for the enforcerment of the
right to redeem agricultural lands, under the provisions of section 12 of the
Agricultural Land Reform Code. As the same issue of law is involved and the
original landowner and vendees in both cases are the same, the two cases are
herein jointly decided.

Respondent-vendor Policarpio Hidalgo was until the time of the execution of


the deeds of sale on September 27, 1963 and March 2, 1964 in favor of his
seven above-named private co-respondents, the owner of the 22,876-square
meter and 7,638-square meter agricultural parcels of land situated in Lumil,
San Jose, Batangas, described in the decisions under review.
In Case L-25326, respondent-vendor sold the 22,876-square meter parcel of
land, together with two other parcels of land for P4,000.00. Petitionersspouses Igmidio Hidalgo and Martina Resales, as tenants thereof, alleging that
the parcel worked by them as tenants is fairly worth P1,500.00, "taking into
account the respective areas, productivities, accessibilities, and assessed
values of three lots, seek by way of redemption the execution of a deed of sale
for the same amount of P1,500.00 by respondents-vendees 1 in their favor.
In Case L-25327, respondent-vendor sold the 7,638-square meter parcel of
land for P750.00, and petitioners-spouses Hilario Aguila and Adela Hidalgo as
tenants thereof, seek by way of redemption the execution of a deed of sale for
the same price of P750.00 by respondents-vendees in their favor.
As stated in the decisions under review, since the parties stipulated on the
facts in both cases, petitioners-tenants have for several years been working on
the lands as share tenants. No 90-day notice of intention to sell the lands for
the exercise of the right of pre-emption prescribed by section 11 of the
Agricultural Land Reform Code (Republic Act No. 3844, enacted on August 8,
1963) was given by respondent-vendor to petitioners-tenants. Subsequently,
the deeds of sale executed by respondent-vendor were registered by
respondents register of deeds and provincial assessor of Batangas in the
records of their respective offices notwithstanding the non-execution by
respondent-vendor of the affidavit required by section 13 of the Land Reform
Code. 2 The actions for redemption were timely filled on March 26, 1965 by
petitioners-tenants within the two-year prescriptive period from registration of
the sale, prescribed by section 12 of the said Code.
The agrarian court rendered on July 19, 1965 two identical decisions
dismissing the petitions for redemption.
It correctly focused on the sole issue of law as follows: "(T)he only issue in this
case is whether or not plaintiffs, asshare tenants, are entitled to redeem the
parcel of land they are working from the purchasers thereof, where no notice
was previously given to them by the vendor, who was their landholder, of the
latter's intention to sell the property and where the vendor did not execute the
affidavit required by Sec. 13 of Republic Act No. 3844 before the registration of
the deed of sale. In other words, is the right of redemption granted by Sec. 12
of Republic Act No. 3844 applicable to share tenants?"

But proceeding from several erroneous assumptions and premises, it arrived


at its erroneous conclusion that the right of redemption granted by section 12
of the Land Reform Code is available to leasehold tenants only but not
to share tenants, and thus dismissed the petitions: "(S)ec 12 of Republic Act
No. 3844, which comes under Chapter I of said Act, under the heading
'Agricultural Leasehold System,' reads as follows:
'SEC. 12. Lessee's Right of Redemption. In case the
landholding is sold to a third person without the knowledge of
the agricultural lessee, the latter shall have the right to
redeem the same at a reasonable price and
consideration: Provided: further, That where there are two or
more agricultural lessees, each shall be entitled to said right of
redemption only to the extent of the area actually cultivated
by him. The right of redemption under this Section may be
exercised within two years from the registration of the sale,
and shall have priority over any other right of legal
redemption.'
The systems of agricultural tenancy recognized in this
jurisdiction are share tenancy and leaseholdtenancy. (Sec. 4,
Republic Act No. 1199; Sec. 4, Republic Act No. 3844).
A share tenant is altogether different from a leasehold tenant
and their respective rights and obligations are not coextensive or co-equal. (See Secs. 22 to 41, inclusive, and Secs.
42 to 48, inclusive, of Republic Act No. 1199; see also Secs. 4
to 38, inclusive, of Republic Act No. 3844).
It is our considered view that the right of redemption granted
by Section 12 of Republic Act No. 3844 is applicable
to leasehold tenants only, but not to share tenants, because
said provision of law clearly, definitely, and unequivocally
grants said right to the 'agricultural lessee,' and to nobody
else. In enacting the Agricultural Land Reform Code, Congress
was fully aware of the existence of sharetenancy and in fact
provided for the abolition of the agricultural share tenancy
system. (Sec. 4, Republic Act No. 3844.) If it were the intention
of Congress to grant the right of redemption to sharetenants,
it would have unmistakably and unequivocally done so. We
cannot extend said right to sharetenants through judicial
legislation, wherever our sympathies may lie.
The agrarian court fell into several erroneous assumptions and premises in
holding that agricultural sharetenancy remains recognized in this jurisdiction;
that "a share tenant is altogether different from a leasehold tenant and their
respective rights and obligations are not co-extensive or co-equal"; and that

the right of redemption granted by section 12 of the Land Reform Code" is


applicable to leasehold tenants only, but not to share tenants, because said
provision of law clearly, definitely, and unequivocally grants said right to the
'agricultural lessee,' and to nobody else."
1. The very essence of the Agricultural Land Reform Code is the abolition of
agricultural share tenancy as proclaimed in its title. Section 4 of the Code
expressly outlaws agricultural share tenancy as "contrary to public policy" and
decrees its abolition. 3 Section 2 of the Code expressly declares it to be the
policy of the State, inter alia, "to establish owner cultivatorship and the
economic family-size farm as the basis of Philippine agriculture and, as a
consequence, divert landlord capital in agriculture to industrial development;
to achieve a dignified existence for the small farmers free from pernicious
institutional restraints and practices; ... and to make the small farmers more
independent, self-reliant and responsible citizens, and a source of strength in
our democratic society." 4 It was error, therefore, for the agrarian court to state
the premise after the Land Reform Code had already been enacted, that "the
systems of agricultural tenancy recognized in this jurisdiction
are share tenancy and leasehold tenancy." A more accurate statement of the
premise is that based on the transitory provision in the first proviso of section
4 of the Code, i.e. that existing share tenancy contracts are allowed to
continue temporarily in force and effect, notwithstanding their express
abolition, until whichever of the following events occurs earlier: (a) the end of
the agricultural year when the National Land Reform Council makes the
proclamation declaring the region or locality a land reform area; or (b) the
shorter period provided in the share tenancy contracts expires; or (c)
theshare tenant sooner exercises his option to elect the leasehold system.
In anticipation of the expiration of share tenancy contracts whether by
contractual stipulation or the tenant's exercise of his option to elect
the leasehold system instead or by virtue of their nullity occuring before the
proclamation of the locality as a land reform area, the same section 4 has
further declared in the third proviso thereof that in such event, the tenant shall
continue in possession of the land for cultivation and "there shall be presumed
to exist a leasehold relationship under the provisions of this Code."
2. The foregoing exposes the error of the agrarian court's corollary premise
that "a share tenant is altogether different from a leasehold tenant." The
agrarian court's dictum that "their respective rights and obligations are not coextensive or co-equal "refer to their contractual relations with the landowner,
with respect to the contributions given, management, division or payment of
the produce. 5
But the Land Reform Code forges by operation of law, between the landowner
and the farmer be a leaseholdtenant or temporarily a share tenant
a vinculum juris with certain vital juridical consequences, such as security of

tenure of the tenant and the tenant's right to continue in possession of the
land he works despite the expiration of the contract or the sale or transfer of
the land to third persons, and now, more basically, the farmer's preemptive right to buy the land he cultivates under section 11 of the Code 6 as
well as the right to redeemthe land, if sold to a third person without his
knowledge, under section 12 of the Code.
This is an essential and indispensable mandate of the Code to implement the
state's policy of establishing owner-cultivatorship and to achieve a dignified
and self-reliant existence for the small farmers that would make them a pillar
of strength of our Republic. Aside from expropriation by the Land Authority of
private agricultural land for resale in economic family-size farm units "to bona
fide tenants, occupants and qualified farmers," 7 the purchase by farmers of
the lands cultivated by them, when the owner decides to sell the same
through rights of pre-emption and redemption are the only means
prescribed by the Code to achieve the declared policy of the State.
3. The agrarian court therefore facilely let itself fall into the error of concluding
that the right of redemption (as well as necessarily the right of pre-emption)
imposed by the Code is available to leasehold tenants only and
excludesshare tenants for the literal reason that the Code grants said rights
only to the "agricultural lessee and to nobody else." For one, it immediately
comes to mind that the Code did not mention tenants,
whether leasehold or sharetenants, because it outlaws share tenancy and
envisions the agricultural leasehold system as its replacement. Thus, Chapter I
of the Code, comprising sections 4 to 38, extensively deals with the
establishment of "agriculturalleasehold relation," defines the parties thereto
and the rights and obligations of the "agricultural lessor" and of the
"agricultural lessee" (without the slightest mention of leasehold tenants) and
the statutory consideration or rental for the leasehold to be paid by the lessee.
There is a studied omission in the Code of the use of the term tenant in
deference to the "abolition of tenancy" as proclaimed in the very title of the
Code, and the elevation of the tenant's status to that of lessee.
Then, the terms "agricultural lessor" and "agricultural lessee" are consistently
used throughout the Chapter and carried over the particular sections (11 and
12) on pre-emption and redemption. The agrarian court's literal construction
would wreak havoc on and defeat the proclaimed and announced legislative
intent and policy of the State of establishing owner-cultivatorship for the
farmers, who invariably were all share tenants before the enactment of the
Code and whom the Code would now uplift to the status of lessees.
A graphic instance of this fallacy would be found in section 11 providing that
"In case the agricultural lessordecides to sell the landholding the agricultural
lessee shall have the preferential right to buy the same under reasonable
terms and conditions." It will be seen that the term "agricultural lessor" is here

used interchangeably with the term "landowner"; which conflicts with the
Code's definition of "agricultural lessor" to mean "a person natural or juridical,
who, either as owner, civil law lessee, usufructuary, or legal possessor, lets or
grants to another the cultivation and use of his land for a price certains." 8
Obviously, the Code precisely referred to the "agricultural lessor (who) decides
to sell the landholding," when it could have more precisely referred to the
"landowner," who alone as such, rather than a civil law lessee, usufructuary or
legal possessor, could sell the landholding, but it certainly cannot be logically
contended that the imprecision should defeat the clear spirit and intent of the
provision.
4. We have, here, then a case of where the true intent of the law is clear that
calls for the application of the cardinal rule of statutory construction that such
intent or spirit must prevail over the letter thereof, for whatever is within the
spirit of a statute is within the statute, since adherence to the letter would
result in absurdity, injustice and contradictions and would defeat the plain and
vital purpose of the statute.
Section 11 of the Code providing for the "agricultural lessee's" preferential
right to buy the land he cultivates provides expressly that "the entire
landholding offered for sale must be pre-empted by the Land Authority if the
landowner so desires, unless the majority of the lessees object to such
acquisition," presumably for being beyond their capabilities. Taken together
with the provisions of Chapter III of the Code on the organization and functions
of the Land Authority and Chapter VII on the Land Project Administration and
the creation and functions of the National Land Reform Council, (in which
chapters the legislature obviously was not laboring under the inhibition of
referring to the term tenants as it was in Chapter I establishing the agricultural
leasehold system and decreeing the abolition of share tenancy, 9 the Code's
intent, policy and objective to give both agricultural lessees and farmers who
transitionally continue to be share tenants notwithstanding the Code's
enactment, the same priority and preferential rights over the lands under their
cultivation, in the event of acquisition of the lands, by expropriation or
voluntary sale, for distribution or resale that may be initiated by the Land
Authority or the National Land Reform Council, are clearly and expressly
stated.
Thus Chapter III, section 51 of the Code decrees it the responsibility of the
Land Authority "(1) To initiate and prosecute expropriation proceedings for the
acquisition of private agricultural lands as defined in Section one hundred
sixty-six of chapter XI of this Code for the purpose of subdivision into
economic family size farm units and resale of said farm units to bona fide
tenants, occupants and qualified farmers ... and "(2) To help bona fide
farmers without lands of agricultural owner-cultivators of uneconomic-size
farms to acquire and own economic family-size farm units ...."

Similarly, Chapter VII, section 128 of the Code, in enjoining the National Land
Reform Council to formulate the necessary rules and regulations to implement
the Code's provisions for selection of agricultural land to be acquired and
distributed and of the beneficiaries of the family farms, ordains the giving of
the same priority "to the actual occupants personally cultivating the land
either as agricultural lessees or otherwise with respect to the area under their
cultivation."
5. It would certainly result in absurdity, contradictions and injustice if a share
tenant would be denied the rights of pre-emption and redemption which he
seeks to exercise on his own resources, notwithstanding that the National
Land Reform Council has not yet proclaimed that all the government
machineries and agencies in the region or locality envisioned in the Code are
operating which machineries and agencies, particularly, the Land Bank were
precisely created "to finance the acquisition by the Government of landed
estates for division and resale to small landholders, as well as the purchase of
the landholding by the agricultural lessee from the landowner." 10The nonoperation in the interval of the Land Bank and the government machineries
and agencies in the region which are envisioned in the Code to assist the
share tenant in shedding off the yoke of tenancy and afford him the financial
assistance to exercise his option of electing the leasehold system and his
preferential right of purchasing the land cultivated by him could not possibly
have been intended by Congress to prevent the exercise of any of these vital
rights by a share tenant who is able to do so, e.g. to purchase the land, on his
own and without government assistance. It would be absurd and unjust that
while the government is unable to render such assistance, the share tenant
would be deemed deprived of the very rights granted him by the Code which
he is in a position to exercise even without government assistance.
6. Herein lies the distinction between the present case and Basbas vs.
Entena 11 where the Court upheld the agrarian court's dismissal of the therein
tenant's action to redeem the landholding sold to a third party by virtue of the
tenant's failure to tender payment or consign the purchase price of the
property. There, the tenant-redemptioner was shown by the evidence to have
no funds and had merely applied for them to the Land Authority which was not
yet operating in the locality and hence, the Court held that no part of the Code
"indicates or even hints that the 2-year redemption period will not commence
to run (indefinitely) until the tenant obtains financing from the Land Bank, or
stops the tenant from securing redemption funds from some other
source." 12 In the present case, the petitioners-tenants' possession of funds
and compliance with the requirements of redemption are not questioned, the
case having been submitted and decided on the sole legal issue of the right of
redemption being available to them as share tenants. The clear and logical
implication of Basbas is where the tenant has his own resources or secures
redemption funds from sources other than the Land Bank or government
agencies under the Code, the fact that the locality has not been proclaimed a

land reform area and that such government machineries and agencies are not
operating therein is of no relevance and cannot prejudice the tenant's rights
under the Code to redeem the landholding.
7. Even from the landowner's practical and equitable viewpoint, the landowner
is not prejudiced in the least by recognizing the share tenant's right of
redemption. The landowner, having decided to sell his land, has gotten his
price therefor from his vendees. (The same holds true in case of the tenant's
exercise of the pre-emptive right by the tenant who is called upon to pay the
landowner the price, if reasonable, within ninety days from the landowner's
written notice.) As for the vendees, neither are they prejudiced for they will
get back from the tenant-redemptioner the price that they paid the vendor, if
reasonable, since the Code grants the agricultural lessee or tenant the top
priority of redemption of the landholding cultivated by him and expressly
decrees that the same "shall have priority over any other right of legal
redemption." In the absence of any provision in the Code as to manner of and
amounts payable on redemption, the pertinent provisions of the Civil Code
apply in a suppletory character. 13 Hence, the vendees would be entitled to
receive from the redemptioners the amount of their purchase besides "(1) the
expenses of the contract, and any other legitimate payments made by reason
of the sale; (and) (2) the necessary and useful expenses made on the thing
sold." 14
8. The historical background for the enactment of the Code's provisions on
pre-emption and redemption further strengthens the Court's opinion. It is
noted by Dean Montemayor 15 that "(T)his is a new right which has not been
granted to tenants under the Agricultural Tenancy Act. It further bolsters the
security of tenure of the agricultural lessee and further encourages
agricultural lessees to become owner-cultivators.
In the past, a landlord often ostensibly sold his land being
cultivated by his tenant to another tenant, who in turn filed a
petition for ejectment against the first tenant on the ground of
personal cultivation. While many of such sales were simulated,
there was a formal transfer of title in every case, and the first
tenant was invariably ordered ejected.
There is indication in this case of the same pattern of sale by the landowner to
another tenant, 16 in order to effect the ejectment of petitioners-tenants. This
is further bolstered by the fact that the sales were executed by respondentvendor on September 27, 1963 and March 2, 1954 shortly after the enactment
on August 8, 1963 of the Land Reform Code which furnishes still another
reason for upholding ... petitioners-tenants' right of redemption, for certainly a
landowner cannot be permitted to defeat the Code's clear intent by
precipitately disposing of his lands, even before the tenant has been given the
time to exercise his newly granted option to elect the new agricultural

leasehold system established by the Code as a replacement for


the share tenancy outlawed by it.
9. Clearly then, the Code intended, as above discussed, to afford the farmers'
who transitionally continued to be share tenants after its enactment but who
inexorably would be agricultural lessees by virtue of the Code's proclaimed
abolition of tenancy, the same priority and preferential right as those other
share tenants, who upon the enactment of the Code or soon thereafter
were earlier converted by fortuitous circumstance into agricultural lessees, to
acquire the lands under their cultivation in the event of their voluntary sale by
the owner or of their acquisition, by expropriation or otherwise, by the Land
Authority. It then becomes the court's duty to enforce the intent and will of the
Code, for "... (I)n fact, the spirit or intention of a statute prevails over the letter
thereof.' (Taada vs. Cuenco, L-10520, Feb. 23, 1957, citing 82 C.J.S., p. 526.)
A statute 'should be construed according to its spirit or intention, disregarding
as far as necessary, the letter of the law.' (Lopez & Sons, Inc. vs. Court of Tax
Appeals, 100 Phil. 855.) By this, we do not correct the act of the Legislature,
but rather ... carry out and give due course to 'its intent.' (Lopez & Sons, Inc.
vs. Court of Tax Appeals, 100 Phil. 850)." 17 The Court has consistently held in
line with authoritative principles of statutory construction that, it will reject a
narrow and literal interpretation, such as that given by the agrarian court, that
would defeat and frustrate rather than foster and give life to the law's
declared policy and intent. 18 Finally, under the established jurisprudence of
the Court, in the interpretation of tenancy and labor legislation, it will be
guided by more than just an inquiry into the letter of the law as against its
spirit and will ultimately resolve grave doubts in favor of the tenant and
worker. 19
The agrarian court's dismissal of the cases at bar should therefore be reversed
and petitioners-tenants' right to redeem the landholdings recognized section
12 of the Code.
In Case L-25326, however, the deed of sale executed by respondent-vendor in
favor of respondents-vendees for the price of P4,000.00 covers three parcels
of land, while what is sought to be redeemed is only the first parcel of land of
22,876 square meters, described in the deed. Petitioners-tenants' allegation
that the proportionate worth of said parcel "taking into account the respective
areas, productivities, accessibilities and assessed values of the three lots," is
P1,500.00, was traversed by respondents in their answer, with the claim that
"the said land is fairly worth P20,000.00. 20 While the vendor would be bound
by, and cannot claim more than, the price stated in the deed, and the Code
precisely provides that the farmer shall have "the preferential right to buy the
(landholding) under reasonable terms and conditions" or "redeem the same at
a reasonable price and consideration" 21 with a view to affording the farmer
the right to seek judicial assistance and relief to fix such reasonable price and
terms when the landowner places in the notice to sell or deed an excessive or

exorbitant amount in collusion with the vendee, we note that in this case the
deed of sale itself acknowledged that the selling price of P4,000.00 therein
stated was not the fair price since an additional consideration therein stated
was that the vendees would support the vendor during his lifetime and take
care of him, should he fall ill, and even assumed the expenses of his burial
upon his death:
Ang halagang P4,000.00 ay hindi kaulat sa tunay na halaga ng
mga lupa subalit ang mga bumili ay may katungkulan na
sostentohin ako habang ako'y nabubuhay, ipaanyo at
ipagamot ako kung ako ay may sakit, saka ipalibing ako kung
ako ay mamatay sa kanilang gastos at ito ay isa sa alangalang o consideracion ng bilihang ito.
Under these circumstances, since the agrarian court did not rule upon
conflicting claims of the parties as to what was the proportionate worth of the
parcel of land in the stated price of P4,000.00 whether P1,500.00 as
claimed by petitioners or a little bit more, considering the proportionate values
of the two other parcels, but the whole total is not to exceed the stated price
of P4,000.00, since the vendor is bound thereby and likewise, what was the
additional proportionate worth of the expenses assumed by the vendees,
assuming that petitioners are not willing to assume the same obligation, the
case should be remanded to the agrarian court solely for the purpose of
determining the reasonable price and consideration to be paid by petitioners
for redeeming the landholding, in accordance with these observations.
In Case L-25327, there is no question as to the price of P750.00 paid by the
vendees and no additional consideration or expenses, unlike in Case L25326, supra, assumed by the vendees. Hence, petitioners therein are entitled
to redeem the landholding for the same stated price.
ACCORDINGLY, the decisions appealed from are hereby reversed, and the
petitions to redeem the subject landholdings are granted.
In Case L-25326, however, the case is remanded to the agrarian court solely
for determining the reasonable price to be paid by petitioners therein to
respondents-vendees for redemption of the landholding in accordance with the
observations hereinabove made.
No pronouncement as to costs.

Tenancy Act and the Agricultural Land Reform Code, such as would come
within the jurisdiction of the Court of Agrarian Relations.
The facts of this particular case are these:
PNR, a government-owned corporation, is the registered owner of three (3)
strips of land with a uniform width of 30. meters adjoining one another
longitudinally, the same being part of its railroad right of way running from
Manila to Legazpi. These strips of land lie within the municipalities of Oas and
Polangui, Province of Albay. At the center thereof is a track measuring ten (10)
to twelve (12) meters in width where railroad ties are placed and rails built for
running locomotives. On both sides of the track, or about (2) to five (5) meters
away from the embarassment of the track, are telegraph and telephone posts
office (50) meters apart from each other, which maintain communication wires
necessary in the operation of PNR trains. PNR draws earth from these sides to
fill up the railroad track whenever it is destroyed by water during rainy days;
and uses them as depository of railroad materials for the repair of destroyed
lines, posts, bridges during washouts, or other damaged parts of the line
occasioned by derailments or other calamities.

EN BANC
G.R. No. L-29381

September 30, 1969

PHILIPPINE NATIONAL RAILWAYS and PANTALEON


BINGABING, petitioners,
vs.
HON. VALERIANO A. DEL VALLE, in his capacity as Presiding Judge,
Court of Agrarian Relations and PAMPILO DOLTZ, respondents
Marcelino B. Bermudez for petitioners.
Nostratis and Estrada for respondent Judge V. A. Del Valle.
Abelardo Flores for respondent Pampilo Doltz.

SANCHEZ, J.:
The decisive issue to be resolved in this case is whether or not strips of land
owned by Philippine National Railways (PNR) which are on both sides of its
railroad track, and are part of its right of way for its railroad operations but
temporarily leased, are agricultural lands within the purview of the Agricultural

The portions of these lands not actually occupied by the railroad track had
been a source of trouble. People occupied them; they reap profits therefrom.
Disputes among those desiring to occupy them cropped up. It is on the face of
all these that, with adequate provisions to safeguard railroad operations, PNR
adopted temporary rules and regulations, as follows: (a) the possession and
enjoyment of the property should be awarded to interested persons thru
competitive public bidding; (b) the rental of the premises is to be determined
from the amount offered by the highest bidder; (e) the duration of the lease
shall be for a limited period, not to exceed three (3) years; (d) the lessee
cannot sublease the premises; (e) the lease contract is revocable at any time
upon demand by the owner, whenever it needs the same for its own use or for
a more beneficial purpose; (f) the owner can enter the leased premises during
the period of the lease to make necessary repairs; and (g) the lessee shall not
use the premises in a manner prejudicial to the operation of the trains.
Sometime in 1963, PNR awarded the portions of the three strips of land
aforementioned which are on both sides of the track, after a competitive
public bidding, to petitioner Pantaleon Bingabing for a period of three (3) years
and under conditions hereinbefore set forth. A civil law lease contract in
printed form was, on April 15, 1963, entered into by and between PNR and
Bingabing. That contract expressly stipulates that Bingabing was "to occupy
and use the property ... temporarily for agriculture." Consideration therefor
was P130.00 per annum. Bingabing, however, failed to take possession
because respondent Pampilo Doltz was occupying the land, had a house
thereon. Doltz claims to be a tenant of previous awardees, and later, of
Bingabing himself.

Sometime in March 1965, PNR and Bingabing filed suit against Doltz for
recovery of possession of the premises in the Court of First Instance of
Albay. 1 They there averred that sometime in January 1963, Doltz illegally
entered the land, constructed a house thereon occupying about fifty (50)
square meters, and planted palay on the other portions thereof. They prayed
that Doltz remove his house, vacate the premises, restore possession to PNR
or Bingabing, pay PNR P160 per annum as reasonable compensation for the
occupation of the premises from January 1963, and P2,000 as expenses of
litigation, pay Bingabing P500 annually from 1963, and shoulder the costs of
suit.
Doltz' answer in that case averred inter alia that the had been a tenant on the
property for over twenty years; that he had been placed thereon by the
deceased Pablo Gomba who leased the property from the then Manila Railroad
Company (now PNR); that he became the tenant of Demetrio de Vera,
Gomba's successor; that he is the tenant of Bingabing, having given the
latter's share of 1/3 during the last two harvests; and that the case is properly
cognizable by the Court of Agrarian Relations. Upon the court's request, Doltz
and Bingabing agreed to temporarily liquidate the harvest on a sharing ratio of
70-30 in Doltz' favor.
It has been suggested in the record that said case Civil Case 3021 was
dismissed by the Court of First Instance of Albay upon the ground that the
subject matter of the action is tenancy; that petitioners have appealed. That
case, parenthetically, has not yet reached this Court.
While the aforesaid Civil Case 3021 was pending in the Albay court of first
instance, Doltz registered with the Court of Agrarian Relations (CAR) a petition
against Bingabing for security of tenure, the adoption of a sharing ratio of 7030 of the crops, and reliquidation of past harvests. This is the present case
CAR Case 692, Albay '67, Court of Agrarian Relations, Ninth Regional District,
Legazpi City, Branch II, entitled "Pampilo Doltz, Petitioner, versus Pantaleon
Bingabing, Respondent." PNR intervened in the case. Petitioners herein there
maintained the position that the premises in controversy are not an
agricultural land within the contemplation of the Agricultural Tenancy Act
(Republic Act 1199) or the Agricultural Land Reform Code (Republic Act 3844);
that no tenancy relationship existed between the parties; that CAR, therefore,
lacked jurisdiction over the case; and that there is a pending case between the
same parties in another court involving the same subject matter and the same
cause of action.
After trial, the CAR promulgated its decision of June 10, 1968. It upheld its
jurisdiction over the case, maintained Doltz in the peaceful possession of the
parcels of land as tenant on a 70-30 sharing ratio in Doltz' favor, ordered
Bingabing to pay Doltz P250 attorneys' fees and the costs, but dismissed the
latter's claim for reliquidation of past harvests for lack of substantial evidence.

Petitioners' move to reconsider the said decision failed. They now come to this
Court. They specifically question CAR's jurisdiction.
1. Is the land here involved in agricultural land within the meaning of the
Agricultural Tenancy Act and the Agricultural Land Reform Code?
According to Section 3 of the Agricultural Tenancy Act, "[a]gricultural tenancy
is the physical possession by a person of land devoted to agriculture belonging
to, or legally possessed by, another for the purpose of production through the
labor of the former and of the members of his immediate farm household, in
consideration of which the former agrees to share the harvest with the latter,
or to pay a price certain or ascertainable, either in produce or in money, or in
both." 2 The term "agricultural land" as understood by the Agricultural Land
Reform Code is not as broad in meaning as it is known in the constitutional
sense. As interpreted in Krivenko vs. Register of Deeds, 79 Phil. 461, 471, the
phrase "agricultural land," constitutionally speaking, includes all lands that are
neither mineral nor timber lands and embraces within it wide sweep not only
lands strictly agricultural or devoted to cultivation for agricultural purposes but
also commercial, industrial, residential lands and lands for other purposes. On
the other hand, by Section 166(1) of the Agricultural Land Reform Code, "
"[a]gricultural land" means landdevoted to any growth including but not
limited to crop lands, salt beds, fishponds, idle land and abandoned land as
defined in paragraphs 18 and 19 of this section, respectively." 3
It is obvious then that under the law, the land here in controversy does not fit
into the concept of agricultural land. PNR cannot devote it to agriculture
because by its own charter, Republic Act 4156, PNR cannot engage in
agriculture.
Indeed, the land which adjoins the railroad track on both sides is part of
PNR's right of way. That right of way is not limited to the particular space
occupied by the roadbed or its main track. It also includes the portions
occupied by the telephone and telegraph posts. It extends to a width of 30
meters which reasonably gives the train locomotive engineer a clear
commanding view of the track and its switches ahead of him.
The entire width is important to PNR's railroad operations. Which should not be
hampered. And, communication lines must not be disturbed. Buildings should
not be constructed so close to the track. Because, it is not so easy to prevent
people from walking along the track; animals, too, may stray into the area;
obstructions there could be along the track itself which might cause
derailment. All of these could prevent the locomotive engineer from taking the
necessary precautions on time to avert accidents which may cause damage to
the trains, injury to its passengers, and even loss of life.

Besides, the use of the strips of land on both sides of the track in railroad
operation is inconsistent with agricultural activities. The contract of lease
authorizes the railroad company to enter upon the premises to make repairs,
place its materials on the land. It may even take soil from the land to fill up
any part of the railroad track destroyed by water during rainy days. What if
PNR should decide to construct another parallel track on the land leased? The
occupant of the land cannot prevent or stop PNR from doing any of these.
Security of tenure so important in landlord-tenant relationship may not thus be
attained.
The foregoing are considerations sufficient enough to deter us from adopting
the view that the disputed land in narrow strips is agricultural land within
the meaning of the Agricultural Tenancy Act and the Agricultural Land Reform
Code. By destination, it is not agricultural.
2. Nor may Pampilo Doltz be considered as a true and lawful tenant.
To be borne in mind is the fact that PNR executed with Pantaleon Bingabing a
civil law lease contract, not an agricultural lease.1awphl.nt This distinction is
expressly recognized by the law. 4 That contract is temporary, at best for a
short term. It is revocable any time upon demand by PNR whenever it needs
the same for its own use or for a more beneficial purpose.
Even on the assumption that the land is agricultural, there is the circumstance
that PNR prohibits the sublease of the premises. PNR's lessees cannot give
what they are not allowed to give. Any contract then of sublease between
Doltz, the supposed tenant, and Pablo Gomba or Demetrio de Vera, the
previous awardees, or even of Pantaleon Bingabing, the present awardee
without PNR's consent cannot bind the latter. No such consent was here
given.
This ushers us to a principle shaped out by jurisprudence that the security of
tenure guaranteed by our tenancy law may be invoked only by tenants de
jure, not by those who are not true and lawful tenants. 5 In Pabustan vs. De
Guzman, L-12898, August 31, 1960, the tenant sublet the landholding to a
third person without the knowledge and consent of the landowner. In an
ejectment suit brought by the landowner against said third person in the CAR,
this Court held that the CAR had no jurisdiction over the case because no
tenancy relationship existed between the parties, as the third person was, in
reality, an unlawful squatter or intruder. Correlating Pabustan to the present
case, the lessee here had no power to sublet. There is also thus no legally
cognizable relationship of tenancy between the parties.
We, accordingly, rule that CAR does not have jurisdiction over the case at bar
and the proceedings below are thus null and void.

For the reasons given, the judgment of the Court of Agrarian Relations of June
10, 1968 in its Case 692, Albay '67, under review is hereby reversed, and said
case is hereby dismissed.
Costs against private respondent Pampilo Doltz. So ordered.
EN BANC

CAMPOS, JR., J.:


This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to
nullify the proceedings and decision of the Department of Agrarian Reform
Adjudication Board (DARAB for brevity) dated September 4, 1989 and to set
aside the decision the decision * of the Court of Appeals dated August 20,
1990, affirming the decision of the DARAB which ordered the segregation of
400 hectares of suitable, compact and contiguous portions of the Central
Mindanao University (CMU for brevity) land and their inclusion in the
Comprehensive Agrarian Reform Program (CARP for brevity) for distribution to
qualified beneficiaries, on the ground of lack of jurisdiction.
This case originated in a complaint filed by complainants calling themselves as
the Bukidnon Free Farmers and Agricultural Laborers Organization (BUFFALO
for brevity) under the leadership of Alvin Obrique and Luis Hermoso against
the CMU, before the Department of Agrarian Reform for Declaration of Status
as Tenants, under the CARP.
From the records, the following facts are evident. The petitioner, the CMU, is
an agricultural educational institution owned and run by the state located in
the town of Musuan, Bukidnon province. It started as a farm school at
Marilang, Bukidnon in early 1910, in response to the public demand for an
agricultural school in Mindanao. It expanded into the Bukidnon National
Agricultural High School and was transferred to its new site in Managok near
Malaybalay, the provincial capital of Bukidnon.

G.R. No. 100091 October 22, 1992


CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR.
LEONARDO A. CHUA, petitioner,
vs.
THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE
COURT OF APPEALS and ALVIN OBRIQUE, REPRESENTING BUKIDNON
FREE FARMERS AGRICULTURAL LABORERS ORGANIZATION
(BUFFALO),respondents.

In the early 1960's, it was converted into a college with campus at Musuan,
until it became what is now known as the CMU, but still primarily an
agricultural university. From its beginning, the school was the answer to the
crying need for training people in order to develop the agricultural potential of
the island of Mindanao. Those who planned and established the school had a
vision as to the future development of that part of the Philippines. On January
16, 1958 the President of the Republic of the Philippines, the late Carlos P.
Garcia, "upon the recommendation of the Secretary of Agriculture and Natural
Resources, and pursuant to the provisions of Section 53, of Commonwealth Act
No. 141, as amended", issued Proclamation No. 476, withdrawing from sale or
settlement and reserving for the Mindanao Agricultural College, a site which
would be the future campus of what is now the CMU. A total land area
comprising 3,080 hectares was surveyed and registered and titled in the name
of the petitioner under OCT Nos. 160, 161 and 162. 1
In the course of the cadastral hearing of the school's petition for registration of
the aforementioned grant of agricultural land, several tribes belonging to

cultural communities, opposed the petition claiming ownership of certain


ancestral lands forming part of the tribal reservations. Some of the claims
were granted so that what was titled to the present petitioner school was
reduced from 3,401 hectares to 3,080 hectares.
In the early 1960's, the student population of the school was less than 3,000.
By 1988, the student population had expanded to some 13,000 students, so
that the school community has an academic population (student, faculty and
non-academic staff) of almost 15,000. To cope with the increase in its
enrollment, it has expanded and improved its educational facilities partly from
government appropriation and partly by self-help measures.
True to the concept of a land grant college, the school embarked on self-help
measures to carry out its educational objectives, train its students, and
maintain various activities which the government appropriation could not
adequately support or sustain. In 1984, the CMU approved Resolution No. 160,
adopting a livelihood program called "Kilusang Sariling Sikap Program" under
which the land resources of the University were leased to its faculty and
employees. This arrangement was covered by a written contract. Under this
program the faculty and staff combine themselves to groups of five members
each, and the CMU provided technical know-how, practical training and all
kinds of assistance, to enable each group to cultivate 4 to 5 hectares of land
for the lowland rice project. Each group pays the CMU a service fee and also a
land use participant's fee. The contract prohibits participants and their hired
workers to establish houses or live in the project area and to use the cultivated
land as a collateral for any kind of loan. It was expressly stipulated that no
landlord-tenant relationship existed between the CMU and the faculty and/or
employees. This particular program was conceived as a multi-disciplinary
applied research extension and productivity program to utilize available land,
train people in modern agricultural technology and at the same time give the
faculty and staff opportunities within the confines of the CMU reservation to
earn additional income to augment their salaries. The location of the CMU at
Musuan, Bukidnon, which is quite a distance from the nearest town, was the
proper setting for the adoption of such a program. Among the participants in
this program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor
Pulao, Danilo Vasquez, Aronio Pelayo and other complainants. Obrique was a
Physics Instructor at the CMU while the others were employees in the lowland
rice project. The other complainants who were not members of the faculty or
non-academic staff CMU, were hired workers or laborers of the participants in
this program. When petitioner Dr. Leonardo Chua became President of the
CMU in July 1986, he discontinued the agri-business project for the production
of rice, corn and sugar cane known as Agri-Business Management and Training
Project, due to losses incurred while carrying on the said project. Some CMU
personnel, among whom were the complainants, were laid-off when this
project was discontinued. As Assistant Director of this agri-business project,
Obrique was found guilty of mishandling the CMU funds and was separated

from service by virtue of Executive Order No. 17, the re-organization law of the
CMU.
Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help
project called CMU-Income Enhancement Program (CMU-IEP) to develop
unutilized land resources, mobilize and promote the spirit of self-reliance,
provide socio-economic and technical training in actual field project
implementation and augment the income of the faculty and the staff.
Under the terms of a 3-party Memorandum of Agreement 2 among the CMU,
the CMU-Integrated Development Foundation (CMU-IDF) and groups or
"seldas" of 5 CMU employees, the CMU would provide the use of 4 to 5
hectares of land to a selda for one (1) calendar year. The CMU-IDF would
provide researchers and specialists to assist in the preparation of project
proposals and to monitor and analyze project implementation. The selda in
turn would pay to the CMU P100 as service fee and P1,000 per hectare as
participant's land rental fee. In addition, 400 kilograms of the produce per year
would be turned over or donated to the CMU-IDF. The participants agreed not
to allow their hired laborers or member of their family to establish any house
or live within vicinity of the project area and not to use the allocated lot as
collateral for a loan. It was expressly provided that no tenant-landlord
relationship would exist as a result of the Agreement.
Initially, participation in the CMU-IEP was extended only to workers and staff
members who were still employed with the CMU and was not made available
to former workers or employees. In the middle of 1987, to cushion the impact
of the discontinuance of the rice, corn and sugar cane project on the lives of
its former workers, the CMU allowed them to participate in the CMU-IEP as
special participants.
Under the terms of a contract called Addendum To Existing Memorandum of
Agreement Concerning Participation To the CMU-Income Enhancement
Program, 3 a former employee would be grouped with an existing selda of his
choice and provided one (1) hectare for a lowland rice project for one (1)
calendar year. He would pay the land rental participant's fee of P1,000.00 per
hectare but on a charge-to-crop basis. He would also be subject to the same
prohibitions as those imposed on the CMU employees. It was also expressly
provided that no tenant-landlord relationship would exist as a result of the
Agreement.
The one-year contracts expired on June 30, 1988. Some contracts were
renewed. Those whose contracts were not renewed were served with notices
to vacate.

The non-renewal of the contracts, the discontinuance of the rice, corn and
sugar cane project, the loss of jobs due to termination or separation from the
service and the alleged harassment by school authorities, all contributed to,
and precipitated the filing of the complaint.
On the basis of the above facts, the DARAB found that the private respondents
were not tenants and cannot therefore be beneficiaries under the CARP. At the
same time, the DARAB ordered the segregation of 400 hectares of suitable,
compact and contiguous portions of the CMU land and their inclusion in the
CARP for distribution to qualified beneficiaries.
The petitioner CMU, in seeking a review of the decisions of the respondents
DARAB and the Court of Appeals, raised the following issues:
1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005
for Declaration of Status of Tenants and coverage of land under the CARP.
2.) Whether or not respondent Court of Appeals committed serious errors and
grave abuse of discretion amounting to lack of jurisdiction in dismissing the
Petition for Review on Certiorari and affirming the decision of DARAB.
In their complaint, docketed as DAR Case No. 5, filed with the DARAB,
complainants Obrique, et al. claimed that they are tenants of the CMU and/or
landless peasants claiming/occupying a part or portion of the CMU situated at
Sinalayan, Valencia, Bukidnon and Musuan, Bukidnon, consisting of about
1,200 hectares. We agree with the DARAB's finding that Obrique, et. al. are not
tenants. Under the terms of the written agreement signed by Obrique, et. al.,
pursuant to the livelihood program called "Kilusang Sariling Sikap Program", it
was expressly stipulated that no landlord-tenant relationship existed between
the CMU and the faculty and staff (participants in the project). The CMU did
not receive any share from the harvest/fruits of the land tilled by the
participants. What the CMU collected was a nominal service fee and land use
participant's fee in consideration of all the kinds of assistance given to the
participants by the CMU. Again, the agreement signed by the participants
under the CMU-IEP clearly stipulated that no landlord-tenant relationship
existed, and that the participants are not share croppers nor lessees, and the
CMU did not share in the produce of the participants' labor.
In the same paragraph of their complaint, complainants claim that they are
landless peasants. This allegation requires proof and should not be accepted
as factually true. Obrique is not a landless peasant. The facts showed he was
Physics Instructor at CMU holding a very responsible position was separated
from the service on account of certain irregularities he committed while
Assistant Director of the Agri-Business Project of cultivating lowland rice.
Others may, at the moment, own no land in Bukidnon but they may not

necessarily be so destitute in their places of origin. No proof whatsoever


appears in the record to show that they are landless peasants.
The evidence on record establish without doubt that the complainants were
originally authorized or given permission to occupy certain areas of the CMU
property for a definite purpose to carry out certain university projects as
part of the CMU's program of activities pursuant to its avowed purpose of
giving training and instruction in agricultural and other related technologies,
using the land and other resources of the institution as a laboratory for these
projects. Their entry into the land of the CMU was with the permission and
written consent of the owner, the CMU, for a limited period and for a specific
purpose. After the expiration of their privilege to occupy and cultivate the land
of the CMU, their continued stay was unauthorized and their settlement on the
CMU's land was without legal authority. A person entering upon lands of
another, not claiming in good faith the right to do so by virtue of any title of
his own, or by virtue of some agreement with the owner or with one whom he
believes holds title to the land, is a squatter. 4 Squatters cannot enter the land
of another surreptitiously or by stealth, and under the umbrella of the CARP,
claim rights to said property as landless peasants. Under Section 73 of R.A.
6657, persons guilty of committing prohibited acts of forcible entry or illegal
detainer do not qualify as beneficiaries and may not avail themselves of the
rights and benefits of agrarian reform. Any such person who knowingly and
wilfully violates the above provision of the Act shall be punished with
imprisonment or fine at the discretion of the Court.
In view of the above, the private respondents, not being tenants nor proven to
be landless peasants, cannot qualify as beneficiaries under the CARP.
The questioned decision of the Adjudication Board, affirmed in toto by the
Court of Appeals, segregating 400 hectares from the CMU land is primarily
based on the alleged fact that the land subject hereof is "not directly, actually
and exclusively used for school sites, because the same was leased to
Philippine Packing Corporation (now Del Monte Philippines)".
In support of this view, the Board held that the "respondent University failed to
show that it is using actually, really, truly and in fact, the questioned area to
the exclusion of others, nor did it show that the same is directly used without
any intervening agency or person", 5 and "there is no definite and concrete
showing that the use of said lands are essentially indispensable for
educational purposes". 6 The reliance by the respondents Board and Appellate
Tribunal on the technical or literal definition from Moreno's Philippine Law
Dictionary and Black's Law Dictionary, may give the ordinary reader a
classroom meaning of the phrase "is actually directly and exclusively", but in
so doing they missed the true meaning of Section 10, R.A. 6657, as to what
lands are exempted or excluded from the coverage of the CARP.

The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive


Agrarian Reform Law of 1988, are as follows:

those already developed shall be exempt from the coverage of


this Act. (Emphasis supplied).

Sec. 4. SCOPE. The Comprehensive Agrarian Reform Law of


1988 shall cover, regardless of tenurial arrangement and
commodity produced, all public and private agricultural lands
as provided in Proclamation No. 131 and Executive Order No.
229 including other lands of the public domain suitable for
agriculture.

The construction given by the DARAB to Section 10 restricts the land area of
the CMU to its present needs or to a land area presently, actively exploited
and utilized by the university in carrying out its present educational program
with its present student population and academic facility overlooking the
very significant factor of growth of the university in the years to come. By the
nature of the CMU, which is a school established to promote agriculture and
industry, the need for a vast tract of agricultural land and for future programs
of expansion is obvious. At the outset, the CMU was conceived in the same
manner as land grant colleges in America, a type of educational institution
which blazed the trail for the development of vast tracts of unexplored and
undeveloped agricultural lands in the Mid-West. What we now know as
Michigan State University, Penn State University and Illinois State University,
started as small land grant colleges, with meager funding to support their ever
increasing educational programs. They were given extensive tracts of
agricultural and forest lands to be developed to support their numerous
expanding activities in the fields of agricultural technology and scientific
research. Funds for the support of the educational programs of land grant
colleges came from government appropriation, tuition and other student fees,
private endowments and gifts, and earnings from miscellaneous sources. 7 It
was in this same spirit that President Garcia issued Proclamation No. 476,
withdrawing from sale or settlement and reserving for the Mindanao
Agricultural College (forerunner of the CMU) a land reservation of 3,080
hectares as its future campus. It was set up in Bukidnon, in the hinterlands of
Mindanao, in order that it can have enough resources and wide open spaces to
grow as an agricultural educational institution, to develop and train future
farmers of Mindanao and help attract settlers to that part of the country.

More specifically, the following lands are covered by the


Comprehensive Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain
devoted to or suitable for agriculture. No reclassification of
forest of mineral lands to agricultural lands shall be
undertaken after the approval of this Act until Congress, taking
into account ecological, developmental and equity
considerations, shall have determined by law, the specific
limits of the public domain;
(b) All lands of the public domain in excess of the specific
limits ad determined by Congress in the preceding paragraph;
(c) All other lands owned by the Government devoted to or
suitable for agriculture; and
(d) All private lands devoted to or suitable for agriculture
regardless of the agricultural products raised or that can be
raised thereon.
Sec. 10 EXEMPTIONS AND EXCLUSIONS. Lands actually,
directly and exclusively used and found to be necessary for
parks, wildlife, forest reserves, reforestration, fish sanctuaries
and breeding grounds, watersheds and mangroves, national
defense, school sites and campuses including experimental
farm stations operated by public or private schools for
educational purposes, seeds and seedlings research and pilot
production centers, church sites and convents appurtenant
thereto, mosque sites and Islamic centers appurtenant
thereto, communal burial grounds and cemeteries, penal
colonies and penal farms actually worked by the inmates,
government and private research and quarantine centers and
all lands with eighteen percent (18%) slope and over, except

In line with its avowed purpose as an agricultural and technical school, the
University adopted a land utilization program to develop and exploit its 3080hectare land reservation as follows: 8
No. of Hectares Percentage
a. Livestock and Pasture 1,016.40 33
b. Upland Crops 616 20
c. Campus and Residential sites 462 15
d. Irrigated rice 400.40 13
e. Watershed and forest reservation 308 10

f. Fruit and Trees Crops 154 5


g. Agricultural
Experimental stations 123.20 4
3,080.00 100%
The first land use plan of the CARP was prepared in 1975 and since then it has
undergone several revisions in line with changing economic conditions,
national economic policies and financial limitations and availability of
resources. The CMU, through Resolution No. 160 S. 1984, pursuant to its
development plan, adopted a multi-disciplinary applied research extension
and productivity program called the "Kilusang Sariling Sikap Project" (CMUKSSP). The objectives 9 of this program were:
1. Provide researches who shall assist in (a) preparation of proposal; (b)
monitor project implementation; and (c) collect and analyze all data and
information relevant to the processes and results of project
implementation;
2. Provide the use of land within the University reservation for the purpose
of establishing a lowland rice project for the party of the Second Part for a
period of one calendar year subject to discretionary renewal by the Party
of the First Part;
3. Provide practical training to the Party of the Second Part on the
management and operation of their lowland project upon request of Party
of the Second Part; and
4. Provide technical assistance in the form of relevant livelihood project
specialists who shall extend expertise on scientific methods of crop
production upon request by Party of the Second Part.
In return for the technical assistance extended by the CMU, the participants in
a project pay a nominal amount as service fee. The self-reliance program was
adjunct to the CMU's lowland rice project.
The portion of the CMU land leased to the Philippine Packing Corporation (now
Del Monte Phils., Inc.) was leased long before the CARP was passed. The
agreement with the Philippine Packing Corporation was not a lease but a
Management and Development Agreement, a joint undertaking where use by
the Philippine Packing Corporation of the land was part of the CMU research
program, with the direct participation of faculty and students. Said contracts
with the Philippine Packing Corporation and others of a similar nature (like MMAgraplex) were made prior to the enactment of R.A. 6657 and were directly

connected to the purpose and objectives of the CMU as an educational


institution. As soon as the objectives of the agreement for the joint use of the
CMU land were achieved as of June 1988, the CMU adopted a blue print for the
exclusive use and utilization of said areas to carry out its own research and
agricultural experiments.
As to the determination of when and what lands are found to be necessary for
use by the CMU, the school is in the best position to resolve and answer the
question and pass upon the problem of its needs in relation to its avowed
objectives for which the land was given to it by the State. Neither the DARAB
nor the Court of Appeals has the right to substitute its judgment or discretion
on this matter, unless the evidentiary facts are so manifest as to show that the
CMU has no real for the land.
It is our opinion that the 400 hectares ordered segregated by the DARAB and
affirmed by the Court of Appeals in its Decision dated August 20, 1990, is not
covered by the CARP because:
(1) It is not alienable and disposable land of the public domain;
(2) The CMU land reservation is not in excess of specific limits as
determined by Congress;
(3) It is private land registered and titled in the name of its lawful owner,
the CMU;
(4) It is exempt from coverage under Section 10 of R.A. 6657 because the
lands are actually, directly and exclusively used and found to be
necessary for school site and campus, including experimental farm
stations for educational purposes, and for establishing seed and seedling
research and pilot production centers. (Emphasis supplied).
Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the
jurisdiction of the DARAB is limited only to matters involving the
implementation of the CARP. More specifically, it is restricted to agrarian cases
and controversies involving lands falling within the coverage of the
aforementioned program. It does not include those which are actually, directly
and exclusively used and found to be necessary for, among such purposes,
school sites and campuses for setting up experimental farm stations, research
and pilot production centers, etc.
Consequently, the DARAB has no power to try, hear and adjudicate the case
pending before it involving a portion of the CMU's titled school site, as the
portion of the CMU land reservation ordered segregated is actually, directly
and exclusively used and found by the school to be necessary for its purposes.

The CMU has constantly raised the issue of the DARAB's lack of jurisdiction
and has questioned the respondent's authority to hear, try and adjudicate the
case at bar. Despite the law and the evidence on record tending to establish
that the fact that the DARAB had no jurisdiction, it made the adjudication now
subject of review.
Whether the DARAB has the authority to order the segregation of a portion of
a private property titled in the name of its lawful owner, even if the claimant is
not entitled as a beneficiary, is an issue we feel we must resolve. The quasijudicial powers of DARAB are provided in Executive Order No. 129-A, quoted
hereunder in so far as pertinent to the issue at bar:
Sec. 13. AGRARIAN REFORM ADJUDICATION BOARD There
is hereby created an Agrarian Reform Adjudication Board
under the office of the Secretary. . . . The Board shall assume
the powers and functions with respect to adjudication of
agrarian reform cases under Executive Order 229 and this
Executive Order . . .
Sec. 17. QUASI JUDICIAL POWERS OF THE DAR. The DAR
is hereby vested with quasi-judicial powers to determine and
adjudicate agrarian reform matters and shall have exclusive
original jurisdiction over all matters including implementation
of Agrarian Reform.
Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as
follows:
The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall
have original jurisdiction over all matters involving the
implementation of agrarian reform. . . .
Section 17 of Executive Order No. 129-A is merely a repetition of
Section 50, R.A. 6657. There is no doubt that the DARAB has
jurisdiction to try and decide any agrarian dispute in the
implementation of the CARP. An agrarian dispute is defined by the
same law as any controversy relating to tenurial rights whether
leasehold, tenancy stewardship or otherwise over lands devoted to
agriculture. 10
In the case at bar, the DARAB found that the complainants are not share
tenants or lease holders of the CMU, yet it ordered the "segregation of a
suitable compact and contiguous area of Four Hundred hectares, more or
less", from the CMU land reservation, and directed the DAR Regional Director

to implement its order of segregation. Having found that the complainants in


this agrarian dispute for Declaration of Tenancy Status are not entitled to claim
as beneficiaries of the CARP because they are not share tenants or
leaseholders, its order for the segregation of 400 hectares of the CMU land
was without legal authority. w do not believe that the quasi-judicial function of
the DARAB carries with it greater authority than ordinary courts to make an
award beyond what was demanded by the complainants/petitioners, even in
an agrarian dispute. Where the quasi-judicial body finds that the
complainants/petitioners are not entitled to the rights they are demanding, it
is an erroneous interpretation of authority for that quasi-judicial body to order
private property to be awarded to future beneficiaries. The order segregation
400 hectares of the CMU land was issued on a finding that the complainants
are not entitled as beneficiaries, and on an erroneous assumption that the
CMU land which is excluded or exempted under the law is subject to the
coverage of the CARP. Going beyond what was asked by the complainants who
were not entitled to the relief prayed the complainants who were not entitled
to the relief prayed for, constitutes a grave abuse of discretion because it
implies such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction.
The education of the youth and agrarian reform are admittedly among the
highest priorities in the government socio-economic programs. In this case,
neither need give way to the other. Certainly, there must still be vast tracts of
agricultural land in Mindanao outside the CMU land reservation which can be
made available to landless peasants, assuming the claimants here, or some of
them, can qualify as CARP beneficiaries. To our mind, the taking of the CMU
land which had been segregated for educational purposes for distribution to
yet uncertain beneficiaries is a gross misinterpretation of the authority and
jurisdiction granted by law to the DARAB.
The decision in this case is of far-reaching significance as far as it concerns
state colleges and universities whose resources and research facilities may be
gradually eroded by misconstruing the exemptions from the CARP. These state
colleges and universities are the main vehicles for our scientific and
technological advancement in the field of agriculture, so vital to the existence,
growth and development of this country.
It is the opinion of this Court, in the light of the foregoing analysis and for the
reasons indicated, that the evidence is sufficient to sustain a finding of grave
abuse of discretion by respondents Court of Appeals and DAR Adjudication
Board. We hereby declare the decision of the DARAB dated September 4, 1989
and the decision of the Court of Appeals dated August 20, 1990, affirming the
decision of the quasi-judicial body, as null and void and hereby order that they
be set aside, with costs against the private respondents.
SO ORDERED

EN BANC
G.R. No. 93100 June 19, 1997
ATLAS FERTILIZER CORPORATION, petitioner,
vs.
THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, respondent.
G.R. No. 97855 June 19, 1997
PHILIPPINE FEDERATION OF FISHFARM PRODUCERS, INC. petitioner,
vs.
THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, respondent.
RESOLUTION

ROMERO, J.:
Before this Court are consolidated petitions questioning the constitutionality of
some portions of Republic Act No. 6657 otherwise known as the
Comprehensive Agrarian Reform Law. 1
Petitioners Atlas Fertilizer Corporation, 2 Philippine Federation of Fishfarm
Producers, Inc. and petitioner-in-intervention Archie's Fishpond, Inc. and
Arsenio Al. Acuna 3 are engaged in the aquaculture industry utilizing fishponds
and prawn farms. They assail Sections 3 (b), 11, 13, 16 (d), 17 and 32 of R.A.
6657, as well as the implementing guidelines and procedures contained in
Administrative Order Nos. 8 and 10 Series of 1988 issued by public respondent
Secretary of the Department of Agrarian Reform as unconstitutional.
Petitioners claim that the questioned provisions of CARL violate the
Constitution in the following manner:
1. Sections 3 (b), 11, 13, 16 (d), 17 and 32 of CARL extend
agrarian reform to aquaculture lands even as Section 4, Article
XIII of the Constitution limits agrarian reform only to
agricultural lands.

2. The questioned provisions similarly treat of aquaculture


lands and agriculture lands when they are differently situated,
and differently treat aquaculture lands and other industrial
lands, when they are similarly situated in violation of the
constitutional guarantee of the equal protection of the laws.
3. The questioned provisions distort employment benefits and
burdens in favor of aquaculture employees and against other
industrial workers even as Section 1 and 3, Article XIII of the
Constitution mandate the State to promote equality in
economic and employment opportunities.
4. The questioned provisions deprive petitioner of its
government-induced investments in aquaculture even as
Sections 2 and 3, Article XIII of the Constitution mandate the
State to respect the freedom of enterprise and the right of
enterprises to reasonable returns on investments and to
expansion and growth.
The constitutionality of the above-mentioned provisions has been ruled upon
in the case of Luz Farms, Inc. v.Secretary of Agrarian Reform 4 regarding the
inclusion of land devoted to the raising of livestock, poultry and swine in its
coverage.
The issue now before this Court is the constitutionality of the same abovementioned provisions insofar as they include in its coverage lands devoted to
the aquaculture industry, particularly fishponds and prawn farms.
In their first argument , petitioners contend that in the case of Luz Farms,
Inc. v. Secretary of Agrarian Reform, 5this Court has already ruled impliedly
that lands devoted to fishing are not agricultural lands. In aquaculture,
fishponds and prawn farms, the use of land is only incidental to and not the
principal factor in productivity and, hence, as held in "Luz Farms," they too
should be excluded from R.A. 6657 just as lands devoted to livestock, swine,
and poultry have been excluded for the same reason. They also argue that
they are entitled to the full benefit of "Luz Farms" to the effect that only five
percent of the total investment in aquaculture activities, fishponds, and prawn
farms, is in the form of land, and therefore, cannot be classified as agricultural
activity. Further, that in fishponds and prawn farms, there are no farmers, nor
farm workers, who till lands, and no agrarian unrest, and therefore, the
constitutionally intended beneficiaries under Section 4, Art. XIII, 1987
Constitution do not exist in aquaculture.
In their second argument, they contend that R.A. 6657, by including in its
coverage, the raising of fish and aquaculture operations including fishponds

and prawn ponds, treating them as in the same class or classification as


agriculture or farming violates the equal protection clause of the Constitution
and is, therefore, void. Further, the Constitutional Commission debates show
that the intent of the constitutional framers is to exclude "industrial" lands, to
which category lands devoted to aquaculture, fishponds, and fish farms
belong.
Petitioners also claim that Administrative Order Nos. 8 and 10 issued by the
Secretary of the Department of Agrarian Reform are, likewise,
unconstitutional, as held in "Luz Farms," and are therefore void as they
implement the assailed provisions of CARL.

distributed to said regular and other farmworkers within ninety


(90) days of the end of the fiscal year. . . .
While the Court will not hesitate to declare a law or an act void when
confronted squarely with constitutional issues, neither will it preempt the
Legislative and the Executive branches of the government in correcting or
clarifying, by means of amendment, said law or act. On February 20, 1995,
Republic Act No. 7881 6 was approved by Congress. Provisions of said Act
pertinent to the assailed provisions of CARL are the following:
Sec. 1. Section 3, Paragraph (b) of Republic Act No. 6657 is
hereby amended to read as follows:

The provisions of CARL being assailed as unconstitutional are as follows:


Sec. 3. Definitions. For the purpose of this
Act, unless the context indicates otherwise:

(a) Section 3 (b) which includes the "raising of fish in the


definition of "Agricultural, Agricultural Enterprise or
Agricultural Activity." (Emphasis Supplied)

(b) Agriculture, Agricultural Enterprise or


Agricultural Activity means the cultivation of
the soil, planting of crops, growing of fruit
trees, including the harvesting of such farm
products and other farm activities and
practices performed by a farmer in conjunction
with such farming operations done by persons
whether natural or juridical.

(b) Section 11 which defines "commercial farms" as private


agricultural lands devoted to fishpondsand prawn ponds. . . .
(Emphasis Supplied)
(c) Section 13 which calls upon petitioner to execute a
production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of
Agrarian reform the authority to summarily determine the just
compensation to be paid for lands covered by the
comprehensive Agrarian reform Law.

Sec. 2. Section 10 of Republic Act No. 6657 is hereby amended


to read as follows:

(e) Section 32 which spells out the production-sharing plan


mentioned in section 13

xxx xxx xxx

. . . (W)hereby three percent (3%) of the gross sales from the


production of such lands are distributed within sixty (60) days
at the end of the fiscal year as compensation to regular and
other farmworkers in such lands over and above the
compensation they currently receive: Provided, That these
individuals or entities realize gross sales in excess of five
million pesos per annum unless the DAR, upon proper
application, determines a lower ceiling.
In the event that the individual or entity realizes a profit, an
additional ten percent (10%) of the net profit after tax shall be

Sec. 10. Exemptions and Exclusions.

b) Private lands actually, directly and


exclusively used for prawn farms and
fishponds shall be exempt from the coverage
of this Act: Provided, That said prawn farms
and fishponds have not been distributed and
Certificate of Land Ownership Award (CLOA)
issued to agrarian reform beneficiaries under
the Comprehensive Agrarian Reform Program.
In cases where the fishponds or prawn farms
have been subjected to the Comprehensive
Agrarian Reform Law, by voluntary offer to sell,
or commercial farms deferment or notices of

compulsory acquisition, a simple and absolute


majority of the actual regular workers or
tenants must consent to the exemption within
one (1) year from the effectivity of this Act.
when the workers or tenants do not agree to
this exemption, the fishponds or prawn farms
shall be distributed collectively to the worker
beneficiaries or tenants who shall form a
cooperative or association to manage the
same.

Sec. 32-A. Incentives. Individuals or entities


owning or operating fishponds and prawn
farms are hereby mandated to execute within
six (6) months from the effectivity of this Act,
an incentive plan with their regular fishpond or
prawn farm workers' organization, if any,
whereby seven point five percent (7.5%) of
their net profit before tax from the operation of
the fishpond or prawn farms are distributed
within sixty (60) days at the end of the fiscal
year as compensation to regular and other
pond workers in such ponds over and above
the compensation they currently receive.

In cases where the fishponds or prawn farms


have not been subjected to the
Comprehensive Agrarian Reform Law, the
consent of the farm workers shall no longer be
necessary, however, the provision of Section
32-A hereof on incentives shall apply.

In order to safeguard the right of the regular


fishpond or prawn farm workers under the
incentive plan, the books of the fishpond or
prawn owners shall be subject to periodic audit
or inspection by certified public accountants
chosen by the workers.

xxx xxx xxx


Sec. 3. Section 11, Paragraph 1 is hereby amended to read as
follows:
Sec. 11. Commercial Farming. Commercial
farms, which are private agricultural lands
devoted to saltbeds, fruit farms, orchards,
vegetable and cut-flower farms and cacao,
coffee and rubber plantations, shall be subject
to immediate compulsory acquisition and
distribution after ten (10) years from the
effectivity of this Act. In the case of new farms,
the ten-year period shall begin from the first
year of commercial production and operation,
as determined by the DAR. During the ten-year
period, the Government shall initiate steps
necessary to acquire these lands, upon
payment of just compensation for the land and
the improvements thereon, preferably in favor
of organized cooperatives or associations,
which shall thereafter manage the said lands
for the workers beneficiaries.
Sec. 4. There shall be incorporated after Section 32 of Republic
Act No. 6657 a section to read as follows

The foregoing provision shall not apply to


agricultural lands subsequently converted to
fishponds or prawn farms provided the size of
the land converted does not exceed the
retention limit of the landowner.
The above-mentioned provisions of R.A. No. 7881 expressly state that
fishponds and prawn farms are excluded from the coverage of CARL. In view of
the foregoing, the question concerning the constitutionality of the assailed
provisions has become moot and academic with the passage of R.A. No. 7881.
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

DECISION
PARAS, J.:

EN BANC
[G.R. No. 86889 : December 4, 1990.]
192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE
DEPARTMENT OF AGRARIAN REFORM, Respondent.

This is a petition for prohibition with prayer for restraining order and/or
preliminary and permanent injunction against the Honorable Secretary of the
Department of Agrarian Reform for acting without jurisdiction in enforcing the
assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988 and in promulgating the Guidelines and
Procedure Implementing Production and Profit Sharing under R.A. No. 6657,
insofar as the same apply to herein petitioner, and further from performing an
act in violation of the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as
follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657,
which includes the raising of livestock, poultry and swine in its coverage
(Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the
Guidelines and Procedures Implementing Production and Profit Sharing as
embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules
and Regulations implementing Section 11 of R.A. No. 6657 (Commercial
Farms). (Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and
poultry business and together with others in the same business allegedly
stands to be adversely affected by the enforcement of Section 3(b), Section
11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657
otherwise known as Comprehensive Agrarian Reform Law and of the
Guidelines and Procedures Implementing Production and Profit Sharing under
R.A. No. 6657 promulgated on January 2, 1989 and the Rules and Regulations
Implementing Section 11 thereof as promulgated by the DAR on January 9,
1989 (Rollo, pp. 2-36).: rd
Hence, this petition praying that aforesaid laws, guidelines and rules be
declared unconstitutional. Meanwhile, it is also prayed that a writ of
preliminary injunction or restraining order be issued enjoining public
respondents from enforcing the same, insofar as they are made to apply to Luz
Farms and other livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among others,
Luz Farms' prayer for the issuance of a preliminary injunction in its
Manifestation dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved to
grant said Motion for Reconsideration regarding the injunctive relief, after the
filing and approval by this Court of an injunction bond in the amount of
P100,000.00. This Court also gave due course to the petition and required the
parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131168).
On December 22, 1989, the Solicitor General adopted his Comment to the
petition as his Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are
made to apply to it:

(a) Section 3(b) which includes the "raising of livestock (and poultry)"
in the definition of "Agricultural, Agricultural Enterprise or Agricultural
Activity."
(b) Section 11 which defines "commercial farms" as "private
agricultural lands devoted to commercial, livestock, poultry and swine
raising . . ."
(c) Section 13 which calls upon petitioner to execute a productionsharing plan.
(d) Section 16(d) and 17 which vest on the Department of Agrarian
Reform the authority to summarily determine the just compensation to
be paid for lands covered by the Comprehensive Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan mentioned
in Section 13
". . . (W)hereby three percent (3%) of the gross sales from the
production of such lands are distributed within sixty (60) days of the
end of the fiscal year as compensation to regular and other
farmworkers in such lands over and above the compensation they
currently receive: Provided, That these individuals or entities realize
gross sales in excess of five million pesos per annum unless the DAR,
upon proper application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional
ten (10%) of the net profit after tax shall be distributed to said regular
and other farmworkers within ninety (90) days of the end of the fiscal
year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13
and 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988),
insofar as the said law includes the raising of livestock, poultry and swine in its
coverage as well as the Implementing Rules and Guidelines promulgated in
accordance therewith.:-cralaw
The constitutional provision under consideration reads as follows:
ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular farmworkers, who
are landless, to own directly or collectively the lands they till or, in the
case of other farmworkers, to receive a just share of the fruits thereof.
To this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations, and
subject to the payment of just compensation. In determining retention
limits, the State shall respect the rights of small landowners. The State
shall further provide incentives for voluntary land-sharing.
x x x"
Luz Farms contended that it does not seek the nullification of R.A.
6657 in its entirety. In fact, it acknowledges the correctness of the
decision of this Court in the case of the Association of Small
Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform
(G.R. 78742, 14 July 1989) affirming the constitutionality of the
Comprehensive Agrarian Reform Law. It, however, argued that
Congress in enacting the said law has transcended the mandate of the
Constitution, in including land devoted to the raising of livestock,

poultry and swine in its coverage (Rollo, p. 131). Livestock or poultry


raising is not similar to crop or tree farming. Land is not the primary
resource in this undertaking and represents no more than five percent
(5%) of the total investment of commercial livestock and poultry
raisers. Indeed, there are many owners of residential lands all over the
country who use available space in their residence for commercial
livestock and raising purposes, under "contract-growing
arrangements," whereby processing corporations and other
commercial livestock and poultry raisers (Rollo, p. 10). Lands support
the buildings and other amenities attendant to the raising of animals
and birds. The use of land is incidental to but not the principal factor
or consideration in productivity in this industry. Including backyard
raisers, about 80% of those in commercial livestock and poultry
production occupy five hectares or less. The remaining 20% are mostly
corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry
raising is embraced in the term "agriculture" and the inclusion of such
enterprise under Section 3(b) of R.A. 6657 is proper. He cited that Webster's
International Dictionary, Second Edition (1954), defines the following words:
"Agriculture the art or science of cultivating the ground and raising
and harvesting crops, often, including also, feeding, breeding and
management of livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
Livestock domestic animals used or raised on a farm, especially for profit.
Farm a plot or tract of land devoted to the raising of domestic or other
animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary task in
constitutional construction is to ascertain and thereafter assure the realization
of the purpose of the framers in the adoption of the Constitution (J.M. Tuazon &
Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).: rd
Ascertainment of the meaning of the provision of Constitution begins with the
language of the document itself. The words used in the Constitution are to be
given their ordinary meaning except where technical terms are employed in
which case the significance thus attached to them prevails (J.M. Tuazon & Co.
vs. Land Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which are
ambiguous or of doubtful meaning, the courts may consider the debates in the
constitutional convention as throwing light on the intent of the framers of the
Constitution. It is true that the intent of the convention is not controlling by
itself, but as its proceeding was preliminary to the adoption by the people of
the Constitution the understanding of the convention as to what was meant by
the terms of the constitutional provision which was the subject of the
deliberation, goes a long way toward explaining the understanding of the
people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).
The transcripts of the deliberations of the Constitutional Commission of 1986
on the meaning of the word "agricultural," clearly show that it was never the
intention of the framers of the Constitution to include livestock and poultry
industry in the coverage of the constitutionally-mandated agrarian reform
program of the Government.
The Committee adopted the definition of "agricultural land" as defined under
Section 166 of R.A. 3844, as laud devoted to any growth, including but not

limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record,
CONCOM, August 7, 1986, Vol. III, p. 11).
The intention of the Committee is to limit the application of the word
"agriculture." Commissioner Jamir proposed to insert the word "ARABLE" to
distinguish this kind of agricultural land from such lands as commercial and
industrial lands and residential properties because all of them fall under the
general classification of the word "agricultural". This proposal, however, was
not considered because the Committee contemplated that agricultural lands
are limited to arable and suitable agricultural lands and therefore, do not
include commercial, industrial and residential lands (Record, CONCOM, August
7, 1986, Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme Court
Justice), posed several questions, among others, quoted as follows:
x x x
"Line 19 refers to genuine reform program founded on the primary
right of farmers and farmworkers. I wonder if it means that leasehold
tenancy is thereby proscribed under this provision because it speaks
of the primary right of farmers and farmworkers to own directly or
collectively the lands they till. As also mentioned by Commissioner
Tadeo, farmworkers include those who work in piggeries and poultry
projects.
I was wondering whether I am wrong in my appreciation that if
somebody puts up a piggery or a poultry project and for that purpose
hires farmworkers therein, these farmworkers will automatically have
the right to own eventually, directly or ultimately or collectively, the
land on which the piggeries and poultry projects were constructed.
(Record, CONCOM, August 2, 1986, p. 618).
x x x
The questions were answered and explained in the statement of then
Commissioner Tadeo, quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami
nagkaunawaan. Ipinaaalam ko kay Commissioner Regalado na hindi
namin inilagay ang agricultural worker sa kadahilanang kasama rito
ang piggery, poultry at livestock workers. Ang inilagay namin dito ay
farm worker kaya hindi kasama ang piggery, poultry at livestock
workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).
It is evident from the foregoing discussion that Section II of R.A. 6657 which
includes "private agricultural lands devoted to commercial livestock, poultry
and swine raising" in the definition of "commercial farms" is invalid, to the
extent that the aforecited agro-industrial activities are made to be covered by
the agrarian reform program of the State. There is simply no reason to include
livestock and poultry lands in the coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in Sections
13 and 32 of R.A. 6657 directing "corporate farms" which include livestock and
poultry raisers to execute and implement "production-sharing plans" (pending
final redistribution of their landholdings) whereby they are called upon to
distribute from three percent (3%) of their gross sales and ten percent (10%)
of their net profits to their workers as additional compensation is unreasonable
for being confiscatory, and therefore violative of due process (Rollo, p. 21).:cralaw
It has been established that this Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a

judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of the question is
unavoidably necessary to the decision of the case itself (Association of Small
Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R.
78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v.
Juico, G.R. 79777, 14 July 1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when confronted
with constitutional issues, it will not hesitate to declare a law or act invalid
when it is convinced that this must be done. In arriving at this conclusion, its
only criterion will be the Constitution and God as its conscience gives it in the
light to probe its meaning and discover its purpose. Personal motives and
political considerations are irrelevancies that cannot influence its decisions.
Blandishment is as ineffectual as intimidation, for all the awesome power of
the Congress and Executive, the Court will not hesitate "to make the hammer
fall heavily," where the acts of these departments, or of any official, betray the
people's will as expressed in the Constitution (Association of Small
Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R.
78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v.
Juico, G.R. 79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary to declare what the
other branches of the government had assumed to do, as void. This is the
essence of judicial power conferred by the Constitution "(I)n one Supreme
Court and in such lower courts as may be established by law" (Art. VIII, Section
1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution and
which was adopted as part of the Freedom Constitution, and Article VIII,
Section 1 of the 1987 Constitution) and which power this Court has exercised
in many instances (Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections
3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of
livestock, poultry and swine in its coverage as well as the Implementing Rules
and Guidelines promulgated in accordance therewith, are hereby DECLARED
null and void for being unconstitutional and the writ of preliminary injunction
issued is hereby MADE permanent.
SO ORDERED.

CANUBAS, MAXIMO A. CANUBAS, REYNALDO CARINGAL,


QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A. CRUZAT,
GREGORIO F. CRUZAT, RUFINO C. CRUZAT, SERGIO CRUZAT,
SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE
SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES,
GREGORIO GONZALES, LEODEGARIO N. GONZALES, PASCUAL P.
GONZALES, ROLANDO A. GONZALES, FRANCISCO A. JUANGCO,
GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M.
MANDANAS, CRISANTO MANDANAS, EMILIO M. MANDANAS,
GREGORIO A. MANDANAS, MARIO G. MANDANAS, TEODORO
MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B. MARQUEZ,
ARMANDO P. MATIENZO, DANIEL D. MATIENZO, MAXIMINO
MATIENZO, PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN,
JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ,
INOCENCIA S. PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F.
PETATE, JUANITO PETATE, PABLO A. PLATON, PRECILLO V.
PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA, DOMINGO
VILLA, JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD A. VILLA,
JACINTA S. ALVARADO, RODOLFO ANGELES, DOMINGO A.
CANUBAS, EDGARDO L. CASALME, QUIRINO DE LEON, LEONILO
M. ENRIQUEZ, CLAUDIA P. GONZALES, FELISA R. LANGUE,
QUINTILLANO LANGUE, REYNALDO LANGUE, ROMEO S.
LANGUE, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B.
FERNANDEZ, ZACARIAS HERRERA, ZACARIAS HERRERA,
REYNARIO U. LAZO, AGAPITO MATIENZO, DIONISIO F. PETATE,
LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO, ROSA
C. AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE
SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF
AGRARIAN REFORM ADJUDICATION BOARD, LAND BANK OF THE
PHILIPPINES, REGISTER OF DEEDS OF LAGUNA, DEPARTMENT
OF ENVIRONMENT AND NATURAL RESOURCES REGIONAL
EXECUTIVE DIRECTOR FOR REGION IV, and REGIONAL
AGRARIAN REFORM OFFICER FOR REGION IV,respondents.
DECISION
FIRST DIVISION
[G.R. No. 112526. October 12, 2001]
STA. ROSA REALTY DEVELOPMENT
CORPORATION, petitioner, vs. COURT OF APPEALS, JUAN B.
AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P.
AYENDE, LETICIA P. BALAT, FILOMENA B. BATINO, ANICETO A.
BURGOS, JAIME A. BURGOS, FLORENCIA CANUBAS, LORETO A.

PARDO, J.:
The case before the Court is a petition for review on certiorari of the
decision of the Court of Appeals[1] affirming the decision of the Department of
Agrarian Reform Adjudication Board[2] (hereafter DARAB) ordering the
compulsory acquisition of petitioners property under the Comprehensive
Agrarian Reform Program (CARP).
Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC)
was the registered owner of two parcels of land, situated at Barangay Casile,

Cabuyao, Laguna covered by TCT Nos. 81949 and 84891, with a total area of
254.6 hectares. According to petitioner, the parcels of land are watersheds,
which provide clean potable water to the Canlubang community, and that
ninety (90) light industries are now located in the area. [3]
Petitioner alleged that respondents usurped its rights over the property,
thereby destroying the ecosystem. Sometime in December 1985, respondents
filed a civil case[4] with the Regional Trial Court, Laguna, seeking an easement
of a right of way to and from Barangay Casile. By way of counterclaim,
however, petitioner sought the ejectment of private respondents.
In October 1986 to August 1987, petitioner filed with the Municipal Trial
Court, Cabuyao, Laguna separate complaints for forcible entry against
respondents.[5]
After the filing of the ejectment cases, respondents petitioned the
Department of Agrarian Reform (DAR) for the compulsory acquisition of the
SRRDC property under the CARP.
On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of
Cabuyao, Laguna issued a notice of coverage to petitioner and invited its
officials or representatives to a conference on August 18, 1989. [6] During the
meeting, the following were present: representatives of petitioner, the Land
Bank of the Philippines, PARCCOM, PARO of Laguna, MARO of Laguna, the
BARC Chairman of Barangay Casile and some potential farmer beneficiaries,
who are residents of Barangay Casile, Cabuyao, Laguna. It was the consensus
and recommendation of the assembly that the landholding of SRRDC be
placed under compulsory acquisition.
On August 17, 1989, petitioner filed with the Municipal Agrarian Reform
Office (MARO), Cabuyao, Laguna a Protest and Objection to the compulsory
acquisition of the property on the ground that the area was not appropriate for
agricultural purposes. The area was rugged in terrain with slopes of 18% and
above and that the occupants of the land were squatters, who were not
entitled to any land as beneficiaries.[7]
On August 29, 1989, the farmer beneficiaries together with the BARC
chairman answered the protest and objection stating that the slope of the land
is not 18% but only 5-10% and that the land is suitable and economically
viable for agricultural purposes, as evidenced by the Certification of the
Department of Agriculture, municipality of Cabuyao, Laguna. [8]
On September 8, 1989, MARO Belen dela Torre made a summary
investigation report and forwarded the Compulsory Acquisition Folder

Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter, PARO).


[9]

On September 21, 1989, PARO Durante Ubeda forwarded his


endorsement of the compulsory acquisition to the Secretary of Agrarian
Reform.
On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau
of Land Acquisition and Development, DAR forwarded two (2) Compulsory
Acquisition Claim Folders covering the landholding of SRRDC, covered by TCT
Nos. T-81949 and T-84891 to the President, Land Bank of the Philippines for
further review and evaluation.[10]
On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor
Santiago sent two (2) notices of acquisition[11] to petitioner, stating that
petitioners landholdings covered by TCT Nos. 81949 and 84891, containing an
area of 188.2858 and 58.5800 hectares, valued at P4,417,735.65 and
P1,220,229.93, respectively, had been placed under the Comprehensive
Agrarian Reform Program.
On February 6, 1990, petitioner SRRDC in two letters[12] separately
addressed to Secretary Florencio B. Abad and the Director, Bureau of Land
Acquisition and Distribution, sent its formal protest, protesting not only the
amount of compensation offered by DAR for the property but also the two (2)
notices of acquisition.
On March 17, 1990, Secretary Abad referred the case to the DARAB for
summary proceedings to determine just compensation under R. A. No. 6657,
Section 16.
On March 23, 1990, the LBP returned the two (2) claim folders previously
referred for review and evaluation to the Director of BLAD mentioning its
inability to value the SRRDC landholding due to some deficiencies.
On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land
Bank President Deogracias Vistan to forward the two (2) claim folders
involving the property of SRRDC to the DARAB for it to conduct summary
proceedings to determine the just compensation for the land.
On April 6, 1990, petitioner sent a letter to the Land Bank of the
Philippines stating that its property under the aforesaid land titles were
exempt from CARP coverage because they had been classified as watershed
area and were the subject of a pending petition for land conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the
two (2) claim folders (CACFs) to the Executive Director of the DAR Adjudication
Board for proper administrative valuation.Acting on the CACFs, on September
10, 1990, the Board promulgated a resolution asking the office of the
Secretary of Agrarian Reform (DAR) to first resolve two (2) issues before it
proceeds with the summary land valuation proceedings.[13]
The issues that need to be threshed out were as follows: (1) whether the
subject parcels of land fall within the coverage of the Compulsory Acquisition
Program of the CARP; and (2) whether the petition for land conversion of the
parcels of land may be granted.
On December 7, 1990, the Office of the Secretary, DAR, through the
Undersecretary for Operations (Assistant Secretary for Luzon Operations) and
the Regional Director of Region IV, submitted a report answering the two
issues raised. According to them, firstly, by virtue of the issuance of the notice
of coverage on August 11, 1989, and notice of acquisition on December 12,
1989, the property is covered under compulsory acquisition. Secondly,
Administrative Order No. 1, Series of 1990, Section IV D also supports the DAR
position on the coverage of the said property. During the consideration of the
case by the Board, there was no pending petition for land conversion
specifically concerning the parcels of land in question.
On February 19, 1991, the Board sent a notice of hearing to all the parties
interested, setting the hearing for the administrative valuation of the subject
parcels of land on March 6, 1991. However, on February 22, 1991, Atty. Ma.
Elena P. Hernandez-Cueva, counsel for SRRDC, wrote the Board requesting for
its assistance in the reconstruction of the records of the case because the
records could not be found as her co-counsel, Atty. Ricardo Blancaflor, who
originally handled the case for SRRDC and had possession of all the records of
the case was on indefinite leave and could not be contacted. The Board
granted counsels request and moved the hearing to April 4, 1991.
On March 18, 1991, SRRDC submitted a petition to the Board for the
latter to resolve SRRDCs petition for exemption from CARP coverage before
any administrative valuation of their landholding could be had by the Board.
On April 4, 1991, the initial DARAB hearing of the case was held and
subsequently, different dates of hearing were set without objection from
counsel of SRRDC. During the April 15, 1991 hearing, the subdivision plan of
subject property at Casile, Cabuyao, Laguna was submitted and marked as
Exhibit 5 for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for
a period of one month to value the land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning


Administrator Generoso B. Opina was presented. The certification issued on
September 8, 1989, stated that the parcels of land subject of the case were
classified as industrial Park per Sanguniang Bayan Resolution No. 45-89 dated
March 29, 1989.[14]
To avert any opportunity that the DARAB might distribute the lands to the
farmer beneficiaries, on April 30, 1991, petitioner filed a petition [15] with
DARAB to disqualify private respondents as beneficiaries. However, DARAB
refused to address the issue of beneficiaries.
In the meantime, on January 20, 1992, the Regional Trial Court, Laguna,
Branch 24, rendered a decision,[16] finding that private respondents illegally
entered the SRRDC property, and ordered them evicted.
On July 11, 1991, DAR Secretary Benjamin T. Leong issued a
memorandum directing the Land Bank of the Philippines to open a trust
account in favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC
property.
On December 19, 1991, DARAB promulgated a decision, the decretal
portion of which reads:
WHEREFORE, based on the foregoing premises, the Board hereby orders:
1. The dismissal for lack of merit of the protest against the compulsory
coverage of the landholdings of Sta. Rosa Realty Development Corporation
(Transfer Certificates of Title Nos. 81949 and 84891 with an area of 254.766
hectares) in Barangay Casile, Municipality of Cabuyao, Province of Laguna
under the Comprehensive Agrarian Reform Program is hereby affirmed;
2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development
Corporation the amount of Seven Million Eight Hundred Forty-One Thousand,
Nine Hundred Ninety Seven Pesos and Sixty-Four centavos (P7,841,997.64) for
its landholdings covered by the two (2) Transfer Certificates of Title mentioned
above.Should there be a rejection of the payment tendered, to open, if none
has yet been made, a trust account for said amount in the name of Sta.
Rosa Realty Development Corporation;
3. The Register of Deeds of the Province of Laguna to cancel with dispatch
Transfer certificate of Title Nos. 84891 and 81949 and new one be issued in
the name of the Republic of the Philippines, free from liens and encumbrances;
4 The Department of Environment and Natural Resources either through its
Provincial Office in Laguna or the Regional Office, Region IV, to conduct a final

segregation survey on the lands covered by Transfer certificate of Title Nos.


84891 and 81949 so the same can be transferred by the Register of Deeds to
the name of the Republic of the Philippines;
5. The Regional Office of the Department of Agrarian Reform through its
Municipal and Provincial Agrarian Reform Office to take immediate possession
on the said landholding after Title shall have been transferred to the name of
the Republic of the Philippines, and distribute the same to the immediate
issuance of Emancipation Patents to the farmer-beneficiaries as determined by
the Municipal Agrarian Reform Office of Cabuyao, Laguna. [17]

the Republic of the Philippines and to distribute the same through the
immediate issuance of Emancipation Patents to the farmer-beneficiaries as
determined by the Municipal Agrarian Officer of Cabuyao, Laguna, (b) The
Department of Agrarian Reform and/or the Department of Agrarian Reform
Adjudication Board, and all persons acting for and in their behalf and under
their authority from entering the properties involved in this case and from
introducing permanent infrastructures thereon; and (c) the private
respondents from further clearing the said properties of their green cover by
the cutting or burning of trees and other vegetation, effective today until
further orders from this Court.[22]

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24,
rendered a decision in Civil Case No. B-2333[18] ruling that respondents were
builders in bad faith.

The main issue raised is whether the property in question is covered by


CARP despite the fact that the entire property formed part of a watershed area
prior to the enactment of R. A. No. 6657.

On February 6, 1992, petitioner filed with the Court of Appeals a petition


for review of the DARAB decision.[19] On November 5, 1993, the Court of
Appeals promulgated a decision affirming the decision of DARAB. The decretal
portion of the Court of Appeals decision reads:

Under Republic Act No. 6657, there are two modes of acquisition of
private land: compulsory and voluntary. In the case at bar, the Department of
Agrarian Reform sought the compulsory acquisition of subject property under
R. A. No. 6657, Section 16, to wit:

WHEREFORE, premises considered, the DARAB decision dated September 19,


1991 is AFFIRMED, without prejudice to petitioner Sta. Rosa Realty
Development Corporation ventilating its case with the Special Agrarian Court
on the issue of just compensation.[20]

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

Hence, this petition.[21]


On December 15, 1993, the Court issued a Resolution which reads:
G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of
Appeals, et. al.) Considering the compliance, dated December 13, 1993, filed
by counsel for petitioner, with the resolution of December 8, 1993 which
required petitioner to post a cash bond or surety bond in the amount of
P1,500,000.00 Pesos before issuing a temporary restraining order prayed for,
manifesting that it has posted a CASH BOND in the same amount with the
Cashier of the Court as evidenced by the attached official receipt no. 315519,
the Court resolved to ISSUE the Temporary Retraining Order prayed for.
The Court therefore, resolved to restrain: (a) the Department of Agrarian
Reform Adjudication Board from enforcing its decision dated December 19,
1991 in DARAB Case No. JC-R-IV-LAG-0001, which was affirmed by the Court of
Appeals in a Decision dated November 5, 1993, and which ordered, among
others, the Regional Office of the Department of Agrarian Reform through its
Municipal and Provincial Reform Office to take immediate possession of the
landholding in dispute after title shall have been transferred to the name of

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 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 the 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 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 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 make immediate possession of the land and shall
request the proper Register of Deeds to issue Transfer Certificate
of Titles (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[23] of proper jurisdiction for final determination of just
compensation.
In compulsory acquisition of private lands, the landholding, the
landowners and 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 (30) 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
(30) 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 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 special agrarian courts (provisionally the Supreme
Court designated branches of the regional trial court as special agrarian
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). Under Sec. 16 of the CARL, the first step in
compulsory acquisition is the identification of the land, the landowners and the
farmer beneficiaries. However, the law is silent on how the identification
process shall be made. To fill this gap, on July 26, 1989, the DAR issued
Administrative Order No. 12, series of 1989, which set the operating procedure
in the identification of such lands. The procedure is as follows:
A. The Municipal Agrarian Reform Officer (MARO), 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 should 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 the 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 No 2 Summary investigation report findings and evaluation
c) CARP CA Form 3Applicants Information sheet
d) CARP CA Form 4 Beneficiaries undertaking
e) CARP CA Form 5 Transmittal report to the PARO

The MARO/BARC shall certify that all information contained in the abovementioned forms have been examined and verified by him and that the same
are true and correct.
3. Send 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 representatives, the Land Bank of the Philippines (LBP)
representative, and the 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 ask 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 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. 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 P500,000 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 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 farmerbeneficiaries, the representatives of the Barangay Agrarian Reform Committee
(BARC), the Land Bank of the Philippines (LBP) and other interested parties to

discuss the inputs to the valuation of the property and solicit views,
suggestions, objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian
Reform Officer (PARO) who shall complete the valuation of the land. Ocular
inspection and verification of the property by the PARO shall be mandatory
when the computed value of the estate exceeds P500,000.00. Upon
determination of the valuation, the PARO shall forward all papers together with
his recommendation to the Central Office of the DAR. The DAR Central Office,
specifically, the Bureau of Land Acquisition and Distribution (BLAD) shall
prepare, on the signature of the Secretary or his duly authorized
representative, a notice of acquisition of the subject property. From this point,
the provisions of R. A. No. 6657, Section 16 shall apply.
For a valid implementation of the CARP Program, two notices are
required: (1) the notice of coverage and letter of invitation to a preliminary
conference sent to the landowner, the representative 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, that is, the notice of coverage and the
letter of invitation to a 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. 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
mere limitation of the use of the land. What is required is the surrender of the
title to and physical possession of the excess and all beneficial rights accruing
to the owner in favor of the farmer beneficiary.
In the case at bar, DAR has executed the taking of the property in
question. However, payment of just compensation was not in accordance with
the procedural requirement. The law required payment in cash or LBP bonds,
not by trust account as was done by DAR.
In Association of Small Landowners in the Philippines v. Secretary of
Agrarian Reform, we held that The CARP Law, for its part, conditions the
transfer of possession and ownership of the land to the government on receipt
of the landowner of the corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then,

title also remains with the landowner. No outright change of ownership is


contemplated either.[24]
Consequently, petitioner questioned before the Court of Appeals DARABs
decision ordering the compulsory acquisition of petitioners property. [25] Here,
petitioner pressed the question of whether the property was a watershed, not
covered by CARP.
Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:
Art. 67. Any watershed or any area of land adjacent to any surface water or
overlying any ground water may be declared by the Department of Natural
resources as a protected area. Rules and Regulations may be promulgated by
such Department to prohibit or control such activities by the owners or
occupants thereof within the protected area which may damage or cause the
deterioration of the surface water or ground water or interfere with the
investigation, use, control, protection, management or administration of such
waters.
Watersheds may be defined as an area drained by a river and its
tributaries and enclosed by a boundary or divide which separates it from
adjacent watersheds. Watersheds generally are outside the commerce of man,
so why was the Casile property titled in the name of SRRDC? The answer is
simple. At the time of the titling, the Department of Agriculture and Natural
Resources had not declared the property as watershed area. The parcels of
land in Barangay Casile were declared as PARK by a Zoning Ordinance
adopted by the municipality of Cabuyao in 1979, as certified by the Housing
and Land Use Regulatory Board. On January 5, 1994, the Sangguniang Bayan
of Cabuyao, Laguna issued a Resolution[26] voiding the zoning classification of
the land at Barangay Casile as Park and declaring that the land is now
classified as agricultural land.
The authority of the municipality of Cabuyao, Laguna to issue zoning
classification is an exercise of its police power, not the power of eminent
domain. A zoning ordinance is defined as a local city or municipal legislation
which logically arranges, prescribes, defines and apportions a given political
subdivision into specific land uses as present and future projection of needs. [27]
In Natalia Realty, Inc. v. Department of Agrarian Reform[28] we held that
lands classified as non-agricultural prior to the effectivity of the CARL may not
be compulsorily acquired for distribution to farmer beneficiaries.
However, more than the classification of the subject land as PARK is the
fact that subsequent studies and survey showed that the parcels of land in
question form a vital part of a watershed area.[29]

Now, petitioner has offered to prove that the land in dispute is a


watershed or part of the protected area for watershed purposes. Ecological
balances and environmental disasters in our day and age seem to be
interconnected. Property developers and tillers of the land must be aware of
this deadly combination. In the case at bar, DAR included the disputed parcels
of land for compulsory acquisition simply because the land was allegedly
devoted to agriculture and was titled to SRRDC, hence, private and alienable
land that may be subject to CARP.

7.2 The Casile farmers should be relocated and given financial assistance.

However, the scenario has changed, after an in-depth study, survey and
reassessment. We cannot ignore the fact that the disputed parcels of land
form a vital part of an area that need to be protected for watershed
purposes. In a report of the Ecosystems Research and Development Bureau
(ERDB), a research arm of the DENR, regarding the environmental assessment
of the Casile and Kabanga-an river watersheds, they concluded that:

The ERDB report was prepared by a composite team headed by Dr. Emilio
Rosario, the ERDB Director, who holds a doctorate degree in water resources
from U.P. Los Banos in 1987; Dr. Medel Limsuan, who obtained his doctorate
degree in watershed management from Colorado University (US) in 1989; and
Dr. Antonio M. Dano, who obtained his doctorate degree in Soil and Water
management Conservation from U.P. Los Banos in 1993.

The Casile barangay covered by CLOA in question is situated in the heartland


of both watersheds. Considering the barangays proximity to the Matangtubig
waterworks, the activities of the farmers which are in conflict with proper soil
and water conservation practices jeopardize and endanger the vital
waterworks.Degradation of the land would have double edge detrimental
effects. On the Casile side this would mean direct siltation of the Mangumit
river which drains to the water impounding reservoir below. On the Kabangaan side, this would mean destruction of forest covers which acts as recharged
areas of the Matang Tubig springs.Considering that the people have little if no
direct interest in the protection of the Matang Tubig structures they couldnt
care less even if it would be destroyed.

Also, DENR Secretary Angel Alcala submitted a Memorandum for the


President dated September 7, 1993 (Subject: PFVR HWI Ref.: 933103
Presidential Instructions on the Protection of Watersheds of the Canlubang
Estates at Barrio Casile, Cabuyao, Laguna) which reads:

The Casile and Kabanga-an watersheds can be considered a most vital life
support system to thousands of inhabitants directly and indirectly affected by
it. From these watersheds come the natural God-given precious resource
water. x x x x x
Clearing and tilling of the lands are totally inconsistent with sound watershed
management. More so, the introduction of earth disturbing activities like road
building and erection of permanent infrastructures. Unless the pernicious
agricultural activities of the Casile farmers are immediately stopped, it would
not be long before these watersheds would cease to be of value. The impact of
watershed degredation threatens the livelihood of thousands of people
dependent upon it. Toward this, we hope that an acceptable comprehensive
watershed development policy and program be immediately formulated and
implemented before the irreversible damage finally happens.
Hence, the following are recommended:

7.3 Declaration of the two watersheds as critical and in need of immediate


rehabilitation.
7.4 A comprehensive and detailed watershed management plan and program
be formulated and implemented by the Canlubang Estate in coordination with
pertinent government agencies.[30]

It is the opinion of this office that the area in question must be maintained for
watershed purposes for ecological and environmental considerations, among
others.Although the 88 families who are the proposed CARP beneficiaries will
be affected, it is important that a larger view of the situation be taken as one
should also consider the adverse effect on thousands of residents downstream
if the watershed will not be protected and maintained for watershed purposes.
The foregoing considered, it is recommended that if possible, an alternate area
be allocated for the affected farmers, and that the Canlubang Estates be
mandated to protect and maintain the area in question as a permanent
watershed reserved.[31]
The definition does not exactly depict the complexities of a
watershed. The most important product of a watershed is water which is one
of the most important human necessity. The protection of watersheds ensures
an adequate supply of water for future generations and the control of
flashfloods that not only damage property but cause loss of lives. Protection of
watersheds is an intergenerational responsibility that needs to be answered
now.
Another factor that needs to be mentioned is the fact that during the
DARAB hearing, petitioner presented proof that the Casile property has slopes
of 18% and over, which exempted the land from the coverage of CARL. R. A.
No. 6657, Section 10, provides:

Section 10. Exemptions and Exclusions. Lands actually, directly and


exclusively used and found to be necessary for parks, wildlife, forest reserves,
reforestration, fish sanctuaries and breeding grounds, watersheds and
mangroves, national defense, school sites and campuses including
experimental farm stations operated by public or private schools for
educational purposes, seeds and seedlings research and pilot production
centers, church sites and convents appurtenent thereto, communal burial
grounds and cemeteries, penal colonies and penal farms actually worked by
the inmates, government and private research and quarantine centers, and all
lands witheighteen percent (18%) slope and over, except those already
developed shall be exempt from coverage of this Act.
Hence, during the hearing at DARAB, there was proof showing that the
disputed parcels of land may be excluded from the compulsory acquisition
coverage of CARP because of its very high slopes.
To resolve the issue as to the true nature of the parcels of land involved in
the case at bar, the Court directs the DARAB to conduct a re-evaluation of the
issue.
IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of
Appeals in CA-G. R. SP No. 27234.
In lieu thereof, the Court REMANDS the case to the DARAB for reevaluation and determination of the nature of the parcels of land involved to
resolve the issue of its coverage by the Comprehensive Land Reform Program.
In the meantime, the effects of the CLOAs issued by the DAR to supposed
farmer beneficiaries shall continue to be stayed by the temporary restraining
order issued on December 15, 1993, which shall remain in effect until final
decision on the case.
No costs.
SO ORDERED.

MENDOZA, J.:p
Private respondent Acil Corporation owned several hectares of land in Linoan,
Montevista, Davao del Norte, which the government took pursuant to the
Comprehensive Agrarian Reform Law (R.A. No. 6657). Private respondent's
certificates of title were cancelled and new ones were issued and distributed
to farmer-beneficiaries.
The lands were valued by the Land Bank of the Philippines at P19,312.24 per
hectare for the riceland and P4,267.68 per hectare for brushland, or for a total
of P439,105.39. It appears, however, that in the Statement of Agricultural
Landholdings ("LISTASAKA") which private respondent had earlier filed with the
Department of Agrarian Reform (DAR), a lower "Fair Value Acceptable to
Landowner" was stated and that based on this statement, the Land Bank of
the Philippines valued private respondent's lands uniformly at P15,311.79 per
hectare and fixed the amount of P390,557.84 as the total compensation to be
paid for the lands.
Private respondent rejected the government's offer, pointing out that nearby
lands planted to the same crops were valued at the higher price of P24,717.40
per hectare. The matter was brought before the Provincial Agrarian Reform
Adjudicator (PARAD) who, on October 8, 1992, sustained the initial valuation
made by the LBP.
On December 12, 1992, private respondent filed a Petition for Just
Compensation in the Regional Trial Court of Tagum, Davao del Norte, sitting as
a Special Agrarian Court. Private respondent prayed that DAR be ordered to
pay P24,717.40 per hectare. However, the RTC dismissed its petition on the
ground that private respondent should have appealed to the Department of
Agrarian Reform Adjudication Board (DARAB), pursuant to the latter's Revised
Rules of Procedure, before recourse to it (the RTC) could be had. In addition
the RTC found that, in violation of the DARAB's rules of procedure the petition
had been filed more than fifteen (15) days after notice of the decision of the
PARAD.
SECOND DIVISION
G.R. No. 122256 October 30, 1996
REPUBLIC OF THE PHILIPPINES, represented by the Department of
Agrarian Reform (DAR), and LAND BANK OF THE
PHILIPPINES, petitioners,
vs.
COURT OF APPEALS and ACIL CORPORATION, respondents.

Private respondent moved for reconsideration but its motion was denied on
October 13, 1994. Private respondent therefore filed a petition
for certiorari with the Court of Appeals, contending that a petition for just
compensation under R.A. No. 6657 56-57 falls under the exclusive and
original jurisdiction of the RTC. His contention was sustained by the Court of
Appeals which, in its decision 1 of October 4, 1995, set aside the order of
dismissal of the RTC. Accordingly, the case was remanded to the RTC for
further proceedings.

In turn the government, represented by the Department of Agrarian Reform,


filed this petition for review oncertiorari, raising as the issue whether in cases
involving claims for just compensation under R.A. No. 6657 an appeal from the
decision of the provincial adjudicator to the DARAB must first be made before
a landowner can resort to the RTC under 57. Petitioners sustain the
affirmative proposition. They cite 50 of R.A. No. 6657 which in pertinent part
provides:
50. Quasi-Judicial Powers of the DAR. The DAR is hereby
vested with primary jurisdiction to determine and adjudicate
agrarian reform matters and shall have exclusive original
jurisdiction over all matters involving the implementation of
agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the
Department of Environment and Natural Resources
(DENR). . .
and argue that the fixing of just compensation for the taking of lands
under R.A. No. 6657 is a "[matter] involving the implementation of
agrarian reform" within the contemplation of this provision. They
invoke 16(f) of R.A. No. 6657, which provides that "any party who
disagrees to the decision [of the DAR] may bring the matter to the
court of proper jurisdiction for final determination of just
compensation," as confirming their construction of 50.
The contention has no merit.
It is true that 50 grants the DAR primary jurisdiction to determine and
adjudicate "agrarian reform matters" and exclusive original jurisdiction over
"all matters involving the implementation of agrarian reform," except those
falling under the exclusive jurisdiction of the Department of Agriculture and
the Department of Environment and Natural Resources. It is also true, however
that 57 provides:
57. Special Jurisdiction. The Special Agrarian Courts shall
have original and exclusive jurisdiction over all petitions for
the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act. The Rules of
Court shall apply to all proceedings before the Special Agrarian
Courts, unless modified by this Act.
The Special Agrarian Courts shall decide all appropriate cases
under their special jurisdiction within thirty (30) days from
submission of the case for decision.

Thus Special Agrarian Courts, which are Regional Trial Courts, are
given original and exclusive jurisdiction over two categories of cases,
to wit: (1) "all petitions for the determination of just compensation to
landowners" and (2) "the prosecution of all criminal offenses under
[R.A. No. 6657]." 2 The provision of 50 must be construed in harmony
with this provision by considering cases involving the determination of
just compensation and criminal cases for violations of R.A. No. 6657 as
excepted from the plenitude of power conferred on the DAR. Indeed,
there is a reason for this distinction. The DAR is an administrative
agency which cannot be granted jurisdiction over cases of eminent
domain (for such are takings under R.A. No. 6657) and over criminal
cases. Thus in EPZA v. Duly 3 and Sumulong v. Guerrero4 we held that
the valuation of property in eminent domain is essentially a judicial
function which cannot be vested in administrative agencies, while
in Scoty's Department Store v. Micaller 5 we struck down a law
granting the then Court of Industrial Relations jurisdiction to try
criminal cases for violations of the Industrial Peace Act.
Petitioners also cite Rule II, 5 and Rule XIII, 1 of the DARAB Rules of
Procedure in support of their contention that decisions of agrarian reform
adjudicators may only be appealed to the DARAB. These rules provide:
Rule II, 5. Appellate Jurisdiction. The Board shall have
exclusive appellate jurisdiction to review, reverse, modify,
alter or affirm resolutions, orders, decisions, and other
dispositions of its [regional and provincial agrarian reform
adjudicators].
Rule XIII, 1. Appeal to the Board. a) An appeal may be
taken from an order or decision of the Regional or Provincial
Adjudicator to the Board by either of the parties or both, by
giving or stating a written or oral appeal within a period of
fifteen (15) days from the receipt of the resolution, order or
decision appealed from, and serving a copy thereof on the
opposite or adverse party, if the appeal is in writing.
b) An oral appeal shall be reduced into writing by the
Adjudicator to be signed by the appellant, and a copy thereof
shall be served upon the opposite or adverse party within ten
(10) days from the taking of oral appeal.
Apart from the fact that only a statute can confer jurisdiction on courts and
administrative agencies rules of procedure cannot it is noteworthy that
the New Rules of Procedure of the DARAB, which was adopted on May 30,
1994, now provide that in the event a landowner is not satisfied with a
decision of an agrarian adjudicator, the landowner can bring the matter

directly to the Regional Trial Court sitting as Special Agrarian Court. Thus Rule
XIII, 11 of the new rules provides:
11. Land Valuation and Preliminary Determination and
Payment of Just Compensation. The decision of the Adjudicator
on land valuation and preliminary determination and payment
of just compensation shall not be appealable to the Board but
shall be brought directly to the Regional Trial
Courts designated as Special Agrarian Courts within fifteen
(15) days from receipt of the notice thereof. Any party shall be
entitled to only one motion for reconsideration. (Emphasis
supplied)
This is an acknowledgment by the DARAB that the decision of just
compensation cases for the taking of lands under R.A. No. 6657 is a
power vested in the courts.
Thus, under the law, the Land Bank of the Philippines is charged with the initial
responsibility of determining the value of lands placed under land reform and
the compensation to be paid for their taking. 6 Through notice sent to the
landowner pursuant to 16(a) of R.A. No. 6657, the DAR makes an offer. In
case the landowner rejects the offer, a summary administrative proceeding is
held 7 and afterward the provincial (PARAD), the regional (RARAD) or the
central (DARAB) adjudicator as the case may be, depending on the value of
the land, fixes the price to be paid for the land. If the landowner does not
agree to the price fixed, he may bring the matter to the RTC acting as Special
Agrarian Court. 8 This in essence is the procedure for the determination of
compensation cases under R.A. No. 6657. In accordance with it, the private
respondent's case was properly brought by it in the RTC, and it was error for
the latter court to have dismissed the case. In the terminology of 57, the RTC,
sitting as a Special Agrarian Court, has "original and exclusive jurisdiction over
all petitions for the determination of just compensation to landowners." 9 It
would subvert this "original and exclusive" jurisdiction of the RTC for the DAR
to vest original jurisdiction in compensation cases in administrative officials
and make the RTC an appellate court for the review of administrative
decisions.
Consequently, although the new rules speak of directly appealing the decision
of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from
57 that the original and exclusive jurisdiction to determine such cases is in
the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to
convert the original jurisdiction of the RTCs into appellate jurisdiction would be
contrary to 57 and therefore would be void. What adjudicators are
empowered to do is only to determine in a preliminary manner the reasonable
compensation to be paid to landowners, leaving to the courts the ultimate
power to decide this question.

WHEREFORE the petition for review on certiorari is DENIED and the decision of
the Court of Appeals is AFFIRMED.
SO ORDERED.

[G.R. No. 126332. November 16, 1999]


LAND BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS
and MARCIA E. RAMOS, respondents.
DECISION
BELLOSILLO, J.:
This petition for review on certiorari under Rule 45 of the Revised Rules of
Court seeks the reversal of the Decision[1] of the Court of Appeals in CA-G.R. SP
Nos. 38795 and 38885 dated 27 June 1996 which modified the decision [2] of
RTC-Br. 23 of Cabanatuan City acting as a Special Agrarian Court in Agrarian
Case No. 90 (AF) dated 25 September 1995. The petition also prays for the
reversal of the Resolution[3] of the Court of Appeals dated 29 August 1996
denying petitioners motion for reconsideration.
Private respondent Marcia E. Ramos inherited from her father two (2)
parcels of land in Barangay Macatbong, Cabanatuan City, some twelve (12)
kilometers away from the center of the city, covered by TCT Nos. T-8774 and
T-36576 containing 36.6125 and 32.1675 hectares, respectively. Both were
classified as ricelands in their tax declarations for 1985.
On 15 June 1988 RA 6657, otherwise known as the Comprehensive
Agrarian Reform Law (CARL) of 1988,[4] took effect. Section 19 thereof provides
for an additional five percent (5%) cash payment for landowners who would
voluntarily offer their lands for sale to the government for distribution to
farmer-beneficiaries.[5] On 3 April 1989, induced by the incentive, private
respondent and her husband wrote then Department of Agrarian Reform (DAR)
Secretary Philip Ella Juico offering for sale her lands covered by TCT Nos. T8774 and T-36576, which were her own paraphernal property. Private
respondent however manifested her intention to retain twenty-nine (29)

hectares for herself, her husband and their eight (8) children. Photocopies of
two (2) land titles, latest tax declarations, Listasaka andvoluntary offer to
sell forms and other documents accompanied the letter. The Listasaka form
and letter of intent indicated a price of only P40,000.00 per hectare because
private respondent was allegedly in a tight financial bind with six (6) of her
eight (8) children taking long courses in college. She thought that a low
valuation for the lands would facilitate payment of just compensation to her by
the government.
On 24 July 1991, after a two (2)-year hiatus, DAR Regional Director
Antonio M. Nuesa sent a notice of acquisition to private respondent informing
her that the DAR had decided to acquire 21.1675 hectares of the 32.1675
hectares covered by TCT No. T-36576. The land, classified as idle and
abandoned, was placed under the Voluntary Offer to Sell (VOS) program. On
28 August 1991 Nuesa sent private respondent another notice of acquisition
where she was informed that the DAR had decided to acquire under its
Compulsory Acquisition (CA) scheme 18.6125 hectares of the 36.6125
hectares covered by TCT No. T-8774. The land was also classified as idle and
abandoned.
Meanwhile, Lolita C. Cruz, Head of the Land Bank of the Philippines Land
Valuation and Landowners Compensation Office, wrote private respondent on
24 July 1991 requiring her to submit a Sworn Statement of Average Production
and Net Income. In compliance, Ramos sent an affidavit stating inter alia the
lowest average yield of eighty (80) cavans per hectare.
On 18 November 1991 Nuesa notified private respondent of the DAR
valuation of P395,591.44 or P9,944.48 per hectare covering 39.78 hectares,
subject to price adjustments to conform with the actual area covered as
determined by a final land survey. The valuation was based on the ocular
inspection report dated 13 May 1991 of which private respondent denied
having been notified.
On 23 December 1991 private respondent wrote Nuesa rejecting
the P9,944.48 per hectare valuation offer of the DAR as it was not the just
compensation she expected for her lands. Thus, the case was elevated to the
Department of Agrarian Reform Adjudication Board (DARAB) which ordered
two (2) ocular inspections of subject two (2) parcels of land. [6]
On 2 January 1992 Nuesa sent a memorandum-letter to the Regional
Agrarian Reform Adjudicator instructing the latter to conduct summary
administrative proceedings for the final valuation of the lands of private
respondent. LBP Valuation Manager Cruz was also requested to open a trust
account in the name of private respondent for the cash portion of the value of
the property as determined by the DAR.

Private respondent was then required by the DARAB to file her


memorandum in order to counter the initial findings of the DAR. The LBP also
submitted its memorandum. Another ocular inspection was thereafter ordered
and finally conducted on 22 May 1992.
On 1 July 1992 the government through the Department of Environment
and Natural Resources (DENR) - Bureau of Lands, together with private
respondent and her husband, identified, surveyed and segregated subject
lands. On 24 August 1992 the complete survey returns on the lands were
submitted by the DENR through its Community Environment and Natural
Resources officer of Cabanatuan City Romeo Buenaventura.
On 12 October 1992 Nuesa ordered the Register of Deeds of Cabanatuan
City to transfer ownership of subject lands from private respondent to the
Republic of the Philippines. However, before the transfer of ownership could be
effected, the DARAB issued an order of revaluation dated 30 October 1992
based on its findings that five (5) to nine (9) hectares of subject lands were
actually being cultivated on a rotation basis and not idle as earlier classified.
The foregoing, more particularly Nuesas order to transfer ownership over
subject lands without waiting for their revaluation, prompted Ramos to file a
complaint for just compensation before the Regional Trial Court (RTC) of
Cabanatuan City, acting as a Special Agrarian Court (SAC), on 23 November
1992. The complaint was filed against Jesli Lapus, in his capacity as President
of LBP, Ernesto D. Garilao, in his capacity as Acting Secretary of DAR, Lolita C.
Cruz, in her capacity as Head of LBP Land Valuation and Landowners
Compensation Office, and Antonio M. Nuesa, in his capacity as Regional
Director of DAR.
LBP officials Lapus and Cruz filed a joint answer dated 8 February 1993
claiming that agrarian reform did not partake of an eminent domain
proceeding so that the doctrine of just compensation would not apply. They
prayed for the dismissal of the complaint because of private respondents
failure to exhaust all administrative remedies available to her before filing the
case with the SAC.
DAR officials Garilao and Nuesa, for their part, filed a motion to dismiss
the complaint contending that the SAC was not the proper forum to hear and
decide the case because of private respondents failure to exhaust
administrative remedies. On 13 April 1993 the SAC denied the motion to
dismiss.
At the pre-trial conference on 15 November 1993 the parties ruled out the
possibility of amicably settling the case. They however agreed -

(a) That the land in question as per ocular inspection on October 1, 1993 is
planted with rice and not idle which the defendant LBP admitted with the
qualification that a portion is still idle;
(b) That the government from time to time changes the valuation formula for
the purchase of privately-owned land subjected to CARP to the advantage of
the government which was likewise admitted by the defendant LBP;

on the other, filed their respective petitions for review with the Court of
Appeals. The LBP did not appeal but filed its comment on the petitions.
The DAR questioned the jurisdiction of the SAC contending that the latter
could not take cognizance of the case pending its resolution before the DARAB
as the preliminary determination of just compensation by the DARAB was a
condition sine qua non before the filing of the case of this nature with the SAC.
[11]

(c) That the formula for the correct valuation of the property is that provided
for under Admin. Order No. 6, Series of 1992, of the DAR which was also
admitted by the defendant LBP; and
(d) That the DARAB thru the Provincial Adjudicator Jose Reyes issued an Order
dated October 30, 1992 which was admitted by both defendants.
On 29 November 1993 the case before the DARAB was dismissed "to
pave way for the disposition of the case in the regular court."[7]
In the meantime, DAR Secretary Garilao issued Admin. Order No. 11,
Series of 1994, revising the rules and regulations covering the valuation of
lands voluntarily offered or compulsorily acquired as embodied in Admin.
Order No. 6, Series of 1992.
On 25 September 1995 the SAC rendered its decision ordering the LBP
and the DAR to pay private respondent just compensation for her lands in the
amount of P2,146,396.90 or P53,956.67 per hectare with legal interest from 3
April 1989 - when the offer was made - until fully paid. The SAC also declared
private respondent entitled to the additional five percent (5%) cash payment
under Sec. 19 of RA 6657[8] by way of incentive for her voluntarily offering
subject lands for sale.[9]
The SAC found the valuation of private respondent to be "cumbersomely
high" for the government and the farmer-beneficiaries considering that the
factors she adopted in arriving at said valuation were not adequately
substantiated and therefore inconclusive. The valuation by the LBP and the
DAR, on the other hand, appeared to be unrealistically low and its bases were
but assumptions of facts unsupported by credible evidence. Thus, the SAC was
left with no other recourse but to take the middle ground wherein the needs of
the parties would be reasonably accommodated, i.e., the price set by private
respondent when she first offered subject lands for voluntary acquisition and
the inflation rate recognized and provided for by the LBP and the DAR. [10]
Both parties, private respondent Marcia E. Ramos on one hand, and the
DAR through Secretary Garilao and DAR Regional Director for Region III Nuesa

Private respondent, on her part, questioned the valuation given by the


SAC for being contrary to the principle of just compensation provided by the
law. She insisted that her property must be valued atP150,000.00 per hectare
and that even assuming that her evidence could not substantiate it, the
formula agreed upon by the parties during the pre-trial conference wherein
they stipulated that LAND VALUE = (CAPITALIZED NET INCOME x .9) +
(MARKET VALUE x .1)[12] should have been used by the trial court. Private
respondent further demanded that she be paid a total of P350,000.00 for the
two (2) irrigation canals situated within the areas to be expropriated.
The LBP through Lapus and Cruz submitted its comment on the
petitions. The LBP did not contradict the position of the DAR that private
respondent should have waited for the termination of the land valuation case
with the DARAB before seeking relief from the courts.[13] The LBP, however,
contended that the compensation as determined by the SAC must be upheld
as it was not only in accordance with Sec. 17 of RA 6657 [14]and applicable DAR
administrative orders on land valuation but it was likewise just and fair to
private respondent, the government and the farmer-beneficiaries of the lands.
On 27 June 1996 the Court of Appeals granted the petition of private
respondent but denied that of the DAR. The appellate court acknowledged the
primary jurisdiction of the DARAB in the determination of just compensation
but ruled that such jurisdiction was not exclusive as the courts of justice,
particularly the RTCs acting as Special Agrarian Courts, could also acquire
jurisdiction as provided under Sec. 57 of RA 6657. [15] It further declared that
noncompliance with the rule on exhaustion of administrative remedies did not
affect the courts jurisdiction but only deprived private respondent of a cause
of action. Nevertheless, it noted that the doctrine recognized certain
exceptions which could be applied to the instant case, i.e., that ownership
over private respondents property was already transferred in the name of the
Republic of the Philippines prior to the final determination of just
compensation by the DARAB.
The appellate court agreed with the findings of the SAC that the evidence
of Ramos in support of her contention that she must be awarded at
least P150,000.00 per hectare as just compensation for her lands fell short of
the substantial evidence requirement in administrative cases. It however ruled

that the SAC should have used the valuation formula agreed upon by the
parties at the pre-trial as "it was sound, the choice of the parties, mutually
acceptable and culled from the order of DAR." Thus, the total valuation was set
at P5,227,171.10 with legal interest plus a five percent (5%) cash incentive. In
addition, the appellate court ordered the payment of P350,000.00 for the two
(2) irrigation canals within subject property.
On 19 July 1996 the LBP filed a motion for reconsideration which was
denied by the Court of Appeals on 29 August 1996. Hence, this petition.

Petitioner also disputes the increase in the total amount of valuation


from P2,146,396.60 or at P53,956.67 per hectare to P5,227,171.10 or
at P131,401.99 per hectare. Petitioner agrees with the formula used by the
Court of Appeals as it is in conformity with that stipulated by the parties during
the pre-trial proceedings before the SAC. But petitioner does not agree with
the data used by the appellate court in arriving at the final valuation, alleging
that the data are taken from those given by private respondent. On the other
hand, it asserts that the valuation as determined by the SAC is more
acceptable as it is in substantial compliance with Sec. 17 of RA 6657. [21]

Petitioner submits that the Court of Appeals erred in: (a) ruling that
private respondent could proceed with the filing of the just compensation case
before the SAC without awaiting the termination of the land valuation
proceedings with the DARAB; (b) increasing the total amount awarded by the
SAC to private respondent for her 39.78 hectare-property from P2,146,396.60
or at P53,956.67 per hectare toP5,227,171.10 or at P131,401.99 per hectare;
and, (c) including within the coverage of RA 6657 the two (2) irrigation canals
of private respondent and pegging the compensation therefor at P350,000.00.

Since the parties have agreed during the pre-trial conference before the
SAC that the valuation shall be determined on the basis of the formula
provided in DAR Admin. Order No. 6, Series of 1992, that formula must be
followed subject to the amendatory provisions of DAR Admin. Order No. 11,
Series of 1994. However, the facts required for the computation are
unavailable before us. Hence, the matter must be remanded to the SAC for the
recomputation of the just compensation in accordance with herein-mentioned
formula.

Petitioner contends that the appellate court erred in affirming the


jurisdiction of the SAC pursuant to Sec. 57 of RA 6657 [16] and as an exception
to the doctrine of exhaustion of administrative remedies.

Finally, petitioner questions the coverage under RA 6657 of the two (2)
irrigation canals within subject areas and pegging the compensation therefor
at P350,000.00. We agree. These irrigation canals should not have been
separately valued as what the appellate court did in the instant case. The
irrigation canals are considered improvements on the two (2) parcels of land of
private respondent, hence relevant only in estimating the total value of her
property.[22] No separate valuation is necessary. The SAC should take note of
this in recomputing the value of the property involved to determine the just
compensation.

We do not agree. It is clear from Sec. 57 that the RTC, sitting as a Special
Agrarian Court, has "original and exclusive jurisdiction over all petitions for the
determination of just compensation to landowners." This "original and
exclusive" jurisdiction of the RTC would be undermined if the DAR would vest
in administrative officials original jurisdiction in compensation cases and make
the RTC an appellate court for the review of administrative decisions. [17] Thus,
although the new rules speak of directly appealing the decision of adjudicators
to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the
original and exclusive jurisdiction to determine such cases is in the RTCs. Any
effort to transfer such jurisdiction to the adjudicators and to convert the
original jurisdiction of the RTCs into an appellate jurisdiction would be contrary
to Sec. 57 and therefore would be void.[18] Thus, direct resort to the SAC by
private respondent is valid.
With the issue of jurisdiction of SAC already settled, this Court finds it
unnecessary to determine whether the order to transfer ownership of subject
lands from private respondent to the Republic of the Philippines before the
DARAB had settled with finality the matter of their proper valuation qualifies
as an exception to the doctrine of exhaustion of administrative
remedies. Moreover, the doctrine of exhaustion of administrative remedies is
inapplicable when the issue is rendered moot and academic, [19] as in the
instant case where the DARAB dismissed the valuation proceedings before it
on 29 November 1993.[20]

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP Nos.


38795 and 38885 is MODIFIED. The Regional Trial Court, Br. 23, of Cabanatuan
City, acting as a Special Agrarian Court in Agrarian Case No. 90 (AF), is
ordered to recompute the final valuation of subject two (2) parcels of land
based on Department of Agrarian Reform Administrative Order No. 6, Series of
1992, as amended.The separate valuation of P350,000.00 for the two (2)
irrigation canals is disregarded; their value as improvements shall be
considered only for the purpose of estimating the total value of subject
property.
SO ORDERED.

FIRST DIVISION
[G.R. No. 123417. June 10, 1999]
JAIME MORTA, SR. and PURIFICACION PADILLA, petitioners, vs. JAIME
OCCIDENTAL, ATTY. MARIANO BARANDA, JR., and DANIEL
CORRAL,respondents.
DECISION
PARDO, J.:
What is before us is a petition for review on certiorari of the decision[1] of
the Court of Appeals and the resolution,[2] denying petitioners' motion for
reconsideration and supplemental motion for reconsideration. In its decision,
the Court of Appeals dismissed the petition for review filed before it, ruling
that the cases below fall within the jurisdiction of the DARAB.
The antecedent facts are as follows:
On January 10 and 21, 1994,[3] petitioners Jaime Morta, Sr. and
Purificacion Padilla filed two (2) cases [4] for damages with preliminary
injunction, with the Municipal Trial Court, Guinobatan, Albay, against
respondents Jaime Occidental, Atty. Mariano Baranda, Jr. and Daniel Corral,
which were consolidated pursuant to Rule 31 of the Revised Rules of Court. In
the complaints, petitioners alleged that respondents through the instigation of
Atty. Baranda, gathered pilinuts, anahaw leaves, and coconuts from their
respective land, delivered the produce to Atty. Mariano Baranda, Jr., and
destroyed their banana and pineapple plants. In Civil Case No. 481, petitioners
claimed damages amounting to P8,930.00, plus costs of suit; in Civil Case No.
482, petitioners claimed P9,950.00, as damages. The court considered the
cases covered by the Rule on Summary Procedure and ordered respondents to
file their answer.
In their answer, respondents claimed that petitioners were not the owners
of the land in question. They alleged that the torrens titles of the land
indicated a certain Gil Opiana as the registered owner. Gil Opiana was the
father of Josefina Opiana-Baraclan who inherited the lots upon the former's
death. Respondent Jaime Occidental contended that he was a bona fide tenant
of Josefina Opiana-Baraclan.Respondents stated that there was no annotation
on the titles establishing petitioners' right over the land. They denied
harvesting the anahaw leaves and coconuts, as well as delivering the produce
to Atty. Baranda, Jr.

Thereafter, the Municipal Trial Court ordered the parties to submit


affidavits of their witnesses and other evidence on the factual issues, together
with their respective position papers. After respondents' failure to file their
position papers within the prescribed period, the trial court considered the
case submitted for decision.
On March 29, 1994, the Municipal Trial Court rendered decision [5] in favor
of petitioners. It held that petitioners had been in actual, continuous, open and
adverse possession of the land in question for forty-five (45) years. The
decretal portion of the decision reads:
WHEREFORE, in view of the foregoing considerations, judgment is rendered in
favor of the plaintiffs and against the defendants in both cases as follows:
1) Ordering the defendants not to molest and disturb the peaceful possession
of the plaintiffs in the lands in question situated at San Rafael, Guinobatan;
2) Condemning the defendants in Civil Cases No. 481 to jointly and severally
pay the plaintiffs the total amount of P8,130.00 representing the value of the
coconuts, pilinuts and anahaw leaves and for the destroyed plants;
3) Ordering the defendants in Civil Cases No. 481 jointly and severally to
reimburse the plaintiffs the amount of P202.00 as legal expenses incurred in
filing this suit;
4) Condemning the defendants in Civil Case No. 482 jointly and severally to
pay the plaintiffs the total amount of P9,950.00 representing the value of the
coconuts and anahaw leaves;
5) Ordering the said defendants in Civil Case No. 482 to jointly and severally
reimburse the plaintiffs the sum of P202.00 as legal expenses in filing this suit.
Guinobatan, Albay, March 29, 1994.
(signed)
JAIME R. REMONTE
Judge[6]
Respondents appealed to the Regional Trial Court, Ligao, Albay. They
questioned the trial court's jurisdiction contending that the case was
cognizable by the Department of Agrarian Reform Adjudicatory Board

(DARAB). They alleged that petitioners engaged in forum shopping and that
the trial court erred in granting the reliefs prayed for.
On August 10, 1994, the Regional Trial Court rendered decision reversing
that of the Municipal Trial Court and dismissing the above cases, [7] ruling that
these cases for damages are tenancy-related problems which fall under the
original and exclusive jurisdiction of the DARAB. The court also declared that
the filing of Civil Cases Nos. 481 and 482, while a case involving the same
issue was pending before the DARAB, amounted to forum shopping.
On September 9, 1994, petitioners filed a petition for review [8] with the
Court of Appeals, contesting the decision of the Regional Trial Court. On May
31, 1995, the Court of Appeals[9] rendered decision affirming the lower's court
ruling that the cases fall within the original and exclusive jurisdiction of
DARAB. However, it ruled that petitioners did not engage in forum shopping.
On June 6, 1995, petitioners filed a motion for reconsideration. [10] On June
13, 1995, they filed a supplemental motion for reconsideration,[11] stressing
that there was no tenancy relationship between the parties, as certified by the
Municipal Agrarian Reform Office (MARO).[12]
On December 8, 1995, the Court of Appeals denied the motions. [13]
Hence, this petition for review on certiorari.
Petitioners claim that Morta is not a tenant of either Jaime Occidental or
Josefina Opiana-Baraclan, as shown by the MARO certification. They argue that
the civil actions for damages are not tenancy-related, and, hence, are properly
cognizable by the trial court, not the DARAB.
We resolve to grant the petition.
It is axiomatic that what determines the nature of an action as well as
which court has jurisdiction over it, are the allegations in the complaint and
the character of the relief sought.[14] "Jurisdiction over the subject matter is
determined upon the allegations made in the complaint, irrespective of
whether the plaintiff is entitled to recover upon a claim asserted therein - a
matter resolved only after and as a result of the trial. Neither can the
jurisdiction of the court be made to depend upon the defenses made by the
defendant in his answer or motion to dismiss. If such were the rule, the
question of jurisdiction would depend almost entirely upon the defendant.
[15]
The complaint filed by petitioners before the Municipal Trial Court is an
action for damages for illegal gathering of anahaw leaves, pilinuts and
coconuts, and the destruction of their banana and pineapple plantations. The

respondents did not question the municipal trial court's jurisdiction in their
answer. The issue of jurisdiction was raised for the first time on appeal.

failure to comply with the above requisites, we conclude that the issue
involved is not tenancy-related cognizable by the DARAB.

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

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

a) adjudication of all matters involving implementation of agrarian


reform;
b) resolution of agrarian conflicts and land-tenure related problems;
and
c) approval and disapproval of the conversion, restructuring or
readjustment of agricultural lands into residential, commercial,
industrial, and other non-agricultural uses.
The regional trial court ruled that the issue involved is tenancy-related
that falls within the exclusive jurisdiction of the DARAB. It relied on the findings
in DARAB Case No. 2413 that Josefina Opiana-Baraclan appears to be the
lawful owner of the land and Jaime Occidental was her recognized
tenant. However, petitioner Morta claimed that he is the owner of the
land. Thus, there is even a dispute as to who is the rightful owner of the land,
Josefina Opiana-Baraclan or petitioner Morta. The issue of ownership cannot be
settled by the DARAB since it is definitely outside its jurisdiction. Whatever
findings made by the DARAB regarding the ownership of the land are not
conclusive to settle the matter. The issue of ownership shall be resolved in a
separate proceeding before the appropriate trial court between the claimants
thereof.
At any rate, whoever is declared to be the rightful owner of the land, the
case can not be considered as tenancy-related for it still fails to comply with
the other requirements. Assuming arguendo that Josefina Opiana-Baraclan is
the owner, then the case is not between the landowner and tenant. If,
however, Morta is the landowner, Occidental can not claim that there is
consent to a landowner-tenant relationship between him and Morta. Thus, for

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

EN BANC

G.R. No. 78742 July 14, 1989


ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC.,
JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T.
GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G. ESTRADA,
FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA,
AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO,
CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE &
NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS
JEREZA, HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and
PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias, Negros
Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN
REFORM COUNCIL, respondents.
G.R. No. 79744 July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, HON. JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE
OF THE PRESIDENT, and Messrs. SALVADOR TALENTO, JAIME
ABOGADO, CONRADO AVANCENA and ROBERTO TAAY, respondents.
G.R. No. 79777 July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND
BANK OF THE PHILIPPINES,respondents.

CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and
challenged Hercules for his life on his way to Mycenae after performing his

eleventh labor. The two wrestled mightily and Hercules flung his adversary to
the ground thinking him dead, but Antaeus rose even stronger to resume their
struggle. This happened several times to Hercules' increasing amazement.
Finally, as they continued grappling, it dawned on Hercules that Antaeus was
the son of Gaea and could never die as long as any part of his body was
touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up in
the air, beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating
touch even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell
of the elemental forces of life and death, of men and women who, like Antaeus
need the sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in
the distribution of this precious resource among our people. But it is more than
a slogan. Through the brooding centuries, it has become a battle-cry
dramatizing the increasingly urgent demand of the dispossessed among us for
a plot of earth as their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social
justice to "insure the well-being and economic security of all the
people," 1 especially the less privileged. In 1973, the new Constitution affirmed
this goal adding specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property and equitably
diffuse property ownership and profits." 2 Significantly, there was also the
specific injunction to "formulate and implement an agrarian reform program
aimed at emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these
sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere
provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively
the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations

and subject to the payment of just compensation. In


determining retention limits, the State shall respect the right
of small landowners. The State shall further provide incentives
for voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land
Reform Code, had already been enacted by the Congress of the Philippines on
August 8, 1963, in line with the above-stated principles. This was substantially
superseded almost a decade later by P.D. No. 27, which was promulgated on
October 21, 1972, along with martial law, to provide for the compulsory
acquisition of private lands for distribution among tenant-farmers and to
specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even
energized the thrust for agrarian reform. Thus, on July 17, 1987, President
Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in favor
of the beneficiaries of P.D. No. 27 and providing for the valuation of still
unvalued lands covered by the decree as well as the manner of their payment.
This was followed on July 22, 1987 by Presidential Proclamation No. 131,
instituting a comprehensive agrarian reform program (CARP), and E.O. No.
229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started its own
deliberations, including extensive public hearings, on the improvement of the
interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This
law, while considerably changing the earlier mentioned enactments,
nevertheless gives them suppletory effect insofar as they are not inconsistent
with its provisions. 4
The above-captioned cases have been consolidated because they involve
common legal questions, including serious challenges to the constitutionality
of the several measures mentioned above. They will be the subject of one
common discussion and resolution, The different antecedents of each case will
require separate treatment, however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos.
228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants
and owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland

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

Replying, the petitioners insist they are proper parties because P.D. No. 27
does not provide for retention limits on tenanted lands and that in any event
their petition is a class suit brought in behalf of landowners with landholdings
below 24 hectares. They maintain that the determination of just compensation
by the administrative authorities is a final ascertainment. As for the cases
invoked by the public respondent, the constitutionality of P.D. No. 27 was
merely assumed in Chavez, while what was decided in Gonzales was the
validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D.
No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been
impliedly repealed by R.A. No. 6657. Nevertheless, this statute should itself
also be declared unconstitutional because it suffers from substantially the
same infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by
Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR
was insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite a
compromise agreement he had reached with his tenant on the payment of
rentals. In a subsequent motion dated April 10, 1989, he adopted the
allegations in the basic amended petition that the above- mentioned
enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is
an organization composed of 1,400 planter-members. This petition seeks to
prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not
the President. Although they agree that the President could exercise legislative
power until the Congress was convened, she could do so only to enact
emergency measures during the transition period. At that, even assuming that
the interim legislative power of the President was properly exercised, Proc. No.
131 and E.O. No. 229 would still have to be annulled for violating the
constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as
the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive

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

Two additional arguments are made by Barcelona, to wit, the failure to


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

(3) The power of the President to legislate was terminated on


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

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

and the landowner shall have been determined in accordance


with the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to
enjoy their right of retention because the Department of Agrarian Reform has
so far not issued the implementing rules required under the above-quoted
decree. They therefore ask the Court for a writ of mandamus to compel the
respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who own
other agricultural lands of more than 7 hectares in aggregate area or lands
used for residential, commercial, industrial or other purposes from which they
derive adequate income for their family. And even assuming that the
petitioners do not fall under its terms, the regulations implementing P.D. No.
27 have already been issued, to wit, the Memorandum dated July 10, 1975
(Interim Guidelines on Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81
dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27
and Retention by Small Landowners), and DAR Administrative Order No. 1,
series of 1985 (Providing for a Cut-off Date for Landowners to Apply for
Retention and/or to Protest the Coverage of their Landholdings under
Operation Land Transfer pursuant to P.D. No. 27). For failure to file the
corresponding applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the
President of the Philippines. Moreover, the issuance of the implementing rules,
assuming this has not yet been done, involves the exercise of discretion which
cannot be controlled through the writ of mandamus. This is especially true if
this function is entrusted, as in this case, to a separate department of the
government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended
to cover them also, the said measures are nevertheless not in force because
they have not been published as required by law and the ruling of this Court
in Tanada v. Tuvera. 10 As for LOI 474, the same is ineffective for the additional
reason that a mere letter of instruction could not have repealed the
presidential decree.
I

Although holding neither purse nor sword and so regarded as the weakest of
the three departments of the government, the judiciary is nonetheless vested
with the power to annul the acts of either the legislative or the executive or of
both when not conformable to the fundamental law. This is the reason for what
some quarters call the doctrine of judicial supremacy. Even so, this power is
not lightly assumed or readily exercised. The doctrine of separation of powers
imposes upon the courts a proper restraint, born of the nature of their
functions and of their respect for the other departments, in striking down the
acts of the legislative and the executive as unconstitutional. The policy,
indeed, is a blend of courtesy and caution. To doubt is to sustain. The theory is
that before the act was done or the law was enacted, earnest studies were
made by Congress or the President, or both, to insure that the Constitution
would not be breached.
In addition, the Constitution itself lays down stringent conditions for a
declaration of unconstitutionality, requiring therefor the concurrence of a
majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc. 11 And as
established by judge made doctrine, the Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a
judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of the question is
unavoidably necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining
an immediate injury as a result of the acts or measures complained of. 13 And
even if, strictly speaking, they are not covered by the definition, it is still within
the wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental
importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must, technicalities of
procedure." We have since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present
petitions.

In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not
hesitate to declare a law or act invalid when it is convinced that this must be
done. In arriving at this conclusion, its only criterion will be the Constitution as
God and its conscience give it the light to probe its meaning and discover its
purpose. Personal motives and political considerations are irrelevancies that
cannot influence its decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will
not hesitate to "make the hammer fall, and heavily," to use Justice Laurel's
pithy language, where the acts of these departments, or of any public official,
betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act
of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is
in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review
under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court
must categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving
the more serious challenges to the constitutionality of the several measures
involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his
powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue. As for the
power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and
229, the same was authorized under Section 6 of the Transitory Provisions of
the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987,
when the Congress of the Philippines was formally convened and took over

legislative power from her. They are not "midnight" enactments intended to
pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987,
and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued
on July 22, 1987. Neither is it correct to say that these measures ceased to be
valid when she lost her legislative power for, like any statute, they continue to
be in force unless modified or repealed by subsequent law or declared invalid
by the courts. A statute does not ipso facto become inoperative simply
because of the dissolution of the legislature that enacted it. By the same
token, President Aquino's loss of legislative power did not have the effect of
invalidating all the measures enacted by her when and as long as she
possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected
but in fact substantially affirmed the challenged measures and has specifically
provided that they shall be suppletory to R.A. No. 6657 whenever not
inconsistent with its provisions. 17 Indeed, some portions of the said measures,
like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and
Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in
the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it
does not conform to the requirements of a valid appropriation as specified in
the Constitution. Clearly, however, Proc. No. 131 is not an appropriation
measure even if it does provide for the creation of said fund, for that is not its
principal purpose. An appropriation law is one the primary and specific
purpose of which is to authorize the release of public funds from the
treasury.19 The creation of the fund is only incidental to the main objective of
the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit,
Section 24 and Section 25(4) of Article VI, are not applicable. With particular
reference to Section 24, this obviously could not have been complied with for
the simple reason that the House of Representatives, which now has the
exclusive power to initiate appropriation measures, had not yet been
convened when the proclamation was issued. The legislative power was then
solely vested in the President of the Philippines, who embodied, as it were,
both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for retention limits as
required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A.
No. 6657 does provide for such limits now in Section 6 of the law, which in fact
is one of its most controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act,
no person may own or retain, directly or indirectly, any public

or private agricultural land, the size of which shall vary


according to factors governing a viable family-sized farm, such
as commodity produced, terrain, infrastructure, and soil
fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3)
hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least
fifteen (15) years of age; and (2) that he is actually tilling the
land or directly managing the farm; Provided, That landowners
whose lands have been covered by Presidential Decree No. 27
shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or
direct compulsory heirs who still own the original homestead
at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a
bill shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue
of its contents and will suffice if the matters embodied in the text are relevant
to each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law
because it came from President Marcos. Such are the ways of despots. Hence,
it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could
not have repealed P.D. No. 27 because the former was only a letter of
instruction. The important thing is that it was issued by President Marcos,
whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos
still had to comply with the requirement for publication as this Court held
in Tanada v. Tuvera. 21 Hence, unless published in the Official Gazette in
accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that
case. LOI 474 was published, though, in the Official Gazette dated November
29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that
the writ of mandamus cannot issue to compel the performance of a
discretionary act, especially by a specific department of the government. That
is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel
the discharge of the discretionary duty itself but not to control the discretion

to be exercised. In other words, mandamus can issue to require action only but
not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of such
duty occurs, if it is a clear duty imposed by law, the courts will
intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will
require specific action. If the duty is purely discretionary, the
courts by mandamus will require action only. For example, if
an inferior court, public official, or board should, for an
unreasonable length of time, fail to decide a particular
question to the great detriment of all parties concerned, or a
court should refuse to take jurisdiction of a cause when the
law clearly gave it jurisdiction mandamus will issue, in the first
case to require a decision, and in the second to require that
jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is
still a plain, speedy and adequate remedy available from the administrative
authorities, resort to the courts may still be permitted if the issue raised is a
question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the
same time on the same subject. In the case of City of Baguio v. NAWASA, 24 for
example, where a law required the transfer of all municipal waterworks
systems to the NAWASA in exchange for its assets of equivalent value, the
Court held that the power being exercised was eminent domain because the
property involved was wholesome and intended for a public use. Property
condemned under the police power is noxious or intended for a noxious
purpose, such as a building on the verge of collapse, which should be
demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is
not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the
limits of the police power in a famous aphorism: "The general rule at least is
that while property may be regulated to a certain extent, if regulation goes too
far it will be recognized as a taking." The regulation that went "too far" was a
law prohibiting mining which might cause the subsidence of structures for
human habitation constructed on the land surface. This was resisted by a coal
company which had earlier granted a deed to the land over its mine but

reserved all mining rights thereunder, with the grantee assuming all risks and
waiving any damage claim. The Court held the law could not be sustained
without compensating the grantor. Justice Brandeis filed a lone dissent in
which he argued that there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some right
theretofore enjoyed, and is, in that sense, an abridgment by
the State of rights in property without making compensation.
But restriction imposed to protect the public health, safety or
morals from dangers threatened is not a taking. The restriction
here in question is merely the prohibition of a noxious use. The
property so restricted remains in the possession of its owner.
The state does not appropriate it or make any use of it. The
state merely prevents the owner from making a use which
interferes with paramount rights of the public. Whenever the
use prohibited ceases to be noxious as it may because of
further changes in local or social conditions the restriction
will have to be removed and the owner will again be free to
enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as
an implement of the former like the power of taxation. The employment of the
taxing power to achieve a police purpose has long been accepted. 26 As for the
power of expropriation, Prof. John J. Costonis of the University of Illinois College
of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365,
which sustained a zoning law under the police power) makes the following
significant remarks:
Euclid, moreover, was decided in an era when judges located
the Police and eminent domain powers on different planets.
Generally speaking, they viewed eminent domain as
encompassing public acquisition of private property for
improvements that would be available for public use," literally
construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's reliance
on an analogy to nuisance law to bolster its support of zoning.
So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the
pertinent measure need have afforded no compensation
whatever. With the progressive growth of government's
involvement in land use, the distance between the two powers
has contracted considerably. Today government often employs
eminent domain interchangeably with or as a useful

complement to the police power-- a trend expressly approved


in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use"
test to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police
power. On the role of eminent domain in the attainment of this purpose,
Justice Douglas declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary, there
is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to
realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the
end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in
1978, the U.S Supreme Court sustained the respondent's Landmarks
Preservation Law under which the owners of the Grand Central Terminal had
not been allowed to construct a multi-story office building over the Terminal,
which had been designated a historic landmark. Preservation of the landmark
was held to be a valid objective of the police power. The problem, however,
was that the owners of the Terminal would be deprived of the right to use the
airspace above it although other landowners in the area could do so over their
respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central
Terminal which it said would "undoubtedly mitigate" the loss caused by the
regulation. This "fair compensation," as he called it, was explained by Prof.
Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn
Central was authorized to transfer to neighboring properties the authorized
but unused rights accruing to the site prior to the Terminal's designation as a
landmark the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing bulk
restrictions on neighboring sites were proportionately relaxed, theoretically
enabling Penn Central to recoup its losses at the Terminal site by constructing
or selling to others the right to construct larger, hence more profitable
buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of


compensable taking is concerned. To the extent that the measures under
challenge merely prescribe retention limits for landowners, there is an exercise
of the police power for the regulation of private property in accordance with
the Constitution. But where, to carry out such regulation, it becomes
necessary to deprive such owners of whatever lands they may own in excess
of the maximum area allowed, there is definitely a taking under the power of
eminent domain for which payment of just compensation is imperative. The
taking contemplated is not a mere limitation of the use of the land. What is
required is the surrender of the title to and the physical possession of the said
excess and all beneficial rights accruing to the owner in favor of the farmerbeneficiary. 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 timehonored justification, as in the case of the police power, that
the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that "private property shall not be taken for public use
without just compensation" and in the abundant jurisprudence that has
evolved from the interpretation of this principle. Basically, the requirements
for a proper exercise of the power are: (1) public use and (2) just
compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310
that the State should first distribute public agricultural lands in the pursuit of
agrarian reform instead of immediately disturbing property rights by forcibly
acquiring private agricultural lands. Parenthetically, it is not correct to say that
only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the
decision to redistribute private agricultural lands in the manner prescribed by
the CARP was made by the legislative and executive departments in the
exercise of their discretion. We are not justified in reviewing that discretion in
the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As
explained by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
"those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in regard
to which full discretionary authority has been delegated to the
legislative or executive branch of the government." It is
concerned with issues dependent upon the wisdom, not
legality, of a particular measure.

It is true that the concept of the political question has been constricted with
the enlargement of judicial power, which now includes the authority of the
courts "to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of the Government." 37 Even so, this should not be
construed as a license for us to reverse the other departments simply because
their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to
include in the CARP the redistribution of private landholdings (even as the
distribution of public agricultural lands is first provided for, while also
continuing apace under the Public Land Act and other cognate laws). The
Court sees no justification to interpose its authority, which we may assert only
if we believe that the political decision is not unwise, but illegal. We do not find
it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March
3,1909 that the entire St. Mary's river between the American
bank and the international line, as well as all of the upland
north of the present ship canal, throughout its entire length,
was "necessary for the purpose of navigation of said waters,
and the waters connected therewith," that determination is
conclusive in condemnation proceedings instituted by the
United States under that Act, and there is no room for judicial
review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled
for us by the Constitution itself No less than the 1987 Charter calls for agrarian
reform, which is the reason why private agricultural lands are to be taken from
their owners, subject to the prescribed maximum retention limits. The
purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary
measures "to encourage and undertake the just distribution of all agricultural
lands to enable farmers who are landless to own directly or collectively the
lands they till." That public use, as pronounced by the fundamental law itself,
must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a
longer and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. 39 It has been repeatedly stressed by
this Court that the measure is not the taker's gain but the owner's loss. 40 The

word "just" is used to intensify the meaning of the word "compensation" to


convey the idea that the equivalent to be rendered for the property to be
taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions
contemplate more than a mere regulation of the use of private lands under the
police power. We deal here with an actual taking of private agricultural lands
that has dispossessed the owners of their property and deprived them of all its
beneficial use and enjoyment, to entitle them to the just compensation
mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable
taking when the following conditions concur: (1) the expropriator must enter a
private property; (2) the entry must be for more than a momentary period; (3)
the entry must be under warrant or color of legal authority; (4) the property
must be devoted to public use or otherwise informally appropriated or
injuriously affected; and (5) the utilization of the property for public use must
be in such a way as to oust the owner and deprive him of beneficial enjoyment
of the property. All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a
deposit upon its taking possession of the condemned property, as "the
compensation is a public charge, the good faith of the public is pledged for its
payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment
or, in case of rejection or no response from the landowner,
upon the deposit with an accessible bank designated by the
DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall take immediate
possession of the land and shall request the proper Register of
Deeds to issue a Transfer Certificate of Title (TCT) in the name
of the Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land to the qualified
beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation,
which it is claimed is entrusted to the administrative authorities in violation of
judicial prerogatives. Specific reference is made to Section 16(d), which
provides that in case of the rejection or disregard by the owner of the offer of
the government to buy his land... the DAR shall conduct summary administrative proceedings
to determine the compensation for the land by requiring the

landowner, the LBP and other interested parties to submit


evidence as to the just compensation for the land, within
fifteen (15) days from the receipt of the notice. After the
expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case within
thirty (30) days after it is submitted for decision.

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.

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,

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;

(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;

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

(vii) Payment for fees of the immediate family of the original


bondholder in government hospitals; and

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

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

(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;

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.
V

The CARP Law and the other enactments also involved in these cases have
been the subject of bitter attack from those who point to the shortcomings of
these measures and ask that they be scrapped entirely. To be sure, these
enactments are less than perfect; indeed, they should be continuously reexamined and rehoned, that they may be sharper instruments for the better
protection of the farmer's rights. But we have to start somewhere. In the
pursuit of agrarian reform, we do not tread on familiar ground but grope on
terrain fraught with pitfalls and expected difficulties. This is inevitable. The
CARP Law is not a tried and tested project. On the contrary, to use Justice
Holmes's words, "it is an experiment, as all life is an experiment," and so we
learn as we venture forward, and, if necessary, by our own mistakes. We
cannot expect perfection although we should strive for it by all means.
Meantime, we struggle as best we can in freeing the farmer from the iron
shackles that have unconscionably, and for so long, fettered his soul to the
soil.
By the decision we reach today, all major legal obstacles to the
comprehensive agrarian reform program are removed, to clear the way for the
true freedom of the farmer. We may now glimpse the day he will be released
not only from want but also from the exploitation and disdain of the past and
from his own feelings of inadequacy and helplessness. At last his servitude will
be ended forever. At last the farm on which he toils will be his farm. It will be
his portion of the Mother Earth that will give him not only the staff of life but
also the joy of living. And where once it bred for him only deep despair, now
can he see in it the fruition of his hopes for a more fulfilling future. Now at last
can he banish from his small plot of earth his insecurities and dark
resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228
and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the
State only upon full payment of compensation to their
respective owners.

5. Subject to the above-mentioned rulings all the petitions are


DISMISSED, without pronouncement as to costs.
SO ORDERED.

SECOND DIVISION
ROMAN CATHOLIC G.R. No. 139285
ARCHBISHOP OF CACERES,
Petitioner, Present:
QUISUMBING, J., Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
SECRETARY OF AGRARIAN
REFORM and DAR REGIONAL Promulgated:
DIRECTOR (Region V),
Respondents. December 21, 2007
x-----------------------------------------------------------------------------------------x
DECISION

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.

VELASCO, JR., J.:


The Comprehensive Agrarian Reform Law (CARL) has truly noble goals,
and these noble goals should not be stymied by the creation of exemptions or
exceptions not contemplated by the law.
The Case

In this Petition for Review on Certiorari under Rule 45, petitioner


Roman Catholic Archbishop of Caceres (Archbishop) questions the February 4,
1999 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 48282, which
upheld the December 8, 1997 and June 10, 1998 Orders of the Department of
Agrarian Reform (DAR).
The Facts
Archbishop is the registered owner of several properties in Camarines Sur,
with a total area of 268.5668 hectares. Of that land, 249.0236 hectares are
planted with rice and corn, while the remaining 19.5432 hectares are planted
with coconut trees.
In 1985, Archbishop filed with the Municipal Agrarian Reform District Office No.
19, Naga City, Camarines Sur several petitions for exemption of certain
properties located in various towns of Camarines Sur from the coverage of
Operation Land Transfer (OLT) under Presidential Decree No. (PD) 27. [2] Two of
these petitions were denied in an Order dated November 6, 1986, issued by
the Regional Director of DAR, Region V, Juanito L. Lorena. [3]
Archbishop appealed from the order of the Regional Director, and sought
exemption from OLT coverage of all lands planted with rice and corn which
were registered in the name of the Roman Catholic Archdiocese of Caceres. In
his appeal, Archbishop cited the following grounds:
a) That said properties are all covered by conditional donations
subject to the prohibitions of the donors to SELL,
EXCHANGE, LEASE, TRANSFER, ENCUMBER OR
MORTGAGE the properties;
b) That they are used for charitable and religious purposes;
c) That the parishes located in depressed areas badly need
them for the furtherance of their mission work,
propagation of the faith, maintenance and support of
their chapels, churches and educational religious
institutions like the Holy Rosary Major and Minor
Seminaries for the promotion of the priesthood
vocation;
d) For the preservation of good relationship between church
and state thru non-infringement of the right to
exercise religious profession and worship;
e) For the maintenance of the Cathedral and Peafrancia
Shrine, which now include the Basilica Minore Housing
our venerable image of Our Lady of Peafrancia and the
venerable portrait of Divine Rostro;
f) That the petitioner (church) is amenable to continue the
leasehold system with the present cultivators or
tenants.[4]
This appeal was denied by then DAR Secretary Ernesto D. Garilao in an
Order dated December 8, 1997.[5] A subsequent motion for reconsideration
was denied in an Order dated June 10, 1998.[6]

The matter was then raised to the CA via Petition for Review on
Certiorari. Archbishop argued that even if the lands in question are registered
in his name, he holds the lands in trust for the benefit of his followers as cestui
que trust. Archbishop further argued that the deeds of donation by which the
lands were transferred to him imposed numerous fiduciary obligations, such
that he cannot sell, exchange, lease, transfer, encumber, or mortgage the
subject lands. By this reasoning, Archbishop concluded that he is not the
landowner contemplated by PD 27 and Republic Act No. (RA) 6657, the CARL
of 1988. He then prayed that the assailed orders of the DAR be reversed, or in
the alternative, that the alleged beneficiaries of the trust be each allowed to
exercise rights of retention over the landholdings.[7]
The petition was dismissed by the CA in its February 4, 1999 Decision.
Archbishop filed a motion for reconsideration, but was denied in the June 18,
1999 CA Resolution.[9]
[8]

Archbishop now brings the matter before us through this petition.

The Issues
Archbishop raises issues he had raised previously, which, he contends, the CA
failed to properly address. He claims that the CA erred in holding that he is
only entitled to assert one right of retention as the subject properties are
registered in his name. He further claims that an express trust had been
created wherein he only held naked title to the subject properties on behalf of
the beneficiaries. He argues that it is not the landowner contemplated by the
law, but merely a trustee, and as such is entitled to as many rights of
retention on behalf of the beneficiaries of each particular property. He then
raises the question of the applicability of the ruling in The Roman Catholic
Apostolic Administrator of Davao, Inc. v. The Land Registration Commission
and the Register of Deeds of Davao City,[10] which, he cites, ruled that
properties held by the Church are held by it as a mere administrator for the
benefit of the members of that particular religion. As Archbishop claims to be
merely an administrator of the subject properties, he argues that these subject
properties should have been exempt from the OLT.
The Courts Ruling
The petition has no merit.
Archbishops arguments, while novel, must fail in the face of the law and the
dictates of the 1987 Constitution.
The laws simply speak of the landowner without qualification as to under what
title the land is held or what rights to the land the landowner may
exercise. There is no distinction made whether the landowner holds naked title
only or can exercise all the rights of ownership. Archbishop would have us read
deeper into the law, to create exceptions that are not stated in PD 27 and RA
6657, and to do so would be to frustrate the revolutionary intent of the law,

which is the redistribution of agricultural land for the benefit of landless


farmers and farmworkers.
Archbishop was found to be the registered owner of the lands in question, and
does not contest that fact. For the purposes of the law, this makes him the
landowner, without the necessity of going beyond the registered titles. He
cannot demand a deeper examination of the registered titles and demand
further that the intent of the original owners be ascertained and followed. To
adopt his reasoning would create means of sidestepping the law, wherein the
mere act of donation places lands beyond the reach of agrarian reform.
There can be no claim of more than one right of retention per
landowner. Neither PD 27 nor RA 6657 has a provision for a landowner to
exercise more than one right of retention.The law is simple and clear as to the
retention limits per landowner. PD 27 states, In all cases, the landowner may
retain an area of not more than seven (7) hectares if such landowner is
cultivating such area or will now cultivate it; while RA 6657 states:
SEC. 6. Retention Limits.Except as otherwise provided in this
Act, no person may own or retain, directly, 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 the 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; Provided, 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.
Nothing in either law supports Archbishops claim to more than one
right of retention on behalf of each cestui que trust. The provisions of PD 27
and RA 6657 are plain and require no further interpretationthere is only one
right of retention per landowner, and no multiple rights of retention can be
held by a single party. Furthermore, the scheme proposed by Archbishop
would create as many rights of retention as there are beneficiaries, which
could in effect protect the entire available land area from agrarian
reform.Under Archbishops reasoning, there is not even a definite landowner to
claim separate rights of retention, and no specific number of rights of
retention to be claimed by the landowners. There is simply no basis in the law
or jurisprudence for his argument that it is the beneficial ownership that
should be used to determine which party would have the right of retention.
Archbishop makes much of the conditional donation, that he does not
have the power to sell, exchange, lease, transfer, encumber or mortgage the

transferred properties. He claims that these conditions do not make him the
landowner as contemplated by the law. This matter has already been
answered in Hospicio de San Jose de Barili, Cebu City(Hospicio) v. Department
of Agrarian Reform.[11] In that case, wherein Act No. 3239 prohibited the sale
under any consideration of lands donated to the Hospicio, a charitable
organization, the Court found that the lands of the Hospicio were not exempt
from the coverage of agrarian reform. In characterizing the sale of land under
agrarian reform, we stated:
Generally, sale arises out of contractual
obligation. Thus, it must meet the first essential requisite of
every contract that is the presence of consent. Consent
implies an act of volition in entering into the agreement. The
absence or vitiation of consent renders the sale either void or
voidable.
In this case, the deprivation of the Hospicios property
did not arise as a consequence of the Hospicios consent to the
transfer. There was no meeting of minds between the
Hospicio, on one hand, and the DAR or the tenants, on the
other, on the properties and the cause which are to constitute
the contract that is to serve ultimately as the basis for the
transfer of ownership of the subject lands. Instead, the
obligation to transfer arises by compulsion of law, particularly
P.D. No. 27.[12]
We discussed further:
The twin process of expropriation under agrarian
reform and the payment of just compensation is akin to a
forced sale, which has been aptly described in common law
jurisdictions as sale made under the process of the court and
in the mode prescribed by law, and which is not the voluntary
act of the owner, such as to satisfy a debt, whether of a
mortgage, judgment, tax lien, etc. The term has not been
precisely defined in this jurisdiction, but reference to the
phrase itself is made in Articles 223, 242, 237 and 243 of the
Civil Code, which uniformly exempt the family home from
execution, forced sale, or attachment. Yet a forced sale is
clearly different from the sales described under Book V of the
Civil Code which are conventional sales, as it does not arise
from the consensual agreement of the vendor and vendee, but
by compulsion of law. Still, since law is recognized as one of
the sources of obligation, there can be no dispute on the
efficacy of a forced sale, so long as it is authorized by law. [13]
Archbishops claim that he does not have jus disponendi over the subject
properties is unavailing. The very nature of the compulsory sale under PD 27
and RA 6657 defeats such a claim. Other less scrupulous parties may even
attempt creating trusts to prevent their lands from coming under agrarian
reform, and say that the trustee has no power to dispose of the
properties. The disposition under PD 27 and RA 6657 is of a different character
than what is contemplated by jus disponendi, wherein under these laws,
voluntariness is not an issue, and the disposition is necessary for the laws to
be effective.

Under PD 27 and RA 6657, Archbishop cannot claim that the alleged


conditions of the donations would have primacy over the application of the
law. This forced sale is not even a violation of the conditions of the donation,
since it is by application of law and beyond Archbishops control. The
application of the law cannot and should not be defeated by the conditions
laid down by the donors of the land. If such were allowed, it would be a simple
matter for other landowners to place their lands without limit under the
protection of religious organizations or create trusts by the mere act of
donation, rendering agrarian reform but a pipe dream.
Archbishops contention that he is merely an administrator of the donated
properties will not serve to remove these lands from the coverage of agrarian
reform. Under PD 27, the coverage is lands devoted to rice and corn. Section 4
of RA 6657 states, The Comprehensive Agrarian Reform Law of 1988 shall
cover, regardless of tenurial arrangement and commodity produced, all public
and private agricultural lands as provided in Proclamation No. 131 and
Executive Order No. 229, including other lands of the public domain suitable
for agriculture. The lands in Archbishops name are agricultural lands that fall
within the scope of the law, and do not fall under the exemptions.
The exemptions under RA 6657 form an exclusive list, as follows:
SEC. 10. Exemptions and Exclusions.
(a) Lands actually, directly and exclusively used for parks,
wildlife, forest reserves, reforestation, fish sanctuaries and
breeding grounds, watersheds and mangroves shall be exempt
from the coverage of this Act.
(b) Private lands actually, directly and exclusively used for
prawn farms and fishponds shall be exempt from the coverage
of this Act: Provided, That said prawn farms and fishponds
have not been distributed and Certificate of Land Ownership
Award (CLOA) issued under the Agrarian Reform Program.
In cases where the fishponds or prawn farms have been
subjected to the Comprehensive Agrarian Reform Law, by
voluntary offer to sell, or commercial farms deferment or
notices of compulsory acquisition, a simple and absolute
majority of the actual regular workers or tenants must consent
to the exemption within one (1) year from the effectivity of this
Act. When the workers or tenants do not agree to this
exemption, the fishponds or prawn farms shall be distributed
collectively to the worker-beneficiaries or tenants who shall
form cooperative or association to manage the same.
In cases where the fishponds or prawn farms have not been
subjected to the Comprehensive Agrarian Reform Law, the
consent of the farmworkers shall no longer be necessary;
however, the provision of Section 32-A hereof on incentives
shall apply.
(c) Lands actually, directly and exclusively used and found to
be necessary for national defense, school sites and campuses,
including experimental farm stations operated by public or
private schools for educational purposes, seeds and seedlings
research and pilot production center, church sites and
convents appurtenant thereto, mosque sites and Islamic
centers appurtenant thereto, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by

the inmates, government and private research and quarantine


centers and all lands with eighteen percent (18%) slope and
over, except those already developed, shall be exempt from
the coverage of this Act. (As amended by R. A. 7881)
Archbishop would claim exemption from the coverage of agrarian reform by
stating that he is a mere administrator, but his position does not appear under
the list of exemptions under RA 6657. His claimed status as administrator does
not create another class of lands exempt from the coverage of PD 27 or RA
6657, and The Roman Catholic Apostolic Administrator of Davao, Inc. [14] does
not create another definition for the term landowner.
We explained in Hospicio:
It is axiomatic that where a general rule is established
by a statute with exceptions, the Court will not curtail nor add
to the latter by implication, and it is a rule that an express
exception excludes all others. We cannot simply impute into a
statute an exception which the Congress did not
incorporate. Moreover general welfare legislation such as land
reform laws is to be construed in favor of the promotion of
social justice to ensure the well-being and economic security
of the people. Since a broad construction of the provision
listing the properties exempted under the CARL would tend to
denigrate the aims of agrarian reform, a strict application of
these exceptions is in order.[15]
Archbishop cannot claim exemption in behalf of the millions of Filipino
faithful, as the lands are clearly not exempt under the law. He should not fear
that his followers are simply being deprived of land, as under both PD 27 and
RA 6657, he is entitled to just compensation, which he may then use for the
benefit of his followers. His situation is no different from other landowners
affected by agrarian reformthey are somewhat deprived of their land, but it is
all for a greater good.
As Association of Small Landowners in the Philippines, Inc. v. Secretary
of Agrarian Reform[16] recognized the revolutionary character of the
expropriation under the agrarian reform law, we follow such lofty ideal for the
resolution of this case. This grand purpose under the CARL must not be
hindered by the simple expedient of appending conditions to a donation of
land, or by donating land to a church. This is not to cast aspersions on
religious organizations, but it is not fitting for them to be used as vehicles for
keeping land out of the hands of the landless. The law is indubitably in line
with the charitable ideals of religious organizations to ensure that the land
they own falls into the hands of able caretakers and owners. As a religious
leader, Archbishop can take solace in the fact that his lands are going to be
awarded to those who need and can utilize them to the fullest.
WHEREFORE, we DENY the petition, and AFFIRM the February 4,
1999 Decision in CA-G.R. SP No. 48282.
SO ORDERED.

FIRST DIVISION
HEIRS OF DR. JOSE DELESTE, namely: JOSEFA
DELESTE, JOSE RAY DELESTE, RAUL HECTOR
DELESTE, and RUBEN ALEX DELESTE,
Petitioners,
- versus LAND BANK OF THE PHILIPPINES (LBP), as
represented by its Manager, LAND VALUATION
OFFICE OF LBP COTABATO CITY; THE
REGIONAL DIRECTOR REGION 12 OF
COTABATO CITY, THE SECRETARY OF THE
DEPARTMENT OF AGRARIAN REFORM; THE
REGIONAL DIRECTOR OF REGION X CAGAYAN
DE ORO CITY, represented by MCMILLAN
LUCMAN, in his capacity as Provincial
Agrarian Reform Officer (PARO) of DAR Lanao
del Norte; LIZA BALBERONA, in her capacity
as DAR Municipal Agrarian Reform Officer
(MARO); REYNALDO BAGUIO, in his capacity
as the Register of Deeds of Iligan City as
nominal party; the emancipation patent
holders: FELIPE D. MANREAL, CUSTUDIO M.
RICO, HEIRS OF DOMINGO V. RICO, HEIRS OF
ABDON T. MANREAL, MACARIO M. VELORIA,
ALICIA B. MANREAL, PABLO RICO, SALVACION
MANREAL, HEIRS OF TRANQUILIANA
MANREAL, HEIRS OF ANGELA VELORIA, HEIRS
OF NECIFURO CABALUNA, HEIRS OF
CLEMENTE RICO, HEIRS OF MANTILLANO
OBISO, HEIRS OF HERCULANO BALORIO, and
TITO BALER,
Respondents.

G.R. No. 169913

Present:
CORONA, C.J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

Promulgated:
June 8, 2011
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:

The Case
Before Us is a Petition for Review on Certiorari under Rule 45 seeking
to reverse and set aside the October 28, 2004 Resolution [1] of the Court of
Appeals (CA) and its September 13, 2005 Resolution [2] denying petitioners
motion for reconsideration.

In 1975, the City of Iligan passed City Ordinance No. 1313, known as
the Zoning Regulation of Iligan City, reclassifying the subject property as
commercial/residential.[14]
Eventually, on February 12, 1984, DAR issued Certificates of Land
Transfer (CLTs) in favor of private respondents who were tenants and actual
cultivators of the subject property.[15] The CLTs were registered on July 15,
1986.[16]

The Facts
The spouses Gregorio Nanaman (Gregorio) and Hilaria Tabuclin
(Hilaria) were the owners of a parcel of agricultural land located in
Tambo, Iligan City, consisting of 34.7 hectares (subject property). Said spouses
were childless, but Gregorio had a son named Virgilio Nanaman (Virgilio) by
another woman. Virgilio had been raised by the couple since he was two years
old. Gregorio also had two daughters, Esperanza and Caridad, by still another
woman.[3]
When Gregorio died in 1945, Hilaria and Virgilio administered the
subject property.[4] On February 16, 1954, Hilaria and Virgilio sold the subject
property to Dr. Jose Deleste (Deleste) for PhP 16,000.[5] The deed of sale was
notarized on February 17, 1954 and registered on March 2, 1954. Also, the tax
declaration in the name of Virgilio was canceled and a new tax declaration was
issued in the name of Deleste. The arrears in the payment of taxes from 1952
had been updated by Deleste and from then on, he paid the taxes on the
property.[6]
On May 15, 1954, Hilaria died.[7] Gregorios brother, Juan Nanaman,
was appointed as special administrator of the estate of the deceased spouses.
Subsequently, Edilberto Noel (Noel) was appointed as the regular
administrator of the joint estate.[8]
On April 30, 1963, Noel, as the administrator of the intestate estate of
the deceased spouses, filed before the Court of First Instance, Branch II, Lanao
del Norte an action against Deleste for the reversion of title over the subject
property, docketed as Civil Case No. 698.[9] Said case went up to this Court
in Noel v. CA, where We rendered a Decision[10] on January 11, 1995, affirming
the ruling of the CA that the subject property was the conjugal property of the
late spouses Gregorio and Hilaria and that the latter could only sell her onehalf (1/2) share of the subject property to Deleste. As a result, Deleste, who
died in 1992, and the intestate estate of Gregorio were held to be the coowners of the subject property, each with a one-half (1/2) interest in it. [11]
Notably, while Civil Case No. 698 was still pending before the CFI,
particularly on October 21, 1972, Presidential Decree No. (PD) 27 was issued.
This law mandates that tenanted rice and corn lands be brought under the
Operation Land Transfer (OLT) Program and awarded to farmer-beneficiaries.
Thus, the subject property was placed under the said program. [12] However,
only the heirs of Gregorio were identified by the Department of Agrarian
Reform (DAR) as the landowners. Concomitantly, the notices and processes
relative to the coverage were sent to these heirs.[13]

In 1991, the subject property was surveyed.[17] The survey of a portion


of the land consisting of 20.2611 hectares, designated as Lot No. 1407, was
approved on January 8, 1999.[18] The claim folder for Lot No. 1407 was
submitted to the LBP which issued a Memorandum of Valuation and a
Certificate of Cash Deposit on May 21, 2001 and September 12, 2001,
respectively. Thereafter, Emancipation Patents (EPs) and Original Certificates
of Title (OCTs) were issued on August 1, 2001 and October 1, 2001,
respectively, in favor of private respondents over their respective portions of
Lot No. 1407.[19]
Meanwhile, on November 22, 1999, the City of Iligan filed a complaint
with the Regional Trial Court (RTC), Branch 4 in Iligan City for the expropriation
of a 5.4686-hectare portion of Lot No. 1407, docketed as Special Civil Action
No. 4979. On December 11, 2000, the RTC issued a Decision granting the
expropriation. Considering that the real owner of the expropriated portion
could not be determined, as the subject property had not yet been partitioned
and distributed to any of the heirs of Gregorio and Deleste, the just
compensation for the expropriated portion of the subject property in the
amount of PhP 27,343,000 was deposited with the Development Bank of the
Philippines in Iligan City, in trust for the RTC in Iligan City. [20]
On February 28, 2002, the heirs of Deleste, petitioners herein, filed
with the Department of Agrarian Reform Adjudication Board (DARAB) a petition
seeking to nullify private respondents EPs.[21] This was docketed as Reg. Case
No. X-471-LN-2002.
On July 21, 2003, the Provincial Agrarian Reform Adjudicator (PARAD)
rendered a Decision[22] declaring that the EPs were null and void in view of the
pending issues of ownership, the subsequent reclassification of the subject
property into a residential/commercial land, and the violation of petitioners
constitutional right to due process of law.
Dissatisfied, private respondents immediately filed their Notice of
Appeal on July 22, 2003. Notwithstanding it, on July 24, 2003, petitioners filed
a Motion for a Writ of Execution pursuant to Section 2, Rule XII of the Revised
Rules of Procedure, which was granted in an Order dated August 4, 2003
despite strong opposition from private respondents.[23] On January 28, 2004,
the DARAB nullified the Order dated August 4, 2003 granting the writ of
execution.[24]
Subsequently, the DARAB, in DARAB Case No. 12486, reversed the
ruling of the PARAD in its Decision[25] dated March 15, 2004. It held, among
others, that the EPs were valid as it was the heirs of Deleste who should have
informed the DAR of the pendency of Civil Case No. 698 at the time the

subject property was placed under the coverage of the OLT Program
considering that DAR was not a party to the said case. Further, it stated that
the record is bereft of any evidence that the city ordinance has been approved
by the Housing and Land Use Regulatory Board (HLURB), as mandated by DAR
Administrative Order No. 01, Series of 1990, and held that whether the subject
property is indeed exempt from the OLT Program is an administrative
determination, the jurisdiction of which lies exclusively with the DAR Secretary
or the latters authorized representative. Petitioners motion for reconsideration
was likewise denied by the DARAB in its Resolution [26] dated July 8, 2004.
Undaunted, petitioners filed a petition for review with the CA, docketed
as CA-G.R. SP No. 85471, challenging the Decision and Resolution in DARAB
Case No. 12486. This was denied by the CA in a Resolution dated October 28,
2004 for petitioners failure to attach the writ of execution, the order nullifying
the writ of execution, and such material portions of the record referred to in
the petition and other supporting papers, as required under Sec. 6 of Rule 43
of the Rules of Court. Petitioners motion for reconsideration was also denied by
the appellate court in a Resolution dated September 13, 2005 for being pro
forma.
On November 18, 2005, petitioners filed a petition for review with this
Court. In Our Resolution[27] dated February 4, 2008, We resolved to deny the
said petition for failure to show sufficiently any reversible error in the assailed
judgment to warrant the exercise by the Court of its discretionary appellate
jurisdiction in this case.
On March 19, 2008, petitioners filed a Motion for Reconsideration.
On April 11, 2008, they also filed a Supplement to the Motion for
Reconsideration.[29]

RECLASSIFYING THE AREA INTO A STRICTLY


RESIDENTIAL AREA IN 1975.
IV.

[WHETHER THE LAND] THAT HAS BEEN PREVIOUSLY


AND PARTIALLY EXPROPRIATED BY A CITY
GOVERNMENT [MAY] STILL BE SUBJECT[ED] TO
AGRARIAN REFORM.

V.

[WHETHER DAR VIOLATED] THE RIGHTS OF


PETITIONERS TO PROCEDURAL DUE PROCESS.

VI.

[WHETHER] THE COMPENSATION DETERMINED BY


DAR AND LBP IS CORRECT GIVEN THAT THE FORMULA
USED HAD BEEN REPEALED.

VII.

[WHETHER] THE ISSUANCE OF EMANCIPATION


PATENTS [IS] LEGAL GIVEN THAT THEY WERE FRUITS
OF AN ILLEGAL PROCEEDING.

VIII.

[WHETHER] THE CERTIFICATES OF TITLE [ARE] VALID


GIVEN THAT THEY WERE DIRECTLY ISSUED TO THE
FARMER-BENEFICIARIES IN GROSS VIOLATION OF
SECTION 16(E) OF R.A. 6657 X X X.[31]

Our Ruling
The petition is meritorious.

[28]

In Our Resolution[30] dated August 20, 2008, this Court resolved to


grant petitioners motion for reconsideration and give due course to the
petition, requiring the parties to submit their respective memoranda.
The Issues
I.

[WHETHER THE CA WAS CORRECT IN


DISMISSING] OUTRIGHT THE PETITION FOR REVIEW OF
PETITIONERS X X X.

II.

[WHETHER] THE OUTRIGHT DENIAL OF


PETITIONERS MOTION FOR RECONSIDERATION BASED
ON A MISAPPRECIATION OF FACTS IS JUSTIFIED; AND
[WHETHER THE] OUTRIGHT DISMISSAL OF THE
PETITION IS JUST CONSIDERING THE IMPORTANCE OF
THE ISSUES RAISED THEREIN.
XXXX

III.

[WHETHER PETITIONERS LAND IS] COVERED BY


AGRARIAN REFORM GIVEN THAT THE CITY
OF ILIGAN PASSED [CITY] ORDINANCE NO. 1313

Effect of non-compliance with the requirements


under Sec. 6, Rule 43 of the Rules of Court
In filing a petition for review as an appeal from awards, judgments,
final orders, or resolutions of any quasi-judicial agency in the exercise of its
quasi-judicial functions, it is required under Sec. 6(c), Rule 43 of the Rules of
Court that it be accompanied by a clearly legible duplicate original or a
certified true copy of the award, judgment, final order, or resolution appealed
from, with certified true copies of such material portions of the record referred
to in the petition and other supporting papers. As stated:
Sec. 6. Contents of the petition. The petition for review
shall (a) state the full names of the parties to the case, without
impleading the court or agencies either as petitioners or
respondents; (b) contain a concise statement of the facts and
issues involved and the grounds relied upon for the review;
(c) be accompanied by a clearly legible duplicate
original or a certified true copy of the award, judgment,
final order or resolution appealed from, together with
certified true copies of such material portions of the
record referred to therein and other supporting papers;
and (d) contain a sworn certification against forum shopping
as provided in the last paragraph of section 2, Rule 42. The

petition shall state the specific material dates showing that it


was filed within the period fixed herein. (Emphasis supplied.)
Non-compliance with any of the above-mentioned requirements
concerning the contents of the petition, as well as the documents that should
accompany the petition, shall be sufficient ground for its dismissal as stated in
Sec. 7, Rule 43 of the Rules:
Sec. 7. Effect of failure to comply with
requirements. The failure of the petitioner to comply with any
of the foregoing requirements regarding the payment of the
docket and other lawful fees, the deposit for costs, proof of
service of the petition, and the contents of and the
documents which should accompany the petition shall
be sufficient ground for the dismissal thereof. (Emphasis
supplied.)
In the instant case, the CA dismissed the petition in CA-G.R. SP No.
85471 for petitioners failure to attach the writ of execution, the order nullifying
the writ of execution, and such material portions of the record referred to in
the petition and other supporting papers.[32]
A perusal of the issues raised before the CA would, however, show that
the foregoing documents required by the appellate court are not necessary for
the proper disposition of the case. Specifically:
Is [Lot No. 1407] within the ambit of the [Comprehensive
Agrarian Reform Program]?
Can the OLT by DAR over the subject land validly proceed
without notice to the landowner?
Can the OLT be validly completed without a certification of
deposit by Land Bank?
[I]s the landowner barred from exercising his right of retention
x x x [considering that EPs were already issued on the basis of
CLTs]?
Are the EPs over the subject land x x x valid x x x? [33]
Petitioners complied with the requirement under Sec. 6(c), Rule 43 of
the Rules of Court when they appended to the petition filed before the CA
certified true copies of the following documents: (1) the challenged resolution
dated July 8, 2004 issued by the DARAB denying petitioners motion for
reconsideration; (2) the duplicate original copy of petitioners Motion for
Reconsideration dated April 6, 2005; (3) the assailed decision dated March 15,
2004 issued by the DARAB reversing on appeal the decision of the PARAD and
nullifying with finality the order of execution pending appeal; (4) the Order
dated December 8, 2003 issued by the PARAD reinstating the writ of execution

earlier issued; and (5) the Decision dated July 21, 2003 issued by the PARAD in
the original proceedings for the cancellation of the EPs. [34] The CA, therefore,
erred when it dismissed the petition based on such technical ground.
Even assuming that the omitted documents were material to the
appeal, the appellate court, instead of dismissing outright the petition, could
have just required petitioners to submit the necessary documents. In Spouses
Espejo v. Ito,[35] the Court held that under Section 3 (d), Rule 3 of the Revised
Internal Rules of the Court of Appeals,[36] the Court of Appeals is with authority
to require the parties to submit additional documents as may be necessary to
promote the interests of substantial justice.
Moreover, petitioners subsequent submission of the documents
required by the CA with the motion for reconsideration constitutes substantial
compliance with Section 6(c), Rule 43 of the Rules of Court. [37] In Jaro v. CA,
this Court held that subsequent and substantial compliance may call for the
relaxation of the rules of procedure. Particularly:
The amended petition no longer contained the fatal
defects that the original petition had but the Court of Appeals
still saw it fit to dismiss the amended petition. The Court of
Appeals reasoned that non-compliance in the original petition
is admittedly attributable to the petitioner and that no highly
justifiable and compelling reason has been advanced to the
court for it to depart from the mandatory requirements of
Administrative Circular No. 3-96. The hard stance taken by the
Court of Appeals in this case is unjustified under the
circumstances.
There is ample jurisprudence holding that the
subsequent and substantial compliance of an appellant
may call for the relaxation of the rules of
procedure. In Cusi-Hernandez vs. Diaz and Piglas-Kamao vs.
National Labor Relations Commission, we ruled that the
subsequent submission of the missing documents with
the motion for reconsideration amounts to substantial
compliance. The reasons behind the failure of the petitioners
in these two cases to comply with the required attachments
were no longer scrutinized. What we found noteworthy in each
case was the fact that the petitioners therein substantially
complied with the formal requirements. We ordered the
remand of the petitions in these cases to the Court of Appeals,
stressing the ruling that by precipitately dismissing the
petitions the appellate court clearly put a premium on
technicalities at the expense of a just resolution of the case.
[38]
(Citations omitted; emphasis supplied.)
Time and again, this Court has held that a strict and rigid application
of technicalities must be avoided if it tends to frustrate rather than promote
substantial justice.[39] As held in Sta. Ana v. Spouses Carpo:[40]

Rules of procedure are merely tools designed to


facilitate the attainment of justice. If the application of the
Rules would tend to frustrate rather than to promote
justice, it is always within our power to suspend the
rules or except a particular case from their
operation. Law and jurisprudence grant to courts the
prerogative to relax compliance with the procedural
rules, even the most mandatory in character, mindful
of the duty to reconcile the need to put an end to
litigation speedily and the parties right to an
opportunity to be heard.
Our recent ruling in Tanenglian v. Lorenzo is
instructive:
We have not been oblivious to or unmindful of the
extraordinary situations that merit liberal application
of the Rules, allowing us, depending on the
circumstances, to set aside technical infirmities and
give due course to the appeal. In cases where we
dispense with the technicalities, we do not mean to
undermine the force and effectivity of the periods set
by law. In those rare cases where we did not
stringently apply the procedural rules, there always
existed a clear need to prevent the commission of a
grave injustice. Our judicial system and the courts
have always tried to maintain a healthy balance
between the strict enforcement of procedural laws and
the guarantee that every litigant be given the full
opportunity for the just and proper disposition of his
cause. (Citations omitted; emphasis supplied.)
Clearly, the dismissal of the petition by the CA on mere technicality is
unwarranted in the instant case.
On the coverage of the subject property
by the agrarian reform program
Petitioners contend that the subject property, particularly Lot No.
1407, is outside the coverage of the agrarian reform program in view of the
enactment of City Ordinance No. 1313 by the City of Iligan reclassifying the
area into a residential/commercial land.[41]
Unconvinced, the DARAB, in its Decision, noted that the record is
bereft of any evidence that the city ordinance has been approved by the
HLURB, thereby allegedly casting doubt on the validity of the reclassification
over the subject property.[42] It further noted that whether the subject property
is exempt from the OLT Program is an administrative determination, the
jurisdiction of which lies exclusively with the DAR Secretary, not with the
DARAB.

Indeed, it is the Office of the DAR Secretary which is vested with the
primary and exclusive jurisdiction over all matters involving the
implementation of the agrarian reform program.[43] However, this will not
prevent the Court from assuming jurisdiction over the petition considering that
the issues raised in it may already be resolved on the basis of the records
before Us. Besides, to allow the matter to remain with the Office of the DAR
Secretary would only cause unnecessary delay and undue hardship on the
parties. Applicable, by analogy, is Our ruling in the recent Bagong Pagkakaisa
ng Manggagawa ng Triumph International v. Department of Labor and
Employment Secretary,[44] where We held:
But as the CA did, we similarly recognize that undue
hardship, to the point of injustice, would result if a
remand would be ordered under a situation where we
are in the position to resolve the case based on the
records before us. As we said in Roman Catholic Archbishop
of Manila v. Court of Appeals:
[w]e have laid down the rule that the remand
of the case to the lower court for further reception of
evidence is not necessary where the Court is in a
position to resolve the dispute based on the records
before it. On many occasions, the Court, in the
public interest and for the expeditious
administration of justice, has resolved actions
on the merits instead of remanding them to the
trial court for further proceedings, such as
where the ends of justice, would not be
subserved by the remand of the case.
Thus, we shall directly rule on the dismissal issue. And
while we rule that the CA could not validly rule on the merits
of this issue, we shall not hesitate to refer back to its dismissal
ruling, where appropriate. (Citations omitted; emphasis
supplied.)
Pertinently, after an assiduous study of the records of the case, We
agree with petitioners that the subject property, particularly Lot No. 1407, is
outside the coverage of the agrarian reform program in view of the enactment
by the City of Iligan of its local zoning ordinance, City Ordinance No. 1313.
It is undeniable that the local government has the power to reclassify
agricultural into non-agricultural lands. In Pasong Bayabas Farmers
Association, Inc. v. CA,[45] this Court held that pursuant to Sec. 3 of Republic
Act No. (RA) 2264, amending the Local Government Code, municipal and/or
city councils are empowered to adopt zoning and subdivision ordinances or
regulations in consultation with the National Planning Commission. It was also
emphasized therein that [t]he power of the local government to convert or
reclassify lands [from agricultural to non-agricultural lands prior to the
passage of RA 6657] is not subject to the approval of the [DAR]. [46]
Likewise, it is not controverted that City Ordinance No. 1313, which
was enacted by the City of Iligan in 1975, reclassified the subject property into

a commercial/residential area. DARAB, however, believes that the approval of


HLURB is necessary in order for the reclassification to be valid.

the Sangguniang Bayan of Dasmarias, Cavite, and approved


by the HSRC, specifying them as residential.

We differ. As previously mentioned, City Ordinance No. 1313 was


enacted by the City of Iligan in 1975. Significantly, there was still no HLURB to
speak of during that time. It was the Task Force on Human Settlements, the
earliest predecessor of HLURB, which was already in existence at that time,
having been created on September 19, 1973 pursuant to Executive Order No.
419. It should be noted, however, that the Task Force was not empowered to
review and approve zoning ordinances and regulations. As a matter of fact, it
was only on August 9, 1978, with the issuance of Letter of Instructions No.
729, that local governments were required to submit their existing land use
plans, zoning ordinances, enforcement systems and procedures to the Ministry
of Human Settlements for review and ratification. The Human Settlements
Regulatory Commission (HSRC) was the regulatory arm of the Ministry of
Human Settlements.[47]

In Natalia Realty, Inc. v. Department of Agriculture, this


Court resolved the issue of whether lands already classified for
residential, commercial or industrial use, as approved by the
Housing and Land Use Regulatory Board (HLURB) and its
precursor agencies, i.e., National Housing Authority and
Human Settlements Regulatory Commission, prior to 15 June
1988, are covered by Republic Act No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law of 1988. We
answered in the negative, thus:

Significantly, accompanying the Certification [48] dated October 8, 1999


issued by Gil R. Balondo, Deputy Zoning Administrator of the City Planning and
Development Office, Iligan City, and the letter[49] dated October 8, 1999 issued
by Ayunan B. Rajah, Regional Officer of the HLURB, is the Certificate of
Approval issued by Imelda Romualdez Marcos, then Minister of Human
Settlements and Chairperson of the HSRC, showing that the local zoning
ordinance was, indeed, approved on September 21, 1978. This leads to no
other conclusion than that City Ordinance No. 1313 enacted by the City
of Iligan was approved by the HSRC, the predecessor of HLURB. The validity of
said local zoning ordinance is, therefore, beyond question.

We now determine whether such lands are covered


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

Since the subject property had been reclassified as


residential/commercial land with the enactment of City Ordinance No. 1313 in
1975, it can no longer be considered as an agricultural land within the ambit of
RA 6657. As this Court held in Buklod nang Magbubukid sa Lupaing Ramos,
Inc. v. E.M. Ramos and Sons, Inc.,[50] To be exempt from CARP, all that is
needed is one valid reclassification of the land from agricultural to nonagricultural by a duly authorized government agency before June 15, 1988,
when the CARL took effect.
Despite the foregoing ruling, respondents allege that the subsequent
reclassification by the local zoning ordinance cannot free the land from the
legal effects of PD 27 which deems the land to be already taken as of October
21, 1972, when said law took effect. Concomitantly, they assert that the rights
which accrued from said date must be respected. They also maintain that the
reclassification of the subject property did not alter its agricultural nature,
much less its actual use.[51]
Verily, vested rights which have already accrued cannot just be taken
away by the expedience of issuing a local zoning ordinance reclassifying an
agricultural land into a residential/commercial area. As this Court extensively
discussed in Remman Enterprises, Inc. v. CA:[52]
In the main, REMMAN hinges its application for
exemption on the ground that the subject lands had ceased to
be agricultural lands by virtue of the zoning classification by

Indeed, lands not devoted to agricultural activity


are outside the coverage of CARL. These include lands
previously converted to non-agricultural uses prior to
the effectivity of CARL by government agencies other
than respondent DAR. In its Revised Rules and
Regulations Governing Conversion of Private
Agricultural Lands to Non-Agricultural Uses, DAR itself
defined agricultural land thus
. . . Agricultural lands refers to those devoted to
agricultural activity as defined in R.A. 6657 and not
classified as mineral or forest by the Department of
Environment and Natural Resources (DENR) and its
predecessor agencies, and not classified in town plans
and zoning ordinances as approved by the Housing
and Land Use Regulatory Board (HLURB) and its
preceding competent authorities prior to 15 June 1988
for residential, commercial or industrial use.
Since the NATALIA lands were converted prior to
15 June 1988, respondent DAR is bound by such
conversion. . . . .

However, Natalia should be cautiously applied in light


of Administrative Order 04, Series of 2003, which outlines the
rules on the Exemption on Lands from CARP Coverage under
Section (3) of Republic Act No. 6657, and Department of
Justice (DOJ) Opinion No. 44, Series of 1990. It reads:
I. Prefatory Statement
Republic Act (RA) 6657 or the Comprehensive
Agrarian Reform Law (CARL), Section 3, Paragraph (c)
defines agricultural land as referring to land devoted
to agricultural activity as defined in this Act and not
classified as mineral, forest, residential, commercial or
industrial land.
Department of Justice Opinion No. 44, Series of
1990, (or DOJ Opinion 44-1990 for brevity) and the
case of Natalia Realty versus Department of Agrarian
Reform (12 August 2993, 225 SCRA 278) opines that
with respect to the conversion of agricultural land
covered by RA 6657 to non-agricultural uses, the
authority of the Department of Agrarian Reform (DAR)
to approve such conversion may be exercised from the
date of its effectivity, on 15 June 1988. Thus, all lands
that are already classified as commercial, industrial or
residential before 15 June 1988 no longer need any
conversion clearance.
However, the reclassification of lands to nonagricultural uses shall not operate to divest
tenant[-]farmers of their rights over lands
covered by Presidential Decree (PD) No. 27,
which have been vested prior to 15 June 1988.
As emphasized, the reclassification of lands to
non-agricultural cannot be applied to defeat vested
rights of tenant-farmers under Presidential Decree No.
27.
Indeed, in the recent case of Sta. Rosa Realty
Development Corporation v. Amante, where the Court was
confronted with the issue of whether the contentious property
therein is agricultural in nature on the ground that the same
had been classified as park since 1979 under the Zoning
Ordinance of Cabuyao, as approved by the HLURB, the Court
said:
The Court recognizes the power of a local
government to reclassify and convert lands through
local ordinance, especially if said ordinance is
approved by the HLURB. Municipal Ordinance No. 11054 dated November 3, 1979, enacted by
the Municipality of Cabuyao, divided the municipality
into residential, commercial, industrial, agricultural

and institutional districts, and districts and parks for


open spaces. It did not convert, however, existing
agricultural lands into residential, commercial,
industrial, or institutional. While it classified Barangay
Casile into a municipal park, as shown in its permitted
uses of land map, the ordinance did not provide for the
retroactivity of its classification. In Co vs. Intermediate
Appellate Court, it was held that an ordinance
converting agricultural lands into residential or
light industrial should be
given prospective application only, and should
not change the nature of existing agricultural
lands in the area or the legal relationships
existing over such land. . . . .
A reading of Metro Manila Zoning Ordinance No.
81-01, series of 1981, does not disclose any provision
converting existing agricultural lands in the covered
area into residential or light industrial. While it
declared that after the passage of the measure, the
subject area shall be used only for residential or light
industrial purposes, it is not provided therein that it
shall have retroactive effect so as to discontinue all
rights previously acquired over lands located within
the zone which are neither residential nor light
industrial in nature. This simply means that, if we
apply the general rule, as we must, the
ordinance should be given prospective operation
only. The further implication is that it should not
change the nature of existing agricultural lands
in the area or the legal relationships existing
over such lands. (Citations omitted; emphasis
supplied.)
This, however, raises the issue of whether vested rights have actually
accrued in the instant case. In this respect, We reckon that under PD 27,
tenant-farmers of rice and corn lands were deemed owners of the land they till
as of October 21, 1972. This policy, intended to emancipate the tenantfarmers from the bondage of the soil, is given effect by the following provision
of the law:
The tenant farmer, whether in land classified as landed
estate or not, shall be deemed owner of a portion
constituting a family size farm of five (5) hectares if not
irrigated and three (3) hectares if irrigated. (Emphasis
supplied.)
It should be clarified that even if under PD 27, tenant-farmers are
deemed owners as of October 21, 1972, this is not to be construed as
automatically vesting upon these tenant-farmers absolute ownership over the
land they were tilling. Certain requirements must also be complied with, such
as payment of just compensation, before full ownership is vested upon the

tenant-farmers. This was elucidated by the Court in Association of Small


Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform:[53]
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.
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 farmerbeneficiary 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. No outright change of ownership is
contemplated either. (Citations omitted; emphasis
supplied.)
Prior to compliance with the prescribed requirements, tenant-farmers
have, at most, an inchoate right over the land they were tilling. In recognition
of this, a CLT is issued to a tenant-farmer to serve as a provisional title of
ownership over the landholding while the lot owner is awaiting full payment of
[just compensation] or for as long as the [tenant-farmer] is an amortizing
owner.[54] This certificate proves inchoate ownership of an agricultural land
primarily devoted to rice and corn production. It is issued in order for the
tenant-farmer to acquire the land[55] he was tilling.
Concomitantly, with respect to the LBP and the government, tenantfarmers cannot be considered as full owners of the land they are tilling unless
they have fully paid the amortizations due them. This is because it is only

upon such full payment of the amortizations that EPs may be issued in their
favor.
In Del Castillo v. Orciga, We explained that land transfer under PD 27 is
effected in two (2) stages. The first stage is the issuance of a CLT to a farmerbeneficiary as soon as the DAR transfers the landholding to the farmerbeneficiary in recognition that said person is its deemed owner. And the
second stage is the issuance of an EP as proof of full ownership of the
landholding upon full payment of the annual amortizations or lease rentals by
the farmer-beneficiary.[56]
In the case at bar, the CLTs were issued in 1984. Therefore, for
all intents and purposes, it was only in 1984 that private
respondents, as farmer-beneficiaries, were recognized to have an
inchoate right over the subject property prior to compliance with the
prescribed requirements. Considering that the local zoning ordinance
was enacted in 1975, and subsequently approved by the HSRC in
1978, private respondents still had no vested rights to speak of
during this period, as it was only in 1984 that private respondents
were issued the CLTs and were deemed owners.
The same holds true even if EPs and OCTs were issued in 2001,
since reclassification had taken place twenty-six (26) years prior to
their issuance. Undeniably, no vested rights accrued prior to
reclassification and its approval. Consequently, the subject property,
particularly Lot No. 1407, is outside the coverage of the agrarian
reform program.
On the violation of petitioners right to due process of law
Petitioners contend that DAR failed to notify them that it is subjecting
the subject property under the coverage of the agrarian reform program;
hence, their right to due process of law was violated. [57] Citing De Chavez v.
Zobel,[58] both the DAR and the private respondents claim that the enactment
of PD 27 is a statutory notice to all owners of agricultural lands devoted to rice
and/or corn production,[59] implying that there was no need for an actual
notice.
We agree with petitioners. The importance of an actual notice in
subjecting a property under the agrarian reform program cannot be
underrated, as non-compliance with it trods roughshod with the essential
requirements of administrative due process of law.[60] Our ruling in Heirs of
Jugalbot v. CA[61] is particularly instructive:
Firstly, the taking of subject property was done in
violation of constitutional due process. The Court of Appeals
was correct in pointing out that Virginia A. Roa was
denied due process because the DAR failed to send
notice of the impending land reform coverage to the
proper party. The records show that notices were
erroneously addressed and sent in the name of Pedro N. Roa
who was not the owner, hence, not the proper party in the
instant case. The ownership of the property, as can be gleaned

from the records, pertains to Virginia A. Roa. Notice should


have been therefore served on her, and not Pedro N. Roa.
xxxx
In addition, the defective notice sent to Pedro N. Roa
was followed by a DAR certification signed by team leader
Eduardo Maandig on January 8, 1988 stating that the subject
property was tenanted as of October 21, 1972 and primarily
devoted to rice and corn despite the fact that there was no
ocular inspection or any on-site fact-finding investigation and
report to verify the truth of the allegations of Nicolas Jugalbot
that he was a tenant of the property. The absence of such
ocular inspection or on-site fact-finding investigation and
report likewise deprives Virginia A. Roa of her right to property
through the denial of due process.
By analogy, Roxas & Co., Inc. v. Court of
Appeals applies to the case at bar since there was likewise a
violation of due process in the implementation of the
Comprehensive Agrarian Reform Law when the petitioner was
not notified of any ocular inspection and investigation to be
conducted by the DAR before acquisition of the property was
to be undertaken. Neither was there proof that petitioner was
given the opportunity to at least choose and identify its
retention area in those portions to be acquired. Both in the
Comprehensive Agrarian Reform Law and Presidential Decree
No. 27, the right of retention and how this right is exercised, is
guaranteed by law.
Since land acquisition under either Presidential
Decree No. 27 and the Comprehensive Agrarian Reform
Law govern the extraordinary method of expropriating
private property, the law must be strictly construed.
Faithful compliance with legal provisions, especially
those which relate to the procedure for acquisition of
expropriated lands should therefore be observed. In the
instant case, no proper notice was given to Virginia A. Roa by
the DAR. Neither did the DAR conduct an ocular inspection and
investigation. Hence, any act committed by the DAR or any of
its agencies that results from its failure to comply with the
proper procedure for expropriation of land is a violation of
constitutional due process and should be deemed arbitrary,
capricious, whimsical and tainted with grave abuse of
discretion. (Citations omitted; emphasis supplied.)
Markedly, a reading of De Chavez invoked by both the DAR and private
respondents does not show that this Court ever made mention that actual
notice may be dispensed with under PD 27, its enactment being a purported
statutory notice to all owners of agricultural lands devoted to rice and/or corn
production that their lands are subjected to the OLT program.

Quite contrarily, in Sta. Monica Industrial & Devt. Corp. v. DAR,[62] this
Court underscored the significance of notice in implementing the agrarian
reform program when it stated that notice is part of the constitutional right to
due process of law. It informs the landowner of the States intention to acquire
a private land upon payment of just compensation and gives him the
opportunity to present evidence that his landholding is not covered or is
otherwise excused from the agrarian law.
The Court, therefore, finds interest in the holding of the DARAB that
petitioners were not denied the right to due process despite the fact that only
the Nanamans were identified as the owners. Particularly:
Fourthly, the PARAD also ruled that the petitioners
were denied the right to be given the notice since only the
Nanamans were identified as the owners. The fault lies with
petitioners who did not present the tax declaration in the
name of Dr. Deleste as of October 21, 1972. It was only in
1995 that Civil Case No. 698 was finally decided by the
Supreme Court dividing the 34.7 hectares between the
Delestes and the Nanamans. Note that Dr. Deleste died in
1992 after PD 27 was promulgated, hence, the subject land or
his share was considered in his name only (see Art. 777, New
Civil Code). Even then, it must be borne in mind that on
September 26, 1972, PD No. 2 was issued by President Marcos
proclaiming the whole country as a land reform area, this was
followed by PD 27. This should have alarmed them more so
when private respondents are in actual possession and
cultivation of the subject property.
But it was incumbent upon the DAR to notify Deleste, being the
landowner of the subject property. It should be noted that the deed of sale
executed by Hilaria in favor of Deleste was registered on March 2, 1954, and
such registration serves as a constructive notice to the whole world that the
subject property was already owned by Deleste by virtue of the said deed of
sale. In Naval v. CA, this Court held:
Applying the law, we held in Bautista v. Fule that the
registration of an instrument involving unregistered
land in the Registry of Deeds creates constructive
notice and binds third person who may subsequently deal
with the same property.[63] x x x (Emphasis supplied.)
It bears stressing that the principal purpose of registration is to notify
other persons not parties to a contract that a transaction involving the
property has been entered into.[64] There was, therefore, no reason for DAR to
feign ignorance of the transfer of ownership over the subject property.
Moreover, that DAR should have sent the notice to Deleste, and not to
the Nanamans, is bolstered by the fact that the tax declaration in the name of
Virgilio was already canceled and a new one issued in the name of Deleste.
[65]
Although tax declarations or realty tax payments of property are not
conclusive evidence of ownership, they are nonetheless good indicia of

possession in the concept of an owner, for no one in his right mind would be
paying taxes for a property that is not in his actual or, at least, constructive
possession.[66]
Petitioners right to due process of law was, indeed, violated when the
DAR failed to notify them that it is subjecting the subject property under the
coverage of the agrarian reform program.
On this note, We take exception to our ruling in Roxas & Co., Inc. v. CA,
where, despite a finding that there was a violation of due process in the
implementation of the comprehensive agrarian reform program when the
petitioner was not notified of any ocular inspection and investigation to be
conducted by the DAR before acquiring the property, thereby effectively
depriving petitioner the opportunity to at least choose and identify its
retention area in those portions to be acquired,[68] this Court nonetheless ruled
that such violation does not give the Court the power to nullify the certificates
of land ownership award (CLOAs) already issued to the farmer-beneficiaries,
since the DAR must be given the chance to correct its procedural lapses in the
acquisition proceedings.
[67]

Manifesting her disagreement that this Court cannot nullify illegally


issued CLOAs and should first ask the DAR to reverse and correct itself, Justice
Ynares-Santiago, in her Concurring and Dissenting Opinion, [69] stated that [i]f
the acts of DAR are patently illegal and the rights of Roxas & Co. violated, the
wrong decisions of DAR should be reversed and set aside. It follows that the
fruits of the wrongful acts, in this case the illegally issued CLOAs, must be
declared null and void. She also noted that [i]f CLOAs can under the DARs own
order be cancelled administratively, with more reason can the courts,
especially the Supreme Court, do so when the matter is clearly in issue.
In the same vein, if the illegality in the issuance of the CLTs is patent,
the Court must immediately take action and declare the issuance as null and
void. There being no question that the CLTs in the instant case were improperly
issued, for which reason, their cancellation is warranted. [70] The same holds
true with respect to the EPs and certificates of title issued by virtue of the void
CLTs, as there can be no valid transfer of title should the CLTs on which they
were grounded are void.[71] Cancellation of the EPs and OCTs are clearly
warranted in the instant case since, aside from the violation of petitioners
right to due process of law, the subject property is outside the coverage of the
agrarian reform program.
Issue of Validity of EPs Not Barred by Res Judicata
The LBP maintains that the issue of the EPs validity has already been
settled by this Court in Heirs of Sofia Nanaman Lonoy v. Secretary of Agrarian
Reform,[72] where We held that the EPs and OCTs issued in 2001 had already
become indefeasible and incontrovertible by the time the petitioners therein
instituted the case in 2005; hence, their issuance may no longer be reviewed.
[73]

In effect, the LBP raises the defense of res judicata in order to preclude
a relitigation of the issue concerning the validity of the EPs issued to private
respondents.

Notably, the doctrine of res judicata has two aspects, namely: (1) bar
by prior judgment,[74] wherein the judgment in a prior case bars the
prosecution of a second action upon the same claim, demand, or cause of
action;[75] and (2) conclusiveness of judgment, [76] which precludes relitigation of
a particular fact or issue in another action between the same parties on a
different claim or cause of action.[77]
Citing Agustin v. Delos Santos,[78] this Court, in Spouses Antonio v.
Sayman,[79] expounded on the difference between the two aspects of res
judicata:
The principle of res judicata is applicable by way of (1)
bar by prior judgment and (2) conclusiveness of judgment.
This Court had occasion to explain the difference between
these two aspects of res judicata as follows:
There is bar by prior judgment when, as between
the first case where the judgment was rendered and
the second case that is sought to be barred, there is
identity of parties, subject matter, and causes of
action. In this instance, the judgment in the first case
constitutes an absolute bar to the second action.
Otherwise put, the judgment or decree of the court of
competent jurisdiction on the merits concludes the
litigation between the parties, as well as their privies,
and constitutes a bar to a new action or suit involving
the same cause of action before the same or other
tribunal.
But where there is identity of parties in the
first and second cases, but no identity of causes
of action, the first judgment is conclusive only
as to those matters actually and directly
controverted and determined and not as to
matters merely involved therein. This is the
concept of res judicata known as conclusiveness
of judgment. Stated differently, any right, fact or
matter in issue directly adjudicated or necessarily
involved in the determination of an action before a
competent court in which judgment is rendered on the
merits is conclusively settled by the judgment therein
and cannot again be litigated between the parties and
their privies whether or not the claim, demand,
purpose, or subject matter of the two actions is the
same. (Citations omitted; emphasis supplied.)
To be sure, conclusiveness of judgment merits application when a fact
or question has been squarely put in issue, judicially passed upon, and
adjudged in a former suit by a court of competent jurisdiction. [80] Elucidating
further on this second aspect of res judicata, the Court, in Spouses Antonio,
stated:

x x x The fact or question settled by final judgment or


order binds the parties to that action (and persons in privity
with them or their successors-in-interest), and continues to
bind them while the judgment or order remains standing and
unreversed by proper authority on a timely motion or petition;
the conclusively-settled fact or question cannot again be
litigated in any future or other action between the same
parties or their privies and successors-in-interest, in the same
or in any other court of concurrent jurisdiction, either for the
same or for a different cause of action. Thus, only the
identities of parties and issues are required for the
operation of the principle of conclusiveness of
judgment.[81] (Citations omitted; emphasis supplied.)
Applying the above statement of the Court to the case at bar, We find
that LBPs contention that this Courts ruling in Heirs of Sofia Nanaman
Lonoy that the EPs and OCTs issued in 2001 had already become indefeasible
and incontrovertible precludes a relitigation of the issue concerning the
validity of the EPs issued to private respondents does not hold water.
In the first place, there is no identity of parties in Heirs of Sofia
Nanaman Lonoy and the instant case. Arguably, the respondents in these two
cases are similar. However, the petitioners are totally different. In Heirs of
Sofia Nanaman Lonoy, the petitioners are the more than 120 individuals who
claim to be descendants of Fulgencio Nanaman, Gregorios brother, and who
collectively assert their right to a share in Gregorios estate, arguing that they
were deprived of their inheritance by virtue of the improper issuance of the
EPs to private respondents without notice to them. On the other hand, in the
instant case, petitioners are the heirs of Deleste who seek nullification of the
EPs issued to private respondents on grounds of violation of due process of
law, disregard of landowners right of retention, improvident issuance of EPs
and OCTs, and non-coverage of the agrarian reform program, among others.
Evidently, there is even no privity among the petitioners in these two cases.
And in the second place, the issues are also dissimilar. In Heirs of Sofia
Nanaman Lonoy, the issue was whether the filing of a petition for prohibition
was the proper remedy for the petitioners therein, considering that the EPs
and OCTs had already been issued in 2001, four (4) years prior to the filing of
said petition in 2005. In the instant case, however, the issue is whether the
EPs and OCTs issued in favor of private respondents are void, thus warranting
their cancellation.
In addition, the factual circumstances in these two cases are different
such that the necessity of applying the rule on indefeasibility of title in one is
wanting in the other. InHeirs of Sofia Nanaman Lonoy, the petition for
prohibition was filed by the petitioners therein in 2005, notwithstanding the
fact that the EPs and OCTs had already been issued in 2001. For that reason,
apart from making a ruling that [p]rohibition, as a rule, does not lie to restrain
an act that is already a fait accompli, it becomes incumbent upon this Court to
hold that:

x x x Considering that such EPs and OCTs were issued


in 2001, they had become indefeasible and
incontrovertible by the time petitioners instituted CAG.R. SP No. 00365 in 2005, and may no longer be judicially
reviewed.[82] (Emphasis supplied.)
On the contrary, in the instant case, the petition for nullification of
private respondents EPs and OCTs was filed on February 28, 2002. Taking into
account that the EPs and OCTs were issued on August 1, 2001 and October 1,
2001, respectively, the filing of the petition was well within the prescribed one
year period, thus, barring the defense of indefeasibility and incontrovertibility.
Even if the petition was filed before the DARAB, and not the Regional Trial
Court as mandated by Sec. 32 of the Property Registration Decree, [83] this
should necessarily have the same effect, considering that DARABs jurisdiction
extends to cases involving the cancellation of CLOAs, EPs, and even of
certificates of title issued by virtue of a void EP. As this Court held in Gabriel v.
Jamias:[84]
It is well-settled that the DAR, through its adjudication
arm, i.e., the DARAB and its regional and provincial
adjudication boards, exercises quasi-judicial functions and
jurisdiction on all matters pertaining to an agrarian dispute or
controversy and the implementation of agrarian reform laws.
Pertinently, it is provided in the DARAB Revised Rules of
Procedure that the DARAB has primary and exclusive
jurisdiction, both original and appellate, to determine and
adjudicate all agrarian disputes involving the implementation
of the Comprehensive Agrarian Reform Program (CARP) and
related agrarian reform laws. Such jurisdiction shall extend
to cases involving the issuance, correction and
cancellation of Certificates of Land Ownership Award
(CLOAs) and Emancipation Patents which are registered
with the Land Registration Authority.
This Court has had the occasion to rule that the mere
issuance of an emancipation patent does not put the
ownership of the agrarian reform beneficiary beyond attack
and scrutiny. Emancipation patents may be cancelled for
violations of agrarian laws, rules and regulations. Section 12
(g) of P.D. No. 946 (issued on June 17, 1976) vested the then
Court of Agrarian Relations with jurisdiction over cases
involving the cancellation of emancipation patents issued
under P.D. No. 266. Exclusive jurisdiction over such cases was
later lodged with the DARAB under Section 1 of Rule II of the
DARAB Rules of Procedure.
For sure, the jurisdiction of the DARAB cannot
be deemed to disappear the moment a certificate of
title is issued, for, such certificates are not modes of
transfer of property but merely evidence of such
transfer, and there can be no valid transfer of title
should the CLOA, on which it was grounded, be void.

The same holds true in the case of a certificate of title


issued by virtue of a void emancipation patent.
From the foregoing, it is therefore undeniable that it is
the DARAB and not the regular courts which has jurisdiction
herein, this notwithstanding the issuance of Torrens titles in
the names of the petitioners. For, it is a fact that the
petitioners Torrens titles emanated from the emancipation
patents previously issued to them by virtue of being the
farmer-beneficiaries identified by the DAR under the OLT of the
government. The DAR ruling that the said emancipation
patents were erroneously issued for failing to consider the
valid retention rights of respondents had already attained
finality. Considering that the action filed by respondents with
the DARAB was precisely to annul the emancipation patents
issued to the petitioners, the case squarely, therefore, falls
within the jurisdiction of the DARAB. x x x (Citations omitted;
emphasis supplied.)
Inevitably, this leads to no other conclusion than that Our ruling
in Heirs of Sofia Nanaman Lonoy concerning the indefeasibility and
incontrovertibility of the EPs and OCTs issued in 2001 does not bar Us from
making a finding in the instant case that the EPs and OCTs issued to private
respondents are, indeed, void.
With the foregoing disquisition, it becomes unnecessary to dwell on
the other issues raised by the parties.
WHEREFORE, the Court GRANTS the petition
and REVERSES and SETS ASIDE the CAs October 28, 2004 and September
13, 2005 Resolutions in CA-G.R. SP No. 85471. The Emancipation Patents and
Original Certificates of Title covering the subject property, particularly Lot No.
1407, issued in favor of private respondents are
herebydeclared NULL and VOID.
The DAR is ordered to CANCEL the aforementioned Emancipation
Patents and Original Certificates of Title erroneously issued in favor of private
respondents.
No pronouncement as to costs.
SO ORDERED.

EN BANC
G.R. No. 171101
July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL
BANKING CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM;
ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA,
RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received
with much misgiving, if not resistance, even if only the number of agrarian
suits filed serves to be the norm. Through the years, this battle cry and root of
discord continues to reflect the seemingly ceaseless discourse on, and great
disparity in, the distribution of land among the people, "dramatizing the
increasingly urgent demand of the dispossessed x x x for a plot of earth as
their place in the sun."2 As administrations and political alignments change,
policies advanced, and agrarian reform laws enacted, the latest being what is
considered a comprehensive piece, the face of land reform varies and is
masked in myriads of ways. The stated goal, however, remains the same:
clear the way for the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a government
policy even before the Commonwealth era. In fact, at the onset of the
American regime, initial steps toward land reform were already taken to
address social unrest.4 Then, under the 1935 Constitution, specific provisions
on social justice and expropriation of landed estates for distribution to tenants
as a solution to land ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting
in motion the expropriation of all tenanted estates. 5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was
enacted,6 abolishing share tenancy and converting all instances of share
tenancy into leasehold tenancy.7 RA 3844 created the Land Bank of the
Philippines (LBP) to provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship
in rice and corn, supposedly to be accomplished by expropriating lands in
excess of 75 hectares for their eventual resale to tenants. The law, however,
had this restricting feature: its operations were confined mainly to areas in
Central Luzon, and its implementation at any level of intensity limited to the
pilot project in Nueva Ecija.8

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389)


declaring the entire country a land reform area, and providing for the
automatic conversion of tenancy to leasehold tenancy in all areas. From 75
hectares, the retention limit was cut down to seven hectares. 9
Barely a month after declaring martial law in September 1972, then President
Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the
"emancipation of the tiller from the bondage of the soil." 10 Based on this
issuance, tenant-farmers, depending on the size of the landholding worked on,
can either purchase the land they tilled or shift from share to fixed-rent
leasehold tenancy.11 While touted as "revolutionary," the scope of the agrarian
reform program PD 27 enunciated covered only tenanted, privately-owned rice
and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino
and the drafting and eventual ratification of the 1987 Constitution. Its
provisions foreshadowed the establishment of a legal framework for the
formulation of an expansive approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular farmworkers. 13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in
the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as
its title14 indicates, the mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the highest policy-making body
that formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of
1988, also known as CARL or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and distribution. As to be expected,
RA 6657 met stiff opposition, its validity or some of its provisions challenged at
every possible turn.Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform 15 stated the observation that the assault was
inevitable, the CARP being an untried and untested project, "an experiment
[even], as all life is an experiment," the Court said, borrowing from Justice
Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and
seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 200634-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well
as the implementing Notice of Coverage dated January 2, 2006 (Notice of
Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a
6,443-hectare mixed agricultural-industrial-residential expanse straddling
several municipalities of Tarlac and owned by Compaia General de Tabacos
de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to
sell Hacienda Luisita as well as their controlling interest in the sugar mill within
the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible
transaction. The Tarlac Development Corporation (Tadeco), then owned and/or
controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed
upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in
pesos, while that for the controlling interest in CAT, in US dollars. 19

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


government, through the then Central Bank of the Philippines, assisted the
buyer to obtain a dollar loan from a US bank.20 Also, the Government Service
Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a
PhP 5.911 million loan in favor of Tadeco to pay the peso price component of
the sale. One of the conditions contained in the approving GSIS Resolution No.
3203, as later amended by Resolution No. 356, Series of 1958, reads as
follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and
whenever conditions should exist warranting such action under the provisions
of the Land Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacaleras interest in CAT. 22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state that on May 7, 1980, the
martial law administration filed a suit before the Manila Regional Trial Court
(RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then
Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform
[DAR]) so that the land can be distributed to farmers at cost. Responding,
Tadeco or its owners alleged that Hacienda Luisita does not have tenants,
besides which sugar landsof which the hacienda consistedare not covered
by existing agrarian reform legislations. As perceived then, the government
commenced the case against Tadeco as a political message to the family of
the late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the governments case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially instituted
and won against Tadeco, et al. The dismissal action was, however, made
subject to the obtention by Tadeco of the PARCs approval of a stock
distribution plan (SDP) that must initially be implemented after such approval
shall have been secured.24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x
x governmental agencies concerned in moving for the dismissal of the case
subject, however, to the following conditions embodied in the letter dated
April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan
for failure to comply with all the requirements for corporate
landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails
to initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without
prejudice, and should be revived if any of the conditions as above set forth is
not duly complied with by the TADECO.25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an
alternative to the actual land transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of the corporation under a
stock ownership arrangement and/or land-to-share ratio.

Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of which
the corporate landowner can comply with CARP, but subject to well-defined
conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such
proportion of the capital stock of the corporation that the agricultural
land, actually devoted to agricultural activities, bears in relation to
the companys total assets, under such terms and conditions as may be
agreed upon by them. In no case shall the compensation received by the
workers at the time the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall
be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued
Administrative Order No. 10, Series of 1988 (DAO 10), 27 entitled Guidelines
and Procedures for Corporate Landowners Desiring to Avail Themselves of the
Stock Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos
preferred option, for, on August 23, 1988,28 it organized a spin-off corporation,
HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this
purpose, Tadeco assigned and conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and
Paz C. Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the
Securities and Exchange Commissions (SECs) approval, increased its capital
stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with
a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000

shares also with par value of PhP 1/share, 150,000,000 of which were to be
issued only to qualified and registered beneficiaries of the CARP, and the
remaining 250,000,000 to any stockholder of the corporation. 31
As appearing in its proposed SDP, the properties and assets of Tadeco
contributed to the capital stock of HLI, as appraised and approved by the SEC,
have an aggregate value of PhP 590,554,220, or after deducting the total
liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP
1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of
the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of
Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified
FWBs34 and attested to by then DAR Secretary Philip Juico. The SDOA
embodied the basis and mechanics of the SDP, which would eventually be
submitted to the PARC for approval. In the SDOA, the parties agreed to the
following:
1. The percentage of the value of the agricultural land of Hacienda
Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY
[HLI] is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per
share, that has to be distributed to the THIRD PARTY [FWBs] under the
stock distribution plan, the said 33.296% thereof being
P118,391,976.85 or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the
permanent and seasonal employees, who are regularly or periodically
employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the
SECOND PARTY shall arrange with the FIRST PARTY [Tadeco]
the acquisition and distribution to the THIRD PARTY on the basis of
number of days worked and at no cost to them of one-thirtieth (1/30)
of 118,391,976.85 shares of the capital stock of the SECOND PARTY
that are presently owned and held by the FIRST PARTY, until such time
as the entire block of 118,391,976.85 shares shall have been
completely acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of
the [SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three
(3%) of the total gross sales from the production of the agricultural
land, whether it be in the form of cash dividends or incentive bonuses
or both.
5. Even if only a part or fraction of the shares earmarked for
distribution will have been acquired from the FIRST PARTY and
distributed to the THIRD PARTY, FIRST PARTY shall execute at the
beginning of each fiscal year an irrevocable proxy, valid and effective
for one (1) year, in favor of the farmworkers appearing as shareholders
of the SECOND PARTY at the start of said year which will empower the
THIRD PARTY or their representative to vote in stockholders and board
of directors meetings of the SECOND PARTY convened during the year

the entire 33.296% of the outstanding capital stock of the SECOND


PARTY earmarked for distribution and thus be able to gain such
number of seats in the board of directors of the SECOND PARTY that
the whole 33.296% of the shares subject to distribution will be entitled
to.
6. In addition, the SECOND PARTY shall within a reasonable time
subdivide and allocate for free and without charge among the qualified
family-beneficiaries residing in the place where the agricultural land is
situated, residential or homelots of not more than 240 sq.m. each,
with each family-beneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on the date of the
execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the
(C.A.R.P.) of the government and with the supervision of the [DAR],
with the end in view of improving the lot of the qualified beneficiaries
of the [SDP] and obtaining for them greater benefits. (Emphasis
added.)
As may be gleaned from the SDOA, included as part of the distribution plan
are: (a) production-sharing equivalent to three percent (3%) of gross sales
from the production of the agricultural land payable to the FWBs in cash
dividends or incentive bonus; and (b) distribution of free homelots of not more
than 240 square meters each to family-beneficiaries. The production-sharing,
as the SDP indicated, is payable "irrespective of whether [HLI] makes money
or not," implying that the benefits do not partake the nature of dividends, as
the term is ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period material, the
assigned value of the agricultural land in the hacienda was PhP 196.63 million,
while the total assets of HLI was PhP 590.55 million with net assets of PhP
355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of
stock corresponds to 33.3% of the outstanding capital stock of the HLI
equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock
Distribution under C.A.R.P.,"35which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989,
5,117 FWBs, out of 5,315 who participated, opted to receive shares in
HLI.36 One hundred thirty-two (132) chose actual land distribution. 37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec.
Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S.
Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be
revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall
ensure that there will be no dilution in the shares of stocks of
individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the
dilution of the percentage shareholdings of the [FWBs], i.e., that the
33% shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in
the [MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms
for determining the actual number of seats to be allocated for the
[FWBs] in the HLI Board;

5. That HLI provide guidelines and a timetable for the distribution of


homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly
provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both
the SDP and MOA.39 Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989,
approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master
list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and
fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross
produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of
500 hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and
no interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of
the hacienda from agricultural to industrial use, 43 pursuant to Sec. 65 of RA
6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award,
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial purposes, the
DAR, upon application of the beneficiary or the landowner, with due notice to
the affected parties, and subject to existing laws, may authorize the
reclassification, or conversion of the land and its disposition: Provided, That
the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs,
including respondent Rene Galang, and Jose Julio Suniga, as evidenced by the
Manifesto of Support they signed and which was submitted to the DAR. 44After
the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the
application on August 14, 1996, per DAR Conversion Order No. 030601074764-(95), Series of 1996,45 subject to payment of three percent (3%) of the
gross selling price to the FWBs and to HLIs continued compliance with its
undertakings under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares
of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the
converted area to the latter.46 Consequently, HLIs Transfer Certificate of Title
(TCT) No. 28791047 was canceled and TCT No. 29209148 was issued in the
name of Centennary. HLI transferred the remaining 200 hectares covered by
TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate

transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP
250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000
divided into 12,100,000 shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto
G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial
Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the
purpose of developing an industrial complex.52 As a result, Centennarys TCT
No. 292091 was canceled to be replaced by TCT No. 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. 36580054 and (b) TCT No. 365801,55 covering 180 and four hectares,
respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the
Rizal Commercial Banking Corporation (RCBC) by way of dacion en pagoin
payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were
canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired
by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX)
complex. In absolute terms, 4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both
undated, reached the DAR in the latter part of 2003. In the first, denominated
as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory
Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI
had failed to give them their dividends and the one percent (1%) share in
gross sales, as well as the thirty-three percent (33%) share in the proceeds of
the sale of the converted 500 hectares of land. They further claimed that their
lives have not improved contrary to the promise and rationale for the adoption
of the SDOA. They also cited violations by HLI of the SDOAs terms. 58 They
prayed for a renegotiation of the SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in
the hacienda were the call in the second petition, styled
as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003
by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA),
where the handwritten name of respondents Rene Galang as "Pangulo
AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As alleged, the
petition was filed on behalf of AMBALAs members purportedly composing
about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group.
On the other hand, HLIs answer62to the AMBALA petition was contained in its
letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues
relating to the SDP of HLI. Among other duties, the Special Task Force was
mandated to review the terms and conditions of the SDOA and PARC
Resolution No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance
reports; evaluate the merits of the petitions for the revocation of the SDP;

conduct ocular inspections or field investigations; and recommend appropriate


remedial measures for approval of the Secretary.63
After investigation and evaluation, the Special Task Force submitted its
"Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that HLI
has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task Forces
recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec.
Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive
Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of
Hacienda Luisita through the compulsory acquisition scheme. Following
review, the PARC Validation Committee favorably endorsed the DAR
Secretarys recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-3201, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY
RESOLVED, to approve and confirm the recommendation of the PARC Executive
Committee adopting in toto the report of the PARC ExCom Validation
Committee affirming the recommendation of the DAR to recall/revoke the SDO
plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO
plan be forthwith placed under the compulsory coverage or mandated land
acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the
resolution attached. A letter-request dated December 28, 200569 for certified
copies of said documents was sent to, but was not acted upon by, the PARC
secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration. 70 On the same
day, the DAR Tarlac provincial office issued the Notice of Coverage71 which HLI
received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration. 72 As HLI
later rued, it "can not know from the above-quoted resolution the facts and the
law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration via Resolution
No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a
temporary restraining order,75enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In
it, Mallari stated that he has broken away from AMBALA with other AMBALA
ex-members and formed Farmworkers Agrarian Reform Movement, Inc.
(FARM).78 Should this shift in alliance deny him standing, Mallari also prayed
that FARM be allowed to intervene.

As events would later develop, Mallari had a parting of ways with other FARM
members, particularly would-be intervenors Renato Lalic, et al. As things
stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari
faction and leaving Renato Lalic, et al. as the remaining members of FARM who
sought to intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang
faction submitted their Comment/Opposition dated December 17, 2006. 80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File
and Admit Attached Petition-In-Intervention dated October 18, 2007. 81 LIPCO
later followed with a similar motion.82 In both motions, RCBC and LIPCO
contended that the assailed resolution effectively nullified the TCTs under their
respective names as the properties covered in the TCTs were veritably
included in the January 2, 2006 notice of coverage. In the main, they claimed
that the revocation of the SDP cannot legally affect their rights as innocent
purchasers for value. Both motions for leave to intervene were granted and
the corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on
oral arguments. On the other hand, the Court, on August 24, 2010, heard
public respondents as well as the respective counsels of the AMBALA-MallariSupervisory Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
Supervisory Group, represented by Suniga and Andaya; and the United Luisita
Workers Union, represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise Agreement (English and
Tagalog versions)dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an
amicable settlement, issued a 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, PETITIONERINTERVENOR RCBC CANNOT BE PREJUDICED BY A
SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT
AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE
PROCESS AS AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over
certain portions of the converted property, and, hence, would ascribe on PARC
the commission of grave abuse of discretion when it included those portions in
the notice of coverage. And apart from raising issues identical with those of
HLI, such as but not limited to the absence of valid grounds to warrant the
rescission and/or revocation of the SDP, LIPCO would allege that the assailed
resolution and the notice of coverage were issued without affording it the right
to due process as an innocent purchaser for value. The government, LIPCO
also argues, is estopped from recovering properties which have since passed
to innocent parties.
Simply formulated, the principal determinative issues tendered in the main
petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA
6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity
or propriety of such recall or revocatory action; and (5) corollary to (4), the
validity of the terms and conditions of the SDP, as embodied in the SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving on
the more serious challenges bearing on the validity of PARCs assailed
issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest

HLI would deny real party-in-interest status to the purported leaders of the
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene
Galang, who filed the revocatory petitions before the DAR. As HLI would have
it, Galang, the self-styled head of AMBALA, gained HLI employment in June
1990 and, thus, could not have been a party to the SDOA executed a year
earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are
not regular farmworkers, but the company nonetheless considered them FWBs
under the SDOA as a mere concession to enable them to enjoy the same
benefits given qualified regular farmworkers. However, if the SDOA would be
canceled and land distribution effected, so HLI claims, citing Fortich v.
Corona,86 the supervisors would be excluded from receiving lands as
farmworkers other than the regular farmworkers who are merely entitled to
the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the
farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by
[HLI]."88 Galang, per HLIs own admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the definition of a real partyin-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 SDP which it previously approved. It may be, as urged, that RA
6657 or other executive issuances on agrarian reform do not explicitly vest the
PARC with the power to revoke/recall an approved SDP. Such power or
authority, however, is deemed possessed by PARC under the principle of
necessary implication, a basic postulate that what is implied in a statute is as
much a part of it as that which is expressed.94
We have explained that "every statute is understood, by implication, to
contain all such provisions as may be necessary to effectuate its object and
purpose, or to make effective rights, powers, privileges or jurisdiction which it
grants, including all such collateral and subsidiary consequences as may be
fairly and logically inferred from its terms." 95 Further, "every statutory grant of
power, right or privilege is deemed to include all incidental power, right or
privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited
by the authority to grant the license, from which it is derived in the first place.
Thus, if the FDA grants a license upon its finding that the applicant drug store
has complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA
may revoke the said license. By the same token, having granted the permit
upon his ascertainment that the conditions thereof as applied x x x have been
complied with, it is only for the violation of such conditions that the mayor
may revoke the said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke
or recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power
would reduce it into a toothless agency of CARP, because the very same
agency tasked to ensure compliance by the corporate landowner with the

approved SDP would be without authority to impose sanctions for noncompliance with it.98 With the view We take of the case, only PARC can effect
such revocation. The DAR Secretary, by his own authority as such, cannot
plausibly do so, as the acceptance and/or approval of the SDP sought to be
taken back or undone is the act of PARC whose official composition includes,
no less, the President as chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP
has been implemented would impair the contractual obligations created under
the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts
and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the nonimpairment guarantee. There is, in that instance, no impingement of the
impairment clause, the non-impairment protection being applicable only to
laws that derogate prior acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties. Impairment, in fine, obtains if a
subsequent law changes the terms of a contract between the parties, imposes
new conditions, dispenses with those agreed upon or withdraws existing
remedies for the enforcement of the rights of the parties.100 Necessarily, the
constitutional proscription would not apply to laws already in effect at the time
of contract execution, as in the case of RA 6657, in relation to DAO 10, vis-vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned
with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as
to laws already in existence, their provisions are read into contracts and
deemed a part thereof. Thus, the non-impairment clause under Section 10,
Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing that
"[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as
such, a breach of its terms and conditions is not a PARC administrative matter,
but one that gives rise to a cause of action cognizable by regular
courts.102 This contention has little to commend itself. The SDOA is a special
contract imbued with public interest, entered into and crafted pursuant to the
provisions of RA 6657. It embodies the SDP, which requires for its validity, or
at least its enforceability, PARCs approval. And the fact that the certificate of
compliance103to be issued by agrarian authorities upon completion of the
distribution of stocksis revocable by the same issuing authority supports the
idea that everything about the implementation of the SDP is, at the first
instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should be the applicable law on
the disposition of the agricultural land of HLI.

Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply
with RA 6657, which the OSG aptly described as the "mother law" of the SDOA
and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage
of CARP by invoking exclusive applicability of the Corporation Code under the
guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since
the FWBs of HLI are also stockholders, its applicability is limited as the rights
of the parties arising from the SDP should not be made to supplant or
circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other
hand, RA 6657 is the special law on agrarian reform. As between a general and
special law, the latter shall prevailgeneralia specialibus non
derogant.105 Besides, the present impasse between HLI and the private
respondents is not an intra-corporate dispute which necessitates the
application of the Corporation Code. What private respondents questioned
before the DAR is the proper implementation of the SDP and HLIs compliance
with RA 6657. Evidently, RA 6657 should be the applicable law to the instant
case.
HLI further contends that the inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the eventual distribution of the land to
the FWBs would amount to a disposition of all or practically all of the corporate
assets of HLI. HLI would add that this contingency, if ever it comes to pass,
requires the applicability of the Corporation Code provisions on corporate
dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would
apply insofar as the winding up of HLIs affairs or liquidation of the assets is
concerned. However, the mere inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the lands eventual distribution to the
FWBs will not, without more, automatically trigger the dissolution of HLI. As
stated in the SDOA itself, the percentage of the value of the agricultural land
of Hacienda Luisita in relation to the total assets transferred and conveyed by
Tadeco to HLI comprises only 33.296%, following this equation: value of the
agricultural lands divided by total corporate assets. By no stretch of
imagination would said percentage amount to a disposition of all or practically
all of HLIs corporate assets should compulsory land acquisition and
distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP
sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special Task Force, as endorsed
by PARC Excom. But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the
corporation, as a mode of CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the fundamental right of farmers and
farmworkers under Sec. 4, Art. XIII of the Constitution. 106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine,
there is stock certificate ownership of the farmers or farmworkers instead of
them owning the land, as envisaged in the Constitution. For FARM, this

modality of distribution is an anomaly to be annulled for being inconsistent


with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the
Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in
this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term
"agrarian reform." The constitutionality of a law, HLI added, cannot, as here,
be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and
necessarily its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and
pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are
first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the
case.108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM,
composed of a small minority of 27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 3l of RA 6657, since as early as
November 21, l989 when PARC approved the SDP of Hacienda Luisita or at
least within a reasonable time thereafter and why its members received
benefits from the SDP without so much of a protest. It was only on December
4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2
dated November 21, 1989 that said plan and approving resolution were sought
to be revoked, but not, to stress, by FARM or any of its members, but by
petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the
constitutionality of Sec. 31 of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27
members formerly belonged to AMBALA, raised the constitutionality of Sec. 31
only on May 3, 2007 when it filed its Supplemental Comment with the Court.
Thus, it took FARM some eighteen (18) years from November 21, 1989 before
it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late
in the day. The FARM members slept on their rights and even accepted
benefits from the SDP with nary a complaint on the alleged unconstitutionality
of Sec. 31 upon which the benefits were derived. The Court cannot now be
goaded into resolving a constitutional issue that FARM failed to assail after the
lapse of a long period of time and the occurrence of numerous events and
activities which resulted from the application of an alleged unconstitutional
legal provision.
It has been emphasized in a number of cases that the question of
constitutionality will not be passed upon by the Court unless it is properly
raised and presented in an appropriate case at the first opportunity. 109 FARM is,
therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be
raised at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be
the very lis mota of the case does not likewise obtain. The lis mota aspect is

not present, the constitutional issue tendered not being critical to the
resolution of the case. The unyielding rule has been to avoid, whenever
plausible, an issue assailing the constitutionality of a statute or governmental
act.110 If some other grounds exist by which judgment can be made without
touching the constitutionality of a law, such recourse is favored. 111 Garcia v.
Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake
judicial review means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed
of on some other ground, such as the application of the statute or the general
law. The petitioner must be able to show that the case cannot be legally
resolved unless the constitutional question raised is determined. This
requirement is based on the rule that every law has in its favor the
presumption of constitutionality; to justify its nullification, there must be a
clear and unequivocal breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken
by AMBALA (to which the FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by HLI with the conditions of
the SDP to support a plea for its revocation. And before the Court, the lis
mota is whether or not PARC acted in grave abuse of discretion when it
ordered the recall of the SDP for such non-compliance and the fact that the
SDP, as couched and implemented, offends certain constitutional and
statutory provisions. To be sure, any of these key issues may be resolved
without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover,
looking deeply into the underlying petitions of AMBALA, et al., it is not the said
section per se that is invalid, but rather it is the alleged application of the said
provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending Sec.
7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock
distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700
provides: "[T]hat after June 30, 2009, the modes of acquisition shall
be limited to voluntary offer to sell and compulsory acquisition." Thus, for all
intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657
is no longer an available option under existing law. The question of whether or
not it is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic114 provided the following
requisites are present:
x x x first, there is a grave violation of the Constitution; second, the
exceptional character of the situation and the paramount public interest is
involved; third, when the constitutional issue raised requires formulation of
controlling principles to guide the bench, the bar, and the public; fourth, the
case is capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article
XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the
right of the farmers and regular farmworkers, who are landless, to OWN
directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress may

prescribe, taking into account ecological, developmental, or equity


considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary landsharing. (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 workerbeneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker beneficiaries who shall form a
workers cooperative or association which will deal with the corporation or
business association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the companys total assets, under
such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks are
distributed be reduced. The same principle shall be applied to associations,
with respect to their equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated
from individual farmers, are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution

that land can be owned COLLECTIVELY by farmers. Even the framers of the
l987 Constitution are in unison with respect to the two (2) modes of ownership
of agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the
principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal
ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers
cooperatives, do the farmers own specific areas of land where they only unite
in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems
involved: the "moshave" type of agriculture and the "kibbutz." So are both
contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng mga
magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila
itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively the
lands they till," is this land for the tillers rather than land for the landless?
Before, we used to hear "land for the landless," but now the slogan is "land for
the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig
sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung
saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig
sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o
isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural
land "sama-sama" or collectively. Thus, the main requisite for collective
ownership of land is collective or group work by farmers of the agricultural
land. Irrespective of whether the landowner is a cooperative, association or
corporation composed of farmers, as long as concerted group work by the
farmers on the land is present, then it falls within the ambit of collective
ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment
on the part of the State to pursue,by law, an agrarian reform program
founded on the policy of land for the landless, but subject to such priorities as
Congress may prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress necessarily
implies that the above constitutional provision is not self-executoryand that
legislation is needed to implement the urgently needed program of agrarian
reform. And RA 6657 has been enacted precisely pursuant to and as a
mechanism to carry out the constitutional directives. This piece of legislation,
in fact, restates118 the agrarian reform policy established in the
aforementioned provision of the Constitution of promoting the welfare of
landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as
"the redistribution of lands to farmers and regular farmworkers who are

landless to lift the economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution of lands, such
as production or profit sharing, labor administration and the distribution of
shares of stock which will allow beneficiaries to receive a just share of the
fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under
Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument of
social justice under Sec. 4 of Article XIII of the Constitution. Albeit land
ownership for the landless appears to be the dominant theme of that policy,
We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not
constrict Congress to passing an agrarian reform law planted on direct land
transfer to and ownership by farmers and no other, or else the enactment
suffers from the vice of unconstitutionality. If the intention were otherwise, the
framers of the Constitution would have worded said section in a manner
mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features,
is not inconsistent with the States commitment to farmers and farmworkers to
advance their interests under the policy of social justice. The legislature, thru
Sec. 31 of RA 6657, has chosen a modality for collective ownership by which
the imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec.
31 do not own the agricultural land but are merely given stock certificates.
Thus, the farmers lose control over the land to the board of directors and
executive officials of the corporation who actually manage the land. They
conclude that such arrangement runs counter to the mandate of the
Constitution that any agrarian reform must preserve the control over the land
in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly
own the land, still, the Corporation Code is clear that the FWB becomes a
stockholder who acquires an equitable interest in the assets of the
corporation, which include the agricultural lands. It was explained that the
"equitable interest of the shareholder in the property of the corporation is
represented by the term stock, and the extent of his interest is described by
the term shares. The expression shares of stock when qualified by words
indicating number and ownership expresses the extent of the owners interest
in the corporate property."119 A share of stock typifies an aliquot part of the
corporations property, or the right to share in its proceeds to that extent when
distributed according to law and equity and that its holder is not the owner of
any part of the capital of the corporation.120 However, the FWBs will ultimately
own the agricultural lands owned by the corporation when the corporation is
eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land
operated and managed by the corporation, a reading of the second paragraph
of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries
have "the right to purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets." The wording of the
formula in the computation of the number of shares that can be bought by the
farmers does not mean loss of control on the part of the farmers. It must be
remembered that the determination of the percentage of the capital stock that

can be bought by the farmers depends on the value of the agricultural land
and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657.
The policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR
and PARC to see to it the farmers should always own majority of the common
shares entitled to elect the members of the board of directors to ensure that
the farmers will have a clear majority in the board. Before the SDP is
approved, strict scrutiny of the proposed SDP must always be undertaken by
the DAR and PARC, such that the value of the agricultural land contributed to
the corporation must always be more than 50% of the total assets of the
corporation to ensure that the majority of the members of the board of
directors are composed of the farmers. The PARC composed of the President of
the Philippines and cabinet secretaries must see to it that control over the
board of directors rests with the farmers by rejecting the inclusion of nonagricultural 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 nonqualified persons and in violation of the prohibition period provided under the
law. This only proves to show that the mere fact that there is land distribution
does not guarantee a successful implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of
land ownership where non-human juridical persons, such as corporations, were
prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a
collective manner through a cooperative or corporation. The former is too
often left to his own devices when faced with failing crops and bad weather, or
compelled to obtain usurious loans in order to purchase costly fertilizers or
farming equipment. The experiences learned from failed land reform activities
in various parts of the country are lack of financing, lack of farm equipment,
lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-to-market
roads, among others. Thus, at the end of the day, there is still no successful
implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a
better position to secure funding and competently maintain the agri-business
than the individual farmer. While direct singular ownership over farmland does
offer advantages, such as the ability to make quick decisions unhampered by
interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement.
Thus, government must be flexible and creative in its mode of implementation
to better its chances of success. One such option is collective ownership
through juridical persons composed of farmers.

Aside from the fact that there appears to be no violation of the Constitution,
the requirement that the instant case be capable of repetition yet evading
review is also wanting. It would be speculative for this Court to assume that
the legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that
a law is the product of earnest studies by Congress to ensure that no
constitutional prescription or concept is infringed.121 Corollarily, courts will not
pass upon questions of wisdom, expediency and justice of legislation or its
provisions. Towards this end, all reasonable doubts should be resolved in favor
of the constitutionality of a law and the validity of the acts and processes
taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated in such a manner as to
leave no doubt in the mind of the Court. In other words, the grounds for nullity
must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA
6657.
The wisdom of Congress in allowing an SDP through a corporation as an
alternative mode of implementing agrarian reform is not for judicial
determination. Established jurisprudence tells us that it is not within the
province of the Court to inquire into the wisdom of the law, for, indeed, We are
bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises
of the revocation or recall of HLIs SDP. Or to be more precise, the inquiry
should be: whether or not PARC gravely abused its discretion in revoking or
recalling the subject SDP and placing the hacienda under CARPs compulsory
acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec.
31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the
lives of the FWBs have hardly improved and the promised increased
income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
workedor the so-called "man days"is grossly onerous to the FWBs,
as HLI, in the guise of rotation, can unilaterally deny work to anyone.
In elaboration of this ground, PARCs Resolution No. 2006-34-01,
denying HLIs motion for reconsideration of Resolution No. 2005-32-01,
stated that the man days criterion worked to dilute the entitlement of
the original share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the
gross sales every year as production-sharing benefit on top of the
workers salary; and

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


titles.
Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests
on solid grounds set forth in the Terminal Report, a position shared by
AMBALA, which, in some pleadings, is represented by the same counsel as
that appearing for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of
the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And
training its sight on the resulting dilution of the equity of the FWBs appearing
in HLIs masterlist, FARM would state that the SDP, as couched and
implemented, spawned disparity when there should be none; parity when
there should have been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to
enhance the dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State
to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of
the landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural
development and industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due
regard to the rights of landowners to just compensation and to the ecological
needs of the nation, shall be undertaken to provide farmers and farm workers
with the opportunity to enhance their dignity and improve the quality of their
lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular
farm workers, who are landless, to own directly or collectively the lands they
till or, in the case of other farm workers, to receive a share of the fruits
thereof. To this end, the State shall encourage the just distribution of all
agricultural lands, subject to the priorities and retention limits set forth in this
Act, having taken into account ecological, developmental, and equity
considerations, and subject to the payment of just compensation. The State
shall respect the right of small landowners and shall provide incentives for
voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to
provide farmers and farm workers with the opportunity to enhance their
dignity and improve the quality of their lives through greater productivity of
agricultural lands." Of note is the term "opportunity" which is defined as a
favorable chance or opening offered by circumstances. 127 Considering this, by
no stretch of imagination can said provision be construed as a guarantee in
improving the lives of the FWBs. At best, it merely provides for a possibility or
favorable chance of uplifting the economic status of the FWBs, which may or
may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA

6657 and DAO 10, a violation of which would justify discarding the stock
distribution option. Nothing in that option agreement, law or department order
indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during
the regime of the SDP (1989-2005), some PhP 3 billion by way of
salaries/wages and higher benefits exclusive of free hospital and medical
benefits to their immediate family. And attached as Annex "G" to HLIs
Memorandum is the certified true report of the finance manager of Jose
Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA
LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since
the Stock Option was Approved by PARC/CARP," detailing what HLI gave their
workers from 1989 to 2005. The sum total, as added up by the Court, yields
the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits)
= PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP
303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of
the hacienda; and the PhP 37.5 million representing 3% from the proceeds of
the sale of the 500-hectare converted lands. While not included in the report,
HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80
hectares of land traversed by the SCTEX.128 On top of these, it is worth
remembering that the shares of stocks were given by HLI to the FWBs for free.
Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI
has not anyway earned profits through the years, it cannot be overemphasized that, as a matter of common business sense, no corporation could
guarantee a profitable run all the time. As has been suggested, one of the key
features of an SDP of a corporate landowner is the likelihood of the corporate
vehicle not earning, or, worse still, losing money. 129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood
that the plan "would result in increased income and greater benefits to
[qualified beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to
have not, as it cannot, actually exact assurance of success on something that
is subject to the will of man, the forces of nature or the inherent risky nature of
business.131 Just like in actual land distribution, an SDP cannot guarantee, as
indeed the SDOA does not guarantee, a comfortable life for the FWBs. The
Court can take judicial notice of the fact that there were many instances
wherein after a farmworker beneficiary has been awarded with an agricultural
land, he just subsequently sells it and is eventually left with nothing in the
end.
In all then, the onerous condition of the FWBs economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its SDP
and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe
Sec. 31 of RA 6657, albeit public respondents erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without
relevance to the issue on the propriety of the assailed order revoking HLIs
SDP, for the paragraph deals with the transfer of agricultural lands to the
government, as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries under

such terms and conditions, consistent with this Act, as they may agree,
subject to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31
provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such
proportion of the capital stock of the corporation that the agricultural
land, actually devoted to agricultural activities, bears in relation to
the companys total assets, under such terms and conditions as may be
agreed upon by them. In no case shall the compensation received by the
workers at the time the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall
be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of
RA 6657 refers to as that "proportion of the capital stock of the corporation
that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec.
31 of RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred
and conveyed to the SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share,
that has to be distributed to the THIRD PARTY under the stock distribution
plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs
other assets is PhP 393,924,220. The total value of HLIs assets is, therefore,
PhP 590,554,220.132 The percentage of the value of the agricultural lands (PhP
196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%,
which represents the stockholdings of the 6,296 original qualified farmworkerbeneficiaries (FWBs) in HLI. The total number of shares to be distributed to
said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by
getting 33.296% of the 355,531,462 shares which is the outstanding capital
stock of HLI with a value of PhP 355,531,462. Thus, if we divide the

118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to


18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for
free.
The Court finds that the determination of the shares to be distributed to the
6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA
6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs
shall be assured of at least one (1) representative in the board of directors or
in a management or executive committee irrespective of the value of the
equity of the FWBs in HLI, the Court finds that the SDOA contained provisions
making certain the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from the FIRST PARTY and distributed to the THIRD PARTY,
FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the farmworkers
appearing as shareholders of the SECOND PARTY at the start of said year
which will empower the THIRD PARTY or their representative to vote in
stockholders and board of directors meetings of the SECOND PARTY
convened during the year the entire 33.296% of the outstanding capital stock
of the SECOND PARTY earmarked for distribution and thus be able to gain such
number of seats in the board of directors of the SECOND PARTY that the whole
33.296% of the shares subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of
its books by accountants chosen by the FWBs; hence, the assumption may be
made that there has been no violation of the statutory prescription under subparagraph (a) on the auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory
minimum ratio of land-to-shares of stock, referring to the 118,391,976.85
shares with par value of PhP 1 each, should have been made in full within two
(2) years from the approval of RA 6657, in line with the last paragraph of Sec.
31 of said law.133
Public respondents submission is palpably erroneous. We have closely
examined the last paragraph alluded to, with particular focus on the two-year
period mentioned, and nothing in it remotely supports the public respondents
posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within
which the corporate landowner, to avoid land transfer as a mode of CARP
coverage under RA 6657, is to avail of the stock distribution option or to have
the SDP approved. The HLI secured approval of its SDP in November 1989, well
within the two-year period reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2
of RA 6657 as well as the statutory issues, We shall now delve into what PARC
and respondents deem to be other instances of violation of DAO 10 and the
SDP.
On the Conversion of Lands

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


Luisita unfragmented is also not among the imperative impositions by the
SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in
1989 to the PARC effectively assured the intended stock beneficiaries that the
physical integrity of the farm shall remain inviolate. Accordingly, the Terminal
Report and the PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500 hectares of the
hacienda. In not too many words, the Report and the resolution view the
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the
continued operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of
the stated criteria to guide PARC in deciding on whether or not to accept an
SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the
undertaking to keep the farm intact and unfragmented ad infinitum. And there
is logic to HLIs stated observation that the key phrase in the provision of Sec.
5(a) is "viability of corporate operations": "[w]hat is thus required is not the
agricultural land remaining intact x x x but the viability of the corporate
operations with its agricultural land being intact and unfragmented. Corporate
operation may be viable even if the corporate agricultural land does not
remain intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as
not violative of any issuance, let alone undermining the viability of Hacienda
Luisitas operation, as the DAR Secretary approved the land conversion
applied for and its disposition via his Conversion Order dated August 14, 1996
pursuant to Sec. 65 of RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial purposes, the
DAR upon application of the beneficiary or landowner with due notice to the
affected parties, and subject to existing laws, may authorize the x x x
conversion of the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of
the gross production sales of the hacienda and pay dividends from profit, the
entries in its financial books tend to indicate compliance by HLI of the profitsharing equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due FWBs as employees
of the company and (b) the 3% of the gross selling price of the converted land
and that portion used for the SCTEX. A plausible evidence of compliance or
non-compliance, as the case may be, could be the books of account of HLI.
Evidently, the cry of some groups of not having received their share from the
gross production sales has not adequately been validated on the ground by
the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when
supported by substantial evidence and are accorded due respect and weight,
especially when they are affirmed by the CA.135 However, such rule is not
absolute. One such exception is when the findings of an administrative agency
are conclusions without citation of specific evidence on which they are

based,136 such as in this particular instance. As culled from its Terminal Report,
it would appear that the Special Task Force rejected HLIs claim of compliance
on the basis of this ratiocination:

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


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

Besides, the Conversion Order dated 14 August 1996 provides that


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

The FWBs do not receive any other benefits under the MOA except the
aforementioned [(viz: shares of stocks (partial), 3% gross production
sale (not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent on
whether HLI has failed to comply with the 3% production-sharing obligation or
the 3% of the gross selling price of the converted land and the SCTEX lot. In
fact, it admits that the FWBs, though not all, have received their share of the
gross production sales and in the sale of the lot to SCTEX. At most, then, HLI
had complied substantially with this SDP undertaking and the conversion
order. To be sure, this slight breach would not justify the setting to naught by
PARC of the approval action of the earlier PARC. Even in contract law,
rescission, predicated on violation of reciprocity, will not be permitted for a
slight or casual breach of contract; rescission may be had only for such
breaches that are substantial and fundamental as to defeat the object of the
parties in making the agreement.137
Despite the foregoing findings, the revocation of the approval of the SDP is not
without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations
or business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding
section shall be provided with homelots and small farmlots for their family use,
to be taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:

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


Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual workerbeneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker-beneficiaries who shall form a
workers cooperative or association which will deal with the corporation or
business association. Until a new agreement is entered into by and between
the workers cooperative or association and the corporation or business
association, any agreement existing at the time this Act takes effect between
the former and the previous landowner shall be respected by both the
workers cooperative or association and the corporation or business
association.
Noticeably, the foregoing provisions do not make reference to corporations
which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it except by stipulation, as in
this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without
charge among the qualified family-beneficiaries x x x residential or homelots
of not more than 240 sq. m. each, with each family beneficiary being assured
of receiving and owning a homelot in the barrio or barangay where it actually
resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was
approved by PARC, and yet, it is still the contention of the FWBs that not all
was given the 240-square meter homelots and, of those who were already
given, some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the
foregoing allegation by submitting proof that the FWBs were already given the
said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries,
the qualified family beneficiaries were not given the 240 square meters each.
So, can you also [prove] that the qualified family beneficiaries were already
provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing
that all the qualified beneficiaries have received homelots was submitted by
HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied
with its undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and
timelines of stock distribution, We find that it violates two (2) provisions of
DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
[HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution
to the THIRD PARTY [FWBs] on the basis of number of days worked and at no
cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital
stock of the SECOND PARTY that are presently owned and held by the FIRST
PARTY, until such time as the entire block of 118,391,976.85 shares shall have
been completely acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to
the FWBs, albeit not entailing a cash out from them, is contingent on the
number of "man days," that is, the number of days that the FWBs have worked

during the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the minimum ratio
of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As
stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries. This distribution plan in all
cases, shall be at least the minimum ratio for purposes of compliance with
Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority,
salary, position and other circumstances which may be deemed desirable as a
matter of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of
stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657.
This minimum ratio contemplates of that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets."139 It is this set of
shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be
allocated "for the distribution of an equal number of shares of stock of the
same class and value, with the same rights and features as all other shares, to
each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a
gratuitous extra grant, meaning that this set or category constitutes an
augmentation share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the management, in the
exercise of its sound discretion, may deem desirable. 140
Before anything else, it should be stressed that, at the time PARC approved
HLIs SDP, HLI recognized 6,296individuals as qualified FWBs. And under the
30-year stock distribution program envisaged under the plan, FWBs who came
in after 1989, new FWBs in fine, may be accommodated, as they appear to
have in fact been accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs
shall depend on the number of "man days," HLI violated the afore-quoted rule
on stock distribution and effectively deprived the FWBs of equal shares of
stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who
theoretically had given up their rights to the land that could have been
distributed to them, suffered a dilution of their due share entitlement. As has
been observed during the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to water down the shares
of the original 6,296 FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose
to enter SDOA instead of placing the land under CARP. And for that reason
those who would have gotten their shares of the land actually gave up their
rights to this land in place of the shares of the stock, is that correct?

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


Justice Abad: Right now, also the government, in a way, gave up its right to
own the land because that way the government takes own [sic] the land and
distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of
HLI to the farmers at that time that numbered x x x those who signed five
thousand four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers
came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave
additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong
to them in 1989 when the land was supposed to have been placed under
CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your
Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands
would be diluted, because the company has chosen to use the shares as
reward system for new workers who come in? It is not that the new workers, in
effect, become just workers of the corporation whose stockholders were
already fixed. The TADECO who has shares there about sixty six percent (66%)
and the five thousand four hundred ninety eight (5,498) farmers at the time of
the SDOA? Explain to me. Why, why will you x x x what right or where did you
get that right to use this shares, to water down the shares of those who should
have been benefited, and to use it as a reward system decided by the
company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who
were qualified beneficiaries at the time of the approval of the SDP, suffered
from watering down of shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and
distribution of the HLI shares were based on "man days" or "number of days
worked" by the FWB in a years time. As explained by HLI, a beneficiary needs
to work for at least 37 days in a fiscal year before he or she becomes entitled
to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get
any share at year end. The number of HLI shares distributed varies depending
on the number of days the FWBs were allowed to work in one year. Worse, HLI
hired farmworkers in addition to the original 6,296 FWBs, such that, as
indicated in the Compliance dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as of said date stood at 10,502.
All these farmworkers, which include the original 6,296 FWBs, were given
shares out of the 118,931,976.85 HLI shares representing the 33.296% of the
total outstanding capital stock of HLI. Clearly, the minimum individual
allocation of each original FWB of 18,804.32 shares was diluted as a result of
the use of "man days" and the hiring of additional farmworkers.

Going into another but related matter, par. 3 of the SDOA expressly providing
for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution plan within three (3)
months from receipt by the corporate landowner of the approval of the plan by
PARC. In fact, based on the said provision, the transfer of the shares of stock in
the names of the qualified FWBs should be recorded in the stock and transfer
books and must be submitted to the SEC within sixty (60) days from
implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock
distribution plan shall be implemented within three (3) months from receipt by
the corporate landowner-applicant of the approval thereof by the PARC, and
the transfer of the shares of stocks in the names of the qualified beneficiaries
shall be recorded in stock and transfer books and submitted to the Securities
and Exchange Commission (SEC) within sixty (60) days from the said
implementation of the stock distribution plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by
PARC. While neither of the clashing parties has made a compelling case of the
thrust of this provision, the Court is of the view and so holds that the intent is
to compel the corporate landowner to complete, not merely initiate, the
transfer process of shares within that three-month timeframe. Reinforcing this
conclusion is the 60-day stock transfer recording (with the SEC) requirement
reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical,
for the three-month threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with agrarian reform by simply
deferring to absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified
by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To
HLI, said section provides a justifying dimension to its 30-year stock
distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall
be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x
x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that
what is involved is stock distribution, it is the corporate landowner who has
the obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within
which to pay the cost of the land thus awarded them to make it less
cumbersome for them to pay the government. To be sure, the reason
underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as the
shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of
RA 6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10

has the force and effect of law and must be duly complied with. 143 The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No.
89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and
voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray
for the exclusion from the coverage of the assailed PARC resolution those
portions of the converted land within Hacienda Luisita which RCBC and LIPCO
acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the
converted farm land. Thus, their plea for the exclusion of that portion from
PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of
Coverage dated January 2, 2006, which called for mandatory CARP acquisition
coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding
the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the
entire three hundred (300) hectares of land from Centennary for the purpose
of developing the land into an industrial complex.144 Accordingly, the TCT in
Centennarys name was canceled and a new one issued in LIPCOs name.
Thereafter, said land was subdivided into two (2) more parcels of land. Later
on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago,
by virtue of which TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every
registered owner receiving a certificate of title in pursuance of a decree of
registration and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and enumerated
therein."145
It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of such burdens and
claims as are annotated on the title. This principle admits of certain
exceptions, such as when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such
inquiry, or when the purchaser has knowledge of a defect or the lack of title in
his vendor or of sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation. 146 A higher level of care
and diligence is of course expected from banks, their business being
impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without
notice that some other person has a right to, or interest in, such property at
the time of such purchase, or before he has notice of the claim or interest of
some other persons in the property. Good faith, or the lack of it, is in the final
analysis a question of intention; but in ascertaining the intention by which one
is actuated on a given occasion, we are necessarily controlled by the evidence
as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined. Truly, good faith is not a visible, tangible fact that
can be seen or touched, but rather a state or condition of mind which can only
be judged by actual or fancied tokens or signs. Otherwise stated, good faith x
x x refers to the state of mind which is manifested by the acts of the individual
concerned.148 (Emphasis supplied.)

In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in
such property; and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has notice of the
claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted
land in questionpurchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a right to or interest in
such property. In fact, at the time LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the property from agricultural to
industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of
Hacienda Luisita, only the following general annotations appeared on the TCTs
of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial
estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and
the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP
300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the
lots that were previously covered by the SDP. Good faith "consists in the
possessors belief that the person from whom he received it was the owner of
the same and could convey his title. Good faith requires a well-founded belief
that the person from whom title was received was himself the owner of the
land, with the right to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage from
another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were
validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2
and, hence, can be legally and validly acquired by them. After all, Sec. 65 of
RA 6657 explicitly allows conversion and disposition of agricultural lands
previously covered by CARP land acquisition "after the lapse of five (5) years
from its award when the land ceases to be economically feasible and sound for
agricultural purposes or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial
purposes." Moreover, DAR notified all the affected parties, more particularly
the FWBs, and gave them the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian
reform matters and its original exclusive jurisdiction over all matters involving
the implementation of agrarian reform. The DAR conversion order became
final and executory after none of the FWBs interposed an appeal to the CA. In
this factual setting, RCBC and LIPCO purchased the lots in question on their

honest and well-founded belief that the previous registered owners could
legally sell and convey the lots though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject
lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for
value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for
the amount of PhP 750 million pursuant to a Deed of Sale dated July 30,
1998.151 On the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of
RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights
which cannot just be disregarded by DAR, PARC or even by this Court. As held
in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of
purchasers in good faith, it is now of no moment that some irregularity
attended the issuance of the SPA, consistent with our pronouncement in Heirs
of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot
be valid, is inapplicable in this case as it will directly contravene the Torrens
system of registration. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over
the property, the court cannot disregard such rights and order the
cancellation of the certificate. The effect of such outright cancellation will
be to impair public confidence in the certificate of title. The sanctity of the
Torrens system must be preserved; otherwise, everyone dealing with the
property registered under the system will have to inquire in every instance as
to whether the title had been regularly or irregularly issued, contrary to the
evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title
to the property. A purchaser in good faith holds an indefeasible title
to the property and he is entitled to the protection of the law.152 x x x
(Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a
"cloistered institution removed" from the realities on the ground. To note, the
approval and issuances of both the national and local governments showing
that certain portions of Hacienda Luisita have effectively ceased, legally and
physically, to be agricultural and, therefore, no longer CARPable are a matter
of fact which cannot just be ignored by the Court and the DAR. Among the
approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang
Bayan of Tarlac favorably endorsing the 300-hectare industrial estate
project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996
issued in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June
1997, approving LIPCOs application for a mixed ecozone and
proclaiming the three hundred (300) hectares of the industrial land as
a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang
Bayan of Tarlac, approving the Final Development Permit for the Luisita
Industrial Park II Project;

(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan
of Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997
issued for the proposed project of building an industrial complex on
three hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997
issued by the HLURB on the project of Luisita Industrial Park II with an
area of three million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the
HLURB authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring
Certain Parcels of Private Land in Barangay San Miguel, Municipality of
Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to
Republic Act No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of industrial land as a
Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued
by the PEZA, stating that pursuant to Presidential Proclamation No.
1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of Luisita Industrial Park
II located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in
an economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie
indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074764-(95) issued in 1996 by then DAR Secretary Garilao had effectively
converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion
order, both RCBC and LIPCO cannot be considered at fault for believing that
certain portions of Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely
abused its discretion when it placed LIPCOs and RCBCs property which once
formed part of Hacienda Luisita under the CARP compulsory acquisition
scheme via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as
part of the SCTEX, this should also be excluded from the compulsory agrarian
reform coverage considering that the transfer was consistent with the
governments exercise of the power of eminent 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 Bank162 discussed the effect to


be given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been
done while such legislative or executive act was in operation and presumed to
be valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the government organ which
has the final say on whether or not a legislative or executive measure is valid,
a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law
of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence
of a statute, prior to such a determination of [unconstitutionality], is an
operative fact and may have consequences which cannot justly be ignored.
The past cannot always be erased by a new judicial declaration. The effect of
the subsequent ruling as to invalidity may have to be considered in various
aspects,with respect to particular relations, individual and corporate, and
particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had
passed since the PARCs approval of the HLIs SDP, in conjunction with
numerous activities performed in good faith by HLI, and the reliance by the
FWBs on the legality and validity of the PARC-approved SDP, perforce, certain
rights of the parties, more particularly the FWBs, have to be respected
pursuant to the application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of
minimal or altogether without relevance to the instant case as it applies only
in considering the effects of a declaration of unconstitutionality of a statute,
and not of a declaration of nullity of a contract. This is incorrect, for this view
failed to consider is that it is NOT the SDOA dated May 11, 1989 which was
revoked in the instant case. Rather, it is PARCs approval of the HLIs Proposal
for Stock Distribution under CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco,
HLI, and the qualified FWBs executed the SDOA. This agreement provided the
basis and mechanics of the SDP that was subsequently proposed and
submitted to DAR for approval. It was only after its review that the PARC,
through then Sec. Defensor-Santiago, issued the assailed Resolution No. 8912-2 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 wellsettled in our jurisprudence. In Chavez v. National Housing Authority, 163We
held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of
the various agreements implementing the SMDRP is an operative fact that can
no longer be disturbed or simply ignored, citing Rieta v. People of the
Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid and must be complied with,
thus:
xxx
xxx
xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of
suspension, as we have no reason to do so, much less retroactively apply such
nullification to deprive private respondent of a compelling and valid reason for
not filing the leave application. For as we have held, a void act though in law a
mere scrap of paper nonetheless confers legitimacy upon past acts or
omissions done in reliance thereof. Consequently, the existence of a statute or
executive order prior to its being adjudged void is an operative fact to which
legal consequences are attached. It would indeed be ghastly unfair to prevent
private respondent from relying upon the order of suspension in lieu of a
formal leave application. (Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated
General Order No. 60, issued by then President Ferdinand E. Marcos was
subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force
and effect. Thus, he asserts, any evidence obtained pursuant thereto is
inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing
therein how such a declaration might affect acts done on a presumption of
their validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank to
wit:
The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence affording
no basis for the challenged decree. . . . It is quite clear, however, that such
broad statements as to the effect of a determination of unconstitutionality
must be taken with qualifications. The actual existence of a statute, prior to
[the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to

invalidity may have to be considered in various aspects with respect to


particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light of the nature both of the
statute and of its previous application, demand examination. These questions
are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot
be justified.
xxx
xxx
xxx
"Similarly, the implementation/enforcement of presidential decrees prior to
their publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be
erased by a new judicial declaration . . . that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of
a statute, there is an imperative necessity of taking into account its actual
existence as an operative fact negating the acceptance of "a principle of
absolute retroactive invalidity." Whatever was done while the legislative or the
executive act was in operation should be duly recognized and presumed to be
valid in all respects. The ASSO that was issued in 1979 under General Order
No. 60 long before our Decision in Taada and the arrest of petitioner is
an operative fact that can no longer be disturbed or simply ignored. (Citations
omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it
revokes or recalls the SDP, what it actually revoked or recalled was the PARCs
approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what
was actually declared null and void was an executive act, PARC Resolution No.
89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it was
the SDOA which was annulled in the instant case. Evidently, the operative fact
doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita
SDP are upheld, the revocation must, by application of the operative fact
principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn
a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or
the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the
FWBs were said to have received from HLI salaries and cash benefits, hospital
and medical benefits, 240-square meter homelots, 3% of the gross produce
from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005. 166 On August 6, 20l0, HLI
and private respondents submitted a Compromise Agreement, in which HLI
gave the FWBs the option of acquiring a piece of agricultural land or remain as
HLI stockholders, and as a matter of fact, most FWBs indicated their choice of
remaining as stockholders. These facts and circumstances tend to indicate
that some, if not all, of the FWBs may actually desire to continue as HLI
shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries
as of November 21, 1989 when the SDP was approved, they are not accorded
the right to acquire land but shall, however, continue as HLI stockholders. All

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

FIRST DIVISION
LAND BANK OF THE PHILIPPINES,
Petitioner,

G.R. No. 177190


Present:

- versus HON. ERNESTO P. PAGAYATAN, in his capacity


as Presiding Judge of the Regional Trial Court,
Branch 46, San Jose, Occidental Mindoro; and
JOSEFINA S. LUBRICA, in her capacity as
Assignee of Federico Suntay,
Respondents.

CORONA, C.J., Chairperson, V


JR.,
NACHURA,*
DEL CASTILLO, and
PEREZ, JJ.
Promulgated:
February 23, 2011

x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks to annul the August
17, 2006 Decision[1] and March 27, 2007 Resolution[2] of the Court of Appeals
(CA) in CA-G.R. SP No. 93206, which affirmed the Order dated March 4,

2005[3] of the Regional Trial Court (RTC), Branch 46 in San Jose, Occidental
Mindoro, in Agrarian Case No. 1390 for the fixing of just compensation,
entitled Land Bank of the Philippines v. Josefina S. Lubrica, in her capacity as
assignee of Federico Suntay, and Hon. Teodoro A. Cidro, as Provincial Agrarian
Reform Adjudicator of San Jose, Occidental Mindoro. The RTC Order affirmed
the Decision dated March 21, 2003[4] of the Provincial Agrarian Reform
Adjudicator (PARAD) of San Jose, Occidental Mindoro in Case No. DCN-04050022-02, entitled Josefina S. Lubrica, in her capacity as Assignee of Federico
Suntay v. Hon. Hernani A. Braganza, in his capacity as Secretary of the
Department of Agrarian Reform, and Land Bank of the Philippines.
The Facts
On October 21, 1972, the 3,682.0286-hectare Suntay Estate, consisting of
irrigated/unirrigated rice and corn lands covered by Transfer Certificate of Title
No. T-31(1326) located in the Barangays of Gen. Emilio Aguinaldo, Sta. Lucia,
and San Nicolas in Sablayan, Occidental Mindoro, was subjected to the
operation of Presidential Decree No. 27, under its Operation Land Transfer
(OLT), with the farmer-beneficiaries declared as owners of the property.
However, a 300-hectare portion of the land was subjected to the
Comprehensive Agrarian Reform Program (CARP) instead of the OLT. Thus,
Certificates of Landownership Award were issued to the farmer-beneficiaries in
possession of the land.[5] Such application of the CARP to the 300-hectare land
was later the subject of a case before the Department of Agrarian Reform
Adjudicatory Board (DARAB), which ruled that the subject land should have
been the subject of OLT instead of CARP. The landowner admitted before the
PARAD that said case was pending with this Court and docketed as G.R. No.
108920, entitled Federico Suntay v. Court of Appeals.

SO ORDERED.[6]
Petitioner Land Bank of the Philippines (LBP) filed a Motion for
Reconsideration dated April 10, 2003 of the above decision, but the PARAD
denied the motion in an Order dated December 15, 2003. [7]
The LBP then filed a Petition dated March 4, 2004 with the RTC
docketed as Agrarian Case No. 1390, appealing the PARAD Decision. In the
Petition, the LBP argued that because G.R. No. 108920 was pending with this
Court in relation to the 300-hectare land subject of the instant case, the
Petition for Summary Determination of Just Compensation filed before the
PARAD was premature. The LBP argued further that the PARAD could only
make an award of up to PhP 5 million only. The PARAD, therefore, could not
award an amount of PhP 71,634,027.30. The LBP also contended that it could
not satisfy the demand for payment of Lubrica, considering that the
documents necessary for it to undertake a preliminary valuation of the
property were still with the Department of Agrarian Reform (DAR).
By way of answer, Lubrica filed a Motion to Deposit the Preliminary
Valuation under Section 16(e) of Republic Act No. (RA) 6657 and Ad
Cautelam Answer dated June 18, 2004.[8] In the said motion, Lubrica claimed
that since the DAR already took possession of the disputed property, the LBP
is duty-bound to deposit the compensation determined by the PARAD in a bank
accessible to the landowner.
In an Order dated March 4, 2005, the RTC resolved Lubricas motion, as

Meanwhile, the owner of the land remained unpaid for the property. Thus,
Josefina S. Lubrica, in her capacity as assignee of the owner of the property,
Federico Suntay, filed a Petition for Summary Determination of Just
Compensation with the PARAD, docketed as Case No. DCN-0405-0022-2002.
Thereafter, the PARAD issued its Decision dated March 21, 2003, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered:
1.

Fixing the preliminary just compensation for


431.1407 hectare property at P166,150.00 per hectare
or a total of P71,634,027.30.

2.

Directing the Land Bank of the Philippines to


immediately pay the aforestated amount to the
Petitioner;

3.

Directing the DAR to immediately comply with all


applicable requirements so that the subject property
may be formally distributed and turned over to the
farmer beneficiaries thereof, in accordance with the
Decision of the DARAB Central in DARAB Case No.
2846.

No cost.

follows:
The foregoing considered and as prayed for by the
respondent-movant The Land Compensation Department,
Land Bank of the Philipines, is hereby directed to deposit the
preliminary compensation as determined by the PARAD, in
case and bonds in the total amount of Php 71,634,027.30, with
the Land Bank of the Philippines, Manila, within seven (7) days
from receipt of this order, and to notify this Court of
compliance within such period.[9]
Thus, the LBP filed an Omnibus Motion dated March 17, 2005 praying
for the reconsideration of the above order, the admission of an amended
petition impleading the DAR, and the issuance of summons to the new
defendants. In the Omnibus Motion, the LBP contended:
In this AMENDED PETITION, Land Bank impleaded the DAR as
respondent because DAR is the lead agency of the
government in the implementation of the agrarian reform. It is
the one which is responsible in identifying the lands to be
covered by agrarian reform program, placing/identifying the
farmer beneficiaries, parcellary mapping of the land, and
determining the land value covered by PD 27/EO 228. The
documents DAR prepares is placed in a folder called claim

folder which it forwards to Land Bank for processing and


payment.

WHEREFORE, premises considered, the petition is


GRANTED. The assailed Amended Decision dated October 27,
2005 of the Court of Appeals in CA-G.R. SP No. 77530 is
REVERSED and SET ASIDE. The Decision dated May 26, 2004
of the Court of Appeals affirming (a) the March 31, 2003
Order of the Special Agrarian Court ordering the
respondent Land Bank of the Philippines to deposit the
just compensation provisionally determined by the
PARAD; (b) the May 26, 2003 Resolution denying respondents
Motion for Reconsideration; and (c) the May 27, 2003 Order
directing Teresita V. Tengco, respondents Land Compensation
Department Manager to comply with the March 31, 2003
Order, is REINSTATED. The Regional Trial Court of San Jose,
Occidental Mindoro, Branch 46, acting as Special Agrarian
Court is ORDERED to proceed with dispatch in the trial of
Agrarian Case Nos. R-1339 and R-1340, and to compute the
final valuation of the subject properties based on the
aforementioned formula.

21. At present there is no claim folder prepared and


submitted by DAR to Land Bank, and therefore Land Bank has
no claim folder to process and no basis to pay the landowner.
[10]

In an Order dated December 8, 2005,[11] the RTC denied the Omnibus


Motion finding no reversible error in its Order dated March 4, 2005 and
denying the motion to amend the petition for being unnecessary towards land
valuation.
Thus, the LBP appealed the RTC Orders dated March 4, 2005 and
December 8, 2005 to the CA through a Petition for Certiorari dated February
13, 2006. The LBP argued that without the claim folder from the DAR, it could
not preliminarily determine the valuation of the covered lands and process the
compensation claims. Moreover, it said that the amount to be deposited under
Sec. 16 of RA 6657, or the Agrarian Reform Law of 1988, is the offered
purchase price of DAR for the land contained in the notice of acquisition and
not the price determined in an administrative proceeding before the PARAD.

SO ORDERED. (Emphasis supplied.)


The principles of res judicata and stare decisis do not apply to the case

Afterwards, on August 17, 2006, the CA issued the assailed decision,


the dispositive portion of which reads:
WHEREFORE, premises considered, the petition is
hereby DENIED DUE COURSE, and subsequently DISMISSED for
lack of merit.
SO ORDERED.[12]
The LBP moved for reconsideration of the CA Decision, but the CA did
not reconsider it, as stated in its Resolution dated March 27, 2007.
Hence, the LBP filed this petition.
The Issue
What is the proper amount to be deposited under Section 16
of Republic Act No. 6657? Is it the PARAD/DARAB determined
valuation or the preliminary valuation as determined by the
DAR/LBP?[13]
The Ruling of the Court

at bar.
In Lanuza v. Court of Appeals,[15] the Court discussed the principle
of res judicata, to wit:
Res judicata means a matter adjudged, a thing
judicially acted upon or decided; a thing or matter settled by
judgment. The doctrine of res judicata provides that a final
judgment, on the merits rendered by a court of competent
jurisdiction is conclusive as to the rights of the parties and
their privies and constitutes an absolute bar to subsequent
actions involving the same claim, demand, or cause of action.
The elements of res judicata are (a) identity of parties or at
least such as representing the same interest in both
actions; (b) identity of rights asserted and relief prayed
for, the relief being founded on the same facts; and (c)
the identity in the two (2) particulars is such that any
judgment which may be rendered in the other action will,
regardless of which party is successful, amount to res judicata
in the action under consideration. (Emphasis supplied.)
In Lubrica, the issue was as follows:

The petition is meritorious.


Private respondent Lubrica argues that, under the doctrines of res
judicata and stare decisis, the instant case must be dismissed in light of the
decision of this Court inLubrica v. Land Bank of the Philippines,[14] the
dispositive portion of which reads:

Petitioners insist that the determination of just


compensation should be based on the value of the
expropriated properties at the time of payment. Respondent
LBP, on the other hand, claims that the value of the realties
should be computed as of October 21, 1972 when P.D. No. 27
took effect.[16]

While the Court directed that the valuation made by the PARAD be the
amount to be deposited in favor of the landowner, it was done only because
the PARADs valuation was based on the time the payment was made.
The issue before Us is whether the RTC acted properly in ordering the
deposit or payment to the landowner of the preliminary valuation of the land
made by the PARAD. This is considering that Sec. 16(e) of RA 6657 clearly
requires the initial valuation made by the DAR and LBP be deposited or paid
to the landowner before taking possession of the latters property, not the
preliminary valuation made by the PARAD.
Evidently, the second element of res judicata is not present. The relief
prayed for in Lubrica is that the amount for deposit in favor of the landowner
be determined on the basis of the time of payment and not of the time of
taking. But here, the prayer of the LBP is for the deposit of the valuation of the
LBP and DAR and not that of the PARAD. These are two distinct and separate
issues. Res judicata, therefore, cannot apply.
We cannot apply the principle of stare decisis to the instant case, too.
The Court explained the principle in Ting v. Velez-Ting:[17]
The principle of stare decisis enjoins adherence by
lower courts to doctrinal rules established by this Court in its
final decisions. It is based on the principle that once a question
of law has been examined and decided, it should be deemed
settled and closed to further argument. Basically, it is a bar
to any attempt to relitigate the same issues, necessary
for two simple reasons: economy and stability. In our
jurisdiction, the principle is entrenched in Article 8 of the Civil
Code. (Emphasis supplied.)
To reiterate, Lubrica and the instant case have different issues.
Hence, stare decisis is also inapplicable here.
The LBP posits that under Sec. 16(e) of RA 6657, and as espoused
in Land Bank of the Philippines v. Court of Appeals,[18] it is the purchase price
offered by the DAR in its notice of acquisition of the land that must be
deposited in an accessible bank in the name of the landowner before taking
possession of the land, not the valuation of the PARAD.
The Court agrees with the LBP. The RTC erred when it ruled:
Under Section 16 (e) the payment of the provisional
compensation determined by the PARAD in the summary
administrative proceedings under Section 16 (d) should
precede the taking of the land. In the present case, the taking
of the property even preceded the mere determination of a
provisional compensation by more than 30 years.[19]

Sec. 16 of RA 6657 contains the procedure for the acquisition of


private lands, 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 of 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.
(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 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. (Emphasis
supplied.)

xxxx
Conspicuously, there is no mention of the PARAD in the foregoing Sec.
16(e) when it speaks of the deposit with an accessible bank designated by the
DAR of the compensation in cash or LBP bonds in accordance with this Act.
Moreover, it is only after the DAR has made its final determination of the initial
valuation of the land that the landowner may resort to the judicial
determination of the just compensation for the land. Clearly, therefore, it is the
initial valuation made by the DAR and LBP that is contained in the letter-offer
to the landowner under Sec. 16(a), said valuation of which must be deposited
and released to the landowner prior to taking possession of the property.
This too was the Courts interpretation of the above provision in Land
Bank of the Philippines v. Heir of Trinidad S. Vda. De Arieta:[20]
It was thus erroneous for the CA to conclude that the
provisional compensation required to be deposited as provided
in Section 16 (e) is the sum determined by the
DARAB/PARAD/RARAD in a summary administrative proceeding
merely because the word deposit appeared for the first time in
the sub-paragraph immediately succeeding that subparagraph where the administrative proceeding is mentioned
(sub-paragraph d). On the contrary, sub-paragraph (e) should
be related to sub-paragraphs (a), (b) and (c) considering that
the taking of possession by the State of the private
agricultural land placed under the CARP is the next step after
the DAR/LBP has complied with notice requirements which
include the offer of just compensation based on the initial
valuation by LBP. To construe sub-paragraph (e) as the
appellate court did would hamper the land redistribution
process because the government still has to wait for the
termination of the summary administrative proceeding before
it can take possession of the lands. Contrary to the CAs view,
the deposit of provisional compensation is made even before
the summary administrative proceeding commences, or at
least simultaneously with it, once the landowner rejects the
initial valuation (offer) by the LBP. Such deposit results from
his rejection of the DAR offer (based on the LBPs initial
valuation). Both the conduct of summary administrative
proceeding and deposit of provisional compensation follow as
a consequence of the landowners rejection under both the
compulsory acquisition and VOS. This explains why the words
rejection or failure to reply and rejection or no response from
the landowner are found in sub-paragraphs (d) and (e). Such
rejection/no response from the landowner could not possibly
refer to the award of just compensation in the summary
administrative proceeding considering that the succeeding
sub-paragraph (f) states that the landowner who disagrees
with the same is granted the right to petition in court for final
determination of just compensation. As it is, the CAs
interpretation would have loosely interchanged the terms
rejected the offer and disagrees with the decision, which is far
from what the entire provision plainly conveys.

Under the law, the LBP is charged with the initial


responsibility of determining the value of lands placed under
land reform and the compensation to be paid for their taking.
Once an expropriation proceeding or the acquisition of private
agricultural lands is commenced by the DAR, the
indispensable role of LBP begins. EO No. 405, issued on June
14, 1990, provides that the DAR is required to make use of the
determination of the land valuation and compensation by the
LBP as the latter is primarily responsible for the determination
of the land valuation and compensation. In fact, the LBP can
disagree with the decision of the DAR in the determination of
just compensation, and bring the matter to the RTC designated
as [Special Agrarian Court] for final determination of just
compensation.
The amount of offer which the DAR gives to the
landowner as compensation for his land, as mentioned
in Section 16 (b) and (c), is based on the initial
valuation by the LBP. This then is the amount which
may be accepted or rejected by the landowner under
the procedure established in Section 16. Perforce, such
initial valuation by the LBP also becomes the basis of
the deposit of provisional compensation pending final
determination of just compensation, in accordance with
sub-paragraph (e). (Emphasis supplied.)
It is clear from Sec. 16 of RA 6657 that it is the initial valuation made
by the DAR and the LBP that must be released to the landowner in order for
DAR to take possession of the property. Otherwise stated, Sec. 16 of RA 6657
does not authorize the release of the PARADs determination of just
compensation for the land which has not yet become final and executory.
Moreover, it bears pointing out that, pursuant to DAR Administrative
Order No. 02, Series of 1996, entitled Revised Rules and Procedures
Governing the Acquisition of Agricultural Lands subject of Voluntary Offer to
Sell and Compulsory Acquisition pursuant to Republic Act No. 6657, the DAR
Municipal Office (DARMO) first prepares a claim folder (CF) containing the
necessary documents for the valuation of the land. The DARMO then forwards
this claim folder to the DAR Provincial Office (DARPO) which, in turn, has the
following duties: Receives claim folder and forwards to the DAR-LBP PreProcessing Unit (PPU) for review/evaluation of documents. Gathers lacking
documents, if any.[21] The DAR-LBP PPU then forwards the CF to the LBP-Land
Valuation and Landowners Compensation Office (LVLCO) which receives and
evaluates the CF for completeness, consistency and document sufficiency.
Gathers additional valuation documents.[22] Thereafter, the LBP-LVLCO
determines land valuation based on valuation inputs and prepares and sends
Memo of Valuation, Claim Folder Profile and Valuation Summary (MOV-CFPVS)
to the DARPO.[23] The DARPO then sends Notice of Valuation and Acquisition to
LO [landowner] by personal delivery with proof of service or by registered mail

with return card, attaching copy of MOV-CFPVS and inviting LOs attention to
the submission of documents required for payment of claim. [24]
Notably, DAR failed to prepare the claim folder which is necessary for
the LBP to make a valuation of the land to be expropriated. The proper remedy
would have been to ask the DAR and LBP to determine such initial valuation
and to have the amount deposited to his account, in accordance with Sec. 16
of RA 6657. Nevertheless, it was erroneous for private respondent to have filed
a Petition for Determination of Just Compensation with PARAD when the
remedy that she was seeking was for the deposit of the initial valuation that
the DAR and LBP should have made.
Contrary to the CAs ruling, the RTCs failure to distinguish between the
initial valuation that is contemplated in Sec. 16 of RA 6657 and the just
compensation subject of judicial determination is a gross and patent error that
can be considered as grave abuse of discretion. Gross abuse of discretion is
defined, as follows:
A special civil action for certiorari, under Rule 65, is an
independent action based on the specific grounds therein
provided and will lie only if there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary course of
law. A petition for certiorari will prosper only if grave abuse of
discretion is alleged and proved to exist. Grave abuse of
discretion, under Rule 65, has a specific meaning. It is the
arbitrary or despotic exercise of power due to passion,
prejudice or personal hostility; or the whimsical, arbitrary, or
capricious exercise of power that amounts to an evasion or
refusal to perform a positive duty enjoined by law or to act at
all in contemplation of law. For an act to be struck down as
having been done with grave abuse of discretion, the
abuse of discretion must be patent and gross.[25] x x x
(Emphasis supplied.)
It should also be pointed out that in the related Land Bank of the
Philippines v. Pagayatan,[26] the Court had found the presiding judge of the
RTC, Branch 16 in San Jose, Occidental Mindoro, herein respondent Judge
Ernesto P. Pagayatan, guilty of Gross Ignorance of the Law or Procedure and
Gross Misconduct for holding Teresita V. Tengco, Acting Chief of the Land
Compensation Department of the LBP, and Leticia Lourdes A. Camara, Chief of
the Land Compensation Department of the LBP, guilty of indirect contempt for
allegedly disobeying the very same Order dated March 4, 2005 of the RTC. In
that case, Court ruled:
The partiality of respondent was highlighted when, out
of his selective invocation of judicial courtesy, he refused to
resolve Leticia and Teresitas February 14, 2007 Urgent
Manifestation of Compliance and Motion and other pending

incidents in view of the pendency before the appellate court of


the LBPs Omnibus Motion praying for, among other things, the
quashal of the warrant of arrest, whereas he had earlier found
Leticia and Teresita guilty of contempt despite the pendency
before the appellate court of LBPs motion for reconsideration
of the dismissal of the petition in CA-G.R. SP No. 93206.
Evidently, the RTC had already acted with partiality in deciding the case and
with grave abuse of discretion.
Moreover, in order to give life and breath to Sec. 16 of RA 6657, as well as
DAR Administrative Order No. 02, Series of 1996, the Court is constrained to
direct the DAR and the LBP to make the initial valuation of the subject land as
of the time of its taking and to deposit the valuation in the name of the
landowner or his estate, in accordance with RA 6657 and the pertinent
decisions of this Court on the matter.
The length of time that has elapsed that the landowner has not received any
compensation for the land cannot justify the release of the PARAD valuation to
the landowner. Sec. 16 of RA 6657 only allows the release of the initial
valuation of the DAR and the LBP to the landowner prior to the determination
by the courts of the final just compensation due. Besides, it must be stressed
that it was only sometime in 2003 that the assignee of the landowner filed a
petition for determination of just compensation with the PARAD.Clearly, the
landowner slept on his right to demand payment of the initial valuation of the
land. Nevertheless, such lapse of time demands that the DAR and the LBP act
with dispatch in determining such initial valuation and to deposit it in favor of
the landowner at the soonest possible time.
WHEREFORE, the petition is GRANTED. The CAs August 17, 2006
Decision and March 27, 2007 Resolution in CA-G.R. SP No. 93206 are
hereby REVERSED andSET ASIDE. The DAR and the LBP are hereby given
three (3) months from receipt of notice that this Decision has become final and
executory, within which to determine the initial valuation of the subject lot and
to deposit its initial value to the account of private respondent Lubrica.
The PARAD Decision dated March 21, 2003 in Case No. DCN-04050022-02 is hereby ANNULLED and SET ASIDE. The RTC Order dated March 4,
2005 in Agrarian Case No. 1390 is also ANNULLED and SET ASIDE.
No costs.
SO ORDERED.

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