AGRARIAN REFORM AND SOCIAL LEGISLATION CASES – FULL TEXTS

1.

Natalia Realty Inc. vs DAR

G.R. No. 103302, August 12, 1993

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as

approved by the Housing and Land Use Regulatory Board and its precursor
agencies 1 prior to 15 June 1988, 2 covered by R.A. 6657, otherwise known
as the Comprehensive Agrarian Reform Law of 1988? This is the pivotal
issue in this petition for certiorari assailing the Notice of Coverage 3 of the
Department of Agrarian Reform over parcels of land already reserved as
townsite areas before the enactment of the law.

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

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312

hectares of land located in the Municipalities of Antipolo, San Mateo and
Montalban as townsite areas to absorb the population overspill in the
metropolis which were designated as the Lungsod Silangan Townsite. The
NATALIA properties are situated within the areas proclaimed as townsite
reservation.

Since private landowners were allowed to develop their properties into low-
cost housing subdivisions within the reservation, petitioner Estate
Developers and Investors Corporation (EDIC, for brevity), as developer of
NATALIA properties, applied for and was granted preliminary approval and
locational clearances by the Human Settlements Regulatory Commission.
The necessary permit for Phase I of the subdivision project, which consisted
of 13.2371 hectares, was issued sometime in 1982; 4 for Phase II, with an
area of 80,000 hectares, on 13 October 1983; 5 and for Phase III, which
consisted of the remaining 31.7707 hectares, on 25 April 1986. 6 Petitioner
were likewise issued development permits 7 after complying with the
requirements. Thus the NATALIA properties later became the Antipolo Hills
Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive

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

EDIC also protested to respondent Director Wilfredo Leano of the DAR

Region IV Office and twice wrote him requesting the cancellation of the
Notice of Coverage.

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok

Antipolo, Inc. (SAMBA, for the brevity), filed a complaint against NATALIA
and EDIC before the DAR Regional Adjudicator to restrain petitioners from
developing areas under cultivation by SAMBA members. 8 The Regional
Adjudicator temporarily restrained petitioners from proceeding with the
development of the subdivision. Petitioners then moved to dismiss the
complaint; it was denied. Instead, the Regional Adjudicator issued on 5
March 1991 a Writ of Preliminary Injunction.

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

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform

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

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

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

The petition is impressed with merit. A cursory reading of the Preliminary

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

Petitioners first secured favorable recommendations from the Lungsod

Silangan Development Corporation, the agency tasked to oversee the
implementation of the development of the townsite reservation, before
applying for the necessary permits from the Human Settlements Regulatory

Commission. 10 And, in all permits granted to petitioners, the Commission

stated invariably therein that the applications were in "conformance" 11 or

"conformity" 12 or "conforming" 13 with the implementing Standards, Rules
and Regulations of P.D. 957. Hence, the argument of public respondents that
not all of the requirements were complied with cannot be sustained.

As a matter of fact, there was even no need for petitioners to secure a

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

The implementing Standards, Rules and Regulations of P.D. 957 applied to

all subdivisions and condominiums in general. On the other hand,
Presidential Proclamation No. 1637 referred only to the Lungsod Silangan
Reservation, which makes it a special law. It is a basic tenet in statutory
construction that between a general law and a special law, the latter
prevails. 14

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

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

Based on the foregoing, it is clear that the undeveloped portions of the

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

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

. . . Agricultural lands refers to those devoted to agricultural activity as

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

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

Be that as it may, the Secretary of Justice, responding to a query by the

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

Anent the argument that there was failure to exhaust administrative

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

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

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

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage

of 22 November 1990 by virtue of which undeveloped portions of the
Antipolo Hills Subdivision were placed under CARL coverage is hereby SET
ASIDE.

SO ORDERED.
2.

Association of Small Landowners in the Philippines vs Secretary of

DAR
G.R. Nos. 78742, 79310, 79744, 79777

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and

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

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

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

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

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

The Constitution of 1987 was not to be outdone. Besides echoing these

sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere
provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform
program:

SEC. 4. The State shall, by law, undertake an agrarian reform program

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

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

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

Subsequently, with its formal organization, the revived Congress of the

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

The above-captioned cases have been consolidated because they involve

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

G.R. No. 79777

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

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

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

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

In connection with the determination of just compensation, the petitioners

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

In considering the rentals as advance payment on the land, the executive

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

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

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

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

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

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

G.R. No. 79310

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

The petitioners claim that the power to provide for a Comprehensive

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

They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known
as the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive
Agrarian Reform Program from 1987 to 1992 which shall be sourced from
the receipts of the sale of the assets of the Asset Privatization Trust and
Receipts of sale of ill-gotten wealth received through the Presidential
Commission on Good Government and such other sources as government
may deem appropriate. The amounts collected and accruing to this special
fund shall be considered automatically appropriated for the purpose
authorized in this Proclamation the amount appropriated is in futuro, not in
esse. The money needed to cover the cost of the contemplated expropriation
has yet to be raised and cannot be appropriated at this time.

Furthermore, they contend that taking must be simultaneous with payment

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

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

A motion for intervention was filed on August 27,1987 by the National

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

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

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

establish by clear and convincing evidence the necessity for the exercise of
the powers of eminent domain, and the violation of the fundamental right to
own property.

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

In his consolidated Comment, the Solicitor General first invokes the

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

On the alleged violation of the equal protection clause, the sugar planters
have failed to show that they belong to a different class and should be
differently treated. The Comment also suggests the possibility of Congress
first distributing public agricultural lands and scheduling the expropriation of
private agricultural lands later. From this viewpoint, the petition for
prohibition would be premature.
The public respondent also points out that the constitutional prohibition is
against the payment of public money without the corresponding
appropriation. There is no rule that only money already in existence can be
the subject of an appropriation law. Finally, the earmarking of fifty billion
pesos as Agrarian Reform Fund, although denominated as an initial amount,
is actually the maximum sum appropriated. The word "initial" simply means
that additional amounts may be appropriated later when necessary.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on

his own behalf, assailing the constitutionality of E.O. No. 229. In addition to
the arguments already raised, Serrano contends that the measure is
unconstitutional because:

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

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

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

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

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of Agrarian

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

On September 3, 1986, the petitioner protested the erroneous inclusion of

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

The petitioner now argues that:

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

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

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

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

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

Lease rentals paid to the landowner by the farmer-beneficiary after October

21, 1972 shall be considered as advance payment for the land.

is an unconstitutional taking of a vested property right. It is also his

contention that the inclusion of even small landowners in the program along
with other landowners with lands consisting of seven hectares or more is
undemocratic.

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

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

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

G.R. No. 78742

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

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

No. 27:

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

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

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

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

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

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

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

In addition, the Constitution itself lays down stringent conditions for a

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

With particular regard to the requirement of proper party as applied in the

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

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers

were allowed to question the constitutionality of several executive orders
issued by President Quirino although they were invoking only an indirect and
general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the
transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must, technicalities
of procedure." We have since then applied this exception in many other
cases. 15
The other above-mentioned requisites have also been met in the present
petitions.

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

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

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

... when the judiciary mediates to allocate constitutional boundaries, it does

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

The cases before us categorically raise constitutional questions that this

Court must categorically resolve. And so we shall.

II

We proceed first to the examination of the preliminary issues before

resolving the more serious challenges to the constitutionality of the several
measures involved in these petitions.

The promulgation of P.D. No. 27 by President Marcos in the exercise of his

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

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

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

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

It should follow that the specific constitutional provisions invoked, to wit,

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

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

Retention Limits. — Except as otherwise provided in this Act, no person may

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

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

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

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

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

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

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

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

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

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

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

Recent trends, however, would indicate not a polarization but a mingling of

the police power and the power of eminent domain, with the latter being
used as an implement of the former like the power of taxation. The
employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the
University of Illinois College of Law (referring to the earlier case of Euclid v.
Ambler Realty Co., 272 US 365, which sustained a zoning law under the
police power) makes the following significant remarks:

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

The Berman case sustained a redevelopment project and the improvement

of blighted areas in the District of Columbia as a proper exercise of the
police power. On the role of eminent domain in the attainment of this
purpose, Justice Douglas declared:

If those who govern the District of Columbia decide that the Nation's Capital
should be beautiful as well as sanitary, there is nothing in the Fifth
Amendment that stands in the way.
Once the object is within the authority of Congress, the right to realize it
through the exercise of eminent domain is clear.

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

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3

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

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

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

of compensable taking is concerned. To the extent that the measures under
challenge merely prescribe retention limits for landowners, there is an
exercise of the police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation, it
becomes necessary to deprive such owners of whatever lands they may own
in excess of the maximum area allowed, there is definitely a taking under
the power of eminent domain for which payment of just compensation is
imperative. The taking contemplated is not a mere limitation of the use of
the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner
in favor of the farmer-beneficiary. This is definitely an exercise not of the
police power but of the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent

domain, the several measures before us are challenged as violative of the
due process and equal protection clauses.

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

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

Classification has been defined as the grouping of persons or things similar

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

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

It is worth remarking at this juncture that a statute may be sustained under

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

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

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

IV

Eminent domain is an inherent power of the State that enables it to forcibly

acquire private lands intended for public use upon payment of just
compensation to the owner. Obviously, there is no need to expropriate
where the owner is willing to sell under terms also acceptable to the
purchaser, in which case an ordinary deed of sale may be agreed upon by
the parties. 35 It is only where the owner is unwilling to sell, or cannot
accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the
State over the interests of the property owner. Private rights must then yield
to the irresistible demands of the public interest on the time-honored
justification, as in the case of the police power, that the welfare of the
people is the supreme law.

But for all its primacy and urgency, the power of expropriation is by no
means absolute (as indeed no power is absolute). The limitation is found in
the constitutional injunction that "private property shall not be taken for
public use without just compensation" and in the abundant jurisprudence
that has evolved from the interpretation of this principle. Basically, the
requirements for a proper exercise of the power are: (1) public use and (2)
just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No.
79310 that the State should first distribute public agricultural lands in the
pursuit of agrarian reform instead of immediately disturbing property rights
by forcibly acquiring private agricultural lands. Parenthetically, it is not
correct to say that only public agricultural lands may be covered by the
CARP as the Constitution calls for "the just distribution of all agricultural
lands." In any event, the decision to redistribute private agricultural lands in
the manner prescribed by the CARP was made by the legislative and
executive departments in the exercise of their discretion. We are not
justified in reviewing that discretion in the absence of a clear showing that it
has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As
explained by Chief Justice Concepcion in the case of Tañada v. Cuenco: 36

The term "political question" connotes what it means in ordinary parlance,

namely, a question of policy. It refers to "those questions which, under the
Constitution, are to be decided by the people in their sovereign capacity; or
in regard to which full discretionary authority has been delegated to the
legislative or executive branch of the government." It is concerned with
issues dependent upon the wisdom, not legality, of a particular measure.

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

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

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

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

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

The second requirement, i.e., the payment of just compensation, needs a

longer and more thoughtful examination.

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

It bears repeating that the measures challenged in these petitions

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

As held in Republic of the Philippines v. Castellvi, 42 there is compensable

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

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

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

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

Objection is raised, however, to the manner of fixing the just compensation,

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

... the DAR shall conduct summary administrative proceedings to determine

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

To be sure, the determination of just compensation is a function addressed

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

The method of ascertaining just compensation under the aforecited decrees

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

xxx

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

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the opportunity to prove that
the valuation in the tax documents is unfair or wrong. And it is repulsive to
the basic concepts of justice and fairness to allow the haphazard work of a
minor bureaucrat or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually viewed the
property, after evidence and arguments pro and con have been presented,
and after all factors and considerations essential to a fair and just
determination have been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not
suffer from the arbitrariness that rendered the challenged decrees
constitutionally objectionable. Although the proceedings are described as
summary, the landowner and other interested parties are nevertheless
allowed an opportunity to submit evidence on the real value of the property.
But more importantly, the determination of the just compensation by the
DAR is not by any means final and conclusive upon the landowner or any
other interested party, for Section 16(f) clearly provides:

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

The determination made by the DAR is only preliminary unless accepted by

all parties concerned. Otherwise, the courts of justice will still have the right
to review with finality the said determination in the exercise of what is
admittedly a judicial function.

The second and more serious objection to the provisions on just

compensation is not as easily resolved.

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

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

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

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

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

(b) For lands above twenty-four (24) hectares and up to fifty (50) hectares
— Thirty percent (30%) cash, the balance to be paid in government financial
instruments negotiable at any time.
(c) For lands twenty-four (24) hectares and below — Thirty-five percent
(35%) cash, the balance to be paid in government financial instruments
negotiable at any time.

(2) Shares of stock in government-owned or controlled corporations, LBP

preferred shares, physical assets or other qualified investments in
accordance with guidelines set by the PARC;

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

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

(a) Market interest rates aligned with 91-day treasury bill rates. Ten percent
(10%) of the face value of the bonds shall mature every year from the date
of issuance until the tenth (10th) year: Provided, That should the landowner
choose to forego the cash portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;

(b) Transferability and negotiability. Such LBP bonds may be used by the
landowner, his successors-in- interest or his assigns, up to the amount of
their face value, for any of the following:

(i) Acquisition of land or other real properties of the government, including

assets under the Asset Privatization Program and other assets foreclosed by
government financial institutions in the same province or region where the
lands for which the bonds were paid are situated;

(ii) Acquisition of shares of stock of government-owned or controlled

corporations or shares of stock owned by the government in private
corporations;

(iii) Substitution for surety or bail bonds for the provisional release of
accused persons, or for performance bonds;

(iv) Security for loans with any government financial institution, provided the
proceeds of the loans shall be invested in an economic enterprise, preferably
in a small and medium- scale industry, in the same province or region as the
land for which the bonds are paid;
(v) Payment for various taxes and fees to government: Provided, That the
use of these bonds for these purposes will be limited to a certain percentage
of the outstanding balance of the financial instruments; Provided, further,
That the PARC shall determine the percentages mentioned above;

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

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

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

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

The fundamental rule in expropriation matters is that the owner of the

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

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

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

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

The medium of payment of compensation is ready money or cash. The

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

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

"Just compensation" for property taken by condemnation means a fair

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

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

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

The expropriation before us affects all private agricultural lands whenever

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

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

We assume that the framers of the Constitution were aware of this difficulty
when they called for agrarian reform as a top priority project of the
government. It is a part of this assumption that when they envisioned the
expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less
conventional if more practical method. There can be no doubt that they were
aware of the financial limitations of the government and had no illusions that
there would be enough money to pay in cash and in full for the lands they
wanted to be distributed among the farmers. We may therefore assume that
their intention was to allow such manner of payment as is now provided for
by the CARP Law, particularly the payment of the balance (if the owner
cannot be paid fully with money), or indeed of the entire amount of the just
compensation, with other things of value. We may also suppose that what
they had in mind was a similar scheme of payment as that prescribed in P.D.
No. 27, which was the law in force at the time they deliberated on the new
Charter and with which they presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be
given the concept of just compensation as applied to the comprehensive
agrarian reform program being contemplated. There was the suggestion to
"fine tune" the requirement to suit the demands of the project even as it was
also felt that they should "leave it to Congress" to determine how payment
should be made to the landowner and reimbursement required from the
farmer-beneficiaries. Such innovations as "progressive compensation" and
"State-subsidized compensation" were also proposed. In the end, however,
no special definition of the just compensation for the lands to be
expropriated was reached by the Commission. 50

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

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

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

Admittedly, the compensation contemplated in the law will cause the

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

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

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

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

Title to property which is the subject of condemnation proceedings does not

vest the condemnor until the judgment fixing just compensation is entered
and paid, but the condemnor's title relates back to the date on which the
petition under the Eminent Domain Act, or the commissioner's report under
the Local Improvement Act, is filed. 51

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

In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases

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

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

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

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-

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

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

All qualified farmer-beneficiaries are now deemed full owners as of October

21, 1972 of the land they acquired by virtue of Presidential Decree No. 27.
(Emphasis supplied.)

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

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

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

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

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

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

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

By the decision we reach today, all major legal obstacles to the

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

WHEREFORE, the Court holds as follows:

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

2. Title to all expropriated properties shall be transferred to the State only

upon full payment of compensation to their respective owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27
are retained and recognized.

4. Landowners who were unable to exercise their rights of retention under

P.D. No. 27 shall enjoy the retention rights granted by R.A. No. 6657 under
the conditions therein prescribed.

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

without pronouncement as to costs.

SO ORDERED.

3.

Hacienda Luisita Inc. vs. Presidential Agrarian Reform Council

GR No. 171101 July 5, 2011

"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 a`dvanced, and agrarian reform laws enacted,
the latest being what is considered a comprehensive piece, the face of land
reform varies and is masked in myriads of ways. The stated goal, however,
remains the same: clear the way for the true freedom of the farmer. 3
Land reform, or the broader term "agrarian reform," has been a government
policy even before the Commonwealth era. In fact, at the onset of the
American regime, initial steps toward land reform were already taken to
address social unrest.4 Then, under the 1935 Constitution, specific provisions
on social justice and expropriation of landed estates for distribution to
tenants as a solution to land ownership and tenancy issues were
incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed,
setting in motion the expropriation of all tenanted estates. 5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was
enacted,6 abolishing share tenancy and converting all instances of share
tenancy into leasehold tenancy.7 RA 3844 created the Land Bank of the
Philippines (LBP) to provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-
cultivatorship in rice and corn, supposedly to be accomplished by
expropriating lands in excess of 75 hectares for their eventual resale to
tenants. The law, however, had this restricting feature: its operations were
confined mainly to areas in Central Luzon, and its implementation at any
level of intensity limited to the pilot project in Nueva Ecija. 8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389)
declaring the entire country a land reform area, and providing for the
automatic conversion of tenancy to leasehold tenancy in all areas. From 75
hectares, the retention limit was cut down to seven hectares.9
Barely a month after declaring martial law in September 1972, then
President Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for
the "emancipation of the tiller from the bondage of the soil." 10 Based on this
issuance, tenant-farmers, depending on the size of the landholding worked
on, can either purchase the land they tilled or shift from share to fixed-rent
leasehold tenancy.11 While touted as "revolutionary," the scope of the
agrarian reform program PD 27 enunciated covered only tenanted, privately-
owned rice and corn lands.12
Then came the revolutionary government of then President Corazon C.
Aquino and the drafting and eventual ratification of the 1987 Constitution.
Its provisions foreshadowed the establishment of a legal framework for the
formulation of an expansive approach to land reform, affecting all
agricultural lands and covering both tenant-farmers and regular
farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural
lands, regardless of tenurial arrangement and commodity produced, as
provided in the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing,
as its title14 indicates, the mechanisms for CARP implementation. It created
the Presidential Agrarian Reform Council (PARC) as the highest policy-
making body that formulates all policies, rules, and regulations necessary for
the implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of
1988, also known as CARL or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and distribution. As to be
expected, RA 6657 met stiff opposition, its validity or some of its provisions
challenged at every possible turn. Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform  15 stated the observation
that the assault was inevitable, the CARP being an untried and untested
project, "an experiment [even], as all life is an experiment," the Court said,
borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails
and seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No.
2006-34-0117 issued on December 22, 2005 and May 3, 2006, respectively,
as well as the implementing Notice of Coverage dated January 2, 2006
(Notice of Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once
a 6,443-hectare mixed agricultural-industrial-residential expanse straddling
several municipalities of Tarlac and owned by Compañia General de Tabacos
de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered
to sell Hacienda Luisita as well as their controlling interest in the sugar mill
within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible
transaction. The Tarlac Development Corporation (Tadeco), then owned
and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As
agreed upon, Tadeco undertook to pay the purchase price for Hacienda
Luisita in pesos, while that for the controlling interest in CAT, in US dollars. 19
To facilitate the adverted sale-and-purchase package, the Philippine
government, through the then Central Bank of the Philippines, assisted the
buyer to obtain a dollar loan from a US bank.20 Also, the Government Service
Insurance System (GSIS) Board of Trustees extended on November 27,
1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price
component of the sale. One of the conditions contained in the approving
GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series
of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any,
and whenever conditions should exist warranting such action under the
provisions of the Land Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacalera’s interest in CAT. 22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to
this narration and need no belaboring. Suffice it to state that on May 7,
1980, the martial law administration filed a suit before the Manila Regional
Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda
Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of
Agrarian Reform [DAR]) so that the land can be distributed to farmers at
cost. Responding, Tadeco or its owners alleged that Hacienda Luisita does
not have tenants, besides which sugar lands––of which the hacienda
consisted––are not covered by existing agrarian reform legislations. As
perceived then, the government commenced the case against Tadeco as a
political message to the family of the late Benigno Aquino, Jr. 23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the government’s case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially
instituted and won against Tadeco, et al. The dismissal action was, however,
made subject to the obtention by Tadeco of the PARC’s approval of a stock
distribution plan (SDP) that must initially be implemented after such
approval shall have been secured.24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the
x x x governmental agencies concerned in moving for the dismissal of the
case subject, however, to the following conditions embodied in the letter
dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as
follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for
failure to comply with all the requirements for corporate landowners set
forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to
initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without
prejudice, and should be revived if any of the conditions as above set forth is
not duly complied with by the TADECO. 25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an
alternative to the actual land transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of the corporation under
a stock ownership arrangement and/or land-to-share ratio.
Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of
which the corporate landowner can comply with CARP, but subject to well-
defined conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total assets, under
such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other
qualified beneficiaries under this section shall be deemed to have complied
with the provisions of this Act: Provided, That the following conditions are
complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks
to dividends and other financial benefits, the books of the corporation or
association shall be subject to periodic audit by certified public accountants
chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association,
the beneficiaries shall be assured of at least one (1) representative in the
board of directors, or in a management or executive committee, if one
exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the
same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void
ab initio unless said transaction is in favor of a qualified and registered
beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to
the compulsory coverage of this Act. (Emphasis added.)
Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR
issued Administrative Order No. 10, Series of 1988 (DAO
10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring
to Avail Themselves of the Stock Distribution Plan under Section 31 of RA
6657.
From the start, the stock distribution scheme appeared to be Tadeco’s
preferred option, for, on August 23, 1988,28 it organized a spin-off
corporation, HLI, as vehicle to facilitate stock acquisition by the
farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the
agricultural land portion (4,915.75 hectares) and other farm-related
properties of Hacienda Luisita in exchange for HLI shares of stock. 29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr.,
and Paz C. Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the
Securities and Exchange Commission’s (SEC’s) approval, increased its capital
stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares
with a par value of PhP 1/share to PhP 400,000,000 divided into
400,000,000 shares also with par value of PhP 1/share, 150,000,000 of
which were to be issued only to qualified and registered beneficiaries of the
CARP, and the remaining 250,000,000 to any stockholder of the
corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco
contributed to the capital stock of HLI, as appraised and approved by the
SEC, have an aggregate value of PhP 590,554,220, or after deducting the
total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP
1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of
the proposed HLI’s Stock Distribution Option Plan. On May 11, 1989, the
Stock Distribution Option Agreement (SDOA), styled as a Memorandum of
Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848
qualified 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.,"35 which was substantially based on the
SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989,
5,117 FWBs, out of 5,315 who participated, opted to receive shares in
HLI.36 One hundred thirty-two (132) chose actual land distribution. 37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago
(Sec. Defensor-Santiago) addressed a letter dated November 6, 1989 38 to
Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the
SDP be revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall
ensure that there will be no dilution in the shares of stocks of individual
[FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of
the percentage shareholdings of the [FWBs], i.e., that the 33%
shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the
[MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the
implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for
determining the actual number of seats to be allocated for the [FWBs] in the
HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of
homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly provided
for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago,
Tadeco/HLI explained that the proposed revisions of the SDP are already
embodied in both the SDP and MOA.39 Following that exchange, the PARC,
under then Sec. Defensor-Santiago, by Resolution No. 89-12-240 dated
November 21, 1989, approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master
list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to
the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe
benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500
hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and no
interest bearing salary/educational loans and rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land
of the hacienda from agricultural to industrial use, 43 pursuant to Sec. 65 of
RA 6657, providing:
SEC. 65. Conversion of Lands.¾After the lapse of five (5) years from its
award, when the land ceases to be economically feasible and sound for
agricultural purposes, or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial
purposes, the DAR, upon application of the beneficiary or the landowner,
with due notice to the affected parties, and subject to existing laws, may
authorize the reclassification, or conversion of the land and its disposition:
Provided, That the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs,
including respondent Rene Galang, and Jose Julio Suniga, as evidenced by
the Manifesto of Support they signed and which was submitted to the
DAR.44 After the usual processing, the DAR, thru then Sec. Ernesto Garilao,
approved the application on August 14, 1996, per DAR Conversion Order No.
030601074-764-(95), Series of 1996,45 subject to payment of three percent
(3%) of the gross selling price to the FWBs and to HLI’s continued
compliance with its undertakings under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000
shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300
hectares of the converted area to the latter.46 Consequently, HLI’s Transfer
Certificate of Title (TCT) No. 28791047 was canceled and TCT No.
29209148 was issued in the name of Centennary. HLI transferred the
remaining 200 hectares covered by TCT No. 287909 to Luisita Realty
Corporation (LRC)49 in two separate transactions in 1997 and 1998, both
uniformly involving 100 hectares for PhP 250 million each. 50
Centennary, a corporation with an authorized capital stock of PhP
12,100,000 divided into 12,100,000 shares and wholly-owned by HLI, had
the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita
C. Lopa, Ernesto G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial
Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the
purpose of developing an industrial complex. 52 As a result, Centennary’s TCT
No. 292091 was canceled to be replaced by TCT No. 310986 53 in the name of
LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels,
for which two (2) separate titles were issued in the name of LIPCO,
specifically: (a) TCT No. 365800 54 and (b) TCT No. 365801,55 covering 180
and four hectares, respectively. TCT No. 310986 was, accordingly, partially
canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004,
LIPCO transferred the parcels covered by its TCT Nos. 365800 and 365801
to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en
pago in payment of LIPCO’s PhP 431,695,732.10 loan obligations. LIPCO’s
titles were canceled and new ones, TCT Nos. 391051 and 391052, were
issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been
acquired by the government as part of the Subic-Clark-Tarlac Expressway
(SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the
original 4,915 hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both
undated, reached the DAR in the latter part of 2003. In the first,
denominated as Petition/Protest,57 respondents Jose Julio Suniga and
Windsor Andaya, identifying themselves as head of the Supervisory Group of
HLI (Supervisory Group), and 60 other supervisors sought to revoke the
SDOA, alleging that HLI had failed to give them their dividends and the one
percent (1%) share in gross sales, as well as the thirty-three percent (33%)
share in the proceeds of the sale of the converted 500 hectares of land. They
further claimed that their lives have not improved contrary to the promise
and rationale for the adoption of the SDOA. They also cited violations by HLI
of the SDOA’s terms.58 They prayed for a renegotiation of the SDOA, or, in
the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in
the hacienda were the call in the second petition, styled
as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4,
2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita
(AMBALA), where the handwritten name of respondents Rene Galang as
"Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As
alleged, the petition was filed on behalf of AMBALA’s members purportedly
composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group.
On the other hand, HLI’s answer62 to the AMBALA petition was contained in
its letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues
relating to the SDP of HLI. Among other duties, the Special Task Force was
mandated to review the terms and conditions of the SDOA and PARC
Resolution No. 89-12-2 relative to HLI’s SDP; evaluate HLI’s compliance
reports; evaluate the merits of the petitions for the revocation of the SDP;
conduct ocular inspections or field investigations; and recommend
appropriate remedial measures for approval of the Secretary. 63
After investigation and evaluation, the Special Task Force submitted its
"Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution
Plan (SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding
that HLI has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task
Force’s recommendations were adopted by then DAR Sec. Nasser
Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive
Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-
2 dated November 21, 1989 approving HLI’s SDP; and (b) the acquisition of
Hacienda Luisita through the compulsory acquisition scheme. Following
review, the PARC Validation Committee favorably endorsed the DAR
Secretary’s recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-
32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY
RESOLVED, to approve and confirm the recommendation of the PARC
Executive Committee adopting in toto the report of the PARC ExCom
Validation Committee affirming the recommendation of the DAR to
recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda
Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI
SDO plan be forthwith placed under the compulsory coverage or mandated
land acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the
resolution attached. A letter-request dated December 28, 2005 69 for certified
copies of said documents was sent to, but was not acted upon by, the PARC
secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration. 70 On the same
day, the DAR Tarlac provincial office issued the Notice of Coverage 71 which
HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what
it considers as the DAR’s hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration. 72 As HLI
later rued, it "can not know from the above-quoted resolution the facts and
the law upon which it is based."73
PARC would eventually deny HLI’s motion for reconsideration via Resolution
No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a
temporary restraining order,75 enjoining the implementation of Resolution
No. 2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed
its Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In
it, Mallari stated that he has broken away from AMBALA with other AMBALA
ex-members and formed Farmworkers Agrarian Reform Movement, Inc.
(FARM).78 Should this shift in alliance deny him standing, Mallari also prayed
that FARM be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other
FARM members, particularly would-be intervenors Renato Lalic, et al. As
things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel
Mallari faction and leaving Renato Lalic, et al. as the remaining members of
FARM who sought to intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang
faction submitted their Comment/Opposition dated December 17, 2006. 80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File
and Admit Attached Petition-In-Intervention dated October 18,
2007.81 LIPCO later followed with a similar motion.82 In both motions, RCBC
and LIPCO contended that the assailed resolution effectively nullified the
TCTs under their respective names as the properties covered in the TCTs
were veritably included in the January 2, 2006 notice of coverage. In the
main, they claimed that the revocation of the SDP cannot legally affect their
rights as innocent purchasers for value. Both motions for leave to intervene
were granted and the corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners
on oral arguments. On the other hand, the Court, on August 24, 2010, heard
public respondents as well as the respective counsels of the AMBALA-Mallari-
Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari;
the Supervisory Group, represented by Suniga and Andaya; and the United
Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a
joint submission and motion for approval of a Compromise Agreement
(English and Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an
amicable settlement, issued a Resolution84 creating a Mediation Panel
composed of then Associate Justice Ma. Alicia Austria-Martinez, as
chairperson, and former CA Justices Hector Hofileña and Teresita Dy-Liacco
Flores, as members. Meetings on five (5) separate dates, i.e., September 8,
9, 14, 20, and 27, 2010, were conducted. Despite persevering and
painstaking efforts on the part of the panel, mediation had to be
discontinued when no acceptable agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY
PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO
NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER
AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM
THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT
VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE
CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND
OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER THE CIVIL
CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x
ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO
NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE
SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE
PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID
PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO
THE SDOA ARE NOW GOVERNED BY THE CORPORATION CODE (BATAS
PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT
EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP
DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED
VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY
AS AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT
NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-INTERVENOR
RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR
RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING
PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN
INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights
over certain portions of the converted property, and, hence, would ascribe
on PARC the commission of grave abuse of discretion when it included those
portions in the notice of coverage. And apart from raising issues identical
with those of HLI, such as but not limited to the absence of valid grounds to
warrant the rescission and/or revocation of the SDP, LIPCO would allege that
the assailed resolution and the notice of coverage were issued without
affording it the right to due process as an innocent purchaser for value. The
government, LIPCO also argues, is estopped from recovering properties
which have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main
petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA
6657; (3) the jurisdiction of PARC to recall or revoke HLI’s SDP; (4) the
validity or propriety of such recall or revocatory action; and (5) corollary to
(4), the validity of the terms and conditions of the SDP, as embodied in the
SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving
on the more serious challenges bearing on the validity of PARC’s assailed
issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and
Rene Galang, who filed the revocatory petitions before the DAR. As HLI
would have it, Galang, the self-styled head of AMBALA, gained HLI
employment in June 1990 and, thus, could not have been a party to the
SDOA executed a year earlier.85 As regards the Supervisory Group, HLI
alleges that supervisors are not regular farmworkers, but the company
nonetheless considered them FWBs under the SDOA as a mere concession to
enable them to enjoy the same benefits given qualified regular farmworkers.
However, if the SDOA would be canceled and land distribution effected, so
HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded
from receiving lands as farmworkers other than the regular farmworkers
who are merely entitled to the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the
farmworkers who appear in the annual payroll, inclusive of the permanent
and seasonal employees, who are regularly or periodically employed by
[HLI]."88 Galang, per HLI’s own admission, is employed by HLI, and is, thus,
a qualified beneficiary of the SDP; he comes within the definition of a real
party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one
who stands to be benefited or injured by the judgment in the suit or is the
party entitled to the avails of the suit.
The same holds true with respect to the Supervisory Group whose members
were admittedly employed by HLI and whose names and signatures even
appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP,
Suniga and the other 61 supervisors are certainly parties who would benefit
or be prejudiced by the judgment recalling the SDP or replacing it with some
other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular
farmworkers, but are in the category of "other farmworkers" mentioned in
Sec. 4, Article XIII of the Constitution,89 thus only entitled to a share of the
fruits of the land, as indeed Fortich teaches, this does not detract from the
fact that they are still identified as being among the "SDP qualified
beneficiaries." As such, they are, thus, entitled to bring an action upon the
SDP.90 At any rate, the following admission made by Atty. Gener Asuncion,
counsel of HLI, during the oral arguments should put to rest any lingering
doubt as to the status of protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the
qualified farmer beneficiaries of Hacienda Luisita were real parties in
interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that
question refers to the complaints of protest initiated before the DAR and the
real party in interest there be considered as possessed by the farmer
beneficiaries who initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are
expressly allowed to represent themselves, their fellow farmers or their
organizations in any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x
xxxx
Responsible farmer leaders shall be allowed to represent themselves, their
fellow farmers or their organizations in any proceedings before the DAR:
Provided, however, that when there are two or more representatives for any
individual or group, the representatives should choose only one among
themselves to represent such party or group before any DAR proceedings.
(Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are
contextually real parties-in-interest allowed by law to file a petition before
the DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for
as records show and as HLI aptly noted,92 his "petisyon" filed with DAR did
not carry the usual authorization of the individuals in whose behalf it was
supposed to have been instituted. To date, such authorization document,
which would logically include a list of the names of the authorizing FWBs,
has yet to be submitted to be part of the records.
PARC’s Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI
maintains that PARC is without authority to revoke an SDP, for neither RA
6657 nor EO 229 expressly vests PARC with such authority. While, as HLI
argued, EO 229 empowers PARC to approve the plan for stock distribution in
appropriate cases, the empowerment only includes the power to disapprove,
but not to recall its previous approval of the SDP after it has been
implemented by the parties.93 To HLI, it is the court which has jurisdiction
and authority to order the revocation or rescission of the PARC-approved
SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to
approve the plan for stock distribution of the corporate landowner belongs to
PARC. However, contrary to petitioner HLI’s posture, PARC also has the
power to revoke the SDP which it previously approved. It may be, as urged,
that RA 6657 or other executive issuances on agrarian reform do not
explicitly vest the PARC with the power to revoke/recall an approved SDP.
Such power or authority, however, is deemed possessed by PARC under the
principle of necessary implication, a basic postulate that what is implied in a
statute is as much a part of it as that which is expressed.94
We have explained that "every statute is understood, by implication, to
contain all such provisions as may be necessary to effectuate its object and
purpose, or to make effective rights, powers, privileges or jurisdiction which
it grants, including all such collateral and subsidiary consequences as may
be fairly and logically inferred from its terms." 95 Further, "every statutory
grant of power, right or privilege is deemed to include all incidental power,
right or privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited
by the authority to grant the license, from which it is derived in the first
place. Thus, if the FDA grants a license upon its finding that the applicant
drug store has complied with the requirements of the general laws and the
implementing administrative rules and regulations, it is only for their
violation that the FDA may revoke the said license. By the same token,
having granted the permit upon his ascertainment that the conditions
thereof as applied x x x have been complied with, it is only for the violation
of such conditions that the mayor may revoke the said permit. 97 (Emphasis
supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to
revoke or recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power
would reduce it into a toothless agency of CARP, because the very same
agency tasked to ensure compliance by the corporate landowner with the
approved SDP would be without authority to impose sanctions for non-
compliance with it.98 With the view We take of the case, only PARC can effect
such revocation. The DAR Secretary, by his own authority as such, cannot
plausibly do so, as the acceptance and/or approval of the SDP sought to be
taken back or undone is the act of PARC whose official composition includes,
no less, the President as chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP
has been implemented would impair the contractual obligations created
under the SDOA.
The broad sweep of HLI’s argument ignores certain established legal
precepts and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the non-
impairment guarantee. There is, in that instance, no impingement of the
impairment clause, the non-impairment protection being applicable only to
laws that derogate prior acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties. Impairment, in fine, obtains if
a subsequent law changes the terms of a contract between the parties,
imposes new conditions, dispenses with those agreed upon or withdraws
existing remedies for the enforcement of the rights of the
parties.100 Necessarily, the constitutional proscription would not apply to laws
already in effect at the time of contract execution, as in the case of RA 6657,
in relation to DAO 10, vis-à-vis HLI’s SDOA. As held in Serrano v. Gallant
Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned
with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however,
as to laws already in existence, their provisions are read into contracts and
deemed a part thereof. Thus, the non-impairment clause under Section 10,
Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing
that "[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as
such, a breach of its terms and conditions is not a PARC administrative
matter, but one that gives rise to a cause of action cognizable by regular
courts.102 This contention has little to commend itself. The SDOA is a special
contract imbued with public interest, entered into and crafted pursuant to
the provisions of RA 6657. It embodies the SDP, which requires for its
validity, or at least its enforceability, PARC’s approval. And the fact that the
certificate of compliance103––to be issued by agrarian authorities upon
completion of the distribution of stocks––is revocable by the same issuing
authority supports the idea that everything about the implementation of the
SDP is, at the first instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to
the Corporation Code, instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should be the applicable law on
the disposition of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the
parties to the SDOA embodying the SDP are primarily governed by RA 6657.
It should abundantly be made clear that HLI was precisely created in order
to comply with RA 6657, which the OSG aptly described as the "mother law"
of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to shield itself
from the coverage of CARP by invoking exclusive applicability of the
Corporation Code under the guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since
the FWBs of HLI are also stockholders, its applicability is limited as the rights
of the parties arising from the SDP should not be made to supplant or
circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other
hand, RA 6657 is the special law on agrarian reform. As between a general
and special law, the latter shall prevail—generalia specialibus non
derogant.105 Besides, the present impasse between HLI and the private
respondents is not an intra-corporate dispute which necessitates the
application of the Corporation Code. What private respondents questioned
before the DAR is the proper implementation of the SDP and HLI’s
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to
the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the eventual distribution of the land
to the FWBs would amount to a disposition of all or practically all of the
corporate assets of HLI. HLI would add that this contingency, if ever it
comes to pass, requires the applicability of the Corporation Code provisions
on corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution
would apply insofar as the winding up of HLI’s affairs or liquidation of the
assets is concerned. However, the mere inclusion of the agricultural land of
Hacienda Luisita under the coverage of CARP and the land’s eventual
distribution to the FWBs will not, without more, automatically trigger the
dissolution of HLI. As stated in the SDOA itself, the percentage of the value
of the agricultural land of Hacienda Luisita in relation to the total assets
transferred and conveyed by Tadeco to HLI comprises only 33.296%,
following this equation: value of the agricultural lands divided by total
corporate assets. By no stretch of imagination would said percentage
amount to a disposition of all or practically all of HLI’s corporate assets
should compulsory land acquisition and distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP
sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special Task Force, as
endorsed by PARC Excom. But first, the matter of the constitutionality of
said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords
the corporation, as a mode of CARP compliance, to resort to stock
distribution, an arrangement which, to FARM, impairs the fundamental right
of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution. 106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine,
there is stock certificate ownership of the farmers or farmworkers instead of
them owning the land, as envisaged in the Constitution. For FARM, this
modality of distribution is an anomaly to be annulled for being inconsistent
with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the
Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in
this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term
"agrarian reform." The constitutionality of a law, HLI added, cannot, as here,
be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and
necessarily its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over,
and pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are
first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the case. 108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM,
composed of a small minority of 27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 3l of RA 6657, since as early as
November 21, l989 when PARC approved the SDP of Hacienda Luisita or at
least within a reasonable time thereafter and why its members received
benefits from the SDP without so much of a protest. It was only on
December 4, 2003 or 14 years after approval of the SDP via PARC Resolution
No. 89-12-2 dated November 21, 1989 that said plan and approving
resolution were sought to be revoked, but not, to stress, by FARM or any of
its members, but by petitioner AMBALA. Furthermore, the AMBALA petition
did NOT question the constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the subsequent
implementation of the SDP. Even the public respondents, as represented by
the Solicitor General, did not question the constitutionality of the provision.
On the other hand, FARM, whose 27 members formerly belonged to
AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it
filed its Supplemental Comment with the Court. Thus, it took FARM some
eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The
FARM members slept on their rights and even accepted benefits from the
SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon
which the benefits were derived. The Court cannot now be goaded into
resolving a constitutional issue that FARM failed to assail after the lapse of a
long period of time and the occurrence of numerous events and activities
which resulted from the application of an alleged unconstitutional legal
provision.
It has been emphasized in a number of cases that the question of
constitutionality will not be passed upon by the Court unless it is properly
raised and presented in an appropriate case at the first opportunity. 109 FARM
is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31
of RA 6657. The second requirement that the constitutional question should
be raised at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must
be the very lis mota of the case does not likewise obtain. The lis mota aspect
is not present, the constitutional issue tendered not being critical to the
resolution of the case. The unyielding rule has been to avoid, whenever
plausible, an issue assailing the constitutionality of a statute or
governmental act.110 If some other grounds exist by which judgment can be
made without touching the constitutionality of a law, such recourse is
favored.111 Garcia v. Executive Secretary explains why:
Lis Mota — the fourth requirement to satisfy before this Court will undertake
judicial review — means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed
of on some other ground, such as the application of the statute or the
general law. The petitioner must be able to show that the case cannot be
legally resolved unless the constitutional question raised is determined. This
requirement is based on the rule that every law has in its favor the
presumption of constitutionality; to justify its nullification, there must be a
clear and unequivocal breach of the Constitution, and not one that is
doubtful, speculative, or argumentative. 112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken
by AMBALA (to which the FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by HLI with the conditions
of the SDP to support a plea for its revocation. And before the Court, the lis
mota is whether or not PARC acted in grave abuse of discretion when it
ordered the recall of the SDP for such non-compliance and the fact that the
SDP, as couched and implemented, offends certain constitutional and
statutory provisions. To be sure, any of these key issues may be resolved
without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover,
looking deeply into the underlying petitions of AMBALA, et al., it is not the
said section per se that is invalid, but rather it is the alleged application of
the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending
Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis-à-vis the
stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of
RA 9700 provides: "[T]hat after June 30, 2009, the modes of acquisition
shall be limited to voluntary offer to sell and compulsory acquisition." Thus,
for all intents and purposes, the stock distribution scheme under Sec. 31 of
RA 6657 is no longer an available option under existing law. The question of
whether or not it is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve
constitutional issues otherwise already moot and academic 114 provided the
following requisites are present:
x x x first, there is a grave violation of the Constitution; second, the
exceptional character of the situation and the paramount public interest is
involved; third, when the constitutional issue raised requires formulation of
controlling principles to guide the bench, the bar, and the public; fourth, the
case is capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4,
Article XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on
the right of the farmers and regular farmworkers, who are landless, to OWN
directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the
State shall encourage and undertake the just distribution of all agricultural
lands, subject to such priorities and reasonable retention limits as the
Congress may prescribe, taking into account ecological, developmental, or
equity considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-
sharing. (Emphasis supplied.)
The wording of the provision is unequivocal––the farmers and regular
farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS
THEY TILL. The basic law allows two (2) modes of land distribution—direct
and indirect ownership. Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted. Indirect transfer
through collective ownership of the agricultural land is the alternative to
direct ownership of agricultural land by individual farmers. The aforequoted
Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language
can be found in the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. The word "collective" is defined
as "indicating a number of persons or things considered as constituting one
group or aggregate,"115 while "collectively" is defined as "in a collective sense
or manner; in a mass or body."116 By using the word "collectively," the
Constitution allows for indirect ownership of land and not just outright
agricultural land transfer. This is in recognition of the fact that land reform
may become successful even if it is done through the medium of juridical
entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec.
29 allows workers’ cooperatives or associations to collectively own the land,
while the second paragraph of Sec. 31 allows corporations or associations to
own agricultural land with the farmers becoming stockholders or members.
Said provisions read:
SEC. 29. Farms owned or operated by corporations or other business
associations.—In the case of farms owned or operated by corporations or
other business associations, the following rules shall be observed by the
PARC.
In general, lands shall be distributed directly to the individual worker-
beneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker beneficiaries who shall form a
workers’ cooperative or association which will deal with the corporation or
business association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners.— x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total assets, under
such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks
are distributed be reduced. The same principle shall be applied to
associations, with respect to their equity or participation. x x x (Emphasis
supplied.)
Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated
from individual farmers, are authorized vehicles for the collective ownership
of agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31
is constitutional as it simply implements Sec. 4 of Art. XIII of the
Constitution that land can be owned COLLECTIVELY by farmers. Even the
framers of the l987 Constitution are in unison with respect to the two (2)
modes of ownership of agricultural lands tilled by farmers––DIRECT and
COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean
the principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal
ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers’
cooperatives, do the farmers own specific areas of land where they only
unite in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems
involved: the "moshave" type of agriculture and the "kibbutz." So are both
contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin ng
mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin
nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama
nilang sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively
the lands they till," is this land for the tillers rather than land for the
landless? Before, we used to hear "land for the landless," but now the slogan
is "land for the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang
ibig sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands
kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang
ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang
lupain o isang bukid, katulad ng sitwasyon sa Negros. 117 (Emphasis
supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural
land "sama-sama" or collectively. Thus, the main requisite for collective
ownership of land is collective or group work by farmers of the agricultural
land. Irrespective of whether the landowner is a cooperative, association or
corporation composed of farmers, as long as concerted group work by the
farmers on the land is present, then it falls within the ambit of collective
ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a
commitment on the part of the State to pursue, by law, an agrarian reform
program founded on the policy of land for the landless, but subject to such
priorities as Congress may prescribe, taking into account such abstract
variable as "equity considerations." The textual reference to a law and
Congress necessarily implies that the above constitutional provision is not
self-executory and that legislation is needed to implement the urgently
needed program of agrarian reform. And RA 6657 has been enacted
precisely pursuant to and as a mechanism to carry out the constitutional
directives. This piece of legislation, in fact, restates 118 the agrarian reform
policy established in the aforementioned provision of the Constitution of
promoting the welfare of landless farmers and farmworkers. RA 6657 thus
defines "agrarian reform" as "the redistribution of lands … to farmers and
regular farmworkers who are landless … to lift the economic status of the
beneficiaries and all other arrangements alternative to the physical
redistribution of lands, such as production or profit sharing, labor
administration and the distribution of shares of stock which will allow
beneficiaries to receive a just share of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised
under Sec. 31 of RA 6657 hews with the agrarian reform policy, as
instrument of social justice under Sec. 4 of Article XIII of the Constitution.
Albeit land ownership for the landless appears to be the dominant theme of
that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as
couched, does not constrict Congress to passing an agrarian reform law
planted on direct land transfer to and ownership by farmers and no other, or
else the enactment suffers from the vice of unconstitutionality. If the
intention were otherwise, the framers of the Constitution would have worded
said section in a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer
features, is not inconsistent with the State’s commitment to farmers and
farmworkers to advance their interests under the policy of social justice. The
legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective
ownership by which the imperatives of social justice may, in its estimation,
be approximated, if not achieved. The Court should be bound by such policy
choice.
FARM contends that the farmers in the stock distribution scheme under Sec.
31 do not own the agricultural land but are merely given stock certificates.
Thus, the farmers lose control over the land to the board of directors and
executive officials of the corporation who actually manage the land. They
conclude that such arrangement runs counter to the mandate of the
Constitution that any agrarian reform must preserve the control over the
land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not
directly own the land, still, the Corporation Code is clear that the FWB
becomes a stockholder who acquires an equitable interest in the assets of
the corporation, which include the agricultural lands. It was explained that
the "equitable interest of the shareholder in the property of the corporation
is represented by the term stock, and the extent of his interest is described
by the term shares. The expression shares of stock when qualified by words
indicating number and ownership expresses the extent of the owner’s
interest in the corporate property."119 A share of stock typifies an aliquot part
of the corporation’s property, or the right to share in its proceeds to that
extent when distributed according to law and equity and that its holder is not
the owner of any part of the capital of the corporation. 120 However, the FWBs
will ultimately own the agricultural lands owned by the corporation when the
corporation is eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land
operated and managed by the corporation, a reading of the second
paragraph of Sec. 31 shows otherwise. Said provision provides that qualified
beneficiaries have "the right to purchase such proportion of the capital stock
of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company’s total assets." The wording of
the formula in the computation of the number of shares that can be bought
by the farmers does not mean loss of control on the part of the farmers. It
must be remembered that the determination of the percentage of the capital
stock that can be bought by the farmers depends on the value of the
agricultural land and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA
6657. The policy on agrarian reform is that control over the agricultural land
must always be in the hands of the farmers. Then it falls on the shoulders of
DAR and PARC to see to it the farmers should always own majority of the
common shares entitled to elect the members of the board of directors to
ensure that the farmers will have a clear majority in the board. Before the
SDP is approved, strict scrutiny of the proposed SDP must always be
undertaken by the DAR and PARC, such that the value of the agricultural
land contributed to the corporation must always be more than 50% of the
total assets of the corporation to ensure that the majority of the members of
the board of directors are composed of the farmers. The PARC composed of
the President of the Philippines and cabinet secretaries must see to it that
control over the board of directors rests with the farmers by rejecting the
inclusion of non-agricultural assets which will yield the majority in the board
of directors to non-farmers. Any deviation, however, by PARC or DAR from
the correct application of the formula prescribed by the second paragraph of
Sec. 31 of RA 6675 does not make said provision constitutionally infirm.
Rather, it is the application of said provision that can be challenged. Ergo,
Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring
control by the farmers.
A view has been advanced that there can be no agrarian reform unless there
is land distribution and that actual land distribution is the essential
characteristic of a constitutional agrarian reform program. On the contrary,
there have been so many instances where, despite actual land distribution,
the implementation of agrarian reform was still unsuccessful. As a matter of
fact, this Court may take judicial notice of cases where FWBs sold the
awarded land even to non-qualified persons and in violation of the
prohibition period provided under the law. This only proves to show that the
mere fact that there is land distribution does not guarantee a successful
implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old pastoral model of
land ownership where non-human juridical persons, such as corporations,
were prohibited from owning agricultural lands are no longer realistic under
existing conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a
collective manner through a cooperative or corporation. The former is too
often left to his own devices when faced with failing crops and bad weather,
or compelled to obtain usurious loans in order to purchase costly fertilizers
or farming equipment. The experiences learned from failed land reform
activities in various parts of the country are lack of financing, lack of farm
equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of
farm-to-market roads, among others. Thus, at the end of the day, there is
still no successful implementation of agrarian reform to speak of in such a
case.
Although success is not guaranteed, a cooperative or a corporation stands in
a better position to secure funding and competently maintain the agri-
business than the individual farmer. While direct singular ownership over
farmland does offer advantages, such as the ability to make quick decisions
unhampered by interference from others, yet at best, these advantages only
but offset the disadvantages that are often associated with such ownership
arrangement. Thus, government must be flexible and creative in its mode of
implementation to better its chances of success. One such option is
collective ownership through juridical persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution,
the requirement that the instant case be capable of repetition yet evading
review is also wanting. It would be speculative for this Court to assume that
the legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with
the exercise by Congress of its official functions, the heavy presumption
being that a law is the product of earnest studies by Congress to ensure that
no constitutional prescription or concept is infringed. 121 Corollarily, courts will
not pass upon questions of wisdom, expediency and justice of legislation or
its provisions. Towards this end, all reasonable doubts should be resolved in
favor of the constitutionality of a law and the validity of the acts and
processes taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided,
an unequivocal breach of, or a clear conflict with the Constitution, not
merely a doubtful or argumentative one, must be demonstrated in such a
manner as to leave no doubt in the mind of the Court. In other words, the
grounds for nullity must be beyond reasonable doubt. 123 FARM has not
presented compelling arguments to overcome the presumption of
constitutionality of Sec. 31 of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an
alternative mode of implementing agrarian reform is not for judicial
determination. Established jurisprudence tells us that it is not within the
province of the Court to inquire into the wisdom of the law, for, indeed, We
are bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the
premises of the revocation or recall of HLI’s SDP. Or to be more precise, the
inquiry should be: whether or not PARC gravely abused its discretion in
revoking or recalling the subject SDP and placing the hacienda under CARP’s
compulsory acquisition and distribution scheme.
The findings, analysis and recommendation of the DAR’s Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian reform,
Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARC’s revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of
the FWBs have hardly improved and the promised increased income has not
materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours
worked––or the so-called "man days"––is grossly onerous to the FWBs, as
HLI, in the guise of rotation, can unilaterally deny work to anyone. In
elaboration of this ground, PARC’s Resolution No. 2006-34-01, denying HLI’s
motion for reconsideration of Resolution No. 2005-32-01, stated that the
man days criterion worked to dilute the entitlement of the original share
beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross
sales every year as production-sharing benefit on top of the workers’ salary;
and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests
on solid grounds set forth in the Terminal Report, a position shared by
AMBALA, which, in some pleadings, is represented by the same counsel as
that appearing for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation
of the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10.
And training its sight on the resulting dilution of the equity of the FWBs
appearing in HLI’s masterlist, FARM would state that the SDP, as couched
and implemented, spawned disparity when there should be none; parity
when there should have been differentiation. 126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates
the agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to
enhance the dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.¾It is the policy of the
State to pursue a Comprehensive Agrarian Reform Program (CARP). The
welfare of the landless farmers and farm workers will receive the highest
consideration to promote social justice and to move the nation towards
sound rural development and industrialization, and the establishment of
owner cultivatorship of economic-sized farms as the basis of Philippine
agriculture.
To this end, a more equitable distribution and ownership of land, with due
regard to the rights of landowners to just compensation and to the ecological
needs of the nation, shall be undertaken to provide farmers and farm
workers with the opportunity to enhance their dignity and improve the
quality of their lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular
farm workers, who are landless, to own directly or collectively the lands they
till or, in the case of other farm workers, to receive a share of the fruits
thereof. To this end, the State shall encourage the just distribution of all
agricultural lands, subject to the priorities and retention limits set forth in
this Act, having taken into account ecological, developmental, and equity
considerations, and subject to the payment of just compensation. The State
shall respect the right of small landowners and shall provide incentives for
voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a
more equitable distribution and ownership of land x x x shall be undertaken
to provide farmers and farm workers with the opportunity to enhance their
dignity and improve the quality of their lives through greater productivity of
agricultural lands." Of note is the term "opportunity" which is defined as a
favorable chance or opening offered by circumstances. 127 Considering this,
by no stretch of imagination can said provision be construed as a guarantee
in improving the lives of the FWBs. At best, it merely provides for a
possibility or favorable chance of uplifting the economic status of the FWBs,
which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA
6657 and DAO 10, a violation of which would justify discarding the stock
distribution option. Nothing in that option agreement, law or department
order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs,
during the regime of the SDP (1989-2005), some PhP 3 billion by way of
salaries/wages and higher benefits exclusive of free hospital and medical
benefits to their immediate family. And attached as Annex "G" to HLI’s
Memorandum is the certified true report of the finance manager of Jose
Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA
LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos)
Since the Stock Option was Approved by PARC/CARP," detailing what HLI
gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages
& Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out
(Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in
the report, include the cost of homelots; the PhP 150 million or so
representing 3% of the gross produce of the hacienda; and the PhP 37.5
million representing 3% from the proceeds of the sale of the 500-hectare
converted lands. While not included in the report, HLI manifests having
given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land
traversed by the SCTEX.128 On top of these, it is worth remembering that the
shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs
have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as
HLI has not anyway earned profits through the years, it cannot be over-
emphasized that, as a matter of common business sense, no corporation
could guarantee a profitable run all the time. As has been suggested, one of
the key features of an SDP of a corporate landowner is the likelihood of the
corporate vehicle not earning, or, worse still, losing money. 129
The Court is fully aware that one of the criteria under DAO 10 for the PARC
to consider the advisability of approving a stock distribution plan is the
likelihood that the plan "would result in increased income and greater
benefits to [qualified beneficiaries] than if the lands were divided and
distributed to them individually."130 But as aptly noted during the oral
arguments, DAO 10 ought to have not, as it cannot, actually exact assurance
of success on something that is subject to the will of man, the forces of
nature or the inherent risky nature of business.131 Just like in actual land
distribution, an SDP cannot guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs. The Court can take judicial
notice of the fact that there were many instances wherein after a
farmworker beneficiary has been awarded with an agricultural land, he just
subsequently sells it and is eventually left with nothing in the end.
In all then, the onerous condition of the FWBs’ economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its
SDP and provide a valid ground for the plan’s revocation.
Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based,
infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without
relevance to the issue on the propriety of the assailed order revoking HLI’s
SDP, for the paragraph deals with the transfer of agricultural lands to the
government, as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries under
such terms and conditions, consistent with this Act, as they may agree,
subject to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31
provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such proportion of the
capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total assets, under
such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks
are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other
qualified beneficiaries under this section shall be deemed to have complied
with the provisions of this Act: Provided, That the following conditions are
complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks
to dividends and other financial benefits, the books of the corporation or
association shall be subject to periodic audit by certified public accountants
chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association,
the beneficiaries shall be assured of at least one (1) representative in the
board of directors, or in a management or executive committee, if one
exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the
same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void
ab initio unless said transaction is in favor of a qualified and registered
beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31
of RA 6657 refers to as that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company’s total assets" had been
observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to
Sec. 31 of RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00)
transferred and conveyed to the SECOND PARTY is 33.296% that, under the
law, is the proportion of the outstanding capital stock of the SECOND PARTY,
which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00
per share, that has to be distributed to the THIRD PARTY under the stock
distribution plan, the said 33.296% thereof being P118,391,976.85 or
118,391,976.85 shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s
other assets is PhP 393,924,220. The total value of HLI’s assets is,
therefore, PhP 590,554,220.132 The percentage of the value of the
agricultural lands (PhP 196,630,000) in relation to the total assets (PhP
590,554,220) is 33.296%, which represents the stockholdings of the 6,296
original qualified farmworker-beneficiaries (FWBs) in HLI. The total number
of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI
shares. This was arrived at by getting 33.296% of the 355,531,462 shares
which is the outstanding capital stock of HLI with a value of PhP
355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296
FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares
under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the
6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA
6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the
FWBs shall be assured of at least one (1) representative in the board of
directors or in a management or executive committee irrespective of the
value of the equity of the FWBs in HLI, the Court finds that the SDOA
contained provisions making certain the FWBs’ representation in HLI’s
governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an
irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND PARTY at the start of
said year which will empower the THIRD PARTY or their representative to
vote in stockholders’ and board of directors’ meetings of the SECOND PARTY
convened during the year the entire 33.296% of the outstanding capital
stock of the SECOND PARTY earmarked for distribution and thus be able to
gain such number of seats in the board of directors of the SECOND PARTY
that the whole 33.296% of the shares subject to distribution will be entitled
to.
Also, no allegations have been made against HLI restricting the inspection of
its books by accountants chosen by the FWBs; hence, the assumption may
be made that there has been no violation of the statutory prescription under
sub-paragraph (a) on the auditing of HLI’s accounts.
Public respondents, however, submit that the distribution of the mandatory
minimum ratio of land-to-shares of stock, referring to the 118,391,976.85
shares with par value of PhP 1 each, should have been made in full within
two (2) years from the approval of RA 6657, in line with the last paragraph
of Sec. 31 of said law.133
Public respondents’ submission is palpably erroneous. We have closely
examined the last paragraph alluded to, with particular focus on the two-
year period mentioned, and nothing in it remotely supports the public
respondents’ posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or
stock transfer envisioned above is not made or realized or the plan for such
stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to
the compulsory coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within
which the corporate landowner, to avoid land transfer as a mode of CARP
coverage under RA 6657, is to avail of the stock distribution option or to
have the SDP approved. The HLI secured approval of its SDP in November
1989, well within the two-year period reckoned from June 1988 when RA
6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2
of RA 6657 as well as the statutory issues, We shall now delve into what
PARC and respondents deem to be other instances of violation of DAO 10
and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda
Luisita unfragmented is also not among the imperative impositions by the
SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in
1989 to the PARC effectively assured the intended stock beneficiaries that
the physical integrity of the farm shall remain inviolate. Accordingly, the
Terminal Report and the PARC-assailed resolution would take HLI to task for
securing approval of the conversion to non-agricultural uses of 500 hectares
of the hacienda. In not too many words, the Report and the resolution view
the conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a.
that the continued operation of the corporation with its agricultural land
intact and unfragmented is viable with potential for growth and increased
profitability."
The PARC is wrong.
In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiaries––is but one
of the stated criteria to guide PARC in deciding on whether or not to accept
an SDP. Said Sec. 5(a) does not exact from the corporate landowner-
applicant the undertaking to keep the farm intact and unfragmented ad
infinitum. And there is logic to HLI’s stated observation that the key phrase
in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is
thus required is not the agricultural land remaining intact x x x but the
viability of the corporate operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable even if the corporate
agricultural land does not remain intact or [un]fragmented." 134
It is, of course, anti-climactic to mention that DAR viewed the conversion as
not violative of any issuance, let alone undermining the viability of Hacienda
Luisita’s operation, as the DAR Secretary approved the land conversion
applied for and its disposition via his Conversion Order dated August 14,
1996 pursuant to Sec. 65 of RA 6657 which reads:
Sec. 65. Conversion of Lands.¾After the lapse of five years from its award
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial purposes,
the DAR upon application of the beneficiary or landowner with due notice to
the affected parties, and subject to existing laws, may authorize the x x x
conversion of the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of
the gross production sales of the hacienda and pay dividends from profit, the
entries in its financial books tend to indicate compliance by HLI of the profit-
sharing equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due FWBs as
employees of the company and (b) the 3% of the gross selling price of the
converted land and that portion used for the SCTEX. A plausible evidence of
compliance or non-compliance, as the case may be, could be the books of
account of HLI. Evidently, the cry of some groups of not having received
their share from the gross production sales has not adequately been
validated on the ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when
supported by substantial evidence and are accorded due respect and weight,
especially when they are affirmed by the CA.135 However, such rule is not
absolute. One such exception is when the findings of an administrative
agency are conclusions without citation of specific evidence on which they
are based,136 such as in this particular instance. As culled from its Terminal
Report, it would appear that the Special Task Force rejected HLI’s claim of
compliance on the basis of this ratiocination:
The Task Force position: Though, allegedly, the Supervisory Group receives
the 3% gross production share and that others alleged that they received 30
million pesos still others maintain that they have not received anything yet.
Item No. 4 of the MOA is clear and must be followed. There is a distinction
between the total gross sales from the production of the land and the
proceeds from the sale of the land. The former refers to the fruits/yield of
the agricultural land while the latter is the land itself. The phrase "the
beneficiaries are entitled every year to an amount approximately equivalent
to 3% would only be feasible if the subject is the produce since there is at
least one harvest per year, while such is not the case in the sale of the
agricultural land. This negates then the claim of HLI that, all that the FWBs
can be entitled to, if any, is only 3% of the purchase price of the converted
land.
Besides, the Conversion Order dated 14 August 1996 provides that "the
benefits, wages and the like, presently received by the FWBs shall not in any
way be reduced or adversely affected. Three percent of the gross selling
price of the sale of the converted land shall be awarded to the beneficiaries
of the SDO." The 3% gross production share then is different from the 3%
proceeds of the sale of the converted land and, with more reason, the 33%
share being claimed by the FWBs as part owners of the Hacienda, should
have been given the FWBs, as stockholders, and to which they could have
been entitled if only the land were acquired and redistributed to them under
the CARP.
xxxx
The FWBs do not receive any other benefits under the MOA except the
aforementioned [(viz: shares of stocks (partial), 3% gross production sale
(not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent
on whether HLI has failed to comply with the 3% production-sharing
obligation or the 3% of the gross selling price of the converted land and the
SCTEX lot. In fact, it admits that the FWBs, though not all, have received
their share of the gross production sales and in the sale of the lot to SCTEX.
At most, then, HLI had complied substantially with this SDP undertaking and
the conversion order. To be sure, this slight breach would not justify the
setting to naught by PARC of the approval action of the earlier PARC. Even in
contract law, rescission, predicated on violation of reciprocity, will not be
permitted for a slight or casual breach of contract; rescission may be had
only for such breaches that are substantial and fundamental as to defeat the
object of the parties in making the agreement. 137
Despite the foregoing findings, the revocation of the approval of the SDP is
not without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations
or business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The
individual members of the cooperatives or corporations mentioned in the
preceding section shall be provided with homelots and small farmlots for
their family use, to be taken from the land owned by the cooperative or
corporation.
The "preceding section" referred to in the above-quoted provision is as
follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.¾In the case of farms owned or operated by corporations or
other business associations, the following rules shall be observed by the
PARC.
In general, lands shall be distributed directly to the individual worker-
beneficiaries.
In case it is not economically feasible and sound to divide the land, then it
shall be owned collectively by the worker-beneficiaries who shall form a
workers’ cooperative or association which will deal with the corporation or
business association. Until a new agreement is entered into by and between
the workers’ cooperative or association and the corporation or business
association, any agreement existing at the time this Act takes effect between
the former and the previous landowner shall be respected by both the
workers’ cooperative or association and the corporation or business
association.
Noticeably, the foregoing provisions do not make reference to corporations
which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it except by stipulation, as in
this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and
without charge among the qualified family-beneficiaries x x x residential or
homelots of not more than 240 sq. m. each, with each family beneficiary
being assured of receiving and owning a homelot in the barrio or barangay
where it actually resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was
approved by PARC, and yet, it is still the contention of the FWBs that not all
was given the 240-square meter homelots and, of those who were already
given, some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the
foregoing allegation by submitting proof that the FWBs were already given
the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer
beneficiaries, the qualified family beneficiaries were not given the 240
square meters each. So, can you also [prove] that the qualified family
beneficiaries were already provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing
that all the qualified beneficiaries have received homelots was submitted by
HLI. Hence, this Court is constrained to rule that HLI has not yet fully
complied with its undertaking to distribute homelots to the FWBs under the
SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and
timelines of stock distribution, We find that it violates two (2) provisions of
DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND
PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the basis of number of days
worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY that are presently owned
and held by the FIRST PARTY, until such time as the entire block of
118,391,976.85 shares shall have been completely acquired and distributed
to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock
to the FWBs, albeit not entailing a cash out from them, is contingent on the
number of "man days," that is, the number of days that the FWBs have
worked during the year. This formula deviates from Sec. 1 of DAO 10, which
decrees the distribution of equal number of shares to the FWBs as the
minimum ratio of shares of stock for purposes of compliance with Sec. 31 of
RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries. This distribution plan in
all cases, shall be at least the minimum ratio for purposes of compliance
with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority,
salary, position and other circumstances which may be deemed desirable as
a matter of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The
first pertains, as earlier explained, to the mandatory minimum ratio of
shares of stock to be distributed to the FWBs in compliance with Sec. 31 of
RA 6657. This minimum ratio contemplates of that "proportion of the capital
stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total assets." 139 It is
this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed
to be allocated "for the distribution of an equal number of shares of stock of
the same class and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a
gratuitous extra grant, meaning that this set or category constitutes an
augmentation share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the management, in
the exercise of its sound discretion, may deem desirable. 140
Before anything else, it should be stressed that, at the time PARC approved
HLI’s SDP, HLI recognized 6,296 individuals as qualified FWBs. And under
the 30-year stock distribution program envisaged under the plan, FWBs who
came in after 1989, new FWBs in fine, may be accommodated, as they
appear to have in fact been accommodated as evidenced by their receipt of
HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs
shall depend on the number of "man days," HLI violated the afore-quoted
rule on stock distribution and effectively deprived the FWBs of equal shares
of stock in the corporation, for, in net effect, these 6,296 qualified FWBs,
who theoretically had given up their rights to the land that could have been
distributed to them, suffered a dilution of their due share entitlement. As has
been observed during the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to water down the
shares of the original 6,296 FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would
have happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: That’s the only point I want to know x x x. Now, but they
chose to enter SDOA instead of placing the land under CARP. And for that
reason those who would have gotten their shares of the land actually gave
up their rights to this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to
own the land because that way the government takes own [sic] the land and
distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of
HLI to the farmers at that time that numbered x x x those who signed five
thousand four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers
came in from 1989, 1990, 1991, 1992 and the rest of the years that you
gave additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have
belong to them in 1989 when the land was supposed to have been placed
under CARP?
Atty. Dela Merced: If you are talking or referring… (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your
Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give
up? None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original… (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands
would be diluted, because the company has chosen to use the shares as
reward system for new workers who come in? It is not that the new workers,
in effect, become just workers of the corporation whose stockholders were
already fixed. The TADECO who has shares there about sixty six percent
(66%) and the five thousand four hundred ninety eight (5,498) farmers at
the time of the SDOA? Explain to me. Why, why will you x x x what right or
where did you get that right to use this shares, to water down the shares of
those who should have been benefited, and to use it as a reward system
decided by the company?142
From the above discourse, it is clear as day that the original 6,296 FWBs,
who were qualified beneficiaries at the time of the approval of the SDP,
suffered from watering down of shares. As determined earlier, each original
FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition
and distribution of the HLI shares were based on "man days" or "number of
days worked" by the FWB in a year’s time. As explained by HLI, a beneficiary
needs to work for at least 37 days in a fiscal year before he or she becomes
entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does
not get any share at year end. The number of HLI shares distributed varies
depending on the number of days the FWBs were allowed to work in one
year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs,
such that, as indicated in the Compliance dated August 2, 2010 submitted
by HLI to the Court, the total number of farmworkers of HLI as of said date
stood at 10,502. All these farmworkers, which include the original 6,296
FWBs, were given shares out of the 118,931,976.85 HLI shares representing
the 33.296% of the total outstanding capital stock of HLI. Clearly, the
minimum individual allocation of each original FWB of 18,804.32 shares was
diluted as a result of the use of "man days" and the hiring of additional
farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly
providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an
arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11
provides for the implementation of the approved stock distribution plan
within three (3) months from receipt by the corporate landowner of the
approval of the plan by PARC. In fact, based on the said provision, the
transfer of the shares of stock in the names of the qualified FWBs should be
recorded in the stock and transfer books and must be submitted to the SEC
within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.¾The approved stock
distribution plan shall be implemented within three (3) months from
receipt by the corporate landowner-applicant of the approval thereof by the
PARC, and the transfer of the shares of stocks in the names of the qualified
beneficiaries shall be recorded in stock and transfer books and submitted to
the Securities and Exchange Commission (SEC) within sixty (60) days from
the said implementation of the stock distribution plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is,
the distribution of the shares of stock to the FWBs, must be made within
three (3) months from receipt by HLI of the approval of the stock
distribution plan by PARC. While neither of the clashing parties has made a
compelling case of the thrust of this provision, the Court is of the view and
so holds that the intent is to compel the corporate landowner to complete,
not merely initiate, the transfer process of shares within that three-month
timeframe. Reinforcing this conclusion is the 60-day stock transfer recording
(with the SEC) requirement reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is
practical, for the three-month threshold. Remove this timeline and the
corporate landowner can veritably evade compliance with agrarian reform by
simply deferring to absurd limits the implementation of the stock distribution
scheme.
The argument is urged that the thirty (30)-year distribution program is
justified by the fact that, under Sec. 26 of RA 6657, payment by
beneficiaries of land distribution under CARP shall be made in thirty (30)
annual amortizations. To HLI, said section provides a justifying dimension to
its 30-year stock distribution program.
HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act
shall be paid for by the beneficiaries to the LBP in thirty (30) annual
amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that
what is involved is stock distribution, it is the corporate landowner who has
the obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within
which to pay the cost of the land thus awarded them to make it less
cumbersome for them to pay the government. To be sure, the reason
underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as
the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49
of RA 6657, the PARC and the DAR have the power to issue rules and
regulations, substantive or procedural. Being a product of such rule-making
power, DAO 10 has the force and effect of law and must be duly complied
with.143 The PARC is, therefore, correct in revoking the SDP. Consequently,
the PARC Resolution No. 89-12-2 dated November 21, l989 approving the
HLI’s SDP is nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly
pray for the exclusion from the coverage of the assailed PARC resolution
those portions of the converted land within Hacienda Luisita which RCBC and
LIPCO acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the
converted farm land. Thus, their plea for the exclusion of that portion from
PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of
Coverage dated January 2, 2006, which called for mandatory CARP
acquisition coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land
in Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while
ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO
purchased the entire three hundred (300) hectares of land from Centennary
for the purpose of developing the land into an industrial
complex.144 Accordingly, the TCT in Centennary’s name was canceled and a
new one issued in LIPCO’s name. Thereafter, said land was subdivided into
two (2) more parcels of land. Later on, LIPCO transferred about 184
hectares to RCBC by way of dacion en pago, by virtue of which TCTs in the
name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every
registered owner receiving a certificate of title in pursuance of a decree of
registration and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and enumerated
therein."145
It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of such burdens and
claims as are annotated on the title. This principle admits of certain
exceptions, such as when the party has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such
inquiry, or when the purchaser has knowledge of a defect or the lack of title
in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation. 146 A higher
level of care and diligence is of course expected from banks, their business
being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without
notice that some other person has a right to, or interest in, such property at
the time of such purchase, or before he has notice of the claim or interest of
some other persons in the property. Good faith, or the lack of it, is in the
final analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily controlled by
the evidence as to the conduct and outward acts by which alone the inward
motive may, with safety, be determined. Truly, good faith is not a visible,
tangible fact that can be seen or touched, but rather a state or condition of
mind which can only be judged by actual or fancied tokens or signs.
Otherwise stated, good faith x x x refers to the state of mind which is
manifested by the acts of the individual concerned. 148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in
such property; and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has notice of the
claim of another.
It can rightfully be said that both LIPCO and RCBC are––based on the above
requirements and with respect to the adverted transactions of the converted
land in question––purchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares
of industrial land, there was no notice of any supposed defect in the title of
its transferor, Centennary, or that any other person has a right to or interest
in such property. In fact, at the time LIPCO acquired said parcels of land,
only the following annotations appeared on the TCT in the name of
Centennary: the Secretary’s Certificate in favor of Teresita Lopa, the
Secretary’s Certificate in favor of Shintaro Murai, and the conversion of the
property from agricultural to industrial and residential use. 149
The same is true with respect to RCBC. At the time it acquired portions of
Hacienda Luisita, only the following general annotations appeared on the
TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an
industrial estate; the Secretary’s Certificate in favor of Koji Komai and
Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee
the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the
lots that were previously covered by the SDP. Good faith "consists in the
possessor’s belief that the person from whom he received it was the owner
of the same and could convey his title. Good faith requires a well-founded
belief that the person from whom title was received was himself the owner
of the land, with the right to convey it. There is good faith where there is an
honest intention to abstain from taking any unconscientious advantage from
another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the
DAR conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were
validly converted to commercial or industrial purposes and for which said
lots were taken out of the CARP coverage subject of PARC Resolution No.
89-12-2 and, hence, can be legally and validly acquired by them. After all,
Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural
lands previously covered by CARP land acquisition "after the lapse of five (5)
years from its award when the land ceases to be economically feasible and
sound for agricultural purposes or the locality has become urbanized and the
land will have a greater economic value for residential, commercial or
industrial purposes." Moreover, DAR notified all the affected parties, more
particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes,
granted the conversion of 500 hectares of Hacienda Luisita pursuant to its
primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate
agrarian reform matters and its original exclusive jurisdiction over all
matters involving the implementation of agrarian reform. The DAR
conversion order became final and executory after none of the FWBs
interposed an appeal to the CA. In this factual setting, RCBC and LIPCO
purchased the lots in question on their honest and well-founded belief that
the previous registered owners could legally sell and convey the lots though
these were previously subject of CARP coverage. Ergo, RCBC and LIPCO
acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita
for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary
for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30,
1998.151 On the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of
RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired
rights which cannot just be disregarded by DAR, PARC or even by this Court.
As held in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of
purchasers in good faith, it is now of no moment that some irregularity
attended the issuance of the SPA, consistent with our pronouncement in
Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract
cannot be valid, is inapplicable in this case as it will directly contravene the
Torrens system of registration. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the cancellation
of the certificate. The effect of such outright cancellation will be to impair
public confidence in the certificate of title. The sanctity of the Torrens
system must be preserved; otherwise, everyone dealing with the property
registered under the system will have to inquire in every instance as to
whether the title had been regularly or irregularly issued, contrary to the
evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the
property. A purchaser in good faith holds an indefeasible title to the property
and he is entitled to the protection of the law.152 x x x (Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a
"cloistered institution removed" from the realities on the ground. To note,
the approval and issuances of both the national and local governments
showing that certain portions of Hacienda Luisita have effectively ceased,
legally and physically, to be agricultural and, therefore, no longer CARPable
are a matter of fact which cannot just be ignored by the Court and the DAR.
Among the approving/endorsing issuances: 154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan
of Tarlac favorably endorsing the 300-hectare industrial estate project of
LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996
issued in accordance with the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997,
approving LIPCO’s application for a mixed ecozone and proclaiming the three
hundred (300) hectares of the industrial land as a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of
Tarlac, approving the Final Development Permit for the Luisita Industrial
Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita
Industrial Park II Project issued by the Office of the Sangguniang Bayan of
Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997
issued for the proposed project of building an industrial complex on three
hundred (300) hectares of industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by
the HLURB on the project of Luisita Industrial Park II with an area of three
million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB
authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain
Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac,
Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No.
7916," designating the Luisita Industrial Park II consisting of three hundred
hectares (300 has.) of industrial land as a Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the
PEZA, stating that pursuant to Presidential Proclamation No. 1207 dated 22
April 1998 and Republic Act No. 7916, LIPCO has been registered as an
Ecozone Developer/Operator of Luisita Industrial Park II located in San
Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in
an economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie
indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No.
030601074-764-(95) issued in 1996 by then DAR Secretary Garilao had
effectively converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and
conversion order, both RCBC and LIPCO cannot be considered at fault for
believing that certain portions of Hacienda Luisita are industrial/commercial
lands and are, thus, outside the ambit of CARP. The PARC, and consequently
DAR, gravely abused its discretion when it placed LIPCO’s and RCBC’s
property which once formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as
part of the SCTEX, this should also be excluded from the compulsory
agrarian reform coverage considering that the transfer was consistent with
the government’s exercise of the power of eminent domain159 and none of
the parties actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of
PARC Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close
its eyes to certain "operative facts" that had occurred in the interim.
Pertinently, the "operative fact" doctrine realizes that, in declaring
a law or executive action null and void, or, by extension, no longer without
force and effect, undue harshness and resulting unfairness must be avoided.
This is as it should realistically be, since rights might have accrued in favor
of natural or juridical persons and obligations justly incurred in the
meantime.160 The actual existence of a statute or executive act is, prior to
such a determination, an operative fact and may have consequences which
cannot justly be ignored; the past cannot always be erased by a new judicial
declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect
to be given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to
be complied with. This is so as until after the judiciary, in an appropriate
case, declares its invalidity, it is entitled to obedience and respect. Parties
may have acted under it and may have changed their positions. What could
be more fitting than that in a subsequent litigation regard be had to what
has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact must be reckoned with. This
is merely to reflect awareness that precisely because the judiciary is the
government organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to a declaration of
nullity. It would be to deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision: "The actual
existence of a statute, prior to such a determination of [unconstitutionality],
is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The
effect of the subsequent ruling as to invalidity may have to be considered in
various aspects,––with respect to particular relations, individual and
corporate, and particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades
had passed since the PARC’s approval of the HLI’s SDP, in conjunction with
numerous activities performed in good faith by HLI, and the reliance by the
FWBs on the legality and validity of the PARC-approved SDP, perforce,
certain rights of the parties, more particularly the FWBs, have to be
respected pursuant to the application in a general way of the operative fact
doctrine.
A view, however, has been advanced that the operative fact doctrine is of
minimal or altogether without relevance to the instant case as it applies only
in considering the effects of a declaration of unconstitutionality of a statute,
and not of a declaration of nullity of a contract. This is incorrect, for this
view failed to consider is that it is NOT the SDOA dated May 11, 1989 which
was revoked in the instant case. Rather, it is PARC’s approval of the HLI’s
Proposal for Stock Distribution under CARP which embodied the SDP that
was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco,
HLI, and the qualified FWBs executed the SDOA. This agreement provided
the basis and mechanics of the SDP that was subsequently proposed and
submitted to DAR for approval. It was only after its review that the PARC,
through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-
12-2 approving the SDP. Considerably, it is not the SDOA which gave legal
force and effect to the stock distribution scheme but instead, it is the
approval of the SDP under the PARC Resolution No. 89-12-2 that gave it its
validity.
The above conclusion is bolstered by the fact that in Sec. Pangandaman’s
recommendation to the PARC Excom, what he proposed is the
recall/revocation of PARC Resolution No. 89-12-2 approving HLI’s SDP, and
not the revocation of the SDOA. Sec. Pangandaman’s recommendation was
favorably endorsed by the PARC Validation Committee to the PARC Excom,
and these recommendations were referred to in the assailed Resolution No.
2005-32-01. Clearly, it is not the SDOA which was made the basis for the
implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive acts––in this
case, the approval by PARC of the HLI proposal for stock distribution––is
well-settled in our jurisprudence. In Chavez v. National Housing
Authority,163 We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence
of the various agreements implementing the SMDRP is an operative fact that
can no longer be disturbed or simply ignored, citing Rieta v. People of the
Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of
Appeals, wherein it is stated that a legislative or executive act, prior to its
being declared as unconstitutional by the courts, is valid and must be
complied with, thus:
x x x           x x x          x x x
This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of
suspension, as we have no reason to do so, much less retroactively apply
such nullification to deprive private respondent of a compelling and valid
reason for not filing the leave application. For as we have held, a void act
though in law a mere scrap of paper nonetheless confers legitimacy upon
past acts or omissions done in reliance thereof. Consequently, the existence
of a statute or executive order prior to its being adjudged void is an
operative fact to which legal consequences are attached. It would indeed be
ghastly unfair to prevent private respondent from relying upon the order of
suspension in lieu of a formal leave application. (Citations omitted; Emphasis
supplied.)
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure
Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated
— General Order No. 60, issued by then President Ferdinand E. Marcos —
was subsequently declared by the Court, in Tañada v. Tuvera, 33 to have no
force and effect. Thus, he asserts, any evidence obtained pursuant thereto is
inadmissible in evidence.
We do not agree. In Tañada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing
therein how such a declaration might affect acts done on a presumption of
their validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank
to wit:
‘The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence
affording no basis for the challenged decree. . . . It is quite clear, however,
that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of
a statute, prior to [the determination of its invalidity], is an operative fact
and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
aspects — with respect to particular conduct, private and official. Questions
of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its previous application,
demand examination. These questions are among the most difficult of those
which have engaged the attention of courts, state and federal, and it is
manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.’
x x x           x x x          x x x
"Similarly, the implementation/enforcement of presidential decrees prior to
their publication in the Official Gazette is ‘an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be
erased by a new judicial declaration . . . that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.’"
The Chicot doctrine cited in Tañada advocates that, prior to the nullification
of a statute, there is an imperative necessity of taking into account its actual
existence as an operative fact negating the acceptance of "a principle of
absolute retroactive invalidity." Whatever was done while the legislative or
the executive act was in operation should be duly recognized and presumed
to be valid in all respects. The ASSO that was issued in 1979 under General
Order No. 60 — long before our Decision in Tañada and the arrest of
petitioner — is an operative fact that can no longer be disturbed or simply
ignored. (Citations omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it
revokes or recalls the SDP, what it actually revoked or recalled was the
PARC’s approval of the SDP embodied in Resolution No. 89-12-2.
Consequently, what was actually declared null and void was an executive
act, PARC Resolution No. 89-12-2,165 and not a contract (SDOA). It is,
therefore, wrong to say that it was the SDOA which was annulled in the
instant case. Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita
SDP are upheld, the revocation must, by application of the operative fact
principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot
turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the
SDOA (or the MOA), which became the basis of the SDP approved by PARC
per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to
2005, the FWBs were said to have received from HLI salaries and cash
benefits, hospital and medical benefits, 240-square meter homelots, 3% of
the gross produce from agricultural lands, and 3% of the proceeds of the
sale of the 500-hectare converted land and the 80.51-hectare lot sold to
SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22,
2005.166 On August 6, 20l0, HLI and private respondents submitted a
Compromise Agreement, in which HLI gave the FWBs the option of acquiring
a piece of agricultural land or remain as HLI stockholders, and as a matter of
fact, most FWBs indicated their choice of remaining as stockholders. These
facts and circumstances tend to indicate that some, if not all, of the FWBs
may actually desire to continue as HLI shareholders. A matter best left to
their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries
as of November 21, 1989 when the SDP was approved, they are not
accorded the right to acquire land but shall, however, continue as HLI
stockholders. All the benefits and 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 land’s value. There is merit in
the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has
been nullified, then all the lands subject of the SDP will automatically be
subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion
Order and the 80.51-hectare SCTEX lot acquired by the government from
the area covered by SDP, then HLI and its subsidiary, Centennary, shall be
liable to the FWBs for the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land to LRC in the amount
of PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its
subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the
consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP
80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the
sale of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We
also take into account the payment of taxes and expenses relating to the
transfer of the land and HLI’s statement that most, if not all, of the proceeds
were used for legitimate corporate purposes. In order to determine once and
for all whether or not all the proceeds were properly utilized by HLI and its
subsidiary, Centennary, DAR will engage the services of a reputable
accounting firm to be approved by the parties to audit the books of HLI to
determine if the proceeds of the sale of the 500-hectare land and the 80.51-
hectare SCTEX lot were actually used for legitimate corporate purposes,
titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it
is determined that there remains a balance from the proceeds of the sale,
then the balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of
the land from 1989. We disagree. It should not be forgotten that the FWBs
are also stockholders of HLI, and the benefits acquired by the corporation
from its possession and use of the land ultimately redounded to the FWBs’
benefit based on its business operations in the form of salaries, and other
fringe benefits under the CBA. To still require HLI to pay rent to the FWBs
will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the
SDP although it will no longer be operating under the SDP, but pursuant to
the Corporation Code as a private stock corporation. The non-agricultural
assets amounting to PhP 393,924,220 shall remain with HLI, while the
agricultural lands valued at PhP 196,630,000 with an original area of
4,915.75 hectares shall be turned over to DAR for distribution to the FWBs.
To be deducted from said area are the 500-hectare lot subject of the August
14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total area
of 6,886.5 square meters of individual lots that should have been distributed
to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that
will be transferred to DAR for land distribution to the FWBs. We find that the
date of the "taking" is November 21, 1989, when PARC approved HLI’s SDP
per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the
determination of just compensation. We cannot use May 11, 1989 when the
SDOA was executed, since it was the SDP, not the SDOA, that was approved
by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-
01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3,
2006, placing the lands subject of HLI’s SDP under compulsory coverage on
mandated land acquisition scheme of the CARP, are hereby AFFIRMED with
the MODIFICATION that the original 6,296 qualified FWBs shall have the
option to remain as stockholders of HLI. DAR shall immediately schedule
meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which
the FWBs will be asked to manifest, in secret voting, their choices in the
ballot, signing their signatures or placing their thumbmarks, as the case may
be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder
is entitled to 18,804.32 HLI shares, and, in case the HLI shares already
given to him or her is less than 18,804.32 shares, the HLI is ordered to issue
or distribute additional shares to complete said prescribed number of shares
at no cost to the FWB within thirty (30) days from finality of this Decision.
Other FWBs who do not belong to the original 6,296 qualified beneficiaries
are not entitled to land distribution and shall remain as HLI shareholders. All
salaries, benefits, 3% production share and 3% share in the proceeds of the
sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and
homelots already received by the 10,502 FWBs, composed of 6,296 original
FWBs and 4,206 non-qualified FWBs, shall be respected with no obligation to
refund or return them.
Within thirty (30) days after determining who from among the original FWBs
will stay as stockholders, DAR shall segregate from the HLI agricultural land
with an area of 4,915.75 hectares subject of PARC’s SDP-approving
Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the
August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX complex; and (c) the
aggregate area of 6,886.5 square meters of individual lots that each FWB is
entitled to under the CARP had he or she not opted to stay in HLI as a
stockholder. After the segregation process, as indicated, is done, the
remaining area shall be turned over to DAR for immediate land distribution
to the original qualified FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to
the FWBs who stayed with the corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200
hectares out of the 500 hectares covered by the August 14, 1996 Conversion
Order, the consideration of PhP 750,000,000 received by its owned
subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300
hectares of the aforementioned 500-hectare lot to Luisita Industrial Park
Corporation, and the price of PhP 80,511,500 paid by the government
through the Bases Conversion Development Authority for the sale of the
80.51-hectare lot used for the construction of the SCTEX road network. From
the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP
750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the
3% of the total gross sales from the production of the agricultural land and
the 3% of the proceeds of said transfers that were paid to the FWBs, the
taxes and expenses relating to the transfer of titles to the transferees, and
the expenditures incurred by HLI and Centennary Holdings, Inc. for
legitimate corporate purposes. For this purpose, DAR is ordered to engage
the services of a reputable accounting firm approved by the parties to audit
the books of HLI and Centennary Holdings, Inc. to determine if the PhP
1,330,511,500 proceeds of the sale of the three (3) aforementioned lots
were used or spent for legitimate corporate purposes. Any unspent or
unused balance as determined by the audit shall be distributed to the 6,296
original FWBs.
HLI is entitled to just compensation for the agricultural land that will be
transferred to DAR to be reckoned from November 21, 1989 per PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of
this judgment. It shall also submit, after submission of the compliance
report, quarterly reports on the execution of this judgment to be submitted
within the first 15 days at the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO TERESITA J. LEONARDO-DE

Associate Justice CASTRO
 Associate Justice

(On official leave)

ARTURO D. BRION
DIOSDADO M. PERALTA*
Associate Justice
Associate Justice

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified
that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice

4.

URBANO F. ESTRELLA, Petitioner, v. PRISCILLA P.
FRANCISCO, Respondent. G.R. No. 209384, June 27, 2016

DECISION

BRION, J.:

This petition for review on certiorari seeks to reverse and set aside

the November 28, 2012 resolution1 of the Court of Appeals (CA) in CA-
G.R. SP No. 121519.2 The CA dismissed petitioner Urbano F. Estrella's
(Estrella) appeal from the Department of Agrarian Reform Adjudication
Board's (DARAB) February 23, 2009 decision3 in DARAB Case No.
13185 which denied Estrella's right of redemption over an agricultural
landholding.

ANTECEDENTS

Lope Cristobal (Cristobal) was the owner of a twenty-three thousand nine

hundred and thirty-three square meter (23,933 sqm.) parcel of agricultural
Riceland (subject landholding) in Cacarong Matanda, Pandi, Bulacan,
covered by Transfer Certificate of Title (TCT) No. T-248106 of the Register of
Deeds of Bulacan. Estrella was the registered agricultural tenant-lessee of
the subject landholding.

On September 22, 1997, Cristobal sold the subject landholding to

respondent Priscilla Francisco (Francisco) for five hundred thousand pesos
(P500,000.00),4 without notifying Estrella.

Upon discovering the sale, Estrella sent Cristobal a demand letter dated
March 31, 1998, for the return of the subject landholding. 5 He also sent
Francisco a similar demand letter dated July 31, 1998. Neither Cristobal nor
Francisco responded to Estrella's demands.6chanrobleslaw

On February 12, 2001, Estrella filed a complaint7 against Cristobal and

Francisco for legal redemption, recovery, and maintenance of peaceful
possession before the Office of the Provincial Agrarian Reform Adjudicator
(PARAD). His complaint was docketed as DCN. R-03-02-2930'01.

Estrella alleged that the sale between Cristobal and Francisco was made
secretly and in bad faith, in violation of Republic Act No. (R.A.) 3844, the
Agricultural Land Reform Code (the Code).8 He insisted that he never waived
his rights as a registered tenant over the property and that he was willing to
match the sale price. Estrella concluded that as the registered tenant, he is
entitled to legally redeem the property from Francisco. He also manifested
his ability and willingness to deposit the amount of P500,000.00 with the
PARAD as the redemption price.9chanrobleslaw

Cristobal did not file an answer while Francisco denied all the allegations in
the complaint except for the fact of the sale.10 Francisco claimed that she
was an innocent purchaser in good faith because she only bought the
property after: (1) Cristobal assured her that there would be no problems
regarding the transfer of the property; and (2) Cristobal personally
undertook to compensate Estrella. Therefore, Estrella had no cause of action
against her.

On June 23, 2002, the PARAD rendered its decision recognizing Estrella's
right of redemption.11 The PARAD found that neither Cristobal nor Francisco
notified Estrella in writing of the sale. In the absence of such notice, an
agricultural lessee has a right to redeem the landholding from the buyer
pursuant to Section 12 of the Code.12chanrobleslaw

Francisco appealed the PARAD's decision to the DARAB where it was

docketed as DARAB Case No. 13185.

On February 23, 2009, the DARAB reversed the PARAD's decision and denied
Estrella the right of redemption.13 Citing Section 12 of the Code as amended,
the DARAB held that the right of redemption may be exercised within 180
days from written notice of the sale. Considering that more than three years
had lapsed between Estrella's discovery of the sale and his filing of the case
for redemption, the DARAB concluded that Estrella slept on his rights and
lost the right to redeem the landholding.

Estrella moved for reconsideration but the DARAB denied the motion.

On September 30, 2011, Estrella filed a motion before the CA to declare

himself as a pauper litigant and manifested his intention to file a petition for
review of the DARAB's decision.14 He alleged that he was living below the
poverty line and did not have sufficient money or property for food, shelter,
and other basic necessities.

On October 17, 2011, Estrella filed a petition for review 15 of the DARAB's
decision before the CA. The petition was docketed as CA-G.R. SP No.
121519.

Estrella emphasized that the purpose of the State in enacting the agrarian
reform laws is to protect the welfare of landless farmers and to promote
social justice towards establishing ownership over the agricultural land by
the tenant-lessees.16 He insisted that the DARAB erred in denying him the
right of redemption based on a technicality and that the redemption period
in Sec. 12 of the Code does not apply in his case because neither the lessor
nor the vendee notified him in writing of the sale. 17chanrobleslaw

On November 28, 2012, the CA dismissed Estrella's petition for review for
failure to show any reversible error in the DARAB's decision. 18 Estrella
received a copy of the CA's resolution on April 10, 2013. 19chanrobleslaw

On April 11, 2013, Estrella filed a motion for a twenty-day extension of time
(or until April 31, 2013) to file his motion for reconsideration of the
November 28, 2012 resolution.20chanrobleslaw

On April 30, 2013, Estrella requested another ten-day extension of time (or
until May 9, 2013) to file his motion for reconsideration. 21chanrobleslaw

On May 9, 2013, Estrella filed his Motion for Reconsideration arguing that his
right of redemption had not yet prescribed because he was not given written
notice of the sale to Francisco.22chanrobleslaw

On May 30, 2013, the CA denied Estrelia's motions for extension of time,
citing the rule that the reglementary period to file a motion for
reconsideration is non-extendible. 23 The CA likewise denied Estrelia's Motion
for Reconsideration.

Hence, the present recourse to this Court.

On August 23, 2013, Estrella filed a motion for extension of time to file his
petition for review and a motion to be declared as a pauper litigant. 24 We
granted both motions on October 13, 2013.

THE PARTIES' ARGUMENTS

Estrella argues that an agricultural tenant's right of redemption over the

landholding cannot prescribe when neither the lessor-seller nor the buyer
has given him written notice of the sale.

On the other hand, Francisco counters that Estrella failed to make a formal
tender of or to consign with the PARAD the redemption price as required
in Quiño v. Court of Appeals.25cralawred She also questioned the
genuineness of Estrelia's claim to be a pauper litigant. Francisco points out
that a person who claims to be willing to pay the redemption price of
P500,000.00 is not, by any stretch of the imagination, a
pauper.26chanrobleslaw

OUR RULING

We find no merit in the petition.

The use and ownership of property bears a social function, and all economic
agents are expected to contribute to the common good. 27 To this end,
property ownership and economic activity are always subject to the duty of
the State to promote distributive justice and intervene when the common
good requires.28chanrobleslaw
As early as 1973, the Philippines has already declared our goal of
emancipating agricultural tenants from the bondage of the soil. 29 The State
adopts a policy of promoting social justice, establishing owner cultivatorship
of economic-size farms as the basis of Philippine agriculture, and providing a
vigorous and systematic land resettlement and redistribution
program.30chanrobleslaw

In pursuit of land reform, the State enacted the Agricultural Land Reform

Code in 1963. The Code established an agricultural leasehold system that
replaced all existing agricultural share tenancy systems at that point.

The existence of an agricultural tenancy relationship between the lessor and

the lessee gives the latter rights that attach to the landholding, regardless of
whoever may subsequently become its owner.31 This strengthens the
security of tenure of the tenants and protects them from being dispossessed
of the landholding or ejected from their leasehold by the death of either the
lessor or of the tenant, the expiration of a term/period in the leasehold
contract, or the alienation of the landholding by the lessor. 32 If either party
dies, the leasehold continues to bind the lessor (or his heirs) in favor of the
tenant (or his surviving spouse/descendants). In case the lessor alienates
the land, the transferee is subrogated to the rights and substituted to the
obligations of the lessor-transferor. The agricultural leasehold subsists,
notwithstanding the resulting change in ownership of the landholding, and
the lessee's rights are made enforceable against the transferee or other
successor-in-interest of the original lessor.

To protect the lessee's security of tenure, the Code grants him the right of
pre-emption - the preferential right to buy the landholding under reasonable
terms and conditions if ever the agricultural lessor decides to sell it. 33 As an
added layer of protection, the Code also grants him the right to redeem the
landholding from the vendee in the event that the lessor sells it without the
lessee's knowledge.34chanrobleslaw

Originally, the lessee had a redemption period of two years from registration
of the sale:
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: 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. 35chanroblesvirtuallawlibrary
In Padasas v. Court of Appeals,36 we held that a lessee's actual knowledge of
the sale of the landholding is immaterial because the Code specifically and
definitively provides that the redemption period must be counted from the
registration of the sale. This ruling was subsequently affirmed in Manuel v.
Court of Appeals.37chanrobleslaw

In 1971, R.A. 6389 amended Section 12 of the Code and shortened the
redemption period:
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 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 one hundred eighty days from notice in writing
which shall be served by the vendee on all lessees affected and the
Department of Agrarian Reform upon the registration of the sale, and
shall have priority over any other right of legal redemption. The redemption
price shall be the reasonable price of the land at the time of the sale.

Upon the filing of the corresponding petition or request with the department
or corresponding case in court by the agricultural lessee or lessees, the
period of one hundred and eighty days shall cease to run.

Any petition or request for redemption shall be resolved within sixty days
from the filing thereof; otherwise, the said period shall start to run again.

The Department of Agrarian Reform shall initiate, while the Land Bank shall
finance, said redemption as in the case of pre-emption. 38 [emphases and
underscoring supplied]
In Mallari v. Court of Appeals,39 we held that the lessee's right of redemption
will not prescribe if he is not served written notice of the sale. We affirmed
this ruling in Springsun Management Systems v. Camerino40 and Planters
Development Bank v. Garcia.41chanrobleslaw

More recently in Po v. Dampal,42 we held that the failure of the vendee to
serve written notice of the sale to the lessee and the DAR prevents the
running of the 180-day redemption period; the lessee's constructive
knowledge of the sale does not dispense with the vendee's duty to give
written notice.
Simply put, Section 12 expressly states that the 180-day period must be
reckoned from written notice of sale. If the agricultural lessee was never
notified in writing of the sale of the landholding, there is yet no prescription
period to speak of.43chanrobleslaw

As the vendee, respondent Francisco had the express duty to serve written

notice on Estrella, the agricultural lessee, and on the DAR. Her failure to
discharge this legal duty prevented the commencement of the 180-day
redemption period. Francisco only gave written notice of the sale in her
answer44 before the PARAD wherein she admitted the fact of the sale.45 Thus,
Estrella timely exercised his right of redemption. To hold otherwise would
allow Francisco to profit from her own neglect to perform a legally mandated
duty.

However, despite the timely filing of the redemption suit, Estrella did not
validly exercise his right to redeem the property. As early as 1969 in Basbas
v. Entena,46 this Court had already held that the valid exercise of the right of
redemption requires either tender of the purchase price or valid consignation
thereof in Court:

the right of legal redemption must be exercised within specified time limits:
and the statutory periods would be rendered meaningless and of easy
evasion unless the redemptioner is required to make an actual tender in
good faith of what he believed to be the reasonable price of the land sought
to be redeemed. The existence of the right of redemption operates to
depress the market value of the land until the period expires, and to render
that period indefinite by permitting the tenant to file a suit for redemption,
with either party unable to foresee when final judgment will terminate the
action, would render nugatory the period of two years [now 180 days] fixed
by the statute for making the redemption and virtually paralyze any efforts
of the landowner to realize the value of his land. No buyer can be expected
to acquire it without any certainty as to the amount for which it may be
redeemed, so that he can recover at least his investment in case of
redemption. In the meantime, the landowner's needs and obligations cannot
be met. It is doubtful if any such result was intended by the statute, absent
clear wording to that effect.

The situation becomes worse when, as shown by the evidence in this case,
the redemptioner has no funds and must apply for them to the Land
Authority, which, in turn, must depend on the availability of funds from the
Land Bank. It then becomes practically certain that the landowner will not be
able to realize the value of his property for an indefinite time beyond the two
years’ redemption period.47chanroblesvirtuallawlibrary
After the amendment of Section 12 of the Code, a certification from the Land
Bank that it will finance the redemption will also suffice in lieu of tender of
payment or consignation.48chanrobleslaw

In the present case, Estrella manifested his willingness to pay the

redemption price but failed to tender payment or consign it with the PARAD
when he filed his complaint. To be sure, a tenant's failure to tender payment
or consign it in court upon filing the redemption suit is not necessarily fatal;
he can still cure the defect and complete his act of redemption by consigning
his payment with the court within the remaining prescriptive
period.49chanrobleslaw

Ordinarily, the 180-day redemption period begins to run from the date that
the vendee furnishes written notice of the sale to the lessee. The filing of a
petition or request for redemption with the DAR (through the PARAD)
suspends the running of the redemption period.

However, as the cases of Basbas and Almeda v. Court of Appeals50 - as well

the amendment to Section 12 of the Code - evidently show, Congress did
not intend the redemption period to be indefinite. This 180-day period
resumes running if the petition is not resolved within sixty
days.51chanrobleslaw

Because Francisco failed to serve Estrella written notice of the sale, Estrella's
180-day redemption period was intact when he filed the complaint before
the PARAD. The filing of the complaint prevented the running of the
prescription period and gave Estrella time to cure the defect of his
redemption through consignment of the redemption price.

After the lapse of sixty days, Estrella's 180-day redemption period began
running pursuant to Section 12 of the Code. Nevertheless, Estrella could still
have consigned payment within this 180-day period.

The exercise of the right of redemption must be made in accordance with the
law. Tender of the redemption price or its valid consignation must be made
within the prescribed redemption period.52 The reason for this rule is
simple:Ch
aOnly by such means can the buyer become certain that the offer to
redeem is one made seriously and in good faith. A buyer cannot be
expected to entertain an offer of redemption without attendant
evidence that the redemptioner can, and is willing to accomplish the
repurchase immediately. A different rule would leave the buyer open
to harassment by speculators or crackpots as well as to unnecessary
prolongation of the redemption period, contrary to the policy of the
law. While consignation of the tendered price is not always necessary
because legal redemption is not made to discharge a pre-existing debt, a
valid tender is indispensable, for the reasons already stated. Of course,
consignation of the price would remove all controversy as to the
redemptioner's ability to pay at the proper time. 53 [Emphasis supplied]
Unfortunately, even after the lapse of the 240 days (the 60-day freeze
period and the 180-day redemption period), there was neither tender nor
judicial consignation of the redemption price. Even though Estrella
repeatedly manifested his willingness to consign the redemption price, he
never actually did.

While Estrella exercised his right of redemption in a timely manner, the

redemption was ineffective because he failed to exercise this right in
accordance with the law. Notably, he had also repeatedly manifested his
inability to even pay judicial costs and docket fees. He has been declared
(twice) as a pauper litigant who was "living below the poverty threshold level
because of limited income."54 This casts considerable doubt on Estrella's
ability to pay the full price of the property. In sum, we have no choice but to
deny the petition.

The Agricultural Land Reform Code is a social legislation designed to

promote economic and social stability. It must be interpreted liberally to give
full force and effect to its clear intent, which is "to achieve a dignified
existence for the small farmers" and to make them "more independent, self-
reliant and responsible citizens, and a source of genuine strength in our
democratic society."55 Nevertheless, while we endeavor to protect the rights
of agricultural lessees, we must be mindful not to do so at the expense of
trampling upon the landowners' rights which are likewise protected by law.

WHEREFORE, we hereby DENY the petition for lack of merit; accordingly,

we AFFIRM the November 28, 2012 resolution of the Court of Appeals in
CA-G.R. SP No. 121519. No costs.
SO ORDERED.chanRoblesvirtualLawlibrary
5.

DEPARTMENT OF AGRARIAN REFORM, REPRESENTED BY OIC-

SECRETARY NASSER C. PANGANDAMAN, Petitioner,
vs.
THE COURT OF APPEALS AND BASILAN AGRICULTURAL TRADING
CORPORATION (BATCO), Respondents.

G.R. No, 170018               September 23, 2013

 DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 is the Decision2 dated September 6,

2005 of the Court of Appeals (CA) in CA-G.R. SP No. 55377 which: (a)
reversed and set aside the Order3 dated February 25, 1999 of the Secretary
of the Department of Agrarian Reform (DAR); (b) cancelled Transfer
Certificates of Title (TCT) Nos. T-1012,4 T-1013,5 and T-10146 in the name of
Malo-ong Canal Farmers Agrarian Reform Multi-Purpose Cooperative
(MCFARMCO); and (c) directed the Registry of Deeds of the Province of
Basilan (Basilan RD) to issue a new set of titles in favor of private
respondent Basilan Agriculture Trading Corporation (BATCO).

The Facts

BATCO was the owner of several parcels of agricultural land, with an

aggregate area of 206.5694 hectares (has.), situated in Malo-ong7 Canal,
Lamitan, Province of Basilan (Basilan) and covered by TCT Nos. T-7454, 8 T-
7455,9 and T-745610 (subject lands).11 On September 20, 1989, the aforesaid
lands were voluntarily offered for sale (VOS) to the government pursuant to
Section 1912 of Republic Act No. (RA) 6657,13 otherwise known as the
"Comprehensive Agrarian Reform Law of 1988," for a consideration of
₱12,360,000.00.14 In 1992, BATCO was notified15 that the 153.8801hectare
portion of the subject lands (subject portion), consisting of Lot Nos.3, 4, and
5, was being placed under the compulsory acquisition scheme by the DAR. 16

On January 6, 1993, BATCO reiterated its offer to sell the entire 206.5694
has. of the subject lands, but this time to include the improvements thereon,
and for a higher consideration of ₱32,000,000.00. 17 On May 6,1997, BATCO
received a Notice of Land Valuation and Acquisition18 dated April 15, 1997
from the DAR Provincial Agrarian Reform Officer (PARO),offering it the
amount of ₱7,501,228.39 for the subject portion.19 BATCO rejected20 the
valuation and opposed the same before the DAR Adjudication Board
(DARAB).21 In view of BATCO’s rejection, the DAR – following the procedure
under Section 16(e)22 of RA 6657 – directed the Land Bank of the Philippines
(LBP) to deposit the compensation in cash and in agrarian reform
bonds23 and thereafter requested24 the Basilan RD to issue TCTs in the name
of the Republic of the Philippines (Republic). In the meantime, the subject
portion was surveyed and the beneficiaries were accordingly identified. After
which, DAR Regional Director Rogelio E. Tamin (Director Tamin) directed the
PARO to generate and issue the corresponding Certificates of Land
Ownership (CLOAs) in favor of the identified beneficiaries even over BATCO's
protest.25
On February 9, 1998, then DAR Secretary Ernesto Garilao directed Director
Tamin and the PARO to proceed with the registration and distribution of the
CLOAs to the said identified beneficiaries.26

In a letter dated March 2, 1998 to Director Tamin,27 BATCO requested for

the exemption of the subject portion, citing the case of Luz Farms v. DAR
Secretary28 (Luz Farms) and DAR Administrative Order No. (AO) 09, Series
of 199329 (DAR AO 09-93).30 On May 6, 1998, BATCO filed before the DAR
Regional Office a petition31 for the exemption of the subject portion from the
coverage of the government's Comprehensive Agrarian Reform Program
(CARP). It alleged that almost all of the entire subject lands have been
devoted to cattle and livestock production since their acquisition
in1987,32 warranting their exemption from CARP coverage in accordance
with the ruling in Luz Farms and the provisions of DAR AO 09-93. It claimed
that as of March 15, 1998, there were 150 heads of cattle, 50 heads of
swine, and 50 heads of goats in the subject portion.33 Meanwhile, BATCO's
certificates of title over the foregoing were cancelled and new titles were
issued in the name of the Republic on July 17, 1998. 34

The DAR Regional Director’s Ruling

On August 12, 1998, Director Tamin issued an Order 35 (August 12,1998

Order) dismissing BATCO's petition, holding that based on the DAR's ocular
inspection/investigation, the subject portion was "not exclusively, directly
and actually used for livestock, poultry, and swine raising as of June15,
1988, the date of effectivity of RA 6657, and contrary to the spirit and intent
of DAR AO 09-93."36 Hence, the subject portion is not exempt from CARP
coverage. Moreover, under DAR AO 09, Series of 1990, VOS of lands to the
government, with the exception of lands within the retention limits, may no
longer be withdrawn.37

BATCO appealed38 to the Office of the DAR Secretary, reiterating 39 its claim
that the subject portion was devoted to cattle production prior to June 15,
1988 as evidenced by the appended certificates of ownership of large cattle
(certificates of livestock ownership) which, according to it," should have
been the major basis in the determination of whether or not a particular
landholding is devoted to such production, as claimed." 40

In the interim, the Republic's certificates of title were cancelled on October

6, 1998 with the registration of the CLOAs in the name of MCFARMCO for the
benefit of its 54 members. Accordingly, new certificates of title, 41 i.e. , TCT
Nos. T-1012, T-1013, and T-1014, were issued in favor of MCFARMCO.

The DAR Secretary’s Ruling

On February 25, 1999, then DAR Secretary Horacio R. Morales, Jr.
(Secretary Morales) issued an Order42 (February 25, 1999 Order), denying
the appeal on the ground that BATCO failed: 1) to present substantial
evidence to show that the subject portion was exclusively, directly and
actually used for livestock, poultry, and swine raising prior to June 15,
1988;and 2) to comply with the livestock and infrastructure requirements
under DAR AO 09-93.43 Secretary Morales observed that: (a) none of the
certificates of livestock ownership appended to the records predates the
effectivity of RA 6657;44 (b) more than half45 of the cattle "was registered
and presumably brought into the property only on March 13, 1998 onwards,
barely three months before BATCO filed its application for exemption with
the DAR Provincial Office on May 6, 1998"; 46 and (c) BATCO's act of
submitting the subject lands (including the subject portion) under the VOS
scheme is an admission that they were subject to CARP coverage. 47 Finding
that the act of changing or converting the lands to livestock, poultry and
swine raising after June 15, 1988 was without an approved conversion,
Secretary Morales directed the Municipal Agrarian Reform Officer concerned
to conduct an investigation48 for possible violations of Section73(c) and (e)
of RA 6657.49 BATCO filed a motion for reconsideration50 and a supplemental
motion,51 averring that prior to its acquisition of the subject lands from the
Marcelo Mendoza Development Corporation (Mendoza Plantation) on
February 4, 1987, the latter was already engaged in livestock raising and
had facilities such as shade/barn, feed storage, corals and gates, which
BATCO subsequently improved and developed.52

BATCO further admitted that only a portion (about 100 has.) of the subject
lands was devoted to livestock raising, for which the corresponding
exemption was prayed.53 It explained that the necessary documents were in
the possession of the previous owner, hence, it was unable to produce the
same before the DAR Regional Director.54 In support of the foregoing
motions, BATCO submitted,55 among others, Certificates of Ownership of
Large Cattle Nos. B-3144051 to B-314415056 dated between July 10, 1987 to
August 15, 1987,57 and the Joint Affidavit58 of barangay officials of
Barangays Tumakid, Maloong San Jose, Maloong Canal, and Buahan, all in
Lamitan, Basilan declaring that BATCO is engaged in large cattle raising.
Nonetheless, BATCO affirmed that it is still offering 100 has. of the subject
lands for the CARP.59

On August 31, 1999, Secretary Morales issued an Order60 denying BATCO's

motion for reconsideration. He gave no credence to the certificates of
livestock ownership belatedly submitted by BATCO, observing that the
absence of a sufficient justification for its failure to present such certificates
earlier casts doubt to their veracity and genuineness.61 Further, he held that
laches had set in, especially considering that the petition was filed only in
1998, or long after the orders for coverage were issued in 1992. 62 Finally, he
pointed out that BATCO failed to present proof that it has met the
infrastructure requirements under DAR AO 09-93. 63

The Proceedings Before the CA

BATCO's appeal was initially dismissed64 but subsequently reinstated by the

CA.65

On September 6, 2005, the CA issued a Decision66 reversing and setting

aside Secretary Morales’ February 25, 1999 Order. It ruled that estoppel
does not lie against BATCO considering that the pertinent law and
regulations did not provide for a prescriptive period for the filing of
exemption from CARP coverage.67 Moreover, in the light of Luz Farms, a
petition for exemption is not even necessary so long as the landholdings are
devoted to livestock, poultry, and swine raising, thus, rendering DAR AO09-
93 ineffective and inconsequential.68

The CA gave credence to BATCO's documentary evidence to support its claim

of the existence and presence of livestock in the lands in question starting
the year 1987 consisting of: (a) the Certification69 dated March 26,1998 of
the Municipal Agriculturist of Lamitan, Basilan (Municipal Agriculturist
Certification) as to the number of cattle found in the area; (b) the
photographs70 of the livestock therein allegedly taken on May 31, 2001and
July 5, 2005; and (c) the affidavits71 of former municipal mayors72 of
Lamitan, Basilan – namely, Wilfrido C. Furigay and Ramon Garcia, Jr. –
attesting to the existence and presence of livestock in the subject lands
starting the year 1987. The CA likewise condemned the cancellation of
BATCO's certificates of title prior to full payment of the compensation and
prior to the decision on the petition for exemption as violative of BATCO's
right to procedural and substantive due process.73 Corollarily, the CA
cancelled TCT Nos. T-1012, T-1013 and T-1014 in the name of MCFARMCO
and directed the Basilan RD to issue a new set of titles in BATCO's favor. 74

The Issue Before the Court

The essential issue in this case is whether or not the CA gravely abused its
discretion in excluding/exempting the subject lands from CARP coverage
despite BATCO's admission that only a portion thereof was devoted to
livestock raising and considering its previous voluntary offer of the lands to
the government under the VOS scheme.

The Court's Ruling

The petition is meritorious.

Under RA 6657, the CARP shall cover all public and private agricultural
lands, including other lands of the public domain suitable for agriculture,
regardless of tenurial arrangement and commodity produced. 75 Section 3(c)
thereof defines "agricultural land" as land devoted to agricultural activity and
not classified as mineral, forest, residential, commercial or industrial land.
Lands devoted to livestock, poultry, and swine raising are classified as
industrial, not agricultural lands and, thus, exempt from agrarian reform. As
such, the DAR has no power to regulate livestock farms. 76

Nevertheless, the determination of the land’s classification as either an

agricultural or industrial land – and, in turn, whether or not the land falls
under agrarian reform exemption – must be preliminarily threshed out
before the DAR, particularly, before the DAR Secretary. Verily, issues of
exclusion or exemption partake the nature of Agrarian Law Implementation
(ALI)cases which are well within the competence and jurisdiction of the DAR
Secretary.77 Towards this end, the latter is ordained to exercise his legal
mandate of excluding or exempting a property from CARP coverage based
on the factual circumstances of each case and in accordance with the law
and applicable jurisprudence.78 Thus, considering too his technical expertise
on the matter, courts cannot simply brush aside his pronouncements
regarding the status of the land in dispute, i.e., as to whether or not it falls
under CARP coverage. As held in DAR v. Oroville Development Corp.: 79

We cannot simply brush aside the DAR’s pronouncements regarding the

status of the subject property as not exempt from CARP coverage
considering that the DAR has unquestionable technical expertise on these
matters. Factual findings of administrative agencies are generally accorded
respect and even finality by this Court, if such findings are supported by
substantial evidence, a situation that obtains in this case. The factual
findings of the Secretary of Agrarian Reform who, by reason of his official
position, has acquired expertise in specific matters within his jurisdiction,
deserve full respect and, without justifiable reason, ought not to be altered,
modified or reversed. (Emphases supplied)

It is settled that in order to be entitled to exclusion/exemption, it must be

shown that the land is exclusively devoted to livestock, swine or poultry
raising.80 The land must be shown to have been used for such purposes as of
the effectivity of RA 6657, or on June 15, 1988,81 in order to prevent any
fraudulent declaration of areas supposedly used for these purposes as well
as to protect the rights of agrarian beneficiaries therein. This is in
consonance with Section 73(c) of RA 6657 which prohibits the conversion by
any landowner of his agricultural land into any non-agricultural use with
intent to avoid the application of RA 6657 to his landholdings and to
dispossess his tenant farmers of the land tilled by them.

A thorough review of the records reveals no substantial evidence to show

that the entirety of the subject lands was exclusively devoted to livestock
production since June 15, 1988 so as to warrant their exclusion/exemption
from CARP coverage and the consequent cancellation of MCFARMCO's
certificates of title. In fact, contrary to its original submission that almost all
of the entire 206.5694 has. landholding has been devoted to cattle and
livestock production since their acquisition in 1987, 82 BATCO subsequently
admitted in its Supplemental Motion for Reconsideration of the Order dated
25 February 199983 (supplemental motion for reconsideration) that only a
portion of the subject lands was actually devoted to livestock raising, for
which the exemption of not less than 100 has. was sought. 84 On this score
alone, the CA gravely abused its discretion in declaring the subject lands as
exempt from CARP coverage and ordering the cancellation of MCFARMCO's
certificates of title and the issuance of new titles in BATCO's favor.

It must be further pointed out that the subject lands were offered by BATCO
to the government under the VOS scheme on September 20, 1989, 85 which
offer was reiterated on January 6, 199386 without any claim of exemption,
notwithstanding the existence of the Luz Farms ruling (which was
promulgated on December 4, 1990). In fact, the subject portion was
acquired by the government in 1992 and still BATCO never sought
exemption under Luz Farms. While it protested the valuation of the
DAR87 during its VOS, it did not, at that time, seek any exemption from CARP
coverage. BATCO only raised the claimed exemption when it filed the
petition for exemption before the DAR Regional Director on May 6,
1998.However, the petition was filed on the basis of DAR AO 09-93, 88 and
accordingly denied by the DAR Regional Director 89 and the DAR
Secretary90 for failing to meet the requirements set forth therein. While the
Court struck down DAR AO 09-93 as unconstitutional in the case of DAR v.
Sutton91

(Sutton) on October 19, 2005, the DAR Decisions and even the CA Decision
dated September 6, 2005 in CA-G.R. SP No. 55377 were all rendered at the
time that the said AO was still subsisting and in full force and effect.
Consequently, in view of the prospectivity principle of judicial decisions 92 and
the operative fact doctrine,93 the petition for exemption must be resolved
under the provisions of the said AO.

Under DAR AO 09-93, in order to be entitled to exemption, the applicant

must prove that: (a) the land sought to be excluded from CARP coverage is
exclusively, directly and actually used for livestock, poultry and swine raising
as of June 15, 1988; (b) there should be one head of cattle per hectare of
land and seven heads of goat per hectare of land; and (c) there should be
21 heads of cattle for every 1.7815 has. of infrastructure, 147 heads of goat
or sheep for every 0.7205 hectare of infrastructure, and 21heads of swine
for every 0.5126 hectare of infrastructure. Consistent with the prohibition
under Section 73(c) of RA 6657, DAR AO 09-93 likewise provided that "any
act of a landowner to change or convert his agricultural and to livestock,
poultry and swine raising after June 15, 1988, with the intent to avoid the
application of [RA 6657] to his landholdings, shall be considered invalid and
illegal and shall not affect the coverage of his land holding under CARP."

It bears noting that the denial of the petition for exemption by the DAR
Regional Director was based on an ocular inspection/investigation conducted
by the DAR provincial personnel in Basilan.94 The rationale for the denial of
the petition was also clearly outlined in the February 25, 1999 Order 95 of the
DAR Secretary who observed that: (a) none of the 156certificates of
livestock ownership submitted by BATCO predates the effectivity of RA
6657;96 (b) more than half (80 out of 156)97 of the cattle was brought into
the property only a few months before the petition was filed; (c) the
municipal agriculturist certified the presence of only 120 heads of
cattle,98 which is short of the minimum requirement under DAR AO 09-
93;99 and (d) no evidence was presented to prove the presence of hogs and
goats as well as of BATCO having met the infrastructure requirements under
DAR AO 09-93.100 There being no cogent reason to deviate from the
foregoing, the Court is impelled to sustain the DAR Secretary’s findings.

To note, in denying BATCO's motion for reconsideration, the DAR Secretary

also observed that, contrary to BATCO's claim that the additional certificates
of livestock ownership it undertook to produce further were in the name of
the Mendoza Plantation from which it purchased the subject lands in 1987,
the certificates eventually submitted with its supplemental motion for
reconsideration were actually under its name. Accordingly, the DAR
Secretary cannot be faulted for not giving credence to the same.

In fact, even if the Court were to apply Sutton retroactively and disregard
DAR AO 09-93, the pieces of evidence relied upon by the CA actually failed
to establish the theory that the entirety of the subject lands or specific
portions thereof are exclusively devoted to the raising of cattle, swine and
goat as of June 15, 1988. The Court notes that the Municipal Agriculturist
Certification101 dated March 26, 1998, which the CA appreciated in favor of
BATCO, merely stated that the subject lands are "suitable for cattle
production since before it was acquired and transferred to BATCO
PLANTATION."102 On the other hand, the Affidavits103 of former municipal
mayors confirming their issuance of several certificates of livestock
ownership during their respective terms were only presented before the CA
and were not backed up by copies of the certificates themselves. Moreover,
while the former municipal mayors attested to the existence and presence of
livestock in the subject lands starting the year 1987, they commonly
described the subject lands as a vast tract of land principally devoted to
coconut production, which was extensively inter-cropped with coffee, rubber,
black pepper, and cacao trees after BATCO's acquisition.104 These
descriptions are insufficient to establish BATCO’s claimed exemption as what
is required is exclusive devotion of the lands to the raising of cattle, swine
and goat as of June 15, 1988.

More pertinently, the Court further notes that contrary to BATCO's

representations in its petition for exemption, the primary land use of the
subject lands105 as declared by BATCO itself in its landowner's reply to notice
of land valuation and acquisition106 (landowners reply) dated May 6,1997,
negates its own claim that the said lands were exclusively devoted for the
raising of cattle, swine and goat, viz.:

Area
Lot Land Use
Acq'd
3 Cocoland 8.9917
Cocoland/Coffee 10.0000

Sub-total 18.9917

4 Cocoland 44.4733
Coco/Coffee 8.0000
Coco/Rubber 1.5000
Coco/Black Pepper 1.5000
Coco/Black Pepper/
Rubber 1.5000

Sub-total 56.9733

5 Cocoland 10.0000
Cocoland/Coffee 67.9151

Sub-total 77.9151

107
GRAND TOTAL
 153.8801
=========

In this accord, the Court finds that BATCO's claim of a different land use in
its petition for exemption was only a mere afterthought which, therefore,
cannot be countenanced.

Finally, the Court cannot give credence to BATCO's claim of denial of due
process when its certificates of title were cancelled and new ones were
issued in favor of the Republic prior to the issuance of the DAR Regional
Director's August 12, 1998 Order. While the final resolution of petitions for
exemption, as a rule, should precede the placing of the property under the
CARP and the issuance of the CLOA to the beneficiaries, 108 it bears stressing
that the subject lands had already been placed under the CARP coverage
in1992, or long before the petition for exemption was filed by BATCO on
May6, 1998. In the meantime, the actions undertaken by BATCO such as the
VOS on January 6, 1993,109 the counter-offer of valuation for the subject
lands according to their declared land uses as contained in the afore-
mentioned landowner’s reply110 dated May 6, 1997, the letter-protest dated
May 23, 1997 (which challenged the survey of the lands), and the
identification of the beneficiaries grounded on its alleged failure to choose
the retention area,111 all affirmed the coverage of the subject lands under
the CARP. Considering further that the claim of denial of due process was
never raised in the proceedings before the DAR but belatedly brought up
only in its Memorandum112 dated July 28, 2005 filed before the CA113 and in
the absence of showing that the same prevented it from presenting its case
before the DAR officials, it cannot be said that BATCO was denied due
process. Neither was it deprived of its properties without just compensation
given that after it rejected the DAR's valuation on May 6, 1997, the DAR
immediately caused the deposit of the compensation in cash and in agrarian
reform bonds on June 11, 1997.114 All told, the denial of BATCO’s petition for
exemption was proper. In view of its contrary ruling, and the absence of any
substantial bases therefor, the Court finds that the CA gravely abused its
discretion in reversing the DAR Secretary’s February 25, 1999 Order.

WHEREFORE, the petition is GRANTED. The Decision dated September 6,

2005 of the Court of Appeals in CA-G.R. SP No. 55377 is hereby REVERSED
AND SET ASIDE and a new judgment is rendered REINSTATING the Order
dated February 25, 1999 of the Department of Agrarian Reform Secretary
dismissing private respondent Basilan Agricultural Trading Corporation’s
petition for exemption.

SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

6.

REPUBLIC vs.SALVADOR N. LOPEZ AGRI-BUSINESS CORP. G.R. No.

178895 & G.R. No. 179071, January 10, 2011

DECISION

SERENO, J.:

Before us are two Rule 45 Petitions1 filed separately by the Department of

Agrarian Reform (DAR), through the Office of the Solicitor General, and by
the Salvador N. Lopez Agri-Business Corp. (SNLABC). Each Petition partially
assails the Court of Appeals Decision dated 30 June 2006 2 with respect to
the application for exemption of four parcels of land - located in Mati, Davao
Oriental and owned by SNLABC - from Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law (CARL).

There is little dispute as to the facts of the case, as succinctly discussed by

the Court of Appeals and adopted herein by the Court, to wit:

Subject of this petition are four (4) parcels of land with an aggregate area of
160.1161 hectares registered in the name of Salvador N. Lopez Agri-
Business Corporation. Said parcels of land are hereinafter described as
follows:

1avvphi1
Title No. Area Location
TCT No. T-12635 (Lot 49.5706 Bo. Limot, Mati, Davao
1454-A & 1296) has. Oriental
TCT No. T-12637 (Lot 42.6822 Bo. Don Enrique Lopez,
1298) has. Mati, Dvo. Or.
TCT No. T-12639 (Lot 67.8633 Bo. Don Enrique Lopez,
1293-B) has. Mati, Dvo. Or.

On August 2, 1991, Municipal Agrarian Reform Officer (MARO) Socorro C.

Salga issued a Notice of Coverage to petitioner with regards (sic) to the
aforementioned landholdings which were subsequently placed under
Compulsory Acquisition pursuant to R.A. 6657 (Comprehensive Agrarian
Reform Law).

On December 10, 1992, petitioner filed with the Provincial Agrarian Reform
Office (PARO), Davao Oriental, an Application for Exemption of the lots
covered by TCT No. T-12637 and T-12639 from CARP coverage. It alleged
that pursuant to the case of Luz Farms v. DAR Secretary said parcels of land
are exempted from coverage as the said parcels of land with a total area of
110.5455 hectares are used for grazing and habitat of petitioner’s 105 heads
of cattle, 5 carabaos, 11 horses, 9 heads of goats and 18 heads of swine,
prior to the effectivity of the Comprehensive Agrarian Reform Law (CARL).

On December 13, 1992 and March 1, 1993, the MARO conducted an onsite
investigation on the two parcels of land confirming the presence of the
livestock as enumerated. The Investigation Report dated March 9, 1993
stated:
That there are at least 2[5] to 30 heads of cows that farrow every year and
if the trend of farrowing persist (sic), then the cattle shall become
overcrowded and will result to scarcity of grasses for the cattle to graze;

That during the week cycle, the herds are being moved to the different
adjacent lots owned by the corporation. It even reached Lot 1454-A and Lot
1296. Thereafter, the herds are returned to their respective night chute
corrals which are constructed under Lot 1293-B and Lot 1298.

xxx

That the age of coconut trees planted in the area are already 40 to 50 years
and have been affected by the recent drought that hit the locality.

That the presence of livestocks (sic) have already existed in the area prior to
the Supreme Court decision on LUZ FARMS vs. Secretary of Agrarian
Reform. We were surprised however, why the management of the
corporation did not apply for Commercial Farm Deferment (CFD) before,
when the two years reglamentary (sic) period which the landowner was
given the chance to file their application pursuant to R.A. 6657,
implementing Administrative Order No. 16, Series of 1989;

However, with regards to what venture comes (sic) first, coconut or

livestocks (sic), majority of the farmworkers including the overseer affirmed
that the coconut trees and livestocks (sic) were (sic) simultaneously and all
of these were inherited by his (applicant) parent. In addition, the financial
statement showed 80% of its annual income is derived from the livestocks
(sic) and only 20% from the coconut industry.

Cognitive thereto, we are favorably recommending for the exemption from

the coverage of CARP based on LUZ FARMS as enunciated by the Supreme
Court the herein Lot No. 1293-B Psd-65835 under TCT No. T-12639 except
Lot No. 1298, Cad. 286 of TCT No. T-12637 which is already covered under
the Compulsory Acquisition (CA) Scheme and had already been valued by
the Land Valuation Office, Land Bank of the Philippines.

On June 24, 1993, TCT No. T-12635 covering Lots 1454-A & 1296 was
cancelled and a new one issued in the name of the Republic of the
Philippines under RP T-16356. On February 7, 1994, petitioner through its
President, Salvador N. Lopez, Jr., executed a letter-affidavit addressed to
the respondent-Secretary requesting for the exclusion from CARP coverage
of Lots 1454-A and 1296 on the ground that they needed the additional area
for its livestock business. On March 28, 1995, petitioner filed before the DAR
Regional Director of Davao City an application for the exemption from CARP
coverage of Lots 1454-A and 1296 stating that it has been operating grazing
lands even prior to June 15, 1988 and that the said two (2) lots form an
integral part of its grazing land.

The DAR Regional Director, after inspecting the properties, issued an Order
dated March 5, 1997 denying the application for exemption of Lots 1454-A
and 1296 on the ground that it was not clearly shown that the same were
actually, directly and exclusively used for livestock raising since in its
application, petitioner itself admitted that it needs the lots for additional
grazing area. The application for exemption, however of the other two (2)
parcels of land was approved.

On its partial motion for reconsideration, petitioner argued that Lots 1454-A
& 1296 were taken beyond the operation of the CARP pursuant to its
reclassification to a Pollutive Industrial District (Heavy Industry) per
Resolution No. 39 of the Sangguniang Bayan of Mati, Davao Oriental,
enacted on April 7, 1992. The DAR Regional Director denied the Motion
through an Order dated September 4, 1997, ratiocinating that the
reclassification does not affect agricultural lands already issued a Notice of
Coverage as provided in Memorandum Circular No. 54-93: Prescribing the
Guidelines Governing Section 20 of R.A. 7160.

Undaunted, petitioner appealed the Regional Director’s Orders to respondent

DAR. On June 10, 1998, the latter issued its assailed Order affirming the
Regional Director’s ruling on Lots 1454-A & 1296 and further declared Lots
1298 and 1293-B as covered by the CARP. Respondent ruled in this wise
considering the documentary evidence presented by petitioner such as the
Business Permit to engage in livestock, the certification of ownership of large
cattle and the Corporate Income Tax Returns, which were issued during the
effectivity of the Agrarian Reform Law thereby debunking petitioner’s claim
that it has been engaged in livestock farming since the 1960s. Respondent
further ruled that the incorporation by the Lopez family on February 12,
1988 or four (4) months before the effectivity of R.A. 6657 was an attempt
to evade the noble purposes of the said law.

On October 17, 2002, petitioner’s Motion for Reconsideration was denied by

respondent prompting the former to file the instant petition. 3

In the assailed Decision dated 30 June 2006, 4 the Court of Appeals partially
granted the SNLABC Petition and excluded the two (2) parcels of land
(Transfer Certificate of Title [TCT] Nos. T-12637 and T-12639) located in
Barrio Don Enrique Lopez (the "Lopez lands") from coverage of the CARL.
However, it upheld the Decisions of the Regional Director 5 and the
DAR6 Secretary denying the application for exemption with respect to Lots
1454-A and 1296 (previously under TCT No. T-12635) in Barrio Limot (the
"Limot lands"). These lots were already covered by a new title under the
name of the Republic of the Philippines (RP T-16356).

The DAR and SNLABC separately sought a partial reconsideration of the

assailed Decision of the Court of Appeals, but their motions for
reconsideration were subsequently denied in the Court of Appeals Resolution
dated 08 June 2007.7

The DAR and SNLABC elevated the matter to this Court by filing separate
Rule 45 Petitions (docketed as G.R. No. 178895 8 and 179071,9 respectively),
which were subsequently ordered consolidated by the Court.

The main issue for resolution by the Court is whether the Lopez and Limot
lands of SNLABC can be considered grazing lands for its livestock business
and are thus exempted from the coverage of the CARL under the Court’s
ruling in Luz Farms v. DAR.10 The DAR questions the disposition of the Court
of Appeals, insofar as the latter allowed the exemption of the Lopez lands,
while SNLABC assails the inclusion of the Limot lands within the coverage of
the CARL.

The Court finds no reversible error in the Decision of the Court of Appeals
and dismisses the Petitions of DAR and SNLABC.

Preliminarily, in a petition for review on certiorari filed under Rule 45, the
issues that can be raised are, as a general rule, limited to questions of
law.11 However, as pointed out by both the DAR and SNLABC, there are
several recognized exceptions wherein the Court has found it appropriate to
re-examine the evidence presented.12 In this case, the factual findings of the
DAR Regional Director, the DAR Secretary and the CA are contrary to one
another with respect to the following issue: whether the Lopez lands were
actually, directly and exclusively used for SNLABC’s livestock business; and
whether there was intent to evade coverage from the Comprehensive
Agrarian Reform Program (CARP) based on the documentary evidence. On
the other hand, SNLABC argues that these authorities misapprehended and
overlooked certain relevant and undisputed facts as regards the inclusion of
the Limot lands under the CARL. These circumstances fall within the
recognized exceptions and, thus, the Court is persuaded to review the facts
and evidence on record in the disposition of these present Petitions.

The Lopez lands of SNLABC are actually and directly being used for livestock
and are thus exempted from the coverage of the CARL.
Briefly stated, the DAR questions the object or autoptic evidence relied upon
by the DAR Regional Director in concluding that the Lopez lands were
actually, directly and exclusively being used for SNLABC’s livestock business
prior to the enactment of the CARL.

In Luz Farms v. Secretary of the Department of Agrarian Reform, 13 the Court

declared unconstitutional the CARL provisions14 that included lands devoted
to livestock under the coverage of the CARP. The transcripts of the
deliberations of the Constitutional Commission of 1986 on the meaning of
the word "agricultural" showed that it was never the intention of the framers
of the Constitution to include the livestock and poultry industry in the
coverage of the constitutionally mandated agrarian reform program of the
government.15 Thus, lands devoted to the raising of livestock, poultry and
swine have been classified as industrial, not agricultural, and thus exempt
from agrarian reform.16

Under the rules then prevailing, it was the Municipal Agrarian Reform Officer
(MARO) who was primarily responsible for investigating the legal status,
type and areas of the land sought to be excluded;17 and for ascertaining
whether the area subject of the application for exemption had been devoted
to livestock-raising as of 15 June 1988.18 The MARO’s authority to
investigate has subsequently been replicated in the current DAR guidelines
regarding lands that are actually, directly and exclusively used for livestock
raising.19 As the primary official in charge of investigating the land sought to
be exempted as livestock land, the MARO’s findings on the use and nature of
the land, if supported by substantial evidence on record, are to be accorded
greater weight, if not finality.

Verily, factual findings of administrative officials and agencies that have

acquired expertise in the performance of their official duties and the exercise
of their primary jurisdiction are generally accorded not only respect but, at
times, even finality if such findings are supported by substantial
evidence.20 The Court generally accords great respect, if not finality, to
factual findings of administrative agencies because of their special
knowledge and expertise over matters falling under their jurisdiction. 21

In the instant case, the MARO in its ocular inspection22 found on the Lopez
lands several heads of cattle, carabaos, horses, goats and pigs, some of
which were covered by several certificates of ownership. There were likewise
structures on the Lopez lands used for its livestock business, structures
consisting of two chutes where the livestock were kept during nighttime. The
existence of the cattle prior to the enactment of the CARL was positively
affirmed by the farm workers and the overseer who were interviewed by the
MARO. Considering these factual findings and the fact that the lands were in
fact being used for SNLABC’s livestock business even prior to 15 June 1988,
the DAR Regional Director ordered the exemption of the Lopez lands from
CARP coverage. The Court gives great probative value to the actual, on-site
investigation made by the MARO as affirmed by the DAR Regional Director.
The Court finds that the Lopez lands were in fact actually, directly and
exclusively being used as industrial lands for livestock-raising.

Simply because the on-site investigation was belatedly conducted three or

four years after the effectivity of the CARL does not perforce make it
unworthy of belief or unfit to be offered as substantial evidence in this case.
Contrary to DAR’s claims, the lack of information as regards the initial
breeders and the specific date when the cattle were first introduced in the
MARO’s Report does not conclusively demonstrate that there was no
livestock-raising on the Lopez lands prior to the CARL. Although information
as to these facts are significant, their non-appearance in the reports does
not leave the MARO without any other means to ascertain the duration of
livestock-raising on the Lopez lands, such as interviews with farm workers,
the presence of livestock infrastructure, and evidence of sales of cattle – all
of which should have formed part of the MARO’s Investigation Report.

Hence, the Court looks with favor on the expertise of the MARO in
determining whether livestock-raising on the Lopez lands has only been
recently conducted or has been a going concern for several years already.
Absent any clear showing of grave abuse of discretion or bias, the findings of
the MARO - as affirmed by the DAR Regional Director - are to be accorded
great probative value, owing to the presumption of regularity in the
performance of his official duties.23

The DAR, however, insisted in its Petition24 on giving greater weight to the
inconsistencies appearing in the documentary evidence presented, and noted
by the DAR Secretary, in order to defeat SNLABC’s claim of exemption over
the Lopez lands. The Court is not so persuaded.

In the Petition, the DAR argued that that the tax declarations covering the
Lopez lands characterized them as agricultural lands and, thus, detracted
from the claim that they were used for livestock purposes. The Court has
since held that "there is no law or jurisprudence that holds that the land
classification embodied in the tax declarations is conclusive and final nor
would proscribe any further inquiry"; hence, "tax declarations are clearly not
the sole basis of the classification of a land."25 Applying the foregoing
principles, the tax declarations of the Lopez lands as agricultural lands are
not conclusive or final, so as to prevent their exclusion from CARP coverage
as lands devoted to livestock-raising. Indeed, the MARO’s on-site inspection
and actual investigation showing that the Lopez lands were being used for
livestock-grazing are more convincing in the determination of the nature of
those lands.lavvphil

Neither can the DAR in the instant case assail the timing of the incorporation
of SNLABC and the latter’s operation shortly before the enactment of the
CARL. That persons employ tactics to precipitously convert their lands from
agricultural use to industrial livestock is not unheard of; they even exploit
the creation of a new corporate vehicle to operate the livestock business to
substantiate the deceitful conversion in the hopes of evading CARP
coverage. Exemption from CARP, however, is directly a function of the land’s
usage, and not of the identity of the entity operating it. Otherwise stated,
lands actually, directly and exclusively used for livestock are exempt from
CARP coverage, regardless of the change of owner. 26 In the instant case,
whether SNLABC was incorporated prior to the CARL is immaterial, since the
Lopez lands were already being used for livestock-grazing purposes prior to
the enactment of the CARL, as found by the MARO. Although the managing
entity had been changed, the business interest of raising livestock on the
Lopez lands still remained without any indication that it was initiated after
the effectivity of the CARL.

As stated by SNLABC, the Lopez lands were the legacy of Don Salvador
Lopez, Sr. The ownership of these lands was passed from Don Salvador
Lopez, Sr., to Salvador N. Lopez, Jr., and subsequently to the latter’s
children before being registered under the name of SNLABC. Significantly,
SNLABC was incorporated by the same members of the Lopez family, which
had previously owned the lands and managed the livestock business. 27 In all
these past years, despite the change in ownership, the Lopez lands have
been used for purposes of grazing and pasturing cattle, horses, carabaos
and goats. Simply put, SNLABC was chosen as the entity to take over the
reins of the livestock business of the Lopez family. Absent any other
compelling evidence, the inopportune timing of the incorporation of the
SNLABC prior to the enactment of the CARL was not by itself a categorical
manifestation of an intent to avoid CARP coverage.

Furthermore, the presence of coconut trees, although an indicia that the

lands may be agricultural, must be placed within the context of how they
figure in the actual, direct and exclusive use of the subject lands. The DAR
failed to demonstrate that the Lopez lands were actually and primarily
agricultural lands planted with coconut trees. This is in fact contradicted by
the findings of its own official, the MARO. Indeed, the DAR did not adduce
any proof to show that the coconut trees on the Lopez lands were used for
agricultural business, as required by the Court in DAR v. Uy, 28 wherein we
ruled thus:
It is not uncommon for an enormous landholding to be intermittently planted
with trees, and this would not necessarily detract it from the purpose of
livestock farming and be immediately considered as an agricultural land. It
would be surprising if there were no trees on the land. Also, petitioner did
not adduce any proof to show that the coconut trees were planted by
respondent and used for agricultural business or were already existing when
the land was purchased in 1979. In the present case, the area planted with
coconut trees bears an insignificant value to the area used for the cattle and
other livestock-raising, including the infrastructure needed for the business.
There can be no presumption, other than that the "coconut area" is indeed
used for shade and to augment the supply of fodder during the warm
months; any other use would be only be incidental to livestock farming. The
substantial quantity of livestock heads could only mean that respondent is
engaged in farming for this purpose. The single conclusion gathered here is
that the land is entirely devoted to livestock farming and exempted from the
CARP.

On the assumption that five thousand five hundred forty-eight (5,548)

coconut trees were existing on the Lopez land (TCT No. T-12637), the DAR
did not refute the findings of the MARO that these coconut trees were merely
incidental. Given the number of livestock heads of SNLABC, it is not
surprising that the areas planted with coconut trees on the Lopez lands
where forage grass grew were being used as grazing areas for the livestock.
It was never sufficiently adduced that SNLABC was primarily engaged in
agricultural business on the Lopez lands, specifically, coconut-harvesting.
Indeed, the substantial quantity of SNLABC’s livestock amounting to a little
over one hundred forty (140) livestock heads, if measured against the
combined 110.5455 hectares of land and applying the DAR-formulated ratio,
leads to no other conclusion than that the Lopez lands were exclusively
devoted to livestock farming.29

In any case, the inconsistencies appearing in the documentation presented

(albeit sufficiently explained) pale in comparison to the positive assertion
made by the MARO in its on-site, actual investigation - that the Lopez lands
were being used actually, directly and exclusively for its livestock-raising
business. The Court affirms the findings of the DAR Regional Director and
the Court of Appeals that the Lopez lands were actually, directly and
exclusively being used for SNLABC’s livestock business and, thus, are
exempt from CARP coverage.

The Limot lands of SNLABC are not actually and directly being used for
livestock and should thus be covered by the CARL.
In contrast, the Limot lands were found to be agricultural lands devoted to
coconut trees and rubber and are thus not subject to exemption from CARP
coverage.

In the Report dated 06 April 1994, the team that conducted the inspection
found that the entire Limot lands were devoted to coconuts (41.5706
hectares) and rubber (8.000 hectares) and recommended the denial of the
application for exemption.30 Verily, the Limot lands were actually, directly
and exclusively used for agricultural activities, a fact that necessarily makes
them subject to the CARP. These findings of the inspection team were given
credence by the DAR Regional Director who denied the application, and were
even subsequently affirmed by the DAR Secretary and the Court of Appeals.

SNLABC argues that the Court of Appeals misapprehended the factual

circumstances and overlooked certain relevant facts, which deserve a second
look. SNLABC’s arguments fail to convince the Court to reverse the rulings of
the Court of Appeals.

In the 07 February 1994 Letter-Affidavit addressed to the DAR Secretary,

SNLABC requested the exemption of the Limot lands on the ground that the
corporation needed the additional area for its livestock business. As pointed
out by the DAR Regional Director, this Letter-Affidavit is a clear indication
that the Limot lands were not directly, actually and exclusively used for
livestock raising. SNLABC casually dismisses the clear import of their Letter-
Affidavit as a "poor choice of words." Unfortunately, the semantics of the
declarations of SNLABC in its application for exemption are corroborated by
the other attendant factual circumstances and indicate its treatment of the
subject properties as non-livestock.

Verily, the MARO itself, in the Investigation Report cited by no less than
SNLABC, found that the livestock were only moved to the Limot lands
sporadically and were not permanently designated there. The DAR Secretary
even described SNLABC’s use of the area as a "seasonal extension of the
applicant’s ‘grazing lands’ during the summer." Therefore, the Limot lands
cannot be claimed to have been actually, directly and exclusively used for
SNLABC’s livestock business, especially since these were only intermittently
and secondarily used as grazing areas. The said lands are more suitable --
and are in fact actually, directly and exclusively being used -- for agricultural
purposes.

SNLABC’s treatment of the land for non-livestock purposes is highlighted by

its undue delay in filing the application for exemption of the Limot lands.
SNLABC filed the application only on 07 February 1994, or three years after
the Notice of Coverage was issued; two years after it filed the first
application for the Lopez lands; and a year after the titles to the Limot lands
were transferred to the Republic. The SNLABC slept on its rights and delayed
asking for exemption of the Limot lands. The lands were undoubtedly being
used for agricultural purposes, not for its livestock business; thus, these
lands are subject to CARP coverage. Had SNLABC indeed utilized the Limot
lands in conjunction with the livestock business it was conducting on the
adjacent Lopez lands, there was nothing that would have prevented it from
simultaneously applying for a total exemption of all the lands necessary for
its livestock.

The defense of SNLABC that it wanted to "save" first the Lopez lands where
the corrals and chutes were located, before acting to save the other
properties does not help its cause. The piecemeal application for exemption
of SNLABC speaks of the value or importance of the Lopez lands, compared
with the Limot lands, with respect to its livestock business. If the Lopez and
the Limot lands were equally significant to its operations and were actually
being used for its livestock business, it would have been more reasonable for
it to apply for exemption for the entire lands. Indeed, the belated filing of
the application for exemption was a mere afterthought on the part of
SNLABC, which wanted to increase the area of its landholdings to be
exempted from CARP on the ground that these were being used for its
livestock business.

In any case, SNLABC admits that the title to the Limot lands has already
been transferred to the Republic and subsequently awarded to SNLABC’s
farm workers.31 This fact only demonstrates that the land is indeed being
used for agricultural activities and not for livestock grazing.

The confluence of these factual circumstances leads to the logical conclusion

that the Limot lands were not being used for livestock grazing and, thus, do
not qualify for exemption from CARP coverage. SNLABC’s belated filing of
the application for exemption of the Limot lands was a ruse to increase its
retention of its landholdings and an attempt to "save" these from
compulsory acquisition.

WHEREFORE, the Petitions of the Department of Agrarian Reform and the

Salvador N. Lopez Agri-Business Corp. are DISMISSED, and the rulings of
the Court of Appeals and the DAR Regional Director are hereby AFFIRMED.

SO ORDERED.
7.

G.R. No. 178895               January 10, 2011

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT
OF AGRARIAN REFORM, through the HON. SECRETARY NASSER C.
PANGANDAMAN, Petitioner,
vs.
SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by
SALVADOR N. LOPEZ, JR., President and General
Manager, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 179071
SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by
SALVADOR N. LOPEZ, JR., President and General
Manager, Petitioner,
vs.
DEPARTMENT OF AGRARIAN REFORM, through the Honorable
Secretary, Respondent.
DECISION
SERENO, J.:
Before us are two Rule 45 Petitions1 filed separately by the Department of
Agrarian Reform (DAR), through the Office of the Solicitor General, and by
the Salvador N. Lopez Agri-Business Corp. (SNLABC). Each Petition partially
assails the Court of Appeals Decision dated 30 June 20062 with respect to
the application for exemption of four parcels of land - located in Mati, Davao
Oriental and owned by SNLABC - from Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law (CARL).
There is little dispute as to the facts of the case, as succinctly discussed by
the Court of Appeals and adopted herein by the Court, to wit:
Subject of this petition are four (4) parcels of land with an aggregate area of
160.1161 hectares registered in the name of Salvador N. Lopez Agri-
Business Corporation. Said parcels of land are hereinafter described as
follows:

1avvphi1

Title No. Area Location

TCT No. T-12635 (Lot 49.5706 Bo. Limot, Mati, Davao

 1454-A & 1296) has. Oriental

TCT No. T-12637 (Lot 42.6822 Bo. Don Enrique Lopez,

1298) has. Mati, Dvo. Or.

TCT No. T-12639 (Lot 67.8633 Bo. Don Enrique Lopez,

1293-B) has. Mati, Dvo. Or.

On August 2, 1991, Municipal Agrarian Reform Officer (MARO) Socorro C.

Salga issued a Notice of Coverage to petitioner with regards (sic) to the
aforementioned landholdings which were subsequently placed under
Compulsory Acquisition pursuant to R.A. 6657 (Comprehensive Agrarian
Reform Law).
On December 10, 1992, petitioner filed with the Provincial Agrarian Reform
Office (PARO), Davao Oriental, an Application for Exemption of the lots
covered by TCT No. T-12637 and T-12639 from CARP coverage. It alleged
that pursuant to the case of Luz Farms v. DAR Secretary said parcels of land
are exempted from coverage as the said parcels of land with a total area of
110.5455 hectares are used for grazing and habitat of petitioner’s 105 heads
of cattle, 5 carabaos, 11 horses, 9 heads of goats and 18 heads of swine,
prior to the effectivity of the Comprehensive Agrarian Reform Law (CARL).
On December 13, 1992 and March 1, 1993, the MARO conducted an onsite
investigation on the two parcels of land confirming the presence of the
livestock as enumerated. The Investigation Report dated March 9, 1993
stated:
That there are at least 2[5] to 30 heads of cows that farrow every year and
if the trend of farrowing persist (sic), then the cattle shall become
overcrowded and will result to scarcity of grasses for the cattle to graze;
That during the week cycle, the herds are being moved to the different
adjacent lots owned by the corporation. It even reached Lot 1454-A and Lot
1296. Thereafter, the herds are returned to their respective night chute
corrals which are constructed under Lot 1293-B and Lot 1298.
xxx
That the age of coconut trees planted in the area are already 40 to 50 years
and have been affected by the recent drought that hit the locality.
That the presence of livestocks (sic) have already existed in the area prior to
the Supreme Court decision on LUZ FARMS vs. Secretary of Agrarian
Reform. We were surprised however, why the management of the
corporation did not apply for Commercial Farm Deferment (CFD) before,
when the two years reglamentary (sic) period which the landowner was
given the chance to file their application pursuant to R.A. 6657,
implementing Administrative Order No. 16, Series of 1989;
However, with regards to what venture comes (sic) first, coconut or
livestocks (sic), majority of the farmworkers including the overseer affirmed
that the coconut trees and livestocks (sic) were (sic) simultaneously and all
of these were inherited by his (applicant) parent. In addition, the financial
statement showed 80% of its annual income is derived from the livestocks
(sic) and only 20% from the coconut industry.
Cognitive thereto, we are favorably recommending for the exemption from
the coverage of CARP based on LUZ FARMS as enunciated by the Supreme
Court the herein Lot No. 1293-B Psd-65835 under TCT No. T-12639 except
Lot No. 1298, Cad. 286 of TCT No. T-12637 which is already covered under
the Compulsory Acquisition (CA) Scheme and had already been valued by
the Land Valuation Office, Land Bank of the Philippines.
On June 24, 1993, TCT No. T-12635 covering Lots 1454-A & 1296 was
cancelled and a new one issued in the name of the Republic of the
Philippines under RP T-16356. On February 7, 1994, petitioner through its
President, Salvador N. Lopez, Jr., executed a letter-affidavit addressed to
the respondent-Secretary requesting for the exclusion from CARP coverage
of Lots 1454-A and 1296 on the ground that they needed the additional area
for its livestock business. On March 28, 1995, petitioner filed before the DAR
Regional Director of Davao City an application for the exemption from CARP
coverage of Lots 1454-A and 1296 stating that it has been operating grazing
lands even prior to June 15, 1988 and that the said two (2) lots form an
integral part of its grazing land.
The DAR Regional Director, after inspecting the properties, issued an Order
dated March 5, 1997 denying the application for exemption of Lots 1454-A
and 1296 on the ground that it was not clearly shown that the same were
actually, directly and exclusively used for livestock raising since in its
application, petitioner itself admitted that it needs the lots for additional
grazing area. The application for exemption, however of the other two (2)
parcels of land was approved.
On its partial motion for reconsideration, petitioner argued that Lots 1454-A
& 1296 were taken beyond the operation of the CARP pursuant to its
reclassification to a Pollutive Industrial District (Heavy Industry) per
Resolution No. 39 of the Sangguniang Bayan of Mati, Davao Oriental,
enacted on April 7, 1992. The DAR Regional Director denied the Motion
through an Order dated September 4, 1997, ratiocinating that the
reclassification does not affect agricultural lands already issued a Notice of
Coverage as provided in Memorandum Circular No. 54-93: Prescribing the
Guidelines Governing Section 20 of R.A. 7160.
Undaunted, petitioner appealed the Regional Director’s Orders to respondent
DAR. On June 10, 1998, the latter issued its assailed Order affirming the
Regional Director’s ruling on Lots 1454-A & 1296 and further declared Lots
1298 and 1293-B as covered by the CARP. Respondent ruled in this wise
considering the documentary evidence presented by petitioner such as the
Business Permit to engage in livestock, the certification of ownership of large
cattle and the Corporate Income Tax Returns, which were issued during the
effectivity of the Agrarian Reform Law thereby debunking petitioner’s claim
that it has been engaged in livestock farming since the 1960s. Respondent
further ruled that the incorporation by the Lopez family on February 12,
1988 or four (4) months before the effectivity of R.A. 6657 was an attempt
to evade the noble purposes of the said law.
On October 17, 2002, petitioner’s Motion for Reconsideration was denied by
respondent prompting the former to file the instant petition.3
In the assailed Decision dated 30 June 2006,4 the Court of Appeals partially
granted the SNLABC Petition and excluded the two (2) parcels of land
(Transfer Certificate of Title [TCT] Nos. T-12637 and T-12639) located in
Barrio Don Enrique Lopez (the "Lopez lands") from coverage of the CARL.
However, it upheld the Decisions of the Regional Director5 and the
DAR6 Secretary denying the application for exemption with respect to Lots
1454-A and 1296 (previously under TCT No. T-12635) in Barrio Limot (the
"Limot lands"). These lots were already covered by a new title under the
name of the Republic of the Philippines (RP T-16356).
The DAR and SNLABC separately sought a partial reconsideration of the
assailed Decision of the Court of Appeals, but their motions for
reconsideration were subsequently denied in the Court of Appeals Resolution
dated 08 June 2007.7
The DAR and SNLABC elevated the matter to this Court by filing separate
Rule 45 Petitions (docketed as G.R. No. 1788958 and
179071,9 respectively), which were subsequently ordered consolidated by
the Court.
The main issue for resolution by the Court is whether the Lopez and Limot
lands of SNLABC can be considered grazing lands for its livestock business
and are thus exempted from the coverage of the CARL under the Court’s
ruling in Luz Farms v. DAR.10 The DAR questions the disposition of the Court
of Appeals, insofar as the latter allowed the exemption of the Lopez lands,
while SNLABC assails the inclusion of the Limot lands within the coverage of
the CARL.
The Court finds no reversible error in the Decision of the Court of Appeals
and dismisses the Petitions of DAR and SNLABC.
Preliminarily, in a petition for review on certiorari filed under Rule 45, the
issues that can be raised are, as a general rule, limited to questions of
law.11 However, as pointed out by both the DAR and SNLABC, there are
several recognized exceptions wherein the Court has found it appropriate to
re-examine the evidence presented.12 In this case, the factual findings of
the DAR Regional Director, the DAR Secretary and the CA are contrary to
one another with respect to the following issue: whether the Lopez lands
were actually, directly and exclusively used for SNLABC’s livestock business;
and whether there was intent to evade coverage from the Comprehensive
Agrarian Reform Program (CARP) based on the documentary evidence. On
the other hand, SNLABC argues that these authorities misapprehended and
overlooked certain relevant and undisputed facts as regards the inclusion of
the Limot lands under the CARL. These circumstances fall within the
recognized exceptions and, thus, the Court is persuaded to review the facts
and evidence on record in the disposition of these present Petitions.
The Lopez lands of SNLABC are actually and directly being used for livestock
and are thus exempted from the coverage of the CARL.
Briefly stated, the DAR questions the object or autoptic evidence relied upon
by the DAR Regional Director in concluding that the Lopez lands were
actually, directly and exclusively being used for SNLABC’s livestock business
prior to the enactment of the CARL.
In Luz Farms v. Secretary of the Department of Agrarian Reform,13 the
Court declared unconstitutional the CARL provisions14 that included lands
devoted to livestock under the coverage of the CARP. The transcripts of the
deliberations of the Constitutional Commission of 1986 on the meaning of
the word "agricultural" showed that it was never the intention of the framers
of the Constitution to include the livestock and poultry industry in the
coverage of the constitutionally mandated agrarian reform program of the
government.15 Thus, lands devoted to the raising of livestock, poultry and
swine have been classified as industrial, not agricultural, and thus exempt
from agrarian reform.16
Under the rules then prevailing, it was the Municipal Agrarian Reform Officer
(MARO) who was primarily responsible for investigating the legal status,
type and areas of the land sought to be excluded;17 and for ascertaining
whether the area subject of the application for exemption had been devoted
to livestock-raising as of 15 June 1988.18 The MARO’s authority to
investigate has subsequently been replicated in the current DAR guidelines
regarding lands that are actually, directly and exclusively used for livestock
raising.19 As the primary official in charge of investigating the land sought
to be exempted as livestock land, the MARO’s findings on the use and nature
of the land, if supported by substantial evidence on record, are to be
accorded greater weight, if not finality.
Verily, factual findings of administrative officials and agencies that have
acquired expertise in the performance of their official duties and the exercise
of their primary jurisdiction are generally accorded not only respect but, at
times, even finality if such findings are supported by substantial
evidence.20 The Court generally accords great respect, if not finality, to
factual findings of administrative agencies because of their special
knowledge and expertise over matters falling under their jurisdiction.21
In the instant case, the MARO in its ocular inspection22 found on the Lopez
lands several heads of cattle, carabaos, horses, goats and pigs, some of
which were covered by several certificates of ownership. There were likewise
structures on the Lopez lands used for its livestock business, structures
consisting of two chutes where the livestock were kept during nighttime. The
existence of the cattle prior to the enactment of the CARL was positively
affirmed by the farm workers and the overseer who were interviewed by the
MARO. Considering these factual findings and the fact that the lands were in
fact being used for SNLABC’s livestock business even prior to 15 June 1988,
the DAR Regional Director ordered the exemption of the Lopez lands from
CARP coverage. The Court gives great probative value to the actual, on-site
investigation made by the MARO as affirmed by the DAR Regional Director.
The Court finds that the Lopez lands were in fact actually, directly and
exclusively being used as industrial lands for livestock-raising.
Simply because the on-site investigation was belatedly conducted three or
four years after the effectivity of the CARL does not perforce make it
unworthy of belief or unfit to be offered as substantial evidence in this case.
Contrary to DAR’s claims, the lack of information as regards the initial
breeders and the specific date when the cattle were first introduced in the
MARO’s Report does not conclusively demonstrate that there was no
livestock-raising on the Lopez lands prior to the CARL. Although information
as to these facts are significant, their non-appearance in the reports does
not leave the MARO without any other means to ascertain the duration of
livestock-raising on the Lopez lands, such as interviews with farm workers,
the presence of livestock infrastructure, and evidence of sales of cattle – all
of which should have formed part of the MARO’s Investigation Report.
Hence, the Court looks with favor on the expertise of the MARO in
determining whether livestock-raising on the Lopez lands has only been
recently conducted or has been a going concern for several years already.
Absent any clear showing of grave abuse of discretion or bias, the findings of
the MARO - as affirmed by the DAR Regional Director - are to be accorded
great probative value, owing to the presumption of regularity in the
performance of his official duties.23
The DAR, however, insisted in its Petition24 on giving greater weight to the
inconsistencies appearing in the documentary evidence presented, and noted
by the DAR Secretary, in order to defeat SNLABC’s claim of exemption over
the Lopez lands. The Court is not so persuaded.
In the Petition, the DAR argued that that the tax declarations covering the
Lopez lands characterized them as agricultural lands and, thus, detracted
from the claim that they were used for livestock purposes. The Court has
since held that "there is no law or jurisprudence that holds that the land
classification embodied in the tax declarations is conclusive and final nor
would proscribe any further inquiry"; hence, "tax declarations are clearly not
the sole basis of the classification of a land."25 Applying the foregoing
principles, the tax declarations of the Lopez lands as agricultural lands are
not conclusive or final, so as to prevent their exclusion from CARP coverage
as lands devoted to livestock-raising. Indeed, the MARO’s on-site inspection
and actual investigation showing that the Lopez lands were being used for
livestock-grazing are more convincing in the determination of the nature of
those lands.lavvphil
Neither can the DAR in the instant case assail the timing of the incorporation
of SNLABC and the latter’s operation shortly before the enactment of the
CARL. That persons employ tactics to precipitously convert their lands from
agricultural use to industrial livestock is not unheard of; they even exploit
the creation of a new corporate vehicle to operate the livestock business to
substantiate the deceitful conversion in the hopes of evading CARP
coverage. Exemption from CARP, however, is directly a function of the land’s
usage, and not of the identity of the entity operating it. Otherwise stated,
lands actually, directly and exclusively used for livestock are exempt from
CARP coverage, regardless of the change of owner.26 In the instant case,
whether SNLABC was incorporated prior to the CARL is immaterial, since the
Lopez lands were already being used for livestock-grazing purposes prior to
the enactment of the CARL, as found by the MARO. Although the managing
entity had been changed, the business interest of raising livestock on the
Lopez lands still remained without any indication that it was initiated after
the effectivity of the CARL.
As stated by SNLABC, the Lopez lands were the legacy of Don Salvador
Lopez, Sr. The ownership of these lands was passed from Don Salvador
Lopez, Sr., to Salvador N. Lopez, Jr., and subsequently to the latter’s
children before being registered under the name of SNLABC. Significantly,
SNLABC was incorporated by the same members of the Lopez family, which
had previously owned the lands and managed the livestock business.27 In
all these past years, despite the change in ownership, the Lopez lands have
been used for purposes of grazing and pasturing cattle, horses, carabaos
and goats. Simply put, SNLABC was chosen as the entity to take over the
reins of the livestock business of the Lopez family. Absent any other
compelling evidence, the inopportune timing of the incorporation of the
SNLABC prior to the enactment of the CARL was not by itself a categorical
manifestation of an intent to avoid CARP coverage.
Furthermore, the presence of coconut trees, although an indicia that the
lands may be agricultural, must be placed within the context of how they
figure in the actual, direct and exclusive use of the subject lands. The DAR
failed to demonstrate that the Lopez lands were actually and primarily
agricultural lands planted with coconut trees. This is in fact contradicted by
the findings of its own official, the MARO. Indeed, the DAR did not adduce
any proof to show that the coconut trees on the Lopez lands were used for
agricultural business, as required by the Court in DAR v. Uy,28 wherein we
ruled thus:
It is not uncommon for an enormous landholding to be intermittently planted
with trees, and this would not necessarily detract it from the purpose of
livestock farming and be immediately considered as an agricultural land. It
would be surprising if there were no trees on the land. Also, petitioner did
not adduce any proof to show that the coconut trees were planted by
respondent and used for agricultural business or were already existing when
the land was purchased in 1979. In the present case, the area planted with
coconut trees bears an insignificant value to the area used for the cattle and
other livestock-raising, including the infrastructure needed for the business.
There can be no presumption, other than that the "coconut area" is indeed
used for shade and to augment the supply of fodder during the warm
months; any other use would be only be incidental to livestock farming. The
substantial quantity of livestock heads could only mean that respondent is
engaged in farming for this purpose. The single conclusion gathered here is
that the land is entirely devoted to livestock farming and exempted from the
CARP.
On the assumption that five thousand five hundred forty-eight (5,548)
coconut trees were existing on the Lopez land (TCT No. T-12637), the DAR
did not refute the findings of the MARO that these coconut trees were merely
incidental. Given the number of livestock heads of SNLABC, it is not
surprising that the areas planted with coconut trees on the Lopez lands
where forage grass grew were being used as grazing areas for the livestock.
It was never sufficiently adduced that SNLABC was primarily engaged in
agricultural business on the Lopez lands, specifically, coconut-harvesting.
Indeed, the substantial quantity of SNLABC’s livestock amounting to a little
over one hundred forty (140) livestock heads, if measured against the
combined 110.5455 hectares of land and applying the DAR-formulated ratio,
leads to no other conclusion than that the Lopez lands were exclusively
devoted to livestock farming.29
In any case, the inconsistencies appearing in the documentation presented
(albeit sufficiently explained) pale in comparison to the positive assertion
made by the MARO in its on-site, actual investigation - that the Lopez lands
were being used actually, directly and exclusively for its livestock-raising
business. The Court affirms the findings of the DAR Regional Director and
the Court of Appeals that the Lopez lands were actually, directly and
exclusively being used for SNLABC’s livestock business and, thus, are
exempt from CARP coverage.
The Limot lands of SNLABC are not actually and directly being used for
livestock and should thus be covered by the CARL.
In contrast, the Limot lands were found to be agricultural lands devoted to
coconut trees and rubber and are thus not subject to exemption from CARP
coverage.
In the Report dated 06 April 1994, the team that conducted the inspection
found that the entire Limot lands were devoted to coconuts (41.5706
hectares) and rubber (8.000 hectares) and recommended the denial of the
application for exemption.30 Verily, the Limot lands were actually, directly
and exclusively used for agricultural activities, a fact that necessarily makes
them subject to the CARP. These findings of the inspection team were given
credence by the DAR Regional Director who denied the application, and were
even subsequently affirmed by the DAR Secretary and the Court of Appeals.
SNLABC argues that the Court of Appeals misapprehended the factual
circumstances and overlooked certain relevant facts, which deserve a second
look. SNLABC’s arguments fail to convince the Court to reverse the rulings of
the Court of Appeals.
In the 07 February 1994 Letter-Affidavit addressed to the DAR Secretary,
SNLABC requested the exemption of the Limot lands on the ground that the
corporation needed the additional area for its livestock business. As pointed
out by the DAR Regional Director, this Letter-Affidavit is a clear indication
that the Limot lands were not directly, actually and exclusively used for
livestock raising. SNLABC casually dismisses the clear import of their Letter-
Affidavit as a "poor choice of words." Unfortunately, the semantics of the
declarations of SNLABC in its application for exemption are corroborated by
the other attendant factual circumstances and indicate its treatment of the
subject properties as non-livestock.
Verily, the MARO itself, in the Investigation Report cited by no less than
SNLABC, found that the livestock were only moved to the Limot lands
sporadically and were not permanently designated there. The DAR Secretary
even described SNLABC’s use of the area as a "seasonal extension of the
applicant’s ‘grazing lands’ during the summer." Therefore, the Limot lands
cannot be claimed to have been actually, directly and exclusively used for
SNLABC’s livestock business, especially since these were only intermittently
and secondarily used as grazing areas. The said lands are more suitable --
and are in fact actually, directly and exclusively being used -- for agricultural
purposes.
SNLABC’s treatment of the land for non-livestock purposes is highlighted by
its undue delay in filing the application for exemption of the Limot lands.
SNLABC filed the application only on 07 February 1994, or three years after
the Notice of Coverage was issued; two years after it filed the first
application for the Lopez lands; and a year after the titles to the Limot lands
were transferred to the Republic. The SNLABC slept on its rights and delayed
asking for exemption of the Limot lands. The lands were undoubtedly being
used for agricultural purposes, not for its livestock business; thus, these
lands are subject to CARP coverage. Had SNLABC indeed utilized the Limot
lands in conjunction with the livestock business it was conducting on the
adjacent Lopez lands, there was nothing that would have prevented it from
simultaneously applying for a total exemption of all the lands necessary for
its livestock.
The defense of SNLABC that it wanted to "save" first the Lopez lands where
the corrals and chutes were located, before acting to save the other
properties does not help its cause. The piecemeal application for exemption
of SNLABC speaks of the value or importance of the Lopez lands, compared
with the Limot lands, with respect to its livestock business. If the Lopez and
the Limot lands were equally significant to its operations and were actually
being used for its livestock business, it would have been more reasonable for
it to apply for exemption for the entire lands. Indeed, the belated filing of
the application for exemption was a mere afterthought on the part of
SNLABC, which wanted to increase the area of its landholdings to be
exempted from CARP on the ground that these were being used for its
livestock business.
In any case, SNLABC admits that the title to the Limot lands has already
been transferred to the Republic and subsequently awarded to SNLABC’s
farm workers.31 This fact only demonstrates that the land is indeed being
used for agricultural activities and not for livestock grazing.
The confluence of these factual circumstances leads to the logical conclusion
that the Limot lands were not being used for livestock grazing and, thus, do
not qualify for exemption from CARP coverage. SNLABC’s belated filing of
the application for exemption of the Limot lands was a ruse to increase its
retention of its landholdings and an attempt to "save" these from
compulsory acquisition.
WHEREFORE, the Petitions of the Department of Agrarian Reform and the
Salvador N. Lopez Agri-Business Corp. are DISMISSED, and the rulings of
the Court of Appeals and the DAR Regional Director are hereby AFFIRMED.
SO ORDERED.

8.

G.R. No. 132866

THE COURT OF APPEALS and THE DEPARTMENT OF AGRARIAN
REFORM ADJUDICATION BOARD, Petitioners,
vs.
ESTRELLA ARRASTIA, Respondent.

DECISION
Tinga, J.:
This deals with two separate Rule 45 petitions, later consolidated, filed by
the Department of Agrarian Reform Adjudication Board ("DARAB") and
Alfredo Danan, et al. Both petitions seek the reversal of the Court of
Appeals’ Decision in CA-G.R. SP No. 33796, which reversed and set aside the
DARAB Decision in DARAB Case No. 1551 and its Resolution denying
petitioners’ motion for reconsideration.
Petitioners ("private petitioners") in G.R. No. 132759 are all residents of
Lubao, Pampanga, claiming to be cultivating a vast landholding owned by
the heirs of Teodorica Reinares Arrastia, Leticia Arrastia Montenegro and
Juanita Arrastia ("Arrastia heirs"). Said property has an aggregate area of
approximately three hundred (300) hectares and is situated at
the Barangays of Lourdes, Baruya, and San Isidro, all within the Municipality
of Lubao, Pampanga. The records of the case show that the landholding had
been subdivided and distributed among the Arrastia heirs and the
corresponding certificates of titles issued accordingly.
Petitioner in G.R. No. 132866 is the DARAB, the adjudication arm of the
Department of Agrarian Reform ("DAR") that is tasked to implement the
government’s comprehensive agrarian reform program ("CARP").
The common respondent in both petitions is Estrella Arrastia, one of the
Arrastia heirs and a co-owner of the disputed property. Respondent Arrastia
own 4.4630 hectares of the disputed property.
The factual antecedents are as follows:
Sometime in 1976, a certain Rustico Coronel leased the subject property for
a period of twelve (12) years or until the crop year 1987 to 1988.1 On
September 27, 1986, persons claiming to be farmers and residents
of Barangay Lourdes and Barangay San Rafael signed a joint resolution as
members of the Aniban ng mga Manggagawa sa Agrikultura ("AMA") to enter
and lease the subject property from the Arrastia heirs. Then Pampanga
Governor Brien Guiao favorably endorsed the resolution to then Minister of
Environment and Natural Resources Heherson Alvarez. On the basis of said
resolution but without the consent of the landowners, the AMA members,
who are herein petitioners, entered the disputed land, cleared portions
thereof and planted various crops thereon. This culminated in a violent
confrontation on May 21, 1988 that led to the filing of criminal charges
against AMA members.2
On June 2, 1988, the AMA filed a complaint with petitioner DARAB, docketed
as DARAB Case No. 0001, praying that respondent Arrastia be prevented
from destroying standing crops on the disputed property and from fencing
said property and that petitioners be allowed to continue with their farming
thereon. On August 15, 1988, the DARAB ordered the DAR Regional Director
to conduct an ocular inspection on the disputed property.3 The inspection
team submitted an Ocular/Investigation Report with the observation that
there were no substantially significant plantings on the disputed property.
The Municipal Agrarian Reform Officer ("MARO") of Lubao, Pampanga also
submitted a report dated September 21, 1989, recommending the
disqualification of private petitioners from availing of the benefits under the
CARP.4
On October 5, 1988, the DARAB issued an order denying AMA’s motion for
authority to cultivate. The order became final and executory on July 29,
1989, after the DARAB denied AMA’s motion for reconsideration.5
On behalf of her co-heirs and co-owners, Arrastia instituted an action against
private petitioners for violation of Section 73(b) of Republic Act (R.A.) No.
6657 on October 9, 1989. Arrastia’s complaint, docketed as Agrarian Case
No. 2000, was raffled to Branch 48 of the Regional Trial Court of San
Fernando, Pampanga on October 9, 1989. The trial court, sitting as a special
agrarian court ("SAC"), issued a temporary restraining order, and
subsequently a preliminary injunction, both enjoining private petitioners
from entering and cultivating the disputed property.
On November 29, 1989, private petitioners filed a complaint for injunction
and damages before the Provincial Agrarian Reform Adjudication Board
("PARAD") against Arrastia, alleging that they were actual tillers of the
disputed property who were forcibly evicted by Arrastia from their tenanted
lots through the use of armed men. In their complaint, docketed as DARAB
Regional Case No. 161-P’ 89, they prayed that Arrastia be restrained from
preventing them from reoccupying the property in question. Upon referral of
the matter to the respective Barangay Agrarian Reform Committees
("BARC") of the Barangays of Lourdes, San Isidro, and San Rafael, BARC
officials reported that the dispute could no longer be settled amicably. In
particular, the BARC of Barangay San Rafael (Baruya), Lubao informed the
hearing officer that private petitioners were tenants or actual tillers of the
disputed property. The Lubao MARO also submitted the reports of other
BARC officials.6
On the basis of the reports submitted by BARC officials and private
petitioners’ affidavits, the hearing officer issued on December 9, 1990 an
order granting a preliminary injunction to restrain Arrastia from disturbing
private petitioners in the tilling of the disputed property. The PARAD hearing
officer also directed the MARO to act on the petition for the coverage of the
disputed property under the CARP.7
Meanwhile, on January 30, 1991, Arrastia filed an omnibus motion in DARAB
Case No. 0001, questioning the jurisdiction of the hearing officer to issue an
order of injunction. The DARAB denied said motion and subsequently issued
the writ of injunction on September 22, 1992.
Arrastia filed an answer in DARAB Regional Case No. 161-P’ 89, interposing
the defense that the disputed land was not devoted to agriculture and that
private petitioners were not tenants thereof.
After due hearing, the PARAD rendered a decision in DARAB Regional Case
No. 161-P’ 89 on May 13, 1993, declaring that the subject property is
covered by the CARP and that private petitioners are qualified beneficiaries
of the program. The adjudicator also issued an injunction prohibiting Arrastia
from disturbing private petitioners’ occupation of the property. The
dispositive portion of the decision reads:
WHEREFORE, PREMISES CONSIDERED, this Board hereby renders judgment:
(1) Confirming and declaring that the subject landholding with an area of
300 hectares, more or less, situated at Barangays Lourdes, San Isidro and
San Rafael (Baruya), Lubao, Pampanga, owned by the defendant and her co-
owners are agricultural land subject to the coverage of RA No. 6657, and
that plaintiffs are qualified beneficiaries who enjoy the benefits of agrarian
laws including the right to an award of the lands they actually till in
accordance with the procedure therein;
(2) Making the preliminary injunction hereto forthwith issued, prohibiting the
defendant and her co-owners and all other persons claiming any right or title
under them, from continuing to exclude plaintiffs and from re-entry and re-
occupation of the subject landholding as agricultural tenants and their
restoration thereat, final and permanent; and
(3) Ordering the defendant and her co-owners to pay plaintiffs the amount
of ₱10,000.00 as attorney’s fees, plus costs.8
Arrastia appealed the aforementioned decision to petitioner DARAB. The
appeal was docketed as DARAB Case No. 1551. On March 28, 1994, the
DARAB rendered its decision modifying the appealed judgment, the
dispositive portion of which reads:
WHEREFORE, premises considered, the appeal is DISMISSED. The judgment
of the Provincial Adjudicator is hereby modified as follows:
1. Declaring Dominador Flores, Rodrigo Serrano, Oscar Salazar, Alejandro
Danan, Tirso Lingad, Francisco Santos, Dante Danan, Jesus Castro, Amado
Escueta, Marcos Susi, Francisco Bernate, Felix Escueta, Ladislao Danan,
Lamberto Danan, Carlito Santos, Orlando Santos, Jose Manansala, Eulalio
Danan, Eddie Escueta, Conrado Castro, Pedro Tala and Victorino Tala to be
agricultural lessees on their respective tillages, and ordering their
reinstatement on the land;
2. Ordering the rest of the Plaintiffs-Appellees to be reinstated on the land
and to possess and occupy their respective areas of cultivation;
3. Ordering the Regional Director of the Department of Agrarian Reform,
Region III, San Fernando, Pampanga, the Provincial Agrarian Reform Officer
for the Province of Pampanga and the Municipal Reform Officer for the
Municipality of Lubao, Province of Pampanga to immediately undertake
administrative processes for the coverage of the land under Republic Act No.
6657 and other applicable agrarian laws, DAR Administrative Order No. 1,
Series of 1993, DAR Department Memorandum Circular No. 04, Series of
1993 and other DAR rules and regulations taking into consideration the
qualifications of Appellees to be beneficiaries of the program as well as the
right of retention of the owners of the subject landholding and the last
paragraph of Section 6, Republic Act No. 6657 which provides:
Upon the effectivity of this Act, any sale, disposition, lease, management
contract or transfer of possession of private lands executed by the original
landowner in violation of this Act shall be null and void; Provided, however,
That those executed prior to this Act shall be valid only when registered with
the Register of Deeds within the period of three (3) months after the
effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR
within thirty (30) days of any transaction involving agricultural lands in
excess of five (5) hectares.
4. Ordering Defendant-Appellant, or any person or persons acting for and in
behalf, to refrain from committing any act or acts which will disturb or in any
way adversely interfere with the peaceful possession, occupation and
farming activities of Appellees on the land itself;
5. Ordering Defendant-Appellant to pay Plaintiff-Appellees the reasonable
amount of Twenty Thousand Pesos (₱20,000.00) as attorney’s fees plus
costs of the suit; and
6. Ordering the Regional Sheriff of the DAR Regional Adjudication Board,
Region III, to implement this Order and submit a return to this Board within
seven (7) days from receipt of this Order.
This decision is immediately executory pursuant to Section 50 of Republic
Act No. 6657.9
Aggrieved, Arrastia elevated the controversy to the Court of Appeals, which
reversed and set aside the decision of the DARAB.
On the issue of whether private petitioners are qualified beneficiaries under
the CARP, the appellate court ruled in the negative mainly on the basis of
the report of MARO Josefina Vidal which was quoted at length in its Decision.
In the said report, the MARO recommended the disqualification of private
petitioners from the coverage of the CARP in view of their continued violation
of Sections 22 and 23 of Executive Order No. 229, under which persons,
associations, or entities which prematurely enter lands covered by agrarian
reform shall be permanently disqualified from CARP coverage and cited for
contempt, respectively. The Court of Appeals also found private petitioners
guilty of violating the temporary restraining order and preliminary injunction
issued by the SAC in Agrarian Case No. 2000 and also the temporary
restraining issued by the Court of Appeals itself on April 13, 1994. The
appeals court denied the motions for reconsideration separately filed by
private petitioners. Hence, the petitions before this Court.
In its petition, DARAB raised the following issues:
1.1. THE HONORABLE COURT OF APPEALS ERRED WHEN IT SET ASIDE THE
ENTIRETY OF THE DECISION APPEALED FROM, TO INCLUDE THE ORDER TO
PLACE THE DISPUTED LANDHOLDINGS UNDER CARP COVERAGE, ON THE
SOLE BASIS OF THE FINDING THAT PRIVATE RESPONDENTS (FARMERS)
THEREIN WERE DISQUALIFIED AS FARMER BENEFICIARIES;
1.2. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED ON THE
DISQUALIFICATION OF ALL THE FARMERS (PRIVATE RESPONDENTS
THEREIN), IRRESPECTIVE OF WHETHER THEY (OR SOME) ARE
AGRICULTURAL TENANTS OR NOT, ON THE SOLE BASIS OF A FIELD REPORT
THAT WAS PREPARED AND SUBMITTED WITHOUT THE FARMERS AT LEAST
GIVEN OPPORTUNITY TO BE HEARD, THUS, VIOLATIVE OF DUE PROCESS.10
In turn, private petitioners in their petition impute the following errors to the
Court of Appeals:
1. RESPONDENT COURT GRAVELY ERRED IN NOT GIVING FIRST DUE
COURSE TO THE PETITION IN CA-G.R. NO. 33796 AND REQUIRED THE
DARAB TO ELEVATE TO IT THE RECORDS OF DARAB CASE NO. 1551
INCLUDING ALL THE EVIDENCE PRESENTED SO IT COULD HAVE FULLY
APPRECIATED ALL THE FACTS INSTEAD OF MERELY RELYING ON THE
PLEADINGS FILED BEFORE IT.
2. THE RESPONDENT COURT GRAVELY ERRED IN IGNORING FUNDAMENTAL
RULES OF ADMINISTRATIVE DUE PROCESS BY ITS FAILURE AND REFUSAL
TO CONSIDER SUBSTANTIVE EVIDENCE INTRODUCED BY PETITIONERS IN
THE PROCEEDINGS IN DARAB CASE NO. 161-P’89 AND DARAB CASE NO.
1551 RESULTING IN FINDINGS WHICH ARE NOT ONLY CONTRARY TO LAW
AND THE EVIDENCE ON RECORD BUT ARE FURTHER PATENTLY PARTIAL TO
PRIVATE RESPONDENTS.
3. THE RESPONDENT COURT GRAVELY ERRED IN MAKING CONCLUSIONS
FROM ITS REVIEW OF THE DARAB DECISION IN DARAB CASE NO. 1551
WITHOUT ANY BASIS ON THE DECISION ITSELF THUS CITING ERRORS IN
THE SAID DECISION WHICH WERE NOT ACTUALLY MADE BY THE DARAB.
4. THE RESPONDENT COURT GRAVELY ERRED IN REVERSING THE FINDINGS
OF FACTS OF THE DARAB WITHOUT DUE REGARD TO EVIDENCE PRESENTED
BEFORE THE LATTER.11
The two petitions advance two main arguments: first, the Court of Appeals’
finding that private petitioners are ineligible to become CARP beneficiaries is
without factual or evidentiary basis; second, the Court of Appeals’ reversal
of the DARAB’s order to undertake administrative proceedings for the
acquisition of the subject property for agrarian reform purposes is
premature.
Private petitioners contend that the Court of Appeals’ declaration that they
are not qualified beneficiaries of the CARP has no evidentiary basis because
it failed to order the transmittal of the DARAB records, particularly the
reports of the different BARC officials establishing tenancy relationship
between private petitioners and the owners of the disputed property. For its
part, DARAB denies having categorically declared in its decision in DARAB
Case No. 1551 that private petitioners are qualified beneficiaries because the
administrative proceeding to determine the beneficiaries entitled under R.A.
No. 6657 was yet to be undertaken not by DARAB but by the administrative
officials of DAR. DARAB also describes as arbitrary and unilateral the MARO
report quoted by the appellate court in support of its ruling that private
petitioners prematurely entered the disputed property.
The resolution of the issue on private petitioners’ eligibility under the CARP
calls for a review of the evidence on record to determine whether or not the
conclusion of the Court of Appeals has factual basis. At the outset, it should
be noted that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Rules of Court is limited to reviewing only
errors of law, as it is not a trier of facts. It is a settled doctrine that findings
of fact of the Court of Appeals are binding and conclusive upon this Court,
not to be disturbed unless: (1) the conclusion is a finding grounded entirely
on speculation, surmise and conjecture; (2) the inference made is manifestly
mistaken; (3) there is grave abuse of discretion; (4) the judgment is based
on a misapprehension of facts; (5) the findings of fact are conflicting; (6)
the Court of Appeals went beyond the issues of the case and its findings are
contrary to the admissions of both appellant and appellees; (7) the findings
of fact of the Court of Appeals are contrary to those of the trial court; (8)
said findings of fact are conclusions without citation of specific evidence on
which they are based; (9) the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondents; and
(10) the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on
record.12
The DARAB and the Court of Appeals’ findings in respect to the status of
private petitioners are conflicting. The DARAB found that private petitioners
are either agricultural lessees paying rentals to the landowners or actual
tillers in possession of distinct portions of the subject property. The Court of
Appeals, however, found private petitioners as not qualified to become CARP
beneficiaries on account of certain violations they committed and considered
it unnecessary to ascertain their status as agricultural lessees or tillers. In
view of the divergent opinions, the Court must review the evidence relied
upon by the DARAB and the Court of Appeals in arriving at their respective
conclusions.
The Court affirms factual findings and conclusions of the Court of Appeals.
The appellate court’s conclusion that private petitioners committed particular
violations warranting their disqualification from the CARP is based on the
MARO report which has not been disputed by all the private petitioners. The
MARO who prepared the report enjoys the presumption of regularity in the
performance of her functions. Absent any showing that the Court of Appeals
committed grave abuse of discretion in giving evidentiary weight to said
report, said factual findings are generally deemed conclusive on this Court,
which is not a trier of facts.13
Anent DARAB’s contention that the MARO report was made unilaterally and
without giving private petitioners the opportunity to be heard, the
circumstances not nullify said report for lack of due process. The essence of
due process is simply an opportunity to be heard or, as applied to
administrative proceedings, an opportunity to explain one's side or an
opportunity to seek reconsideration of the action or ruling complained
of.14 Private petitioners cannot claim denial of due process simply because
they had ample opportunity to rebut the MARO’s findings and present
contrary evidence in the proceedings before the PARAD, the DARAB, or the
Court of Appeals.
Private petitioners insist that they are bona fide agricultural tenants of the
disputed property. It is unnecessary to pass upon this issue in the light of
the categorical finding of the appellate court that private petitioners are no
longer entitled to avail of the benefits under the CARP. In any event,
however, the claim is not well-founded.
A perusal of the decision in DARAB Case No. 1551 reveals that DARAB
classified two (2) sets of farmworkers, i.e., those who cultivated the land
and paid corresponding rentals, and those who occupied and cultivated
portions of the disputed property since 1986 as certified by BARC officials.
Mere occupation or cultivation of an agricultural land does not automatically
convert a tiller or farmworker into an agricultural tenant recognized under
agrarian laws. The essential requisites of a tenancy relationship are: (1) the
parties are the landowner and the tenant; (2) the subject is agricultural
land; (3) there is consent among the parties; (4) the purpose is agricultural
production; (5) there is personal cultivation; and (6) there is sharing of
harvests. All these requisites must concur in order to create a tenancy
relationship between the parties.15 In the case at bar, it has not been
sufficiently established that private petitioners’ occupation and cultivation of
the disputed property was with the consent of the landowners.
DARAB assails the Court of Appeals in reversing the DARAB decision in its
entirety. It contends that the determination of private petitioners’ eligibility
under R.A. No. 6657 has no bearing on its order to commence administrative
procedure for the acquisition of the disputed property.
As borne by the case records,16 respondent Arrastia owns only 4.4630
hectares of the subject property, which is below the retention limit under
Section 617 of R.A. No. 6657 granting a right of retention of up to a
maximum of five (5) hectares of agricultural land in favor of a landowner
whose property may be acquired for distribution to agrarian reform
beneficiaries. Consequently, a landowner may keep his entire covered
landholding if its aggregate size does not exceed the retention limit of five
(5) hectares. His land will not be covered at all by the operation land
transfer program although all requisites for coverage are present.
The right of retention is a constitutionally guaranteed right, which is subject
to qualification by the legislature. It serves to mitigate the effects of
compulsory land acquisition by balancing the rights of the landowner and the
tenant and by implementing the doctrine that social justice was not meant to
perpetrate an injustice against the landowner. A retained area, as its name
denotes, is land which is not supposed to anymore leave the landowner's
dominion, thus sparing the government from the inconvenience of taking
land only to return it to the landowner afterwards, which would be a
pointless process.18 For as long as the area to be retained is compact or
contiguous and does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained must prevail. Moreover,
Administrative Order No. 4, series of 1991, which supplies the details for the
exercise of a landowner's retention rights, likewise recognizes no limit to the
prerogative of the landowner, although he is persuaded to retain other lands
instead to avoid dislocation of farmers.19 Therefore, there is no legal and
practical basis to order the commencement of the administrative
proceedings for the placement of respondent Arrastia’s land under the CARP
since her property’s land area falls below the retention limit of five (5)
hectares.
WHEREFORE, both petitions in G.R No. 132759 and G.R. No. 132866 are
DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 33796 is
AFFIRMED. Costs against private petitioners.
SO ORDERED.
9.

Heirs of Daez vs CA, G.R. No. 133507, February 17, 2000

G.R. No. 133507           February 17, 2000

EUDOSIA DAEZ AND/OR HER HEIRS, REP. BY ADRIANO D.
DAEZ, petitioners,
vs.
THE HON. COURT OF APPEALS MACARIO SORIENTES, APOLONIO
MEDIANA, ROGELIO MACATULAD and MANUEL UMALI, respondents.
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court

of Appeals2 dated January 28, 1998 which denied the application of
petitioner heirs of Eudosia Daez for the retention of a 4.1685-hectare
riceland pursuant to Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law3, thereby reversing the Decision4 of
then Executive Secretary Ruben D. Torres and the Order5 of then Deputy
Executive Secretary Renato C. Corona, both of which had earlier set aside
the Resolution6 and Order7 of then Department of Agrarian Reform (DAR)
Secretary Ernesto D. Garilao denying exemption of the same riceland from
coverage under Presidential Decree (P.D.) No. 27.
The pertinent facts are:
Eudosia Daez, now deceased, was the owner of a 4.1685-hectare riceland in
Barangay Lawa, Meycauayan, Bulacan which was being cultivated by
respondents Macario Soriente, Rogelio Macatulad, Apolonio Mediana and
Manuel Umali under a system of share-tenancy. The said land was subjected
to the Operation Land Transfer (OLT) Program under Presidential Decree
(P.D.) No. 278 as amended by Letter of Instruction (LOI) No. 4749. Thus,
the then Ministry of Agrarian Reform acquired the subject land and issued
Certificates of Land Transfer (CLT) on December 9, 1980 to private
respondents as beneficiaries.
However, on May 31, 1981, private respondents signed an affidavit,
allegedly under duress, stating that they are not share tenants but hired
laborers10. Armed with such document, Eudosia Daez applied for the
exemption of said riceland from coverage of P.D. No. 27 due to non-tenancy
as well as for the cancellation of the CLTs issued to private
respondents.1âwphi1.nêt
In their Affidavit dated October 2, 1983, Eudosia Daez and her husband,
Lope, declared ownership over 41.8064 hectares of agricultural lands located
in Meycauayan, Bulacan and fourteen (14) hectares of riceland, sixteen (16)
hectares of forestland, ten (10) hectares of "batuhan" and 1.8064 hectares
of residential lands11 in Penaranda, Nueva Ecija. Included in their 41.8064-
hectare landholding in Bulacan, was the subject 4,1685-hectare riceland in
Meycauayan.
On July 27, 1987, DAR Undersecretary Jose C. Medina issued an Order
denying Eudosia Daez's application for exemption upon finding that her
subject land is covered under LOI No. 474, petitioner being owner of the
aforesaid agricultural lands exceeding seven (7) hectares12.
On June 29, 1989, Eudosia Daez wrote a letter to DAR Secretary Benjamin
T. Leong requesting for reconsideration of Undersecretary Medina's order.
But on January 16, 199213 Secretary Leong affirmed the assailed order
upon finding private respondents to be bonafide tenants of the subject land.
Secretary Leong disregarded private respondents' May 31, 1981 affidavit for
having been executed under duress because he found that Eudosia's son,
Adriano, who was then the incumbent Vice-Mayor of Meycauayan, pressured
private respondents into signing the same.
Undaunted, Eudosia Daez brought her case on February 20, 1992 to the
Court of Appeals via a petition for certiorari. The Court of Appeals, however,
sustained the order of Secretary Leong in a decision dated April 29, 1992.
Eudosia pursued her petition before this court but we denied it in a minute
resolution dated September 18, 1992. We also denied her motion for
reconsideration on November 9, 1992.
Meantime, on August 6 and 12, 1992, the DAR issued Emancipation Patents
(EPs) to private respondents. Thereafter, the Register of Deeds of Bulacan
issued the corresponding Transfer Certificates of Title (TCTs).
Exemption of the 4.1685 riceland from coverage by P.D. No. 27 having been
finally denied her, Eudosia Daez next filed an application for retention of the
same riceland, this time under R.A. No. 6657.
In an order dated March 22, 1994, DAR Region III OIC-Director Eugenio B.
Bernardo allowed Eudosia Daez to retain the subject riceland but he denied
the application of her eight (8) children to retain three (3) hectares each for
their failure to prove actual tillage of the land or direct management thereof
as required by law14. Aggrieved, they appealed to the DAR.
On August 26, 1994, then DAR Secretary Ernesto D. Garilao, set aside the
order of Regional Director Bernardo in a Resolution,15 the decretal portion of
which reads, viz.:
WHEREFORE, premises considered, this Resolution is hereby issued setting
aside with FINALITY the Order dated March 22, 1994 of the Regional
Director of DAR Region III.
The records of this case is remanded to the Regional Office for immediate
implementation of the Order dated January 16, 1992 of this office as
affirmed by the Court of Appeals and the Supreme Court.
SO ORDERED.
Eudosia Daez filed a Motion for Reconsideration but it was denied on January
19, 199516.
She appealed Secretary Garilao's decision to the Office of the President
which ruled in her favor. The dispositive portion of the Decision17 of then
Executive Secretary reads:
WHEREFORE, the resolution and order appealed from are hereby SET ASIDE
and judgment is rendered authorizing the retention by Eudosia Daez or her
heirs of the 4.1685-hectare landholding subject thereof.
SO ORDERED.18
Aggrieved, private respondents sought from the Court of Appeals, a review
of the decision of the Office of the President.
On January 28, 1999, the said Decision of the Office of the President was
reversed. The Court of Appeals ordered, thus:
WHEREFORE, the assailed decision of July 5, 1996 and Order dated October
23, 1996 of the public respondents are REVERSED AND SET ASIDE, and the
Resolution and Order of DAR Secretary Ernesto D. Garilao respectively dated
August 26, 1994 and January 19, 1995 are REINSTATED.
SO ORDERED.
Hence, this petition which assigns the following errors:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT
DISTINCTION BETWEEN EXEMPTION FROM AGRARIAN REFORM COVERAGE
AND THE RIGHT OF RETENTION OF LANDOWNERS IS ONLY A MATTER OF
SEMANTICS THAT AN ADVERSE DECISION IN THE FORMER WILL
FORECLOSE FURTHER ACTION TO ENFORCE THE LATTER CONSIDERING
THAT THEY CONSTITUTE SEPARATE AND DISTINCT CAUSES OF ACTION
AND, THEREFORE, ENFORCEABLE SEPARATELY AND IN SEQUEL.
II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT APPLIED THE
PRINCIPLE OF RES JUDICATA DESPITE THE FACT THAT THE PREVIOUS CASE
CITED (EXEMPTION FROM COVERAGE DUE TO NON-TENANCY) AND THE
PRESENT CASE (RETENTION RIGHT) ARE OF DIFFERENT CAUSES OF
ACTION.
III. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED/OPINED
THAT THERE WAS A CUT-OFF DATE (AUGUST 27, 1985) FOR LANDOWNERS
TO APPLY FOR EXEMPTION OR RETENTION UNDER PD 27 AND THOSE WHO
FAILED TO FILE THEIR APPLICATIONS/PETITIONS ARE DEEMED TO HAVE
WAIVED THEIR RIGHTS.
IV. THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT
PETITIONERS (RESPONDENTS THEREIN) ARE GUILTY OF ESTOPPEL.
V. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE
LAND SUBJECT OF THIS CASE IS NO LONGER OWNED BY PETITIONERS
SINCE PRIVATE RESPONDENTS HAVE ALREADY BEEN ISSUED NOT ONLY
THEIR RESPECTIVE CERTIFICATES OF LAND TRANSFER BUT ALSO THEIR
INDIVIDUAL CERTIFICATES OF TITLE OVER THE DISPUTED AREA.19
We grant the petition.
First. Exemption and retention in agrarian reform are two (2) distinct
concepts.
P.D. No. 27, which implemented the Operation Land Transfer (OLT)
Program, covers tenanted rice or corn lands. The requisites for coverage
under the OLT program are the following: (1) the land must be devoted to
rice or corn crops; and (2) there must be a system of share-crop or lease-
tenancy obtaining therein. If either requisite is absent, a landowner may
apply for exemption. If either of these requisites is absent, the land is not
covered under OLT. Hence, a landowner need not apply for retention where
his ownership over the entire landholding is intact and undisturbed.
P.D. No. 27 grants each tenant of covered lands a five (5)-hectare lot, or in
case the land is irrigated, a three (3)-hectare lot constituting a family size
farm. However, said law allows a covered landowner to retain not more than
seven (7) hectares of his land if his aggregate landholding does not exceed
twenty-four (24) hectares. Otherwise, his entire landholding is covered
without him being entitled to any retention right20.
Consequently, a landowner may keep his entire covered landholding if its
aggregate size does not exceed the retention limit of seven (7) hectares. In
effect, his land will not be covered at all by the OLT program although all
requisites for coverage are present. LOI No. 474 clarified the effective
coverage of OLT to include tenanted rice or corn lands of seven (7) hectares
or less, if the landowner owns other agricultural lands of more than seven
(7) hectares. The term "other agricultural lands" refers to lands other than
tenanted rice or corn lands from which the landowner derives adequate
income to support his family.
Thus, on one hand, exemption from coverage of OLT lies if: (1) the land is
not devoted to rice or corn crops even if it is tenanted; or (2) the land is
untenanted even though it is devoted to rice or corn crops.
On the other hand, the requisites for the exercise by the landowner of his
right of retention are the following: (1) the land must be devoted to rice or
corn crops; (2) there must be a system of share-crop or lease-tenancy
obtaining therein; and (3) the size of the landholding must not exceed
twenty-four (24) hectares, or it could be more than twenty-four (24)
hectares provided that at least seven (7) hectares thereof are covered lands
and more than seven (7) hectares of it consist of "other agricultural lands".
Clearly, then, the requisites for the grant of an application for exemption
from coverage of OLT and those for the grant of an application for the
exercise of a landowner's right of retention, are different.
Hence, it is incorrect to posit that an application for exemption and an
application for retention are one and the same thing. Being distinct
remedies, finality of judgment in one does not preclude the subsequent
institution of the other. There was, thus, no procedural impediment to the
application filed by Eudosia Daez for the retention of the subject 4.1865-
hectare riceland, even after her appeal for exemption of the same land was
denied in a decision that became final and executory.
Second. Petitioner heirs of Eudosia Daez may exercise their right of retention
over the subject 4.1685 riceland.
The right of retention is a constitutionally guaranteed right, which is subject
to qualification by the legislature21. It serves to mitigate the effects of
compulsory land acquisition by balancing the rights of the landowner and the
tenant and by implementing the doctrine that social justice was not meant to
perpetrate an injustice against the landowner22. A retained area, as its
name denotes, is land which is not supposed to anymore leave the
landowner's dominion, thus sparing the government from the inconvenience
of taking land only to return it to the landowner afterwards, which would be
a pointless process.
In the landmark case of Association of Small Landowners in the
Phil., Inc. v. Secretary of Agrarian Reform23, we held that landowners who
have not yet exercised their retention rights under P.D. No. 27 are entitled
to the new retention rights under R.A. No. 665724. We disregarded the
August 27, 1985 deadline imposed by DAR Administrative Order No. 1,
series of 1985 on landowners covered by OLT. However, if a landowner filed
his application for retention after August 27, 1985 but he had previously
filed the sworn statements required by LOI Nos. 41, 45 and 52, he is still
entitled to the retention limit of seven (7) hectares under P.D. No. 2725.
Otherwise, he is only entitled to retain five (5) hectares under R.A. No.
6657.
Sec. 6 of R.A. No. 6657, which provides, viz.:
Sec. 6. Retention Limits — Except as otherwise provided in this Act, no
person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors governing
a viable family-size, 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 land 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 right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner. Provided, however, That in case
the area selected for retention by the landowner is tenanted, the tenant shall
have the option to choose whether to remain therein or be a beneficiary in
the same or another agricultural land with similar or comparable features. In
case the tenant chooses to remain in the retained area, he shall be
considered a leaseholder and shall lose his right to be a beneficiary under
this Act. In case the tenant chooses to be a beneficiary in another
agricultural land, he loses his right as a lease-holder to the land retained by
the landowner. The tenant must exercise this option within a period of one
(1) year from the time the landowner manifests his choice of the area for
retention.
In all cases, the security of tenure of the farmers or farmworkers on the land
prior to the approval of this Act shall be respected.
Upon the effectivity of this Act, any sale, disposition, lease, management
contract or transfer of possession of private lands executed by the original
landowner in violation of this Act shall be null and void; Provided, however,
That those executed prior to this Act shall be valid only when registered with
the Register of Deeds within a period of three (3) months after the effectivity
of this Act. Thereafter, all Register of Deeds shall inform the DAR within
thirty (3) days of any transaction involving agricultural lands in excess of
five (5) hectares26.
defines the nature and incidents of a landowner's right of retention. For as
long as the area to be retained is compact or contiguous and it does not
exceed the retention ceiling of five (5) hectares, a landowner's choice of the
area to be retained, must prevail. Moreover, Administrative Order No. 4,
series of 1991,27 which supplies the details for the exercise of a landowner's
retention rights, likewise recognizes no limit to the prerogative of the
landowner, although he is persuaded to retain other lands instead to avoid
dislocation of farmers.
Without doubt, this right of retention may be exercised over tenanted land
despite even the issuance of Certificate of Land Transfer (CLT) to farmer-
beneficiaries.28 What must be protected, however, is the right of the
tenants to opt to either stay on the land chosen to be retained by the
landowner or be a beneficiary in another agricultural land with similar or
comparable features.29
Finally. Land awards made pursuant to the government's agrarian reform
program are subject to the exercise by a landowner, who is so qualified, of
his right of retention.
Under P.D. No. 27, beneficiaries are issued CLTs to entitle them to possess
lands. Thereafter, they are issued Emancipation Patents (EPs) after
compliance with all necessary conditions. Such EPs, upon their presentation
to the Register of Deeds, result in the issuance of the corresponding transfer
certificates of title (TCT) in favor of the beneficiaries mentioned therein30.
Under R.A. No. 6657, the procedure has been simplified31. Only Certificates
of Land Ownership Award (CLOAs) are issued, in lieu of EPs, after
compliance with all prerequisites. Thereafter, upon presentation of the
CLOAs to the Register of Deeds, TCTs are issued to the designated
beneficiaries. CLTs are no longer issued.
The issuance of EPs or CLOAs to beneficiaries does not absolutely bar the
landowner from retaining the area covered thereby. Under Administrative
Order No. 2, series of 199432, an EP or CLOA may be cancelled if the land
covered is later found to be part of the landowner's retained area.
A certificate of title accumulates in one document a comprehensive
statement of the status of the fee held by the owner of a parcel of
land.33 As such, it is a mere evidence of ownership and it does not
constitute the title to the land itself. It cannot confer title where no title has
been acquired by any of the means provided by law34.
Thus, we had, in the past, sustained the nullification of a certificate of title
issued pursuant to a homestead patent because the land covered was not
part of the public domain and as a result, the government had no authority
to issue such patent in the first place35. Fraud in the issuance of the patent,
is also a ground for impugning the validity of a certificate of title36. In other
words, the invalidity of the patent or title is sufficient basis for nullifying the
certificate of title since the latter is merely an evidence of the former.
In the instant case, the CLTs of private respondents over the subject
4.1685-hectare riceland were issued without Eudosia Daez having been
accorded her right of choice as to what to retain among her landholdings.
The transfer certificates of title thus issued on the basis of those CLTs cannot
operate to defeat the right of the heirs of deceased Eudosia Daez to retain
the said 4.1685 hectares of riceland.
WHEREFORE, the instant petition is hereby GRANTED. The Decision of the
Court of Appeals, dated January 28, 1998, is REVERSED and SET ASIDE and
the Decision of the Office of the President, dated July 5, 1996, is hereby
REINSTATED. In the implementation of said decision, however, the
Department of Agrarian Reform is hereby ORDERED to fully accord to private
respondents their rights under Section 6 of R.A. No. 6657.1âwphi1.nêt
No costs.
SO ORDERED.

10.
HEIRS OF TEODORO CADELIÑA, REPRESENTED BY SOLEDAD CADIZ
VDA. DE CADELIÑA, PETITIONERS, VS. FRANCISCO CADIZ,
CELESTINO DELA CRUZ, ANTONIO VICTORIA, HEIRS OF TELESFORO
VILLAR REPRESENTED BY SAMUEL VILLAR, FRANCISCO VICTORIA
AND MAGNO GANTE, RESPONDENTS;
HON. JOSE C. REYES, JR., IN HIS CAPACITY AS PRESIDING JUSTICE,
HON. NORMANDIE PIZARRO, IN HIS CAPACITY AS MEMBER, AND
HON. RICARDO R. ROSARIO, IN HIS CAPACITY AS MEMBER OF THE
COURT OF APPEALS SPECIAL FORMER THIRD DIVISION, PUBLIC
RESPONDENTS.

DECISION
JARDELEZA, J.:
This is a petition for certiorari[1] under Rule 65 of the Revised Rules of Court
seeking to nullify the Court of Appeals' (CA) May 25, 2009 Resolution[2] and
September 22, 2010 Resolution[3] in CA-G.R. SP No. 108414 (collectively,
Assailed Resolutions). The Assailed Resolutions dismissed the petition for
review under Rule 43 of the Revised Rules of Court filed by the Heirs of
Teodoro Cadeliña represented by Soledad Cadiz Vda. De Cadeliña
(petitioners), against the July 5, 2006 Decision[4] and the March 11, 2009
Resolution[5] of the Department of Agrarian Reform Adjudication Board
(DARAB) in DARAB Cases Nos. 10543 and 10554.[6] The DARAB granted the
complaint[7] filed by Francisco Cadiz, Celestino Dela Cruz, Antonio Victoria
and heirs of Telesforo Villar, represented by Samuel Villar, (respondents) for
reinstatement of possession as farmer tenants.
The Facts

Respondents filed complaints for reinstatement of possession as farmer

tenants against petitioners with the DARAB-Region 2, San Fermin, Cauayan,
Isabela docketed as DARAB Cases Nos. II-2063-ISA 2000 and II-2064-ISA
2000.[8] Respondents alleged that they were the farmers/tillers of
portions[9] of Lot No. 7050, Cad. 211, Santiago Cadastre (properties),
"ownership then claimed by Nicanor Ibuna, Sr. [who is] their landowner,"
since 1962 until around the end of 1998 when they were deprived of their
respective possessions, occupations and tillage of the properties.[10] This
was allegedly brought about by the execution of the decision of the CA in a
previous case (CA-G.R. CV No. 42237)[11] ordering the transfer of the
properties to Teodoro Cadeliña (Teodoro) and his heirs, petitioners herein.

Petitioners moved to dismiss the complaint on the ground that respondents

cannot be considered as tenants under land reform law because they were
instituted by Nicanor Ibuna, Sr. (Ibuna) whose rights were declared by the
court illegal and unlawful in CA-G.R. CV No. 42237 and that the DARAB has
no jurisdiction to entertain the case for lack of tenancy relationship between
the parties.[12]

In its Decision[13] dated October 24, 2000, the DARAB, Region 2, San

Fermin, Cauayan, Isabela ruled in favor of respondents. The DARAB declared
Ibuna as legal possessor of the properties who had the right to institute
respondents as tenants of the properties. The DARAB said, "[w]hile the title
of the late Nicanor Ibuna was subsequently declared null and void by the
[CA in CA-G.R. CV No. 42237], he is deemed considered as legal possessor
of the subject land" and "[a]s legal possessor, the late Ibuna has the right to
grant to the herein plaintiffs the cultivation of the land pursuant to Section 6
of [Republic Act (RA) No.] 3844, as amended, otherwise known as the
Agricultural Land Reform Code."[14] As a result, respondents are entitled to
security of tenure in working on the properties. Thus, the DARAB: (1)
declared respondents the tenants of the properties; (2) ordered petitioners,
their heirs, agent, or any person(s) acting on their behalf to vacate the land
in issue and to deliver the possession and cultivation of said lands to
respondents; (3) ordered respondents to pay lease rentals to petitioners in
accordance with Section 34 of RA No. 3844; and (4) ordered petitioners to
pay respondents attorney's fees and honoraria in the amount of P20,000.00.
[15]

This was appealed before the DARAB Quezon City (DARAB Cases Nos.
10543-10544) which denied the appeal in its Decision dated July 5, 2006. A
motion for reconsideration was also denied in the March 11, 2009
Resolution. Thereafter, petitioners filed the petition for review under Rule 43
before the CA.

On May 25, 2009, the CA dismissed the petition for not being sufficient in
form and in substance.[16] In their Motion for Reconsideration,
[17] petitioners attached the missing special power of attorney in favor of
Enor C. Cadeliña and the certified original copies of the pertinent DARAB
decisions and resolution, and cited inadvertence and excusable negligence
for the other procedural lapses. The CA, however, denied the motion in the
September 22, 2010 Resolution which petitioners received on September 29,
2010.[18]

Hence, this petition filed on November 26, 2010,[19] where petitioners

argue that the CA committed grave abuse of discretion in dismissing the
petition based on procedural grounds, and for ignoring the merits of the
petition. According to them, there is a conflict between the decision in CA
G.R. CV No. 42237 annulling the titles of respondents and declaring the
homestead patents of Teodoro lawful, and the DARAB Decision dated
October 24, 2000 declaring respondents as tenants.[20]
The Issue

Whether the CA committed grave abuse of discretion in dismissing the

petition for review based on procedural grounds.
Our Ruling

We grant the petition.

Technical rules of procedure may be set aside in order to achieve substantial

justice.

It does not escape us that the right recourse against the dismissal of
petitioners' appeal with the CA is an appeal by certiorari under Rule 45, and
not certiorari under Rule 65, of the Revised Rules of Court.[21] The Assailed
Decisions were final and appealable judgments, which disposed of
petitioners' appeal in a manner left nothing more to be done by the CA.
[22] As a rule, the existence and availability of this right to appeal precludes
the resort to certiorari since a petition for certiorari under Rule 65 of the
Revised Rules of Court may only be resorted to in the absence of appeal or
any plain, speedy and adequate remedy in the ordinary course of law.
[23] Corollarily, we have repeatedly ruled that certiorari is not and cannot be
made a substitute for a lost appeal. As such, this case would have been
dismissed outright for failure of petitioners to avail of the proper remedy.

Nevertheless, when we are convinced that substantial justice will be

defeated by the strict application of procedural rules that are, ironically,
intended for the just, speedy and inexpensive disposition of cases on the
merits, we will not hesitate to overlook the procedural technicalities. While
ordinarily, certiorari is unavailing where the appeal period has lapsed, there
are exceptions, as when: (a) the public welfare and the advancement of
public policy dictates; (b) the broader interest of justice so requires; (c) the
writs issued are null and void; or (d) the questioned order amounts to an
oppressive exercise of judicial authority.[24] Thus, we said in Pahila-Garrido
v. Tortogo:[25]
We also observe that the rule that a petition should have been brought
under Rule 65 instead of under Rule 45 of the Rules of Court (or vice versa)
is not inflexible or rigid. The inflexibility or rigidity of application of the rules
of procedure is eschewed in order to serve the higher ends of justice. Thus,
substance is given primacy over form, for it is paramount that the rules of
procedure are not applied in a very rigid technical sense, but used only to
help secure, not override, substantial justice. If a technical and rigid
enforcement of the rules is made, their aim is defeated. Verily, the strict
application of procedural technicalities should not hinder the speedy
disposition of the case on the merits. To institute a guideline, therefore,
the Rules of Court expressly mandates that the rules of procedure "shall be
liberally construed in order to promote their objective of securing a just,
speedy and inexpensive disposition of every action and
proceeding."[26] (Emphasis supplied.)
The record shows that the facts of this case are undisputed and we are only
presented with questions of law which we are readily able to decide. The
issues only involve the determination of whether respondents are de
jure tenants entitled to security of tenure under our land reform laws, and
consequently, of the jurisdiction of the DARAB to order the restoration of
possession of petitioners' properties to respondents. After review, we hold
that since the merits of the petition far outweigh the rigid application of the
rules, there is a need to suspend the rules in this case to achieve substantial
justice.

This is all the more true when the strict application of technical rules of
procedure will result in a decision that will disturb already settled cases. We
are mindful of the impact that the dismissal of this petition may have on the
final and executory decisions not only in CA-G.R. CV No. 42237 (declaring
Ibuna's title as void, and upholding petitioners' homestead over the
properties), but also in a much earlier case involving the denial of the free
patent application of Ibuna over the properties (which also declared his title
void) in Department of Agriculture and Natural Resources (DANR) Case No.
2411.[27] We take notice that we affirmed this order of the Secretary of
DANR in DANR Case No. 2411 in our Resolution in G.R. No. L-30916 dated
April 25, 1988.[28]

Respondents are not agricultural leasehold lessees entitled to security of

tenure.

We first address petitioners' claim that there is inconsistency between

respondents' position of claiming ownership in CA-G.R. CV No. 42237, and
their claim of tenancy relationship in this case. While we have previously
held that "[t]enancy relationship is inconsistent with the assertion of
ownership,"[29] this is not applicable in the case of respondents. Records
show that respondents were previously issued title (albeit nullified in CA-
G.R. CV No. 42237) under Section 3[30] of Presidential Decree No. 152,
[31] which gives a share tenant actually tilling the land the preferential right
to acquire the portion actually tilled by him.[32] Respondents' assertions of
ownership over the properties in CA-G.R. CV No. 42237 were only but a
consequence of their previous status as alleged tenants of Ibuna; their
claims of tenancy status and ownership were successive, and not
simultaneous. Thus, particular to the circumstances of their case, there was
no conflict between their assertion of ownership in CA-G.R. CV No. 42237
and of tenancy in this case.

Nevertheless, respondents' claim of tenancy relationship fails.

Under RA No. 3844,[33] otherwise known as the Agriculture Land Reform

Code, which superseded RA No. 1199,[34] the determination of the
existence of an agricultural leasehold relation is not only a factual issue, but
is also an issue determined by the terms of the law. RA No. 3844 provides
that agricultural leasehold relation is established: (1) by operation of law in
accordance with Section 4 of the said act as a result of the abolition of the
agricultural share tenancy system under RA No. 1199, and the conversion of
share tenancy relations into leasehold relations; or (2) by oral or written
agreement, either express or implied.[35] While petitioners Cadiz and
Victoria claim to be instituted as tenants in 1962 or during the effectivity of
RA No. 1199, and petitioners Villar and Dela Cruz claim to be instituted in
1972 or during the effectivity of RA No. 3844, the principles in establishing
such relationship in cases before us have been the same for both laws.

For agricultural tenancy or agricultural leasehold to exist, the following

requisites must be present: (1) the parties are the landowner and the tenant
or agricultural lessee; (2) the subject matter of the relationship is an
agricultural land; (3) there is consent between the parties to the
relationship; (4) the purpose of the relationship is to bring about agricultural
production; (5) there is personal cultivation on the part of the tenant or
agricultural lessee; and (6) the harvest is shared between landowner and
tenant or agricultural lessee.[36] The absence of any of the requisites does
not make an occupant, cultivator, or a planter, a de jure tenant which
entitles him to security of tenure or to coverage by the Land Reform
Program of the government under existing tenancy laws.[37]
In Cunanan v. Aguilar,[38] we held that a tenancy relationship can only be
created with the true and lawful landowner who is the owner, lessee,
usufructuary or legal possessor of the land, to wit:

Under the foregoing factual milieu, private respondent's claims-(1) that

petitioner was not agricultural tenant, and (2) that the recognition by the
Court of Agrarian Relations of his alleged tenancy status has been secured
thru misrepresentation and suppression of facts-must prevail.
(1) By petitioner's own claim filed with the CAR in 1970 he was constituted
as tenant on the land by Pragmacio Paule. Paule was, however, ordered to
vacate the holding and surrender the same to private respondents herein,
the heirs of Ciriaco Rivera, as early as December 8, 1964 by the final and
executory judgment in Civil Case No. 1477. Therefore, Paule's institution of
petitioner as tenant in the holding did not give rise to a tenure
relationship. Tenancy relationship can only be created with the consent of
the true and lawful landowner who is the owner, lessee, usufructuary or
legal possessor of the land. It cannot be created by the act of a supposed
landowner, who has no right to the land subject of the tenancy, much less
by one who has been dispossessed of the same by final judgement.
[39] (Emphasis supplied; citations omitted.)
In this case, Ibuna's institution of respondents as tenants did not give rise to
a tenure relationship because Ibuna is not the lawful landowner, either in the
concept of an owner or a legal possessor, of the properties. It is undisputed
that prior to the filing of the complaint with the DARAB, the transfers of the
properties to Ibuna and his predecessor, Andres Castillo, were declared void
in separate and previous proceedings.[40] Since the transfers were void, it
vested no rights whatsoever in favor of Ibuna, either of ownership and
possession. It is also for this reason that the DARAB erred in declaring Ibuna
as a legal possessor who may furnish a landholding to respondents. That
which is inexistent cannot give life to anything at all.[41]

Notably, upholding Ibuna as the legal possessor of the properties is

inconsistent with petitioners' homestead since a homestead applicant is
required to occupy and cultivate the land for his own and his family's benefit,
and not for the benefit of someone else.[42] Also, it must be recalled that
the CA, in CA-G.R. CV No. 42237, ordered respondents to reconvey the
properties to petitioners herein.[43] Upholding respondents' claim for
tenancy, and consequently their possession of the properties, would
frustrate this final and executory decision of the CA.
There being no agricultural tenancy relationship between petitioners and
respondents, the DARAB acted beyond its jurisdiction when it ordered
petitioners, among other things, to restore possession of the lands to
respondents.

WHEREFORE, the petition is GRANTED. The DARAB Quezon City Decision

dated July 5, 2006 and the Resolution dated March 11, 2009 in DARAB
Cases Nos. 10543 and 10544, as well as the affirmed Decision of the
DARAB-Region 2 dated October 14, 2000, are hereby SET ASIDE. The
complaints in DARAB Case Nos. 11-2063-ISA 2000 and 11-2064-ISA 2000
are DISMISSED.

No costs.

SO ORDERED.

11.
G.R. No. 171972               June 8, 2011
LUCIA RODRIGUEZ AND PRUDENCIA RODRIGUEZ, Petitioners,
vs.
TERESITA V. SALVADOR, Respondent.
DECISION
DEL CASTILLO, J.:
Agricultural tenancy is not presumed but must be proven by the person
alleging it.
This Petition for Certiorari1 under Rule 65 of the Rules of Court assails the
August 24, 2005 Decision2 and the February 20, 2006 Resolution3 of the
Court of Appeals (CA) in CA G.R. SP No. 86599. However, per Resolution4 of
this Court dated August 30, 2006, the instant petition shall be treated as a
Petition for Review on Certiorari under Rule 45 of the same Rules.
Factual Antecedents
On May 22, 2003, respondent Teresita V. Salvador filed a Complaint for
Unlawful Detainer,5 docketed as Civil Case No. 330, against petitioners Lucia
(Lucia) and Prudencia Rodriguez, mother and daughter, respectively before
the Municipal Trial Court (MTC) of Dalaguete, Cebu.6 Respondent alleged
that she is the absolute owner of a parcel of land covered by Original
Certificate of Title (OCT) No. P-271407 issued by virtue of Free Patent No.
(VII-5) 2646 in the name of the Heirs of Cristino Salvador represented by
Teresita Salvador;8 that petitioners acquired possession of the subject land
by mere tolerance of her predecessors-in-interest;9 and that despite several
verbal and written demands made by her, petitioners refused to vacate the
subject land.10
In their Answer,11 petitioners interposed the defense of agricultural tenancy.
Lucia claimed that she and her deceased husband, Serapio, entered the
subject land with the consent and permission of respondent’s predecessors-
in-interest, siblings Cristino and Sana Salvador, under the agreement that
Lucia and Serapio would devote the property to agricultural production and
share the produce with the Salvador siblings.12 Since there is a tenancy
relationship between the parties, petitioners argued that it is the Department
of Agrarian Reform Adjudication Board (DARAB) which has jurisdiction over
the case and not the MTC.13
On July 10, 2003, the preliminary conference was terminated and the parties
were ordered to submit their respective position papers together with the
affidavits of their witnesses and other evidence to support their respective
claims.14
Ruling of the Municipal Trial Court
On September 10, 2003, the MTC promulgated a Decision15 finding the
existence of an agricultural tenancy relationship between the parties, and
thereby, dismissing the complaint for lack of jurisdiction. Pertinent portions
of the Decision read:
Based on the facts presented, it is established that defendant Lucia
Rodriguez and her husband Serapio Rodriguez were instituted as agricultural
tenants on the lot in question by the original owner who was the
predecessor-in-interest of herein plaintiff Teresita Salvador. The consent
given by [the]original owner to constitute [defendants] as agricultural
tenants of subject landholdings binds plaintiff who as successor-in-interest of
the original owner Cristino Salvador steps into the latter’s shoes acquiring
not only his rights but also his obligations towards the herein defendants. In
the instant case, the consent to tenurial arrangement between the parties is
inferred from the fact that the plaintiff and her successors-in-interest had
received their share of the harvests of the property in dispute from the
defendants.
Moreover, dispossession of agricultural tenants can only be ordered by the
Court for causes expressly provided under Sec. 36 of R.A. 3844. However,
this Court has no jurisdiction over detainer case involving agricultural
tenants as ejectment and dispossession of said tenants is within the primary
and exclusive jurisdiction of the Department of Agrarian Reform and
Agricultural Board (DARAB). ([S]ee Sec. 1(1.4) DARAB 2003 Rules of
Procedure[.])
WHEREFORE, in view of the foregoing, the instant complaint is hereby
ordered DISMISSED for lack of jurisdiction.
SO ORDERED.16
Aggrieved, respondent filed an appeal, docketed as Civil Case No. AV-1237,
with the Regional Trial Court (RTC) of Argao, Cebu, Branch 26.17
Ruling of the Regional Trial Court
On January 12, 2004, the RTC rendered a Decision18 remanding the case to
the MTC for preliminary hearing to determine whether tenancy relationship
exists between the parties.
Petitioners moved for reconsideration19 arguing that the purpose of a
preliminary hearing was served by the parties’ submission of their respective
position papers and other supporting evidence.
On June 23, 2004, the RTC granted the reconsideration and affirmed the
MTC Decision dated September 10, 2003. The fallo of the new
Decision20 reads:
WHEREFORE, the motion for reconsideration is GRANTED. The Decision
dated September 10, 2003 of the Municipal Trial Court of Dalaguete, Cebu,
is hereby AFFIRMED.
IT IS SO DECIDED.21
Respondent sought reconsideration22 but it was denied by the RTC in an
Order23 dated August 18, 2004.
Thus, respondent filed a Petition for Review24 with the CA, docketed as CA
G.R. SP No. 86599.
Ruling of the Court of Appeals
On August 24, 2005, the CA rendered judgment in favor of respondent. It
ruled that no tenancy relationship exists between the parties because
petitioners failed to prove that respondent or her predecessors-in-interest
consented to the tenancy relationship.25 The CA likewise gave no probative
value to the affidavits
of petitioners’ witnesses as it found their statements insufficient to establish
petitioners’ status as agricultural tenants.26 If at all, the affidavits merely
showed that petitioners occupied the subject land with the consent of the
original owners.27 And since petitioners are occupying the subject land by
mere tolerance, they are bound by an implied promise to vacate the same
upon demand by the respondent.28 Failing to do so, petitioners are liable to
pay damages.29 Thus, the CA disposed of the case in this manner:
WHEREFORE, in view of all the foregoing premises, judgment is hereby
rendered by us SETTING ASIDE, as we hereby set aside, the decision
rendered by the RTC of Argao, Cebu on June 23, 2004 in Civil Case No. AV-
1237 and ORDERING the remand of this case to the MTC of Dalaguete, Cebu
for the purpose of determining the amount of actual damages suffered by
the [respondent] by reason of the [petitioners’] refusal and failure to turn
over to [respondent] the possession and enjoyment of the land and, then, to
make such award of damages to the [respondent].
SO ORDERED.30
Issues
Hence, this petition raising the following issues:
I.
WHETHER X X X THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
RULING THAT PETITIONERS-DEFENDANTS ARE NOT TENANTS OF THE
SUBJECT LAND.
II.
WHETHER X X X SUCH RULING OF THE COURT OF APPEALS HAS FACTUAL
AND LEGAL BASIS AND IS SUPPORTED WITH SUBSTANTIAL EVIDENCE.31
Petitioners’ Arguments
Petitioners contend that under Section 532 of Republic Act No. 3844,
otherwise known as the Agricultural Land Reform Code, tenancy may be
constituted by agreement of the parties either orally or in writing, expressly
or impliedly.33 In this case, there was an implied consent to constitute a
tenancy relationship as respondent and her predecessors-in-interest allowed
petitioners to cultivate the land and share the harvest with the landowners
for more than 40 years.34
Petitioners further argue that the CA erred in disregarding the affidavits
executed by their witnesses as these are sufficient to prove the existence of
a tenancy relationship.35 Petitioners claim that their witnesses had personal
knowledge of the cultivation and the sharing of harvest.36
Respondent’s Arguments
Respondent, on the other hand, maintains that petitioners are not
agricultural tenants because mere cultivation of an agricultural land does not
make the tiller an agricultural tenant.37 Respondent insists that her
predecessors-in-interest merely tolerated petitioners’ occupation of the
subject land.38
Our Ruling
The petition lacks merit.
Agricultural tenancy relationship does not exist in the instant case.
Agricultural tenancy exists when all the following requisites are present: 1)
the parties are the landowner and the tenant or agricultural lessee; 2) the
subject matter of the relationship is an agricultural land; 3) there is consent
between the parties to the relationship; 4) the purpose of the relationship is
to bring about agricultural production; 5) there is personal cultivation on the
part of the tenant or agricultural lessee; and 6) the harvest is shared
between landowner and tenant or agricultural lessee.39
In this case, to prove that an agricultural tenancy relationship exists
between the parties, petitioners submitted as evidence the affidavits of
petitioner Lucia and their neighbors. In her affidavit,40 petitioner Lucia
declared that she and her late husband occupied the subject land with the
consent and permission of the original owners and that their agreement was
that she and her late husband would cultivate the subject land, devote it to
agricultural production, share the harvest with the landowners on a 50-50
basis, and at the same time watch over the land. Witness Alejandro Arias
attested in his affidavit41 that petitioner Lucia and her husband, Serapio,
have been cultivating the subject land since 1960; that after the demise of
Serapio, petitioner Lucia and her children continued to cultivate the subject
land; and that when respondent’s predecessors-in-interest were still alive,
he would often see them and respondent get some of the harvest. The
affidavit42 of witness Conseso Muñoz stated, in essence, that petitioner
Lucia has been in peaceful possession and cultivation of the subject property
since 1960 and that the harvest was divided into two parts, ½ for the
landowner and ½ for petitioner Lucia.
The statements in the affidavits presented by the petitioners are not
sufficient to prove the existence of an agricultural tenancy.
As correctly found by the CA, the element of consent is lacking.43 Except for
the self-serving affidavit of Lucia, no other evidence was submitted to show
that respondent’s predecessors-in-interest consented to a tenancy
relationship with petitioners. Self-serving statements, however, will not
suffice to prove consent of the landowner; independent evidence is
necessary.44
Aside from consent, petitioners also failed to prove sharing of
harvest.1avvphil The affidavits of petitioners’ neighbors declaring that
respondent and her predecessors-in-interest received their share in the
harvest are not sufficient. Petitioners should have presented receipts or any
other evidence to show that there was sharing of harvest45 and that there
was an agreed system of sharing between them and the landowners.46
As we have often said, mere occupation or cultivation of an agricultural land
will not ipso facto make the tiller an agricultural tenant.47 It is incumbent
upon a person who claims to be an agricultural tenant to prove by
substantial evidence all the requisites of agricultural tenancy.48
In the instant case, petitioners failed to prove consent and sharing of
harvest between the parties. Consequently, their defense of agricultural
tenancy must fail. The MTC has jurisdiction over the instant case. No error
can therefore be attributed to the CA in reversing and setting aside the
dismissal of respondent’s complaint for lack of jurisdiction. Accordingly, the
remand of the case to the MTC for the determination of the amount of
damages due respondent is proper.
Respondent is entitled to the fair rental value or the reasonable
compensation for the use and occupation of the subject land.
We must, however, clarify that "the only damage that can be recovered [by
respondent] is the fair rental value or the reasonable compensation for the
use and occupation of the leased property. The reason for this is that [in
forcible entry or unlawful detainer cases], the only issue raised in ejectment
cases is that of rightful possession; hence, the damages which could be
recovered are those which the [respondent] could have sustained as a mere
possessor, or those caused by the loss of the use and occupation of the
property, and not the damages which [she] may have suffered but which
have no direct relation to [her] loss of material possession."49
WHEREFORE, the petition is DENIED. The assailed August 24, 2005 Decision
and the February 20, 2006 Resolution of the Court of Appeals in CA G.R. SP
No. 86599 are AFFIRMED. This case is ordered REMANDED to the Municipal
Trial Court of Dalaguete, Cebu, to determine the amount of damages
suffered by respondent by reason of the refusal and failure of petitioners to
turn over the possession of the subject land, with utmost dispatch consistent
with the above disquisition.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:

12.
Alita vs Court of Appeals G.R. No. 78517 February 27, 1989

Bureau of Agrarian Legal Assistance for petitioners.

Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private
respondents.

PARAS,  J.:
Before us is a petition seeking the reversal of the decision rendered by the
respondent Court of Appeals**on March 3, 1987 affirming the judgment of
the court a quo dated April 29, 1986, the dispositive portion of the trial
court's decision reading as follows;

WHEREFORE, the decision rendered by this Court on November

5, 1982 is hereby reconsidered and a new judgment is hereby
rendered:

1. Declaring that Presidential Decree No. 27 is inapplicable to

lands obtained thru the homestead law,

2. Declaring that the four registered co-owners will cultivate and

operate the farmholding themselves as owners thereof; and

3. Ejecting from the land the so-called tenants, namely; Gabino

Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente
Ricalde and Rolando Salamar, as the owners would want to
cultivate the farmholding themselves.

No pronouncement as to costs.

SO ORDERED. (p. 31, Rollo)

The facts are undisputed. The subject matter of the case consists of two (2)
parcels of land, acquired by private respondents' predecessors-in-interest
through homestead patent under the provisions of Commonwealth Act No.
141. Said lands are situated at Guilinan, Tungawan, Zamboanga del Sur.

Private respondents herein are desirous of personally cultivating these lands,

but petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D.
316 and appurtenant regulations issued by the then Ministry of Agrarian
Reform (DAR for short), now Department of Agrarian Reform (MAR for
short).

On June 18, 1981, private respondents (then plaintiffs), instituted a

complaint against Hon. Conrado Estrella as then Minister of Agrarian Reform,
P.D. Macarambon as Regional Director of MAR Region IX, and herein
petitioners (then defendants) for the declaration of P.D. 27 and all other
Decrees, Letters of Instructions and General Orders issued in connection
therewith as inapplicable to homestead lands.

Defendants filed their answer with special and affirmative defenses of July 8,
1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin
the defendants from declaring the lands in litigation under Operation Land
Transfer and from being issued land transfer certificates to which the
defendants filed their opposition dated August 4, 1982.

On November 5, 1982, the then Court of Agrarian Relations 16th Regional

District, Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial
Region, Branch XVIII) rendered its decision dismissing the said complaint
and the motion to enjoin the defendants was denied.

On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to

which defendants filed their opposition on January 10, 1983.

Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted
decision prompting defendants to move for a reconsideration but the same
was denied in its Order dated June 6, 1986.

On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:

WHEREFORE, finding no reversible error thereof, the decision

appealed from is hereby AFFIRMED.

SO ORDERED. (p. 34, Rollo)

Hence, the present petition for review on certiorari.

The pivotal issue is whether or not lands obtained through homestead patent
are covered by the Agrarian Reform under P.D. 27.

The question certainly calls for a negative answer.

We agree with the petitioners in saying that P.D. 27 decreeing the

emancipation of tenants from the bondage of the soil and transferring to
them ownership of the land they till is a sweeping social legislation, a
remedial measure promulgated pursuant to the social justice precepts of the
Constitution. However, such contention cannot be invoked to defeat the very
purpose of the enactment of the Public Land Act or Commonwealth Act No.
141. Thus,

The Homestead Act has been enacted for the welfare and
protection of the poor. The law gives a needy citizen a piece of
land where he may build a modest house for himself and family
and plant what is necessary for subsistence and for the
 satisfaction of life's other needs. The right of the citizens to their
homes and to the things necessary for their subsistence is as
vital as the right to life itself. They have a right to live with a
certain degree of comfort as become human beings, and the
State which looks after the welfare of the people's happiness is
under a duty to safeguard the satisfaction of this vital right.
(Patricio v. Bayog, 112 SCRA 45)

In this regard, the Philippine Constitution likewise respects the superiority of

the homesteaders' rights over the rights of the tenants guaranteed by the
Agrarian Reform statute. In point is Section 6 of Article XIII of the 1987
Philippine Constitution which provides:

Section 6. The State shall apply the principles of agrarian reform

or stewardship, whenever applicable in accordance with law, in
the disposition or utilization of other natural resources, including
lands of public domain under lease or concession suitable to
agriculture, subject to prior rights, homestead rights of small
settlers, and the rights of indigenous communities to their
ancestral lands.

Additionally, it is worthy of note that the newly promulgated Comprehensive

Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a
proviso supporting the inapplicability of P.D. 27 to lands covered by
homestead patents like those of the property in question, reading,

Section 6. Retention Limits. ...

... Provided further, That original homestead grantees or their

direct compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same areas
as long as they continue to cultivate said homestead.'

WHEREFORE, premises considered, the decision of the respondent Court of

Appeals sustaining the decision of the Regional Trial Court is hereby
AFFIRMED.

SO ORDERED.

Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ.,

concur.

 
13.

G.R. No. 199008               November 19, 2014

DANILO ALMERO, TERESITA ALAGON, CELIA BULASO, LUDY

RAMADA, REGINA GEGREMOSA, ISIDRO LAZARTE, THELMA
EMBARQUE, FELIPE LAZARTE, GUILERMA LAZARTE, DULCESIMA
BENIMELE, Petitioners,
vs.
HEIRS OF MIGUEL PACQUING, as represented by LINDA PACQUING
FADRILAN, Respondents.

DECISION

BRION, J.:

Before this Court is a petition for review on certiorari 1 filed under Rule 45 of

the Rules of Court directly assailing the February 16, 2011 Decision 2 and July
19, 2011 resolution3 of the Office of the President (OP) in OP Case No. 10-C-
152. The OP recalled and cancelled the Certificate of Land Ownership Awards
( CLOAs) issued to the petitioners covering certain homestead lots that
formed part of the Pacquing Estate, a 23.6272-hectare property located in
Cuambogan, Tagum City.

Factual Antecedents

Miguel Pacquing acquired agricultural lands (the property) with a total area
of 23.6272 hectares in Cuambogan, Tagum City through Homestead Patent
No. V-33775. These lands were registered on January 6, 1955 with the
Register of Deeds under Original Certificate of Title No. (P-2590) P-653.

The records show that, on August 5, 1991, the Municipal Agrarian Reform
Officer (MARO) sent Miguel’s representative a Notice of Coverage placing the
Pacquing Estate under the Comprehensive Agrarian Reform Program (CARP).
Miguel failed to reply to the notice and, instead filed a Voluntary Offer to Sell
(VOS) with the Department of Agrarian Reform (DAR) on August 31, 1991.
Miguel, however, died during the pendency of the VOS proceedings. Miguel’s
wife, Salome, had died five years earlier.

In January 1992, respondent Linda Pacquing-Fadrilan, sole heir of the

spouses Pacquing, executed an affidavit adjudicating to herself ownership of
the property. In August of the sameyear, she filed an application for
retention with the DAR Regional Directorwho denied Linda’s application in an
order dated December 14, 1993. The order denying Linda’s application for
retention later became final and executory.

On June 25, 1994, certain individuals, including the present petitioners who
were earlier identified as farmer-beneficiaries of the subject land, were
issued CLOAs over their respective cultivated portions of the property.

On October 20, 1999, Linda, through her attorney-in-fact, Samuel Osias,

filed with the Office of the Provincial Adjudicator in Tagum City a petition to
cancel the petitioners’ CLOAs. The Provincial Adjudicator later dismissed the
petition due to Linda’s failure to file her position paper. She appealed the
dismissal with the Department of Agrarian Reform Adjudication Board
(DARAB).

It appears that, in the meantime, Transfer Certificates of Title (TCTs)

covering portions of the property were issued to Napoleon Villa Sr., et al.
who had been contracted by Linda, under an agricultural leasehold
agreement, to cultivate the lands.

In a resolution dated June 29, 2001, the DARAB nullified the TCTs issued to
Napoleon Villa Sr. et. al. and reinstated Linda’s title to the property. At the
same time, the DARAB ordered the generation and issuance of titles to the
petitioners and other farmer-beneficiaries of the subject land. In a
subsequent resolution dated September 28, 2001, the DARAB validated the
TCTs issued to the following individuals: Danilo Almero, Celia Bulaso, Ludy
Ramada, Isidro Lazarte, Cepriano Lazarte, Thelma Emorque, Domingo
Juanico, Candido Labeste and Renato Benimate.

Root of the present petition: Petition to Recall and Cancel the petitioners’
CLOAs

Linda again sought to recall and cancel the petitioners’ CLOAs by filing a
petition with the DAR, which the latter endorsed to the DAR Regional Office.
Linda argued that the DARAB erred in distributing portions of the land to the
petitioners because the entire property was supposed to be exempt from
CARP coverage. The petitioners opposed Linda’s petition.

In an order dated December 18,2008, the DAR Regional Director ruled that
the Pacquing Estate was subject to CARP and that the CLOAs issued to the
petitioners were valid. Linda filed an appeal to the DAR Secretary.

In an order dated August 18, 2009, former DAR Secretary Nasser C.

Pangandaman denied Linda’s appeal under the following terms:

"xxx, under Section 6 of R.A. No. 6657, there are two requisites to exempt
homestead lands from CARP coverage. First, the homestead grantee or his
direct compulsory heir(s) still own the original homestead at the time of the
effectivity of R.A. No. 6657 on 15 June 1988; and second, the original
homestead grantee or his direct compulsory heir(s) was cultivating the
homestead as of 15 June 1988 and continues to cultivate the same.

In this case, it is undisputed that the subject landholdings were still owned
by the original homestead grantees at the time of the effectivity of R.A. No.
6657. However,the said homestead grantees no longer cultivate the same.
Therefore, on this score, the subject landholdings cannot be exempted from
CARP coverage." (Emphasis ours)

Linda appealed the DAR Secretary’s August 18, 2009 order to the OP.

In a decision dated February 16,2011, the OP, through Executive Secretary

Paquito N. Ochoa Jr., reversed the DAR Secretary’s August 18, 2009 Order
and recalled and cancelled the petitioners’ CLOAs. The OP held that:

"xxx, the fact that petitioners-appellants (referring to the respondent Linda),

since the beginning, have always protested the issuance of the CLOAs to the
respondents-appellees (referring to the petitioners) is a clear demonstration
of their willingness to continue with the cultivation of the subject
landholdings, or tostart anew with the cultivation or even to direct the
management of the farm.

Given the foregoing, petitioners-appellants should be given the chance to

exercise their rights as heirs of the homestead grantee to continue to
cultivate the homestead lots either personally or directly managing the farm
pursuant to the pronouncement in the Paris case. They still own the original
homestead issuedto their predecessor-in-interest and have manifested their
intention to continue with the cultivation of the homestead lots." 4 (Emphasis
supplied)

The petitioners moved to reconsider the decision, but the OP denied their
motion in a resolution5 dated July 19, 2011.

With no appeal or petition for review filed with the Court of Appeals within
the fifteen (15) - day appeal period, the DAR Bureau of Agrarian Legal
Assistance issued on August 22, 2011 a Certificate of Finality 6 declaring as
final and executory the OP’s February 16, 2011 decision and July 19, 2011
resolution.The petitioners, however, contest the finality of the OP’s decision
and allege that their counsel only received a certified copy of the OP’s
resolution denying their motion for reconsideration on September 29, 2011.

On November 14, 2011, the petitioners directly filed with this Court a
petition for review on certiorari under Rule 45 assailing the subject OP’s
decision and resolution.

The Petition

The petitioners raise the following issues:

 I- WHO WILL ISSUE A CERTIFICATE OF FINALITY OF THE DECISION
WHEN THE DECISION OF THE ADMINISTRATIVE AGENCY IS REVERSE
(sic) ON APPEAL BY THE OFFICE OF THE PRESIDENT?

II- ARE LANDS UNDER THE HOMESTEAD GRANT, EXEMPT FROM

AGRARIAN REFORM COVERAGE UNDER SECTION 6 OF R.A. 6657,
EVEN IF THE HEIR OF THE PATENTEE IS NOT CULTIVATING THE LAND,
BUT AND HAD EVEN OFFERED THE SAME UNDER THE VOLUNTARY
OFFER TO SELL SCHEME?

III- IN CARP COVERAGE, IS DEPOSIT OF LAND OWNER’S

COMPENSATION WITH LAND BANK OF THE PHILIPPINES ENOUGH TO
TRANSFER TITLE TO THE STATE, EVEN IF THE OWNER DOES NOT
ACCEPT THE SAME?7 (Emphasis supplied)

Pleadings Subsequent to the Petition

In her comment dated March 16, 2012,8 Linda counter-argues that the

present petition should be denied outright for being an improper mode of
appeal: the appeal from the OP’s assailed decision and resolution should
have been filed with the CA via a petition for review under Rule 43 and not
directly with this Court viaa petition for review on certiorari under Rule 45.

The petitioners filed their counter-comment/reply 9 asking this Court to

decide the present case not on technicalities but based on its merits, and
that the Court, instead, treat their petition as a special civil action for
certiorari under Rule 65.

OUR RULING

We see MERIT in the present petition.

First, we address the proceduralissue raised by the respondent.

Under Rule 43 of the Rules of Court, an appeal from the awards, judgments,
final orders or resolutions of or authorized by any quasi-judicial agency such
as the Office of the President, in the exercise of its quasijudicial functions
shall be filed to the CA10 within a period of fifteen (15) days from notice of,
publication or denial of a motion for new trial or reconsideration. 11 The
appeal may involve questions of fact, of law, or mixed questions of fact and
law.12

A direct resort to this Court, however, may be allowed in cases where only
questions of law are raised.13 A question of law exists when the doubt or
controversy concerns the correct application of law or jurisprudence to a
certain set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts
being admitted.14

In the present petition, the petitioners raised valid questions of law that
warranted the direct recourse to this Court. Basically, they question the OP’s
application of the law and jurisprudence on the issue of whether the
Pacquing Estate should be exempt from CARP coverage. In this case, no
further examination of the truth or falsity of the facts is required. Our review
of the case is limited to the determination of whether the OP has correctly
applied the law and jurisprudence based on the facts on record.

We now proceed to the merits of the case.

R.A. No. 6657 or the Comprehensive Agrarian Reform Law (CARL) of 1988
covers all public and private agricultural lands as provided in Proclamation
No. 13115 and E.O. No. 229,16 including other lands of the public domain
suitable for agriculture. Section 4 of R.A. 6657, as amended, 17 specifically
lists the lands covered by the CARP, which include:

(a) All alienable and disposable lands of the public domain devoted to
or suitable for agriculture. No reclassification of forest or mineral lands
to agricultural lands shall be undertaken after the approval of this Act
until Congress, taking into account ecological, developmental and
equity considerations, shall have determined by law, the specific limits
of the public domain;

(b) All lands of the public domain in excess to the specific limits as
determined by Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for
agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of

the agricultural products raised or that can be raised thereon.

And Section 10 of R.A. 6657, as amended,18 expressly provides for the lands

exempted or excluded from the CARP, namely:

(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 (CLOA) issued under the
Agrarian Reform Program; and

xxxx

(c) Lands actually, directly and exclusively used and found to be

necessary for national defense, school sites and campuses, including
experimental farms stations operated by public or private schools for
educational purposes, seeds and seedlings research and pilot
production centers, church sites and covenants 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.

The subject land, being agricultural in nature, is clearly not exempt from
CARP coverage.

But Linda argues that the subject land is exempt from CARP primarily
because it was acquired by her father viaa homestead patent. She claims
that the rights of homestead grantees have been held superior to those of
agrarian reform tenants and, thus, her right to the subject land must be
upheld. The OP, agreeing with the respondent, stated that:

"There can be no question that, weighed against each other, the rights of a
homesteader prevail over the rights of the tenants guaranteed by agrarian
reform laws.

As early as the case of Patricio v. Bayug, it has been held that the more
paramount and superior policy consideration is to uphold the right of the
homesteader and his heirs to own and cultivate personally the land acquired
from the State without being encumbered by tenancy relations.

Just right after the promulgation of Republic Act No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law (CARL), the doctrine enunciated
in Patricio was applied in Alita v. Court of Appeals where it was held
thatPresidential DecreeNo. 27 cannot be invoked to defeat the very purpose
of the enactment of the Public Land Act or Commonwealth Act No. 141. It
was further pointedout that even the Philippine Constitution respects the
superiority of the homesteaders’ rights over the rights of the tenants
guaranteed by the Agrarian Reform statute."19 (Citations omitted.)

The right of homestead grantees to retain or keep their homestead is,

however, not absolutely guaranteed by law.1âwphi1 Section 6 of R.A 6657
provides that:

"Section 6. Retention Limits.— Except as otherwise provided in this Act, no

person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors governing
a viable family-size 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 areas originally retained by them thereunder: provided, further,
that original homestead grantees or their direct compulsory heirs who still
own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead.
(Emphasis ours)

Thus, in order for the homestead grantees or their direct compulsory heirs to
retain or keep their homestead, the following conditions must first be
satisfied: (a) they must still be the owners of the original homestead at the
time of the CARL's effectivity, and (b) they must continue to cultivate the
homestead land.

In this case, Linda, as the direct compulsory heir of the original homestead
grantee, is no longer cultivating the subject homestead land. The OP
misinterpreted our ruling in Paris v. Alfeche20 when it held that Linda's mere
expression of her desire to continue or to start anew with the cultivation of
the land would suffice to exempt the subject homestead land from the CARL.
On the contrary, we specifically held in Paris v. Alfeche that:

"Indisputably, homestead grantees or their direct compulsory heirs can own

and retain the original homestead, only for "as long as they continue to
cultivate" them. That parcels of land are covered by homestead patents will
not automatically exempt them from the operation of land reform. It is the
fact of continued cultivation by the original grantees or their direct
compulsory heirs that shall exempt their lands from land reform
coverage."21 (Emphasis supplied) WHEREFORE, in view of the foregoing, we
hereby:

(a) REVERSE and SET ASIDE the February 16, 2011 Decision and July
19, 2011 Resolution of the Office of the President in OP Case No. 1 O-
C-152;

(b) RECALL and REVOKE the August 22, 2011 Certificate of Finality
issued by the Department of Agrarian Reform Bureau of Agrarian Legal
Assistance; and

(c) AFFIRM the August 18, 2009 Order of the Department of Agrarian
Reform Secretary in DARCO Order No. MS-0908-295 Series of 2009 A-
999-10-CLT-028-09.

SO ORDERED.

14.

G.R. No. 139592               October 5, 2000

REPUBLIC OF THE PHILIPPINES rep. by the DEPARTMENT OF

AGRARIAN REFORM, petitioner,
vs.
HON. COURT OF APPEALS and GREEN CITY ESTATE & DEVELOPMENT
CORPORATION, respondents.
 DECISION

GONZAGA-REYES, J.:

This is a petition for review by certiorari of the Decision1 of the Court of

Appeals dated December 9, 1998 that reversed the Order of petitioner, the
Department of Agrarian Reform (petitioner DAR), by exempting the parcels
of land of private respondent Green City Estate and Development
Corporation (private respondent) from agrarian reform. Also assailed in this
instant petition is the Resolution dated May 11, 1998 issued by the same
court that denied the Motion for Reconsideration of petitioner DAR.

The five parcels of land in issue has a combined area of approximately

112.0577 hectares situated at Barangay Punta, Municipality of Jala-Jala,
Province of Rizal, covered by Transfer Certificates of Title Nos. M-45856, M-
45857, M-45858, M-45859 and M-45860 of the Register of Deeds of Rizal.
Private respondent acquired the land by purchase on May 26, 1994 from
Marcela Borja vda. De Torres. The tax declarations classified the properties
as agricultural.

On June 16, 1994, petitioner DAR issued a Notice of Coverage of the subject
parcels of land under compulsory acquisition pursuant to Section 7, Chapter
II of R.A. 6657 or the Comprehensive Land Reform Law of 1998 (CARL).

On July 21, 1994, private respondent filed with the DAR Regional Office an
application for exemption of the land from agrarian reform, pursuant to DAR
Administrative Order No. 6, series of 19942 and DOJ Opinion No. 44, series
of 1990. Administrative Order No. 6 provides the guidelines for exemption
from the Comprehensive Agrarian Reform Program (CARP) coverage while
DOJ Opinion No. 44, Series of 1990, authorizes the DAR to approve
conversion of agricultural lands covered by RA 6651 to non-agricultural uses
effective June 15 1988.

In support of its application for exemption, private respondent submitted the

following documents:

1. Certified photocopies of the titles and tax declarations.

2. Vicinity and location plans.

3. Certification of the Municipal Planning and Development Coordinator

of the Office of the Mayor of Jala-Jala.

4. Resolution No. R-36, series of 1981 of the HLURB.

 5. Certification from the National Irrigation Administration.

On October 12, 1994, the DAR Regional Director recommended a denial of

the said petition, on the ground that private respondent "failed to
substantiate their (sic) allegation that the properties are indeed in the
municipality’s residential and forest conservation zone and that portions of
the properties are not irrigated nor irrigable".

On February 15, 1995, private respondent filed an Amended Petition for

Exemption/Exclusion from CARP coverage. This time, private respondent
alleged that the property should be exempted since it is within the
residential and forest conservation zones of the town plan/zoning ordinance
of Jala-Jala. The amended petition for exemption showed that a portion of
about 15 hectares of the land is irrigated riceland which private respondent
offered to sell to the farmer beneficiaries or to the DAR. In support of its
amended petition, private respondent submitted the following additional
documents:

1. Certification letter from the HLURB that the specific properties are
within the residential and forest conservation zone.

2. Certification from the HLURB that the town plan/zoning ordinance of

Jala-Jala was approved on December 2, 1981 by the Human
Settlements Commission.

3. Undertaking that the landowner is ready and willing to pay

disturbance compensation to the tenants for such amount as may be
agreed upon or directed by the DAR.

4. Vicinity plan.

5. Amended survey plan which indicates the irrigated riceland that is

now excluded from the application.

6. Certification of the Jala-Jala Municipal Planning and Development

Coordinator to the effect that the properties covered are within the
residential and forest conservation areas pursuant to the zoning
ordinance of Jala-Jala.

On October 19, 1995, the DAR Secretary issued an Order denying the
application for exemption of private respondent, on the grounds that the
land use plan of Jala-Jala, which differs from its land use map, intends to
develop 73% of Barangay Punta into an agricultural zone; that the
certification issued by the Housing and Land Use Regulatory Board (HLURB)
is not definite and specific; and that the certification issued by the National
Irrigation Authority (NIA) that the area is not irrigated nor programmed for
irrigation, is not conclusive on the DAR, since big areas in the municipality
are recipients of JICA-funded Integrated Jala-Jala Rural Development
Projects. The motion for reconsideration filed by private respondent was
likewise denied by the DAR Secretary.

Private respondent then appealed to the Court of Appeals. During the course
of the appeal, said court created a commission composed of three (3)
members tasked to conduct an ocular inspection and survey of the subject
parcels of land and to submit a report on the result of such inspection and
survey. To verify the report of the commission, the DAR constituted its own
team to inspect and report on the property in question. The verification
report of the DAR, duly filed with the Court of Appeals, objected to the
report of the commission mainly due to the lack of specific boundaries
delineating the surveyed areas.

On December 9, 1998, the Court of Appeals issued its Decision that reversed
the assailed DAR orders, the dispositive portion of which reads:

"WHEREFORE, the Orders of the respondent Secretary dated October 19,

1995 and November 15, 1995 are hereby REVERSED, and judgement is
hereby rendered declaring those portions of the land of the petitioner which
are mountainous and residential, as found by the Courts (sic)
commissioners, to be exempt from the Comprehensive Agrarian Reform
Program, subject to their delineation. The records of this case are hereby
ordered remanded to the respondent Secretary for further proceedings in
the determination of the boundaries of the said areas."3

Hence this petition for review wherein petitioner DAR seeks the reversal of
the foregoing decision on the ground that the honorable Court of Appeals
erred:

1. WHEN IT RULED THAT THERE WAS NO DEFINITE CLASSIFICATION

OF THE PROPERTIES INVOLVED WHEN, PER THE CORRESPONDING
TAX DECLARATIONS, THEY ARE GENERALLY CLASSIFIED AS
AGRICULTURAL.

2. WHEN IT RULED THAT THE PHYSICAL FEATURES OF THE LAND AS

OF 1980 OR BEFORE AS APPEARING IN TABLE 3-3 OF THE ZONING
ORDINANCE IS THE PRESENT CLASSIFICATION OF THE
LANDHOLDINGS INVOLVED; and
 3. WHEN IT MADE A RULING ON HOW SUBJECT LANDHOLDING BE
CLASSIFIED (WHETHER COVERED BY AGRARIAN REFORM FOR BEING
AGRICULTURAL LAND OR NOT) AND DISPOSED OF SOLELY ON THE
BASIS OF THE PHYSICAL CONDITION OF THE LAND IRRESPECTIVE OF
THE LEGAL ISSUE RAISED ON THEIR LEGAL CLASSIFICATION, A
FUNCTION THAT IS VESTED IN CONGRESS.4

The petition has no merit.

Republic Act No. 6657 otherwise known as the Comprehensive Agrarian

Reform Law (CARL) of 1998 covers all public and private agricultural lands.
The same law defines agricultural as "land devoted to agricultural activity as
defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land".5

Private respondent sought exemption from the coverage of CARL on the

ground that its five parcels of land are not wholly agricultural. The land use
map of the municipality, certified by the Office of the Municipal Planning and
Development Coordinator (MPDC) of Jala-Jala and the report of the
commission constituted by the Court of Appeals established that the
properties lie mostly within the residential and forest conservation zone.

Petitioner DAR maintains that the subject properties have already been
classified as agricultural based on the tax declarations. 6 The Office of the
Solicitor General (OSG) and petitioner DAR are one in contending that the
classification of lands once determined by law may not be varied or altered
by the results of a mere ocular or aerial inspection. 7

We are unable to sustain petitioner’s contention. There is no law or

jurisprudence that holds that the land classification embodied in the tax
declarations is conclusive and final nor would proscribe any further inquiry.
Furthermore, the tax declarations are clearly not the sole basis of the
classification of a land. In fact, DAR Administrative Order No. 6 lists other
documents, aside from tax declarations, that must be submitted when
applying for exemption from CARP.8 In Halili vs. Court of Appeals9 , we
sustained the trial court when it ruled that the classification made by the
Land Regulatory Board of the land in question outweighed the classification
stated in the tax declaration. The classification of the Board in said case was
more recent than that of the tax declaration and was based on the present
condition of the property and the community thereat. 10

In this case, the Court of Appeals was constrained to resort to an ocular

inspection of said properties through the commission it created considering
that the opinion of petitioner DAR conflicted with the land use map
submitted in evidence by private respondent. Respondent court also noted
that even from the beginning the properties of private respondent had no
definite delineation and classification.11 Hence, the survey of the properties
through the court appointed commissioners was the judicious and equitable
solution to finally resolve the issue of land classification and delineation.

The OSG stresses that to be exempt from CARP under DOJ Opinion No. 44,
the land must have been classified as industrial/residential before June 15,
1988. 12 Based on this premise, the OSG points out that no such
classification was presented except the municipality’s alleged land use map
in 1980 showing that subject parcels of land fall within the municipality’s
forest conservation zone.13 The OSG further argues that assuming that a
change in the use of the subject properties in 1980 may justify their
exemption from CARP under DOJ Opinion No. 44, such land use of 1980 was,
nevertheless, repealed/amended when the HLURB approved the
municipality’s Comprehensive Development Plan for Barangay Punta for the
years 1980 to 2000 in its Resolution No. 33, series of 1981. 14 The plan for
Barangay Punta, where the parcels of land in issue are located, allegedly
envision the development of the barangay into a progressive agricultural
community with the limited allocation of only 51 hectares for residential use
and none for commercial and forest conservation zone use. 15

The foregoing arguments are untenable. We are in full agreement with

respondent Court when it rationalized that the land use map is the more
appropriate document to consider, thus:

"The petitioner (herein private respondent) presented a development plan of

the Municipality of Jala-Jala, which was approved by the Housing and Land
Use Regulatory Board (HLURB) on December 2, 1981. It also presented
certifications from the HLURB and the Municipal Planning and Development
Coordinator of Jala-Jala that the subject properties fall within the Residential
and Forest Conservation zones of the municipality. Extant on the record is a
color-coded land use map of Jala-Jala, showing that the petitioner’s land falls
mostly within the Residential and Forest Conservation zones. This
notwithstanding, the respondent Secretary of Agrarian Reform denied the
petitioner’s application on the ground that the town plan of the municipality,
particularly Table 4-4 thereof, shows that Barangay Punta is intended to
remain and to become a progressive agricultural community in view of the
abundance of fertile agricultural areas in the barangay, and that there is a
discrepancy between the land use map which identifies a huge forest
conservation zone and the land use plan which has no area classified as
forest conservation.1âwphi1
However, a closer look at the development plan for the municipality of Jala-
Jala shows that Table 4-4 does not represent the present classification of
land in that municipality, but the proposed land use to be achieved. The
existing land use as of 1980 is shown by Table 3-3, wherein Barangay Punta
is shown to have a forest area of 35 hectares and open grassland (which was
formerly forested area) of 56 hectares. The land use map is consistent with
this."16

Moreover, the commissioner’s report on the actual condition of the

properties confirms the fact that the properties are not wholly agricultural.
In essence, the report of the commission showed that the land of private
respondent consists of a mountainous area with an average 28 degree slope
containing 66.5 hectares; a level, unirrigated area of 34 hectares of which 5
to 6 hectares are planted to palay; and a residential area of 8 hectares. 17 The
finding that 66.5 hectares of the 112.0577 hectares of land of private
respondent have an average slope of 28 degrees provides another cogent
reason to exempt these portions of the properties from the CARL. Section 10
of the CARL is clear on this point when it provides that "all lands with
eighteen percent (18%) slope and over, except those already developed
shall be exempt from the coverage of this Act".

Petitioner DAR and the OSG contest the finding of the Court of Appeals that
the subject parcels of land have a mountainous slope on the ground that this
conclusion was allegedly arrived at in a manner not in accord with
established surveying procedures.18 They also bewail the consideration given
by the Court of Appeals to the "slope" issue since this matter was allegedly
never raised before the DAR and the Court of Appeals.19 Petitioner DAR and
the OSG thus claim that laches had already set in.20

As pointed out earlier, the crux of the controversy is whether the subject
parcels of land in issue are exempt from the coverage of the CARL. The
determination of the classification and physical condition of the lands is
therefore material in the disposition of this case, for which purpose the Court
of Appeals constituted the commission to inspect and survey said properties.
Petitioner DAR did not object to the creation of a team of
commissioners21 when it very well knew that the survey and ocular
inspection would eventually involve the determination of the slope of the
subject parcels of land. It is the protestation of petitioner that comes at a
belated hour. The team of commissioners appointed by respondent court
was composed persons who were mutually acceptable to the parties. 22 Thus,
in the absence of any irregularity in the survey and inspection of the subject
properties, and none is alleged, the report of the commissioners deserves
full faith and credit and we find no reversible error in the reliance by the
appellate court upon said report.
WHEREFORE, the petition is hereby DENIED. The challenged Decision is
AFFIRMED.

SO ORDERED.

15..
Ong vs. Imperial, G.R. No. 197127, July 15, 2015
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a petition for review on certiorari under Rule 45 seeking
to reverse, nullify, and set aside the November 30, 2010 Decision1and the
May 11, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 93941.
The facts are as follows:
Petitioners Noel L. Ong, Omar Anthony L. Ong, and Norman L. Ong
(petitioners) are registered owners of a parcel of land with an area of Four
Hundred Five Thousand Six Hundred Forty-Five (405,645) square meters
described under Transfer Certificate of Title (TCT) No. T-1 7045 located in
Barangay Dogongan, Daet, Camarines Norte (subject property).
The Municipal Agrarian Reform Officer (MARO) of Daet issued a Notice of
Coverage to petitioners on August 14, 1994.
Petitioners wrote a letter dated April 26, 1995 "vehemently
protesting/objecting" to the coverage of the subject property under
compulsory acquisition under Comprehensive Agrarian Reform Law (CARL),
for the following reasons:
1) The entire area of 40.5645 [hectares] had been used as grazing
area for cattle and carabao long before the passage of R.A. 6657, and
is therefore, excluded from the coverage of CARL;
2) After deducting the retention area of the individual landowners, the
excess area of each is only 8.5215 has.;
3) Considering that there are several bills pending in Congress to
increase the retention area of landowners, to cover lands below 20
hectares will result only in confusion and needless paperwork should
the retention area be increased in answer to the clamor of majority of
landowners.
MARO Jinny Glorioso sent a letter-reply on May 31, 1995, stating that the
petitioners had confirmed that the entire 40.5645 hectares was actually
being used for coconut production, so petitioners had failed to comply with
the requirement that the property must be actually, directly and exclusively
used for livestock, poultry, and swine-raising purposes. MARO Glorioso also
wrote that the subject property was covered by CARL because the retention
area for landowners is five hectares, and the excess area in this case is
8.5214 hectares; thus, it is covered.
On September 23, 1996, MARO Glorioso issued a Notice of Acquisition over
the subject property.
Petitioners then filed an application for exemption clearance with the
Department of Agrarian Reform (DAR) Regional Office V on October 16,
1996, claiming that subject property had already been reclassified as
residential built-up area pursuant to the Town Plan and Zoning Ordinance of
Daet dated September 21, 1978 and Zoning Ordinance No. 04, series of
1980. Petitioners submitted the following supporting documents:
 1. Certified True Copy of TCT No. 17045;
2. Location Map;
3. Certification dated 9 October 1996 issued by [Deputized Zoning
Administrator (DZA)] Jesus L. Hernandez, Jr. stating that the subject
landholding is within the residential built-up area per Zoning Ordinance
No. 4, series of 1980;
4. Certification dated 9 December 1996 issued by Jesus A. Obligacion,
Regional Director of Housing and Land Use Regulatory Board (HLURB),
Region V, stating that the Town Plan and Zoning Ordinance of Daet,
Camarines Norte was approved by then Human Settlements
Regulatory Commission now HLURB on 21 September 1978;
5. Certification dated 14 October 1996 issued by Antonio A. Avila, Jr.
of the National Irrigation Administration (NIA) of Daet, Camarines
Norte stating that the subject land is not covered by an existing
irrigation system [or] by [an] irrigation project with firm funding
commitment; and
6. Certification dated 5 March 1997 issued by [MARO] Jinny P. Glorioso
stating that the land covered by TCT No. 17045 [was] tenanted and a
Notice of Coverage/Acquisition [had] been issued on 17 August 1996.
DAR Region V Director Percival C. Dalugdug sent a letter dated June 5, 1997
to Deputized Zoning Administrator Fernandez, which reads in part:
Please be informed that subject property has already been covered by the
CARP under the [Compulsory] Acquisition scheme, because we believe
that the land is agricultural and not otherwise. x x x.
xxxx
In order to rectify these conflicting claims may we request from your good
office for a revalidation and verification of the exact location of the above-
mentioned landholding as far as its zoning location is concerned according to
the Official Land Use Plan of Daet, for the proper guidance of this office in
the issuance of requested DAR Exemption Clearance. x x x. (Emphasis ours.)
Deputized Zoning Administrator Fernandez replied to the DAR Director’s
request for revalidation and verification of the exact location of the subject
property in the following manner:
Please be informed that there is no conflict between the official land
use map of 1978 and the certification issued by our Office. Please
note that what is reflected in the aforesaid town plan is the actual
use of properties in Daet as of 1978, while our Certification states
that the property under TCT T-17045 is within the RESIDENTIAL
BUILTUP AREA. x x x.
xxxx
The projected increase of 278.465 hectares is the Built-Up Area for
residential purposes, to which the property in question is classified.1âwphi1
Please be informed further that in classifying Built-Up areas, we give priority
to properties in the center or poblacion of barangays connected to provincial
or national roads, more so if the adjacent properties are already being used
and classified as residential as of 1978. Please note that in the land use
map of 1978, the area directly in front of the property in question, as
well as the property in the eastern portion are already classified as
residential areas. We took into consideration also the fact that the
Barangay Hall Day Care and Health Center of the Barangay are located in
this area.
We hope that all the above explanation clears the issue on the
supposed conflicting claims, and we see no reason to rectify our
Certification dated October 9, 1996 regarding the property under
TCT No. T-17045-C.N. (Emphases added.)
The DAR Regional Center for Land Use Policy, Planning and Implementation
(RCLUPPI) V conducted an investigation and in its report, wrote the following
as established facts:
a) Subject landholdings are planted with coconuts and predominantly
agricultural in nature;
b) Said lands are tenanted by Nicolasa Vda. De Imperial, Efren Rodelo
and Julio Jamite;
c) The landowner executed a Deed of Undertaking to pay disturbance
compensation to affected tenants;
d) The area has been reclassified as residential prior to 15 June
1988;
e) The area applied for conversion has not been placed under the
coverage of P.D. 27 but a Notice of Coverage under R.A. 6657 had
been issued on 17 August 1994 by MARO Jinny P. Glorioso; and
f) The area is not irrigated nor scheduled for irrigation rehabilitation
nor irrigable (sic) with firm funding commitment. (Emphasis ours.)
Based on their findings, the DAR RCLUPPI V investigating team
recommended the denial of petitioners’ application for exemption. DAR
Region V Director Dalugdug in his 2nd Indorsement to the DAR Secretary
dated September 30, 1997, wrote:
This Office, after a careful evaluation of the records of the
application, concurs with the findings and recommendations of the
RCLUPPI V [Investigation] team for the denial of the application on
the ground that the subject property has been [placed] under
compulsory coverage and a Notice of Acquisition was already issued
by the MARO of Daet, Camarines Norte. Moreover, the
contention/justification of the Deputized Zoning Administrator when he was
requested to explain why the properties are in the green [colorcoded] in the
land use map as stated in his July 7, 1997 letter cannot be given credence
by this Office. This is due to the fact that we believe that the built-up
area for residential areas provided in the right hand portion of the
map (from 258 to 556 has.) or another 258 has. between 1978 and
1982) has long been exhausted. If one will take note, the present
residential area of Daet is well beyond the 556 has. limit set for 1982. The
Ong property, [therefore], can no longer find any room in the built-
up area under the 1978 land use plan. (Emphases ours.)
Upholding the findings of the Regional Office, then DAR Secretary Horacio R.
Morales, Jr. issued an Order dated February 2, 2000 denying petitioners’
Application for Exemption under DOJ Opinion No. 44, series of 1990, and
directing the Director of DAR Region V "to proceed with the acquisition of the
subject landholding in accordance with existing agrarian laws." Secretary
Morales’s Order contained the following discussion, which we quote:
First, the justification made by Jesus L. Fernandez, Jr., Deputized
Zoning Administrator of Daet, Camarines Norte, in his letter dated 7
July 1997, is not sufficient to prove that the subject land is classified
as built-up area for residential purposes. It is true that the said
agency is the proper forum to certify as to the classification of a
parcel of land within their jurisdiction. However, the same must be
supported by substantial evidence. The findings of the Regional
Director reveal that the built-up area for residential purposes
provided in the right hand portion of the Official Land Use Plan of
1978 of the Municipality of Daet has long been exhausted. Thus, the
present residential area of Daet is well beyond the 556-hectare limit set for
1982. Therefore, the subject landholding cannot be considered as part of the
built-up area reserved for residential purposes. The subject landholding
remains agricultural based on the original land use plan in 1978. Being an
agricultural land, the subject landholding is within the ambit of RA 6657.
Second, Administrative Order No. 6, Series of 1994, requires that any
application for exemption should be accompanied by a Certification from the
Housing and Land Use Regulatory Board (HLURB) that the pertinent zoning
ordinance has been approved by the Board prior to 15 June 1988. In the
case at hand, the original land use plan in 1978 shows that the subject
landholding was agricultural in nature. The Deputy Zoning Administrator
claims that the subject landholdings became part of the residential built-up
area by virtue of an authority indicated in the right hand portion of the land
use plan to extend the residential area from 258 hectares in 1980 to 556
hectares in 1982. However, it is not shown that the 1982 land use plan
had been similarly approved by the HLURB. No proof has ever been
presented that the 1982 land use plan had been approved by the
HLURB. Since coverage is the general rule, applicant has the burden
of proof that subject property is exempt.
Acting on petitioners’ Motion for Reconsideration, then DAR Secretary
Hernani A. Braganza issued an Order on June 20, 2002 stating that the
opinion of the Deputized Zoning Administrator had insufficient basis and
could not prevail over the clear findings of the DAR Regional Director.
Meanwhile, TCT No. T-4202-A (Certificate of Land Ownership Award No.
00538736) was issued to "Nicolasa Imperial, et al." Covering 253,263
square meters in Barangay Dogongan, Municipality of Daet, Province of
Camarines Norte on October 27, 2000. Petitioners appealed the DAR Orders
dated February 2, 2000 and June 20, 2002 (the questioned DAR Orders) to
the Office of the President for review.
The records from the Office of the President contained a copy of a document
entitled Memorandum for the Executive Secretary from DESLA Manuel G.
Gaite, Subject: Appeal of Noel Ong in O.P. Case No. 04-L-500 dated July 29,
2005 and we note the following portion of said memorandum:
The DZA has positively declared that the subject property is within the
reclassified built-up residential areas of the municipality. As far as the
coverage of the Municipal Ordinance is concerned, the DZA should have the
last say, since it is within its mandate to determine the coverage of the
zoning ordinance and therefore has exclusive jurisdiction as far as the issue
is concerned. Verification likewise of the records show (Rec. p. 12) that the
application is accompanied by a corresponding certification of HLURB Region
No. 5, Regional Director, Jesse A. Obligacion that the pertinent Municipal
Ordinance No. 4 of Daet, Camarines Norte, has been approved by the HLURB
on September 21, 1978, prior to June 15, 1988, the effectivity of the CARP
law.
The Office of the President rendered its Decision on September 5, 2005
signed by Executive Secretary Eduardo Ermita. The Office of the President
declared that the main issue was whether or not the subject property had
been reclassified as residential so as to exempt it from Comprehensive
Agrarian Report Program (CARP) coverage. The Office of the President found
that "[a] closer scrutiny of the facts will reveal that the DAR Secretary
concurred with the findings of the DAR Regional Director, who in turn relied
on his own belief that the land is agricultural and not otherwise." The Office
of the President reversed and set aside the questioned DAR Orders and
approved petitioners’ application for clearance, "exempting from CARP
coverage the 40.5 hectares property with TCT No. T-17045, situated in
Barangay Dogongan, Daet, Camarines Norte."
We quote below relevant portions of the September 5, 2005 Decision of the
Office of the President:
A careful reading of the map would show that what the DAR Secretaries
referred to as having been fully exhausted/allocated, are those actual and
original residential areas of the municipality totaling 278.465 hectares, as
indicated in colored map. It does not refer to those additional built-up
residential areas of the Municipality covered by the Ordinance in the total
area of 556.93 hectares pointed out by DZA, which includes the property in
question.
Thus, as between the findings of the DAR Regional Director and the
DZA, we must favor the expertise of the latter. The determination
and classification of land areas within their jurisdiction is rightfully
vested in the local government unit concerned, in this case, the
Deputy Zoning Administrator of Daet, as approved through municipal
ordinance.
Under the foregoing circumstances, the denial of the exemption on the
ground that the MARO has already issued a NOTICE OF ACQUISITION in
1994 is flawed. The area having already been reclassified as residential prior
to June 1988 (as established by the DAR RCLUPPI V), it cannot be the
subject of a Notice of Acquisition which covers only agricultural lands.
Perforce, the Notice of Acquisition over the subject property is void ab initio.
Finally, the ruling of the DAR Secretary that the application for exemption
was belatedly filed in order to defeat CARP coverage of the property is
untenable.1âwphi1 What invalidated CARP coverage over the subject
property is not the application for exemption, but the fact the land in
question not being anymore agricultural, is beyond the coverage of CARP,
pursuant to Section 4 of R.A. 6657 (Natalia Realty vs. Department of
Agrarian Reform, supra).
In a subsequent Order dated March 3, 2006, the Office of the President
resolved the Verified Motion for Intervention with Motion for Reconsideration
(of the September 5, 2005 Decision of the Office of the President) filed by
Nicolasa O. Imperial, Dario R. Echaluce, Roel I. Robelo, Serafin R. Robelo,
Efren R. Robelo, Ronilo S. Agno, Lorena Robelo, Romeo O. Imperial, Nanilon
I. Cortez, Joven I. Cortez, and Rodelio O. Imperial (respondents), who raised
the following as grounds for reconsideration:
1. The Decision violates their constitutional rights to due process;
2. The opinion of the Municipal Deputy Zoning Administrator (DZA) of
Daet cannot prevail over the expert opinion of the Department of Land
Reform on the matter;
3. The application for exemption by the applicants-appellants was a
mere afterthought intended merely to defeat the CARP coverage; and
4. There is no proof that prior to the alleged reclassification of the
subject land, a public hearing was conducted and the required
percentage of the total agricultural land area at the time of the
passage of the ordinance was considered.
The Office of the President denied the Motion for Intervention and
Reconsideration and reaffirmed its earlier Decision, reasoning as follows:
While it is true that movants were not made parties to the case, this was so
because applicants Ong, et al. filed their application for exemption
from CARP coverage pursuant to DOJ Opinion No. 44, Series of 1990,
as implemented by DAR Administrative Order No. 06, Series of 1994.
The application for exemption was premised on the doctrine (as
affirmed by DOJ Opinion No. 44) that a land already converted to
residential prior to June 15, 1988 cannot be the subject of a Notice
of Acquisition since the subject land, being residential and not
agricultural, is already beyond the coverage of CARP. (Natalia Realty
vs. DAR, 225 SCRA 278) Hence, the application was not adversarial
against any other parties, but personal to the landowner-petitioner.
Nevertheless, the implementation of DAR A.O. No. 6, series of 1994, puts in
place a process of application and notice so that all parties concerned are
fully aware of the pending application for exemption clearance.
Upon receipt of an application for exemption pursuant to DOJ Opinion No.
44, the DAR Regional Center for Land Use, Policy, Planning and
Implementation (RCLUPPI) field unit conducts an ocular inspection. In that
inspection, the field unit interviews and informs the tenants/farmers if any,
that such an application is pending.
Further, the RCLUPPI unit files a detailed report, indicating therein the
number of farmer-beneficiaries affected and whether or not a Deed of
Undertaking was executed by the landowner to pay disturbance
compensation to affected tenants. In this case, appellants Ong et al.
executed a Deed of Undertaking dated January 11, 1997, in favor of tenants
Nicolasa vda. De Imperial, Efren Robelo and Julio Jamito. The RCLUPPI
Region V also reported that there were only three tenants at the time of the
inspection. Hence, the rest of the intervenors-movants herein are either
children or relatives of the above-named three tenants of the Ong family.
It is therefore incorrect to say that movants-intervenors were totally
unaware of the proceedings until they received the questioned
Decision on September 26, 2005. Thus, we hold that there was
reasonable opportunity to intervene since the application was filed
in 1996. During this period, the proceedings were elevated from the
Regional to Department level, and finally on appeal to this Office. (Emphases
added, citation omitted.)
Unsatisfied, respondents filed a petition for review with the Court of Appeals
under Rule 43 seeking to nullify and set aside the Decision dated September
5, 2005 and the Order dated March 3, 2006, both of the Office of the
President. This was docketed as CA-G.R. SP. No. 93941.
RULING OF THE COURT OF APPEALS
In its November 30, 2010 Decision, the Court of Appeals ruled "that the
Office of the President committed reversible error in reversing the Orders of
the DAR Secretaries and in approving [petitioners’] Application for
Exemption of their property from the CARP." The Court of Appeals
ratiocinated as follows:
While WE agree with the Office of the President that lands which have been
reclassified as residential prior to June 15, 1988 [cannot] be the subject of
compulsory acquisition by the DAR for its agrarian reform program, WE are
not inclined to sustain its ruling approving the application for clearance of
respondents exempting from CARP coverage the subject landholding
because of respondents’ failure to comply with the requirements for such
exemption.
A careful scrutiny of the record of this case reveals that the Office of the
President failed to judiciously examine the supporting documents submitted
by respondents in their application for exemption.
xxxx
As can be gleaned from [DAR Administrative Order No. 6, series of 1994, or
the "Guidelines for the Issuance of Exemption Clearances based on Sec. 3(c)
of RA 6657 and the Department of Justice (DOJ) Opinion No. 44, Series of
1990"], an application for exemption from the coverage of the CARP must be
accompanied by a certification from the HLURB that the pertinent zoning
ordinance has been approved by the Board prior to June 15, 1988 (the date
of effectivity of the CARL). In the instant case, respondents did file an
accompanying Certification from the HLURB. However, a meticulous
perusal of the Certification issued by the HLURB as compared with
the one issued by the Deputized Zoning Ordinance shows glaring
inconsistencies which cast doubt as to the land use classification of
respondents’ landholding. x x x.
xxxx
The glaring inconsistency and discrepancy in the foregoing certifications are
readily apparent. According to the Deputized Zoning Administrator of Daet,
Camarines Norte, the Zoning Ordinance reclassifying the landholding of
respondents into residential land was passed in 1980, however, in the
Certification of the HLURB the said "Town Plan and Zoning Ordinance of
Daet, Camarines Norte was approved by the Housing and Land Regulatory
Board, then Human Settlements Regulatory Commission on September 21,
1978." Obviously, the approved Zoning Ordinance being referred to in the
Certification of the HLURB was not Zoning Ordinance No. 4, Series of 1980
mentioned by the Deputized Zoning Administrator in his Certification. For
how could the HLURB [approve] on September 21, 1978 a town plan and
zoning ordinance still to be passed in 1980. Certainly, the HLURB could not
approve a zoning ordinance which was not yet existing at the time of the
passage of the approval. The HLURB must have been referring to another
town plan and zoning ordinance of Daet, Camarines Norte which was passed
in 1978 and not in 1980. This can be inferred from the letter of Deputized
Zoning Administrator Jesus L. Fernandez, Jr. x x x.
 xxxx
If what was approved by the HLURB on September 21, 1978 was the 1978
original land use plan of Daet, Camarines Norte [t]hen the inescapable
conclusion would be that subject landholding of respondents is not exempt
from CARP coverage since the same was classified as agricultural in nature
as found by the then DAR Secretary Horacio R. Morales, Jr. x x x.
xxxx
Even assuming for the sake of argument, that a zoning ordinance was
enacted after 1978, particularly in 1980 or 1982, reclassifying respondents’
landholding from agricultural to non-agricultural or residential, still OUR
conclusion would be the same since no proof was ever presented that the
later zoning ordinance was approved by the HLURB. We are, therefore, in
accord with the x x x disquisition of the DAR Secretary x x x.
The Court of Appeals denied petitioners’ Motion for Reconsideration. Hence,
this appeal.
The parties submitted their respective Memoranda on July 1, 2013
(petitioners) and July 12, 2013 (respondents).

THEORY OF PETITIONERS
Petitioners are now before us to raise the following issues which they allege
to be purely questions of law:
1. Whether or not the subject landholding of the petitioners is
exempted from the coverage of the government’s Comprehensive
Agrarian Reform Program;
2. Whether or not the petition filed by respondents before the Court of
Appeals is exempted from the rule that errors not assigned on appeal
cannot be passed upon.
Petitioners claim that the Court of Appeals failed to take into consideration
that with respect to the alleged discrepancy involving the approval of Zoning
Ordinance No. 4, series of 1980, and the ratification of Daet’s Town Plan by
the National Coordinating Council for Town Planning, Housing and Zoning
(NCCTPHZ) in 1978, the NCCTPHZ was created as a first attempt to
formulate and approve the Comprehensive Development Town Plans in
selected municipalities throughout the country as mandated by Letter of
Instructions No. 729; that almost all the town plans then approved by the
NCCTPHZ included a Land Use Plan, but not a Zoning Plan or an adopted
Zoning Ordinance; that after one year, the NCCTPHZ was dissolved, and the
Human Settlements Regulatory Commission (now HLURB) subsequently
formed was the one that required a Zoning Ordinance as part of the
Comprehensive Development Plan to be submitted by each municipality for
approval. Petitioners contend that Daet, Camarines Norte was among the
first municipalities which formulated its Comprehensive Development Plan
approved by NCCTHPZ without a zoning ordinance and that "it was only in
1980 that the Sangguniang Bayan of Daet adopted their zoning ordinance
based on their previously approved Land Use Plan."
Petitioners contend that they are deemed to have substantially complied
with the requirements of Administrative Order No. 6, series of 1994,
particularly with respect to the HLURB certification that the pertinent zoning
ordinance must have been approved by the board prior to June 15, 1988.
Petitioners point out that "there was no HLURB yet at the time that Daet’s
Town Plan was prepared and the Zoning Ordinance was passed" and that the
"HLURB came about when the former Human Settlements Regulatory
Commission was renamed" per Executive Order No. 90 dated December 17,
1986. Petitioners allege that it is absurd to require approval by the HLURB of
the subject 1980 Zoning Ordinance. Petitioners further allege that the
approval of Daet’s Town Plan or Land Use Plan on September 21, 1978 by
NCCTPHZ or HSRC must be favorably considered to have carried with it the
corresponding approval of the Zoning Ordinance subsequently passed in
1980 which, in the first place, was based on the HSRC-approved 1978 Town
Plan or Land Use Plan.
Petitioners cite Junio v. Garilao:
The Certification issued by the Board expressly mentioned that the "property
x x x, Lot 835-B located at Brgy. Tangub, Bacolod City, covered by TCT T-
79622, x x x was identified for residential use under the 1976 Framework
Plan of the City of Bacolod prepared pursuant to the Program of the then
Ministry of Local Government and approved by the City Council in its
Resolution No. 5153-A, Series of 1976." It also certified that the "area where
the aforecited property is located was likewise identified for residential use
under the Town Planning, Housing Zoning Program of the National
Coordinating Council of the then Ministry of Human Settlements as approved
under the City Council Resolution No. 5792, Series of 1977. x x x." (Citations
omitted.) Petitioners, alternatively, submit that the HLURB approval of the
1980 Zoning Ordinance is not necessary following the provision of Section 4
in relation to Section 3(c) of Republic Act No. 6657, which reads:
SECTION 3. Definitions. — For the purpose of this Act, unless the context
indicates otherwise:
xxxx
(c) Agricultural land refers to land devoted to agricultural activity and not
classified as mineral, forest, residential, commercial or industrial land.
SECTION 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.
More specifically, the following lands are covered by the Comprehensive
Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain devoted to
or suitable for agriculture. No reclassification of forest or mineral lands
to agricultural lands shall be undertaken after the approval of this Act
until Congress, taking into account ecological, developmental and
equity considerations, shall have determined by law, the specific limits
of the public domain.
(b) All lands of the public domain in excess of the specific limits as
determined by Congress in the preceding paragraph;
(c) All other lands owned by the Government devoted to or suitable for
agriculture; and
(d) All private lands devoted to or suitable for agriculture regardless of
the agricultural products raised or that can be raised thereon.
Petitioners submit that there is nothing in the above provisions of law that
requires the exercise of the power to reclassify an agricultural land to be
approved by the HLURB. Petitioners claim that such power to reclassify is
exclusively within the authority of the local government unit concerned.
Petitioners allege that given the reclassification of the subject property to
residential pursuant to Ordinance No. 04, series of 1980, based on the 1978
approved Town Plan, the same can no longer be reverted to agricultural.
Petitioners conclude that since the subject property was reclassified from
agricultural to residential long before June 15, 1988, it is therefore exempt
from the coverage of the CARL.
Petitioners likewise argue that the Court of Appeals "committed palpable and
patent error and/or grave abuse of discretion in holding that the present
case is exempted from the rule that errors not assigned on appeal cannot be
passed upon."
According to petitioners, the Court of Appeals expressly admitted that the
issue regarding the alleged lack of proof of approval by the HLURB of the
1980 Zoning Ordinance was not raised as an error in the appealed case, but
the Court of Appeals was able to justify its action by enumerating the
instances when an appellate court is clothed with ample authority to review
rulings even if they are not assigned as errors in the appeal, and claiming
that the present case fell squarely under the enumerated exceptions.
Petitioners submit that the instant case does not fall under any of the
mentioned exceptions.
Petitioners claim injustice because the Court of Appeals allegedly allowed
respondents to intervene in the instant case even beyond the period
prescribed by the Rules of Court.
THEORY OF RESPONDENTS
Respondents allege that a careful reading of the Certification issued by the
HLURB as compared with the one issued by the Deputized Zoning
Administrator would show "glaring inconsistencies which cast doubt as to the
land use classification of petitioners’ landholding."
Respondents contend that if "what was approved by the HLURB on
September 21, 1978 was the original land use plan of Daet, Camarines
Norte, then the inescapable conclusion would be that the subject landholding
of respondents is not exempt from CARP coverage since the same was
classified as agricultural in nature."
Respondents claim that HLURB approval is required for reclassification of
land through local ordinance, contrary to petitioners’ contention.
As regards petitioners’ allegation that the Court of Appeals committed grave
abuse of discretion when it passed upon an issue not assigned as error,
respondents argue that this maxim is subject to exceptions as provided in
Section 8 of Rule 51.
Claiming that they are indispensable parties, respondents finally argue that
the allowance of their motion to intervene by the Court of Appeals even
beyond the period prescribed by the Rules of Court was proper.
THIS COURT’S RULING
The petition has merit. We sustain the September 5, 2005 Decision of the
Office of the President and its Order dated March 3, 2006 and thus reverse
the questioned Decision and Resolution of the Court of Appeals, which
upheld the decision of the DAR to deny petitioner’s request for exemption
from CARP for the subject property.
The power to reclassify land is granted by law to the local government,
which was validly exercised in this case. The subject property having already
been validly reclassified to residential land by the municipality of Daet prior
to June 15, 1988, when the CARL took effect, then it is exempt from the
coverage of CARP.
DISCUSSION
At the outset, we would like to address petitioners’ contention that the Court
of Appeals allegedly allowed respondents to intervene in the instant case
even beyond the period prescribed by the Rules of Court. The Court of
Appeals found, however, that being the farmer-beneficiaries, respondents
"have substantial rights or interests in the outcome of the case;" that
"[i]ndisputably, they stand to be directly injured by the assailed Decision of
the Office of the President;" and that "their rights or interests cannot be
adequately pursued and protected in another proceeding." Furthermore, the
Court of Appeals, in giving due course to respondents’ intervention,
reasoned that this Court has in the past allowed a party to intervene even
beyond the period prescribed by the Rules, as "the allowance or disallowance
of a motion for intervention rests on the sound discretion of the court after
consideration of the appropriate circumstances." We see no reason to
question the Court of Appeals’ discretion on this matter.
Nevertheless, we disagree with the Court of Appeals’ disposition of the
substantive issue of whether subject property is exempt from the coverage
of the CARP.
We have unequivocally held that "to be exempt from CARP, all that is
needed is one valid reclassification of the land from agricultural to non-
agricultural by a duly authorized government agency before June 15, 1988,
when the CARL took effect."
As to what is a "duly authorized government agency," the DAR Handbook for
CARP Implementors recognizes and discusses the LGU’s authority to
reclassify lands under Republic Act No. 7160 or the Local Government Code.
Moreover, in Heirs of Dr. Jose Deleste v. Land Bank of the Philippines, the
Court held that "[it] is undeniable that the local government has the power
to reclassify agricultural into non-agricultural lands." Citing Pasong Bayabas
Farmers Association, Inc. v. Court of Appeals, the Court further held that
this power is not subject to DAR approval, and we quote:
[P]ursuant 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]." (Emphasis ours,
citation omitted.)
In the case now before us, the Court of Appeals reversed the Office of the
President’s ruling approving petitioners’ application for exemption clearance
"because of [petitioners’] failure to comply with the requirements for such
exemption." Even though not specifically assigned as an error, the Court of
Appeals focused on the discrepancy it had allegedly found between the
certification issued by the Deputized Zoning Administrator and the one from
the HLURB regarding the year that the subject property was reclassified by
the local government from agricultural to residential. The Court of Appeals
even went on to state that "[a] careful scrutiny of the record of this case
reveals that the Office of the President failed to judiciously examine the
supporting documents submitted by respondents in their application for
exemption."
The Court of Appeals found it material that the HLURB certified that the
"Town Plan and Zoning Ordinance of Daet, Camarines Norte was approved
by the Housing and Land Use Regulatory Board, then Human Settlements
Regulatory Commission on September 21, 1978" while the Deputized Zoning
Administrator authorized that as per Zoning Ordinance No. 4, series of 1980,
subject property was within the residential built-up area. The Court of
Appeals insisted that petitioners should have submitted the HLURB
certification for Zoning Ordinance No. 4.
The Certification from Deputized Zoning Administrator Engr. Jesus
Fernandez, Jr. dated October 9, 1996, reads in part:
This is to certify that the parcel of land owned [in] common by NOEL L.
ONG, OMAR ANTHONY L. ONG and NORMAN L. ONG situated at
Barangay Dogongan, Daet, Camarines Norte, described under Transfer
Certificate of Title No. T-17045 and Sketch Plan of Lot 1, Psu-19545,
surveyed by JOSE A. GOC, JR. Geodetic Engineer, with an area of FOUR
HUNDRED FIVE THOUSAND SIX HUNDRED FORTYFIVE (405,645)
square meters is within the RESIDENTIAL BUILT-UP area as per
Zoning Ordinance No. 4, series of 1980, outside the ten meters right of
way and the municipality has no proposed road expansion and improvement
on the area as per record of existing Town Plan.
The body of the Certification dated December 9, 1996 from the HLURB
Regional Director Jesse A. Obligacion reads as follows:
This is to certify that as per records on file, the Town Plan and Zoning
Ordinance of Daet, Camarines Norte was approved by the Housing and
Land Use Regulatory Board, then Human Settlements Regulatory
Commission on September 21, 1978 in accordance with official practices
and procedures carried out pursuant to Letter of Instruction No. 511 which
established a National Coordinating Council for Town Planning, Housing and
Zoning (NCCTPHZ), and pursuant to HLRB Memorandum Circular No. 15,
Series of 1995.
Factual as this may seem, this brings to us the crucial question of whether,
based on these two certifications, petitioners had effectively complied with
the requirements for exemption.
Looking at such requirements, DAR Administrative Order No. 06-94 or the
"Guidelines for the Issuance of Exemption Clearances Based on Sec. 3(c) of
Republic Act No. 6657 and the Department of Justice (DOJ) Opinion No. 44,
Series Of 1990" was the prevailing rule when petitioners filed their petition
for exemption. Under A.O. No. 06-94’s chapter entitled "Legal Basis," it is
stated that:

Department of Justice Opinion No. 44 series of 1990 has ruled that with
respect to the conversion of agricultural lands covered by R.A. No. 6657 to
non-agricultural uses, the authority of DAR to approve such conversion may
be exercised from the date of its effectivity, on June 15, 1988. Thus, all
lands that already classified as commercial, industrial or residential
before 15 June 1988 no longer need any conversion clearance.
DAR A.O. No. 06-94 also provided a list of required documents to be
attached to the application for exemption clearance, as follows:
The application should be duly signed by the landowner or his
representative, and should be accompanied by the following documents:
 1. Duly notarized Special Power of Attorney, if the applicant is not the
landowner himself;
2. Certified true copies of the titles which is the subject of the
application;
3. Current tax declaration (s) covering the property;
4. Location Map or Vicinity Map;
5. Certification from the Deputized Zoning Administrator that
the land has been reclassified to residential industrial or
commercial use prior to June 15, 1988;
6. Certification from the HLURB that the pertinent zoning
ordinances has been approved by the Board prior to June 15,
1988;
7. Certification from the National Irrigation Administration that the
land is not covered by Administrative Order No. 20, s. 1992, i.e., that
the area is not irrigated, nor scheduled for irrigation rehabilitation nor
irrigable with firm funding commitment.
8. Proof of payment of disturbance compensation, if the area is presently
being occupied by farmers, or waiver/undertaking by the occupants that
they will vacate the area whenever required.
The Court of Appeals focused on petitioners’ alleged "failure to comply with
the requirements for such exemption," a matter not even assigned by
respondents (petitioners therein) as an error, which fact the Court of
Appeals itself admits in its questioned decision, and which it further admits it
may not rule upon, but which it claims falls under one of the exceptions to
the general rule.
The respondents’ Verified Petition for Review with Prayer for Preliminary
Injunction and TRO filed before the Court of Appeals contains a "Concise
Statement of the issues & Assignment of Errors Found in the Questioned
O.P. Decision & O.P. Order committed by the Honorable Office of the
President," which reads:
I - THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN
HOLDING THAT RESPONDENTS’ PARCEL OF LAND COVERED BY TCT
NO. T-17045 WITH AN AREA OF 405,605 SQUARE METERS HAS BEEN
RECLASSIFIED AS RESIDENTIAL LAND, HENCE, EXEMPT FROM CARP
COVERAGE.
 II – THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN
APPLYING THE CASE OF NATALIA REALTY VS. DAR, 225 SCRA 278 IN
THE INSTANT CASE NOTWITHSTANDING THE GREAT VARIANCE IN
THE PECULIAR FACTUAL MILIEU OR ENVIRONMENT OF EACH CASE.
III – THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN
ADMITTING HOOK, LINE & SINKER THE [BIASED], SELF-SERVING,
VAGUE, AND AMBIGUOUS CERTIFICATION OF THE DEPUTY ZONING
ADMINISTRATOR & THE INADEQUATE & INSUFFICIENT HLURB
CERTIFICATION, AS AGAINST THE THOROUGH & EXPERT
INVESTIGATION & CONSISTENT FINDINGS THAT THE SUBJECT LAND
IS AGRICULTURAL OF THE DAR RCLUPPI INVESTIGATING TEAM, THE
HONORABLE DAR REGIONAL DIRECTOR, & THE HONORABLE DAR
SECRETARIES.
The Court of Appeals wrote:
After a judicious review of the record of this case, WE rule to grant the
Petition but on another ground.
xxxx
While the foregoing issue has not been raised as an error, and
therefore, WE may not pass upon it, as this would contravene the
basic rules of fair play and justice, however, it is jurisprudentially
recognized that it is well within the authority of this Court to raise, if
it deems proper under the circumstances obtaining, error/s not
assigned on an appealed case. Thus, in several cases, the Supreme Court
declared that an appellate court is clothed with ample authority to review
rulings even if they are not assigned as errors in the appeal in these
instances: (a) grounds not assigned as errors but affecting jurisdiction over
the subject matter; (b) matters not assigned as errors on appeal but are
evidently plain or clerical errors within contemplation of law; (c) matters not
assigned as errors on appeal but consideration of which is necessary in
arriving at a just decision and complete resolution of the case or to serve the
interests of justice or to avoid dispensing piecemeal justice; (d) matters not
specifically assigned as errors on appeal but raised in the trial court and are
matters of record having some bearing on the issue submitted which the
parties failed to raise or which the lower court ignored; (e) matters not
assigned as errors on appeal but closely related to an error assigned; and (f)
matters not assigned as errors on appeal but upon which the determination
of a question properly assigned, is dependent. The present case
undoubtedly falls squarely under the above-enumerated exceptions.
(Emphasis ours.)
To our mind, the Court of Appeals committed a reversible error when it
decided the case based on a ground neither found in the aforequoted
assignment of errors submitted by respondents nor in the arguments
propounded in the appellants’ brief. The applicable rule is Section 8, Rule 51
of the 1997 Rules of Civil Procedure, which reads:

Section 8. Questions that may be decided. - No error which does not affect
the jurisdiction over the subject matter or the validity of the judgment
appealed from or the proceedings therein will be considered unless stated in
the assignment of errors, or closely related to or dependent on an assigned
error and properly argued in the brief, save as the court may pass upon
plain errors and clerical errors.
Although the Court has declared many exceptions to the above rule, and the
Court of Appeals painstakingly enumerated some of these exceptions, the
Court of Appeals omitted to discuss to which exception this alleged error
belongs, and exactly how this error falls under such exception. To our mind,
flexibility in applying the rules must be balanced with sufficient reason and
justification, clearly arrived at and explained by the Court of Appeals, so as
not to "contravene the basic rules of fair play and justice."
We find that the decision of the Office of the President is more consistent
with law and jurisprudence. The Office of the President found that the
subject property had been properly reclassified by the appropriate local
government authority as residential, a fact even noted by the DAR.
To reiterate, we have held that "lands previously converted by government
agencies to non-agricultural uses prior to the effectivity of the CARL are
outside its coverage."
As to the appropriateness of an HSRC approval, the Court in Heirs of Deleste
ruled on the validity of a local government’s reclassification of land that was
subsequently approved not by the HLURB, but by its predecessor, the HSRC.
The Court held that the HSRC approval is enough, and it is a valid
reclassification, as explained in the following quoted portion of the
decision:
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.
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.
Significantly, accompanying the Certification dated October 8, 1999 issued
by Gil R. Balondo, Deputy Zoning Administrator of the City Planning and
Development Office, Iligan City, and the letter 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.
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. x
x x. (Emphases supplied, citations omitted.)
The Court then cited a similar case, Remman Enterprises, Inc. v. Court of
Appeals, wherein it was held:
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 the Sangguniang Bayan of Dasmariñas, Cavite, and
approved by the HSRC, specifying them as residential.
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 x x x. (Citation
omitted.)
We discussed the history of the HSRC in Buklod nang Magbubukid sa
Lupaing Ramos, Inc. v. E. M. Ramos and Sons, Inc. wherein we said:
The Court again agrees with the Court of Appeals that Resolution No. 29-A
need not be subjected to review and approval by the HSRC/HLURB.
Resolution No. 29-A was approved by the Municipality of Dasmariñas on July
9, 1972, at which time, there was even no HSRC/HLURB to speak of.
The earliest predecessor of the HSRC, the Task Force on Human
Settlements, was created through Executive Order No. 419 more than a year
later on September 19, 1973. And even then, the Task Force had no
power to review and approve zoning and subdivision ordinances and
regulations.
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 HSRC was eventually established on February 7, 1981. Section 5(b) of
the HSRC Charter contained the explicit mandate for the HSRC to:
b. Review, evaluate and approve or disapprove comprehensive land
use development plans and zoning ordinances of local government;
and the zoning component of civil works and infrastructure projects of
national, regional and local governments; subdivisions, condominiums or
estate development projects including industrial estates, of both the public
and private sectors and urban renewal plans, programs and projects:
Provided, that the land use Development Plans and Zoning Ordinances of
Local Governments herein subject to review, evaluation and approval of the
commission shall respect the classification of public lands for forest purposes
as certified by the Ministry of Natural Resources: Provided, further, that the
classification of specific alienable and disposable lands by the Bureau of
Lands shall be in accordance with the relevant zoning ordinance of Local
government where it exists; and provided, finally, that in cities and
municipalities where there are as yet no zoning ordinances, the Bureau of
Lands may dispose of specific alienable and disposable lands in accordance
with its own classification scheme subject to the condition that the
classification of these lands may be subsequently change by the local
governments in accordance with their particular zoning ordinances which
may be promulgated later. x x x. ASEIDH
Neither the Ministry of Human Settlements nor the HSRC, however, could
have exercised its power of review retroactively absent an express provision
to that effect in Letter of Instructions No. 729 or the HSRC Charter,
respectively. A sound cannon 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. Article 4 of the Civil Code provides that:
"Laws shall have no retroactive effect, unless the contrary is provided."
Hence, 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
without 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.
xxxx
Since the subject property had been reclassified as residential land
by virtue of Resolution No. 29-A dated July 9, 1972, it is no longer
agricultural land by the time the CARL took effect on June 15, 1988
and is, therefore, exempt from the CARP. (Emphases supplied, citations
omitted.)
In Buklod, the Court cited previous decisions with the same conclusion, and
we quote the relevant points of discussion below:
This is not the first time that the Court made such a ruling.
xxxx
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 —

"x x x Agricultural land refers to those devoted to agricultural activity as

defined in R.A. 6657 and not classified as mineral or forest by the
Department of Environment and Natural Resources (DENR) and its
predecessor agencies, and not classified in town plans and zoning ordinances
as approved by the Housing and Land Use Regulatory Board (HLURB) and its
preceding competent authorities prior to 15 June 1988 for residential,
commercial or industrial use."
Since the NATALIA lands were converted prior to 15 June 1988, respondent
DAR is bound by such conversion. It was therefore error to include the
undeveloped portions of the Antipolo Hills Subdivision within, the coverage
of CARL.
Be that as it may, the Secretary of Justice, responding to a query by the
Secretary of Agrarian Reform, noted in an Opinion that lands covered by
Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands
are part, having been reserved for townsite purposes "to be developed as
human settlements by the proper land and housing agency," are "not
deemed ‘agricultural lands’ within the meaning and intent of Section 3(c) of
R.A. No. 6657." Not being deemed "agricultural lands," they are outside the
coverage of CARL. x x x.
That the land in the Natalia Realty case was reclassified as residential by a
presidential proclamation, while the subject property herein was reclassified
as residential by a local ordinance, will not preclude the application of the
ruling of this Court in the former to the latter. The operative fact that
places a parcel of land beyond the ambit of the CARL is its valid
reclassification from agricultural to nonagricultural prior to the
effectivity of the CARL on June 15, 1988, not by how or whose
authority it was reclassified.
In Pasong Bayabas Farmers Association, Inc. v. Court of Appeals (Pasong
Bayabas case), the Court made the following findings:
Under Section 3(c) of Rep. Act No. 6657, agricultural lands refer to lands
devoted to agriculture as conferred in the said law and not classified as
industrial land. Agricultural lands are only those lands which are arable or
suitable lands that do not include commercial, industrial and residential
lands. Section 4(e) of the law provides that it covers all private lands
devoted to or suitable for agriculture regardless of the agricultural products
raised or that can be raised thereon. Rep. Act No. 6657 took effect only on
June 15, 1988. But long before the law tools effect, the property
subject of the suit had already been reclassified and converted from
agricultural to non-agricultural or residential land by the following
administrative agencies: (a) the Bureau of Lands, when it approved the
subdivision plan of the property consisting of 728 subdivision lots; (b) the
National Planning Commission which approved the subdivision plan
subdivided by the LDC/CAI for the development of the property into a low-
cost housing project; (c) the Municipal Council of Carmona, Cavite,
when it approved Kapasiyahang Blg. 30 on May 30, 1976; (d) Agrarian
Reform Minister Conrado F. Estrella, on July 3, 1979, when he granted the
application of the respondent for the development of the Hakone Housing
Project with an area of 35.80 hectares upon the recommendation of the
Agrarian Reform Team, Regional Director of Region IV, which found, after
verification and investigation, that the property was not covered by P.D. No.
27, it being untenanted and not devoted to the production of palay/or corn
and that the property was suitable for conversion to residential subdivision;
(e) by the Ministry of Local Government and Community Development; (f)
the Human Settlements Regulatory Commission which issued a location
clearance, development permit, Certificate of Inspection and License to Sell
to the LDC/private respondent; and, (g) the Housing and Land Use
Regulatory Board which also issued to the respondent CAI/LDC a license to
sell the subdivision lots.
x x x.
Noticeably, there were several government agencies which reclassified and
converted the property from agricultural to nonagricultural in the Pasong
Bayabas case. The CARL though does not specify which specific government
agency should have done the reclassification. To be exempt from CARP, all
that is needed is one valid reclassification of the land from agricultural to
non-agricultural by a duly authorized government agency before June 15,
1988, when the CARL took effect. All similar actions as regards the land
subsequently rendered by other government agencies shall merely serve as
confirmation of the reclassification. The Court actually recognized in the
Pasong Bayabas case the power of the local government to convert or
reclassify lands through a zoning ordinance:
Section 3 of Rep. Act No. 2264, amending the Local Government Code,
specifically empowers municipal and/or city councils to adopt zoning and
subdivision ordinances or regulations in consultation with the National
Planning Commission. A zoning ordinance prescribes, defines, and
apportions a given political subdivision into specific land uses as present and
future projection of needs. The power of the local government to convert or
reclassify lands to residential lands to non-agricultural lands reclassified is
not subject to the approval of the Department of Agrarian Reform. Section
65 of Rep. Act No. 6657 relied upon by the petitioner applies only to
applications by the landlord or the beneficiary for the conversion of lands
previously placed under the agrarian reform law after the lapse of five years
from its award. It does not apply to agricultural lands already converted as
residential lands prior to the passage of Rep. Act No. 6657. x x x.
At the very beginning of Junio v. Garilao, the Court already declared that:
Lands already classified and identified as commercial, industrial or
residential before June 15, 1988 - the date of effectivity of the
Comprehensive Agrarian Reform Law (CARL) - are outside the coverage of
this law. Therefore, they no longer need any conversion clearance from the
Department of Agrarian Reform (DAR).
The Court then proceeded to uphold the authority of the City Council of
Bacolod to reclassify as residential a parcel of land through Resolution No.
5153-A, series of 1976. The reclassification was later affirmed by the HSRC.
Resultantly, the Court sustained the DAR Order dated September 13, 1994,
exempting the same parcel of land from CARP Coverage.
Therefore, the Office of the President was correct when it ruled that the
DAR's "denial of the exemption on the ground that the MARO [had] already
issued a NOTICE OF ACQUISITION in 1994 is flawed" and that "[the] area
having already been reclassified as residential prior to June 1988 (as
established by the DAR RCLUPPI V), it cannot be the subject of a Notice of
Acquisition which covers only agricultural lands." The Office of the President
likewise correctly held that "the Notice of Acquisition over the subject
property is void ab initio. "
WHEREFORE, in view of the foregoing, we GRANT the petition. We hereby
SET ASIDE the November 30, 2010 Decision and the May 11, 2011
Resolution of the Court of Appeals in CA-G.R. SP No. 93941 and
REINSTATE the September 5, 2005 Decision and the March 3, 2006 Order
of the Office of the President.
SO ORDERED.
16.
BUKLOD NANG MAGBUBUKID SA LUPAING RAMOS, INC.,
PETITIONER, VS. E. M. RAMOS AND SONS, INC., RESPONDENT.
[G.R. No. 131481, March 16 : 2011]
DEPARTMENT OF AGRARIAN REFORM, PETITIONER, VS. E. M. RAMOS
AND SONS, INC., RESPONDENT.
[G.R. No. 131624]

DECISION

LEONARDO-DE CASTRO,  J.:

Before the Court are consolidated Petitions for Review on Certiorari, under
Rule 45 of the 1997 Rules of Civil Procedure, filed by the Buklod ng
Maqbubukid Sa Lupaing Ramos, Inc. (Buklod) and the Department of
Agrarian Regorm (DAR), assailing the Decision[1] dated March 26, 1997 and
the Resolution[2] dated November 24, 1997 of the Court of Appeals in CA
G.R. SP No. 40950.

The Court of Appeals declared the parcels of land owned by E.M. Ramos and
Sons, Inc. (EMRASON), located in Barangay Langkaan, Dasmariñas, Cavite
(subject property), exempt from the coverage of the Comprehensive
Agrarian Reform Program (CARP), thus, nullifying and setting aside the
Decision[3] dated February 7, 1996 and Resolution[4] dated May 14, 1996 of
the Office of hte President (OP) in O.P. Case No. 5461.

Quoted hereunder are the facts of the case as found by the Court of
Appeals:

At the core of the controversy are several parcels of unirrigated land

(303.38545 hectares) which from part of a larger expanse with an area of
372 hectares situated at Barangay Langkaan, Dasmariñas, Cavite. 
Originally owned by the MAnila Golf and Country Club, he property was
aquired by the [herein repondent EMRASON] in 1965 for the purpose of
developing the same into a residential subdivision known as "Traveller's Life
Homes".

Sometime in 1971, the Municipal Council of Dasmariñas, Cavite, acting

pursuant to Republic Act (R.A.) No. 2264, otherwise known as the "Loval
Autonomy Act", enacteed Municipal Ordinance No. 1, hereinafter referred to
as Ordinance No. 1, enitled "An Ordinance Providing Subdivision Regulation
and Providing Penalties for Violation Thereof."

In May, 1972, [respondent] E.M. Ramos and Sons, Inc., applied for an
authority to convert and development its aforementioned 372-hectare
property into a residential subdivision, ataching to the apllication detailed
development plans and development proposals from Bancom Development
Corporation and San Miguel Corporation.  Acting thereon the Municipal
Council of Dasmariñas, Cavite passed on July 9, 1972 Municipal Ordinance
No. 29-A (Ordinance "No. 29-A, for brevity), approving [EMRASON's]
application. Ordinance No. 29-A pertinently reads:

"Resolved, as it is hereby resolved, to approve the application for

subdivision containing an area of Three Hundred Seventy-Two (372)
Hectares situated in Barrios Bocal and Langkaan, named as Traveller's Life
Homes.

Resolved that the Municipal Ordinance regarding subdivision regulations

existing in this municipality shall be strictly followed by the subdivision ".

Subsequently, [EMRASON] paid the fees, dues and licenses needed to

proceed with property development.

It appears, however, that the actual implementation of the subdivision

project suffered delay owing to the confluence of events. Among these was
the fact that the property in question was then mortgaged to, and the titles
thereto were in the possession of, the Overseas Bank of Manila, which during
the period material was under liquidation.

On June 15. 1988, Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law or CARL, took effect, ushering in a new
process of land classification, acquisition and distribution.

On September 23, 1988, the Municipal Mayor of Dasmariñas, Cavite

addressed a letter to [EMRASON], stating in part, as follows:

"In reply to your letter of June 2, 1988, we wish to clarify that the
Municipality of Dasmariñas, Cavite, has approved the development of your
property situated in Barrios Bukal and Langkaan, Dasmariñas, Cavite, with
a total area of 3 72 hectares, more or less, into residential, industrial,
commercial and golf course project.

This conversion conforms with the approved Development Plan of the

Municipality of Dasmariñas Cavite ".

Then came the Aquino government's plan to convert the tenanted

neighboring property of the National Development Company (NDC) into an
industrial estate to be managed through a joint venture scheme by NDC and
the Marubeni Corporation. Part of the overall conversion package called for
providing the tenant-farmers, opting to remain at the NDC property, with
three (3) hectares each. However, the size of the NDC property turned out
to be insufficient for both the demands of the proposed industrial project as
well as the government's commitment to the tenant-farmers. To address this
commitment, the Department of Agrarian Reform (DAR) was thus tasked
with acquiring additional lands from the nearby areas. The DAR earmarked
for this purpose the subject property of [EMRASON].

On August 29, 1990, then OAR Secretary Benjamin Leong sent out the first
of four batches of notices of acquisition, each of which drew protest from
[EMRASON]. All told, these notices covered 303.38545 hectares of land
situated at Barangay Langkaan, Dasmariñas, Cavite owned by [EMRASON].

In the meantime, [EMRASON] filed with the Department of Agrarian Reform

Adjudication Board (DARAB), Region IV, Pasig, Metro Manila, separate
petitions to nullify the first three sets of the above notices. Collectively
docketed as DARAB Case No. IV-Ca-0084-92, these petitions were
subsequently referred to the Office of the Regional Director, Region IV,
which had jurisdiction thereon. In his referral action, the Provincial Agrarian
Adjudicator directed the DAR Region IV, through its Operations Division, to
conduct a hearing and/or investigation lo determine whether or not the
subject property is covered by the Comprehensive Agrarian Reform Program
(CARP) and, if not, to cancel the notices of acquisition.

Forthwith, the DAR regional office conducted an on-site inspection of the

subject property.

In the course of the hearing, during which [EMRASON] offered Exhibits :'A"
to "UU-2" as documentary evidence, [EMRASON] received another set of
notices of acquisition. As lo be expected, [EMRASON] again protested.

On August 28, 1992, the Legal Division of DAR, Region IV, through Hearing
Officer Victor Baguilat, rendered a decision declaring as null and void all the
notices of acquisitions, observing that the property covered thereby is,
pursuant to Department of Justice (DOJ) Opinion No. 44, series of 1990,
exempt from CARP. The dispositive portion of the decision reads, as follows;

''WHEREFORE, in the light of the foregoing x x x, considering that the notices

of acquisition dated August 29, 1990 relative to the 39 hectares partly
covered by Transfer Certificate of Title No. T-19298; notices of acquisition all
dated April 3, 1991 relative to the 131.41975 hectares partly covered by
Transfer Certificates of Title Nos. x x x; notices of acquisition all dated
August 28, 1991 relative lo the 56.9201 hectares covered by Transfer
Certificates of Title Nos. x x x; and notices of acquisition all dated May 15,
1992 relative to the 76.0456 covered by Transfer Certificates of Title Nos.
xx, all located at Barangay Langkaan, Dasmariñas, Cavite and owned by
petitioner EM RAMOS and SONS, INC. are null and void on the ground that
the subject properties are exempted from CARP coverage pursuant to DOJ
Opinion No. 44, Series of 1990,  therefore, the aforesaid notices of
acquisition be cancelled and revoked. "

The DOJ Opinion adverted to, rendered by then Justice Secretary Franklin
Drilon, clarified that lands already converted to non-agricultural uses before
June 15, 1988 were no longer covered by CARP.

On September 3, 1992, the Region IV DAR Regional Director motu

propio elevated the case to the Office of the Agrarian Reform Secretary, it
being his view that Hearing Officer Baguilat's decision ran contrary to the
department's official position "to pursue the coverage of the same properties
and its eventual distribution to qualified beneficiaries particularly the
Langkaan farmers in fulfillment of the commitment of the government to
deliver to them the balance of thirty-nine hectares x x x".

On January 6, 1993, the herein respondent DAR Secretary Ernesto

Garilao [(DAR Secretary Garilao)] issued an order, the decretal portion of
which partly reads:

"WHEREFORE, in the interest of law and justice, an order is hereby

rendered:

1.  Affirming the Notices of Acquisition dated August 29, 1990, April 3,
1991, August 28, 1991 and May 15, 1992 covering 303.38545 hectares of
the property owned by the E.M. RAMOS & SONS, INC, located at Barangay
Langkaan, Dasmarinas, Cavite x x x;

x x x x

3. Directing the OAR field officials concerned to pursue (he coverage under
RA 6657 of the properties of E.M.  Ramos & Sons,  Inc. for which subject
Notices of Acquisition had been issued.

SO ORDERED".

Its motion for reconsideration of the aforesaid order having been denied by
the [DAR Secretary Garilao] in his subsequent order of January 6, 1993,
[EMRASON] appealed to the Office of the President where the recourse
was docketed as O.P. Case No. 5461.

On February 7, 1996, the Office of the President, through herein

respondent Deputy Executive Secretary Renato C. Corona [(Deputy
Executive Secretary Corona)], rendered the herein assailed decision x x x,
dismissing [EMRASON's] appeal on the strength of the following observation:

"To recapitulate, this Office holds that [EMRASON's] property has remained
AGRICULTURAL in classification and therefore falls within the coverage of
the CARP, on the basis of the following:br>

1. [EMRASON] failed to comply with the mandatory

requirements and conditions of Municipal Ordinance Nos. 1
and 29-A, specifically, among others, the need for
approval of the National   Planning   Commission through
the Highway District Engineer, and the Bureau of Lands
before final submission to the Municipal Council and
Municipal Mayor;

2. [EMRASON] failed to comply with Administrative Order No.

152, dated December 16, 1968, and

3. The  certification  of the  Human Settlements Regulatory

Commission (HSRC)  in  1981  and the Housing and Land
Use Regulatory Board (HLRB) in 1992 that the property of
[EMRASON] is agricultural".

Undaunted, [EMRASON] interposed a motion for reconsideration, followed

later by another motion whereunder it invited attention to legal doctrines
involving land conversion recently enunciated by no less than the Office of
the President itself.

On May 14, 1996, the [Deputy Executive Secretary Corona] came out with
his second challenged issuance denying [EMRASON's] aforementioned
motion for reconsideration x x x.[5]

From the denial of its Motion for Reconsideration by the OP, EMRASON filed
a Petition for Review with the Court of Appeals, which was docketed as CA-
G.R. SP No. 40950.

On July 3, 1996, the Court of Appeals issued a Temporary Restraining Order

(TRO),[6] which enjoined then DAR Secretary Ernesto Garilao and Deputy
Executive Secretary Renato C. Corona  from implementing the OP Decision
of February 7, 1996 and Resolution of May 14, 1996 until further orders
from the court. On September 17, 1996, the appellate court issued a
Resolution[8] granting the prayer of EMRASON for the issuance of a writ of
preliminary injunction.  The writ of preliminary injunction [9] was actually
issued on September 30, 1996 after EMRASON posted the required bond of
P500,000,00.

The DAR Secretary filed a Motion for Reconsideration of the Resolution dated
September 17, 1996 of the Court of Appeals, with the prayer that the writ of
preliminary injunction already issued be lifted, recalled and/or dissolved.

At this juncture, the DAR had already prepared Certificates of Land

Ownership Award (CLOAs) to distribute the subject property to farmer-
beneficiaries.  However, the writ of preliminary injunction issued by the
Court of Appeals enjoined the release of the CLOAs. Buklod, on behalf of the
alleged 300 farmer-beneficiaries of the subject property, filed a
Manifestation and Omnibus Motion, wherein it moved that it be allowed to
intervene as an indispensable party in CA-G.R. SP No. 40950; that the writ
of preliminary injunction be immediately dissolved, having been issued in
violation of Section 55 of the CARL; and that the Petition for Review of
EMRASON be dismissed since the appropriate remedy should have been a
petition for certiorari before the Supreme Court.

On March 26, 1997, the Court of Appeals promulgated its assailed Decision.

The Court of Appeals allowed the intervention of Buklod because -the latter's
participation was "not being in any way prejudicial to the interest of the
original parties, nor will such intervention change the factual legal
complexion of the case." The appellate court, however, affirmed the
propriety of the remedy availed by EMRASON given that under Section 5 of
Supreme Court Revised Administrative Circular No. 1-95 dated May 16,
1995, appeals from judgments or final orders of the OP or the DAR under
the CARL shall be taken to the Court of Appeals, through a verified petition
for review; and that under Section 3 of the same Administrative Circular,
such a petition for review may raise questions of facts, law, or mixed
questions of facts and law.

Ultimately, the Court of Appeals ruled in favor of EMRASON because the

subject property was already converted/classified as residential by the
Municipality of Dasmariñas prior to the effectivity of the CARL. The
appellate court reasoned:

For one, whether or not the Municipality of Dasmariñas, Cavite had in place
in the early seventies a general subdivision plan is to us of no moment. The
absence of such general plan at that time cannot be taken, for the nonce,
against the [herein respondent EMRASON]. To our mind, the more weighty
consideration is the accomplished fact that the municipality, conformably
with its statutory-conferred local autonomy, had passed a subdivision
measure, I.e., Ordinance No. 1, and had approved in line thereto, through
the medium of Ordinance No. 29-A, [EMRASON's] application for subdivision,
or with like effect approved the conversion/classification of the lands in
dispute as residential. Significantly, the Municipal Mayor of Dasmariñas,
Cavite, in his letter of September 23, 1988 to [EMRASON], clarified that
such conversion conforms with the approved development plan of the
municipality.

For another, the requirement prescribed by the cited Section 16[a] of

Ordinance No. 1 relates to the approval in the first instance by the National
Planning Commission of the final plat of the scheme of the subdivision, not
the conversion from agricultural to residential itself. As [EMRASON] aptly
puts it:

"x x x the final plat or final plan, map or chart of the subdivision is not a
condition sine qua non for the conversion x x x as the conversion was
already done by the Municipal Council of Dasmariñas, Cavite. Municipal
Ordinance NO. 29-A merely required that the final plat, or final plan x x x of
the subdivision be done in conformity with Municipal Ordinance No. 1, the
same to be followed by (he subdivision itself. [EMRASON] therefore did not
have to undertake the immediate actual development of the subject parcel
of lands as the same had already been converted and declared residential by
law. x x x " (Petition, pp. 17 and 18).

[EMRASON's] pose has the merit of logic. As may be noted, Ordinance No.
29-A contained two (2) resolutory portions, each interrelated to, but
nonetheless independent of, the other. The first resolution, reading -

"Resolved, as it is hereby resolved, to approve the application for

subdivision containing an area of Three Hundred Seventy-Two (372)
Hectares situated in Barrios Bocal and Langkaan, named as Travellers Life
Homes "

approved the application for subdivision or the conversion of the 372-hectare

area into residential, while the second, reading -

"Resolved that the Municipal Ordinance regarding subdivision regulations

existing in this municipality shall be strictly followed by the subdivision "

provides that the subdivision owner/developer shall follow subdivision

regulations, it will be noted further that the second resolution already
referred to the [EMRASON's] property as "'subdivision", suggesting that the
Municipal Council already considered as of that moment [EMRASON's] area
to be for residential use.

Another requirement which [EMRASON] allegedly failed to comply with is

found in Administrative Order (A.O.) No. 152, series of 1968, which
pertinently provides -

"1. All Municipal Boards or City Councils, and all Municipal Councils in cities
and municipalities in which a subdivision ordinance is in force, shall submit
three copies of every proposed subdivision plan for which approval is sought
together with the subdivision ordinance, to the National Planning
Commission for comment and recommendation ".

This Court is at a loss to understand how [EMRASON] could be expected to

heed a directive addressed to local government legislative bodies. From a
perusal of the title of A.O. No. 152, it is at once obvious from whom it exacts
compliance with its command, thus: "REQUIRING THE MUNICIPAL BOARDS
OR CITY COUNCILS AND MUNICIPAL COUNCILS TO SUBMIT PROPOSED
ORDINANCES AND SUBDIVISION PLANS TO THE NATIONAL PLANNING
COMMISSION FOR COMMENT AND RECOMMENDATION, BEFORE TAKING
ACTION ON THE SAME, AND TO FORWARD A COPY OF THEIR APPROVED
SUBDIVISION ORDINANCES TO THE SAID COMMISSION".

To be sure, [EMRASON] cannot be made to bear the consequences for the

non-compliance, if this be the case, by the Municipal Council of Dasmarinas,
Cavite with what A.O. 152 required. A converse proposition would be
antithetical to the sporting idea of fair play.[11]

As for the other requirements which EMRASON purportedly failed to comply

with, the Court of Appeals held that these became obligatory only after the
subject property was already converted to non-agricultural, to wit:

Foregoing considered, this Court holds that everything needed to validly

effect the conversion of the disputed area to residential had been
accomplished. The only conceivable step yet to be taken relates to the
obtention of a conversion order from the DAR, or its predecessor, the
Ministry of Agrarian Reform (MAR.) under its rather intricate procedure
established under Memorandum Circular No. 11-79. But then, this omission
can hardly prejudice the [herein respondent EMRASON] for the DAR7MAR
guidelines were promulgated only in 1979, at which time the conversion of
[EMRASON's] property was already a fait accompli.

Like the conversion procedure set up under Memorandum Circular No. 11-
79, the revised methodology under the CARL cannot also be made to apply
retroactively to lands duly converted/classified as residential under the aegis
of the Local Autonomy Act. For, as a rule, a statute is not intended to affect
transactions which occurred before it becomes operational
(Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL
CODE, Vol. I, 1983 ed.; p. 23). And as the landmark case of Natalia
Realty, Inc. vs. Department of Agrarian Reform, 225 SCRA 278,
teaches:

"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 effectively of CARL by government agencies other than
respondent DAR x x x.

x x x x

Since the NATALIA lands were converted prior to 15 June 1988, respondent
DAR is hound by such conversion.  It was therefore error to  include the
underdeveloped portions x x x within the  coverage  of CARL".

It may be so, as the assailed decision stated, that in Natalia the lands

therein involved received a locational clearance from the Housing and Land
Use Regulatory Board (HLRB, formerly the Human Settlement Regulatory
Commission [HSRC], as residential or commercial, a factor [EMRASON]
cannot assert in its favor. This dissimilarity, however, hardly provides a
compelling justification not to apply the lessons of Natalia. This is because
the property involved in this case, unlike that in Natalia, underwent
classification/conversion before the creation on May 13, 1976 of the HSRC,
then known as the Human Settlements Regulatory Commission (P.D. No.
933). Furthermore, what is recognized as the HSRC's authority to classify
and to approve subdivisions and comprehensive land use development plans
of local governments devolved on that agency only upon its reorganization
on February 7, 1981, with the issuance of Executive Order No. 648 known as
the Charter of the Human Settlements Regulatory Commission.
Section 5 of the same executive order invested the HSRC with the above
classifying and approving authority. In fine, the property of [EMRASON]
went into the process of conversion at the time when the intervention
thereon of the HSRC, which was even then non-existent, was unnecessary.
Shortly before the creation of the HSRC, it would appear that to provincial,
city, or municipal councils/boards, as the case may be, belong the
prerogative, albeit perhaps not exclusive, to classify private lands within
their respective territorial jurisdiction and approve their conversion from
agricultural to residential or other non-agricultural uses. To paraphrase the
holding in Patalinghug vs. Court of Appeals, 229 SCRA 554, once a local
government has, pursuant to its police power, reclassified an area as
residential, that determination ought to prevail and must be respected. [12]

The Court of Appeals further observed that the subject property has never
been devoted to any agricultural activity and is, in fact, more suitable for
non-agricultural purposes, thus:

It is worthy to note that the CARL defines "agricultural lands" as "lands

devqtedto agricultural activity x x x and not classified as mineral, forest,
residential, commercial or industrial lands" (Sec. 3[c]). Guided by this
definition, it is clear that [herein respondent EMRASON's] area does not fall
under the category of agricultural lands.  For, let alone the reality that the
property is not devoted to some agricultural activity, being in fact
unirrigated, and, as implied in the decision of the DAR Hearing Officer Victor
Baguilat, without duly instituted tenants, the same had been effectively
classified as residential.  The bare circumstance of its not being actually
developed as subdivision or that it is underdeveloped would not alter the
conclusion. For, according to Natalia, what actually determines the
applicability of the CARL to a given piece of land is its previous classification
and not its current use or stages of development as non-agricultural
property.

As a pragmatic consideration, the disputed area, in terms of its location in

relation to existing commercial/industrial sites and its major economic use,
is more suitable for purposes other than agriculture. In this connection, this
Court notes that the property is situated at the heart of the CALABARZON,
and, as Annex "C" of the petition demonstrates, lies adjacent to huge
industrial/commercial complexes. The San Miguel-Monterey meat plant, the
NDC-Marubeni complex and the Reynolds Aluminum plant may be
mentioned. For sure, the Sangguniang Panlalawigan of Cavite, obviously
cognizant of the economic potential of certain areas in the Municipality of
Dasmariñas has, by Resolution No. 105, series of 1988. declared defined
tracts of lands in the Municipality of Dasmariñas as "industrial-residential-
institutional mix."[13]

As a last point, the Court of Appeals justified its issuance of a writ of

preliminary injunction enjoining the implementation of the OP Decision dated
February 7, 1996 and Resolution dated May 14, 1996, viz:

As a final consideration, we will address the [herein petitioners] OAR

Secretary's and Buklod's joint concern regarding the propriety of the
preliminary injunction issued in this case. They alleged that the issuance is
violative of Section 55 of the CARL which reads:
"SEC. 55. No Restraining Order or Preliminary

Injunction. - No Court in the Philippines shall have jurisdiction to issue any

restraining order or writ of preliminary injunction against the PARC or any of
its duly authorized or designated agencies in any case, dispute, controversy
arising from, necessary to, or in connection with the application,
implementation, enforcement, or interpretation of this Act and other
pertinent laws on agrarian reform". (Underscoring added.)

As will be noted, the aforequoted section specifically mentions the

Presidential Agrarian Reform Council (PARC) of which the DAR Secretary is
the Vice Chairman, or any of its duly designated agencies as protected from
an injunctive action of any court. These agencies include the PARC Executive
Committee, the PARC Secretariat, which the DAR Secretary heads, and. on
the local level, the different Agrarian Reform Action Committees (Sees. 41 to
45, R.A. No. 6657).

From the records, there is no indication that the [petitioner] Agrarian

Reform Secretary acted vis-a-vis the present controversy for, or as an
agency of, the PARC. Hence, he cannot rightfully invoke Section 55 of the
CARL and avail himself of the protective mantle afforded by that provision. 
The PARC, it bears to stress, is a policy-formulating and coordinating body
(Sec. 18. E.O. 229, July 22, 1987) without express adjudicatory mandate,
unlike the DAR Secretary who, as department head, is "vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall
have exclusive jurisdiction over all matters involving the implementation of
agrarian reform" (Sec. 50. R.A. 6657). Thus, it is easy lo accept the
proposition that the [petitioner] Agrarian Reform Secretary issued his
challenged orders in the exercise of his quasi-judicial power as department
head.[14]

In the end, the Court of Appeals decreed:

WHEREFORE, the instant petition for review is hereby GRANTED.

Accordingly, the challenged decision dated February 7, 1996 and the
resolution of May 14, 1996 of the Office of the President in O.P. Case No.
5461 are hereby NULLIFIED, VACATED and SET ASIDE, and the notices
of acquisition issued by the Department of Agrarian Reform covering the
372-hectare property of the [herein respondent EMRASON] at Barangay
Langkaan, Dasmariñas, Cavite declared VOID.

The writ of preliminary injunction issued by this Court on September 30,

1996 is hereby made permanent.[15]
Buklod and DAR. filed their respective Motions for Reconsideration of the
foregoing Decision but both Motions were denied by the Court of Appeals in
a Resolution dated November 24, 1997.

Aggrieved, Buklod and DAR filed the instant Petitions, which were
consolidated by this Court in a Resolution [16] dated August 19, 1998.

In G.R. No. 131481, Buklod raises the following arguments:

1] THE MUNICIPAL ORDINANCE INVOKED BY [EMRASON] AS CONVERSION

OF THE PROPERTY IN QUESTION ENACTED ON JULY 9, 1972 BY THE
MUNICIPAL COUNCIL OF DASMARIÑAS, CAVITE IS IMPOTENT BECAUSE THE
MUNICIPAL ORDINANCE IMPOSED CONDITIONS WHICH [EMRASON] NEVER
COMPLIED. NO COMPLIANCE NO CONVERSION.

2] AT THE TIME THE ALLEGED ORDINANCE WAS ENACTED, A LAND REFORM

LAW WAS ALREADY IN EFFECT GRANTING SECURITY OF TENURE TO THE
FARMERS SO THAT A LANDOWNER CANNOT ARBITRARILY CONVERT AN
AGRICULTURAL LAND INTO A DIFFERENT CLASSIFICATION WITHOUT
COMPLYING WITH LEGAL REQUIREMENTS (R.A. 3844).

3] A MERE MUNICIPAL ORDINANCE CANNOT NEGATE LAND REFORM RIGHTS

GRANTED TO THE FARMERS BY LEGISLATIVE ENACTMENT UNDER R.A. 3844
AND SUBSEQUENT LAWS. LAND REFORM LAW BEING A SOCIAL
LEGISLATION IS PARAMOUNT.

4] LAND REFORM IS A CONSTITUTIONAL MANDATE FOR THE BENEFIT OF

THE LANDLESS FARMERS SO THAT THE LAND REFORM LAW SHOULD BE
CONSTRUED AND APPLIED IN ORDER TO ATTAIN THE LEGISLATIVE INTENT
OF RELIEVING THE FARMERS FROM THEIR POVERTY AND BONDAGE.  THE
COURT OF APPEALS IGNORED THIS CONSTITUTIONAL MANDATE TO FAVOR
THE LANDLORD [EMRASON].

5] THE COURT OF APPEALS ISSUED A RESTRAINING ORDER/INJUNCTION

AGAINST THE CLEAR PROHIBITION IN THE CARL (SEC. 55 RA 6657) AND SO
FAR DEPARTED FROM THE USUAL COURSE OF BY REFUSING TO GRANT THE
PETITIONER FARMERS A HEARING INSPITE OF THE PROCEDURE
PRESCRIBED BY RA 7902 (SEC. ]).[17]

In G.R. No. 131624, the DAR ascribes the following errors on the part of
the Court of Appeals:

I.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE
MUNICIPALITY OF DASMARIÑAS, CAVITE, WAS AUTHORIZED, UNDER THE
LOCAL AUTONOMY ACT, TO CLASSIFY AND/OR RECLASSIFY LANDS
CONSIDERING THAT WHAT WAS CONFERRED THEREUNDER WAS ONLY
ZONING AUTHORITY, THUS, RENDER THE EXERCISE THEREOF BY THE
MUNICIPAL COUNCIL OF DASMARIÑAS, CAVITE, ULTRA VIRES;

II.

EVEN ASSUMING, IN GRATIA ARGUMENTI, THAT THE AUTHORITY TO

CLASSIFY AND RECLASSIFY LANDS IS POSSESSED BY MUNICIPAL
CORPORATIONS, STILL THE HONORABLE COURT OF APPEALS ERRED WHEN
IT CONSIDERED THE ALLEGED PASSAGE OF ORDINANCE NO. 29-A OF THE
MUNICIPAL COUNCIL OF DASMARIÑAS, CAVITE, AS A VALID MEASURE
RECLASSIFYING SUBJECT AGRICULTURAL LAND TO NON-AGRICULTURAL
USE CONSIDERING THAT THE SAID APPROVAL OF THE SUBDIVISION, PER
LETTER OF THE MUNICIPAL MAYOR, FAILED TO COMPLY WITH EXISTING
RULES AND REGULATIONS ON THE MATTER AND, THEREFORE,
NONCOMPLYING AND INEFFECTUAL; AND

III.

THE HONORABLE COURT OF APPEALS ERRED WHEN IT APPLIED THE RULING

OF THE HONORABLE COURT IN THE NATALIA REALTY CASE DUE TO
SUBSTANTIAL DISSIMILARITY IN FACTUAL SETTING AND MILIEU. [18]

At the crux of the present controversy is the question of whether the subject
property could be placed under the CARP.

DAR asserts that the subject property could be compulsorily acquired by the
State from EMRASON and distributed to qualified farmer-beneficiaries under
the CARP since it was still agricultural land when the CARL became effective
on June 15, 1988. Ordinance Nos. 1 and 29-A, approved by the Municipality
of Dasmariñas on July 13, 1971 and July 9, 1972, respectively, did not
reclassify the subject property from agricultural to non-agricultural. The
power to reclassify lands is an inherent power of the National Legislature
under Section 9 of Commonwealth Act No. 141, otherwise known as the
Public Land Act, as amended, which, absent a specific delegation, could not
be exercised by any local government unit (LGU). The Local Autonomy Act of
1959 - in effect when the Municipality of Dasmariñas approved Ordinance
Nos. 1 and 29-A - merely delegated to cities and municipalities zoning
authority, to be understood as the regulation of the uses of property in
accordance with the existing character of the land and structures.  It was
only Section 20 of Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, which extended to cities and municipalities
limited authority to reclassity agricultural lands.

DAR also argues that even conceding that cities and municipalities were
already authorized in 1972 to issue an ordinance reclassifying lands from
agricultural to non-agricultural, Ordinance No. 29-A of the Municipality of
Dasmariñas was not valid since it failed to comply with Section 3 of the
Local Autonomy Act of 1959, Section 16(a) of Ordinance No. 1 of the
Municipality of Dasmarinas, and Administrative Order No. 152 dated
December 16, 1968, which all required review and approval of such an
ordinance by the National Planning Commission (NPC). Subsequent
developments further necessitated review and approval of Ordinance No. 29-
A by the Human Settlements Regulatory Commission (HSRC), which later
became the Housing and Land Use Regulatory Board (HLURB).

DAR further avers that the reliance by the Court of Appeals -on Natalia
Realty, Inc. v. Department of Agrarian Reform [19] (Natalia Realty case) is
misplaced because the lands involved therein were converted from
agricultural to residential use by Presidential Proclamation No. 1637, issued
pursuant to the authority delegated to the President under Section 71, et
seq., of the Public Land Act. [20]

Buklod adopts the foregoing arguments of DAR. In addition, it submits that

prior to Ordinance Nos. 1 and 29-A, there were already laws implementing
agrarian reform, particularly: (1) Republic Act No. 3844, otherwise known as
the Agricultural Land Reform Code, in effect since August 8, 1963, and
subsequently amended by Republic Act No. 6389 on September 1.0, 1971,
after which it became known as the Code of Agrarian Reforms; and (2)
Presidential Decree No. 27, otherwise known as the Tenants Emancipation
Decree, which took effect on November 19, 1972. Agricultural land could not
be converted for the purpose of evading land reform for there were already
laws granting farmer-tenants security of tenure, protection from ejectment
without just cause, and vested rights to the land they work on.

Buklod contends that EMRASON failed to comply with Section 36 of the Code
of Agrarian Reforms, which provided that the conversion of land should be
implemented within one year, otherwise, the conversion is deemed in bad
faith. Given the failure of EMRASON to comply with many other
requirements for a valid conversion, the subject property has remained
agricultural. Simply put, no compliance means no conversion.  In fact,
Buklod points out, the subject property is still declared as "agricultural" for
real estate tax purposes. Consequently, EMRASON is now estopped from
insisting that the subject property is actually "residential."
Furthermore, Buklod posits that land reform is a constitutional mandate
which should be given paramount consideration. Pursuant to said
constitutional mandate, the Legislature enacted the CARL. It is a basic legal
principle that a legislative statute prevails over a mere municipal ordinance.

Finally, Buklod questions the issuance by the Court of Appeals of a writ of

preliminary injunction enjoining the distribution of the subject property to
the farmer-beneficiaries in violation of Section 55 of the CARL; as well as the
refusal of the appellate court to hold a hearing despite Section 1 of Republic
Act No. 7902,[21] prescribing the procedure for reception of evidence before
the Court of Appeals. At such a hearing, Buklod intended to present evidence
that the subject property is actually agricultural and that Buklod members
have been working on said property for decades, qualifying them as farmer-
beneficiaries.

EMRASON, on the other hand, echoes the ruling of the Court of Appeals that
the subject property is exempt from CARP because it had already been
reclassified as residential with the approval of Ordinance No. 29-A by the
Municipality of Dasmariñas on July 9, 1972. EMRASON cites Ortigas & Co.,
Ltd. Partnership v. Feati Bank and Trust Co. [22] (Ortigas case) where this
Court ruled that a municipal council is empowered to adopt zoning and
subdivision ordinances or regulations under Section 3 of the Local Autonomy
Act of 1959.

Still relying on the Ortigas case, EMRASON avows that the Municipality of

Dasmariñas, taking into account the conditions prevailing in the area, could
validly zone and reclassify the subject property in the exercise of its police
power in order to safeguard the health, safety, peace, good order, and
general welfare of the people in the locality. EMRASON describes the whole
area surrounding the subject property as residential subdivisions (i.e., Don
Gregorio, Metro Gate, Vine Village, and Cityland Greenbreeze 1 and 2
Subdivisions) and industrial estates (i.e., Reynolds Aluminum Philippines,
Inc. factory; NDC-Marubeni industrial complex, San Miguel Corporation-
Monterey cattle and piggery farm and slaughterhouse), traversed by national
highways (i.e., Emilio Aguinaldo National Highway, Trece Martirez, Puerto
Azul Road, and Governor's Drive). EMRASON mentions that on March 25,
1988, the Sangguniang Panlalawigan of the Province of Cavite passed
Resolution No. 105 which declared the area where subject  property  is
located as "industrial-residential-institutional mix."

EMRASON further maintains that Ordinance No. 29-A of the Municipality of

Dasmariñas is valid. Ordinance No. 29-A is complete in itself, and there is
no more need to comply with the alleged requisites which DAR and Buklod
are insisting upon. EMRASON quotes from Patalinghug v. Court of
Appeals[23] (Patalinghug case) that "once a local government has reclassified
an area as commercial, that determination for zoning purposes must
prevail."

EMRASON points out that Ordinance No. 29-A, reclassifying the subject
property, was approved by the Municipality of Dasmariñas on July 9, 1972.
Executive Order No. 648, otherwise known as the Charter of the Human
Settlements Regulatory Commission (HSRC Charter) - which conferred upon
the HSRC the power and duty to review, evaluate, and approve or
disapprove comprehensive land use and development plans and zoning
ordinances of LGUs - was issued only on February 7, 1981. The exercise by
HSRC of such power could not be applied retroactively to this case without
impairing vested rights of EMRASON. EMRASON disputes as well the
absolute necessity of submitting Ordinance No. 29-A to the NPC for
approval. Based on the language of Section 3 of the Local Autonomy Act of
1959, which used the word "may," review by the NPC of the local planning
and zoning ordinances was merely permissive. EMRASON additionally posits
that Ordinance No. 1 of the Municipality of Dasmariñas simply required
approval by the NPC of the final plat or plan, map, or chart of the
subdivision, and not of the rcclassification and/or conversion by the
Municipality of the subject property from agricultural to residential.  As for
Administrative Order No. 152 dated December 16, 1968, it was directed to
and should have been complied with by the city and municipal boards and
councils. Thus, EMRASON should not be made to suffer for the non-
compliance by the Municipal Council of Dasmarinas with said administrative
order.

EMRASON likewise reasons that since the subject property was already
reclassified as residential with the mere approval of Ordinance No. 29-A by
the Municipality of Dasmarinas, then EMRASON did not have to immediately
undertake actual development of the subject property. Reclassification
and/or conversion of a parcel of land are different from the implementation
of the conversion.

EMRASOK is resolute in its stance that the Court of Appeals correctly applied
the Natalia Realty case to the present case since both have similar facts; the
only difference being that the former involves a presidential fiat while the
latter concerns a legislative fiat.

EMRASON denies that the Buklod members are farmer-tenants of the

subject property. The subject property has no farmer-tenants because, as
the Court of Appeals observed, the property is unirrigated and not devoted
to any agricultural activity. The subject property was placed under the CARP
only to accommodate the farmer-tenants of the NDC property who were
displaced by the NDC-Marubeni Industrial Project. Moreover, the Buklod
members are still undergoing a screening process before the DAR-Region IV,
and are yet to be declared as qualified farmer-beneficiaries of the subject
property. Hence, Buklod members tailed to establish they already have
vested right over the subject property.

EMRASON urges the Court not to consider issues belatedly raised by Buklod,
It may be recalled that Buklod intervened in CA-G.R. SP No. 40950 just
before the Court of Appeals rendered judgment in said case. When the
appellate court promulgated its Decision on March 26, 1997 favoring
EMRASON, Buklod filed a Motion for Reconsideration of said judgment, to
which EMRASON, in turn, filed a Comment and Opposition. In its Reply to
the aforementioned Comment and Opposition of EMRASON, Buklod raised
new factual matters, specifically, that: (1) EMRASON has not even
subdivided the title to the subject property 27 years after its purported
reclassification/conversion; (2) EMRASON never obtained a development
permit nor mayor's permit to operate a business in Dasmarinas; and (3) the
farmer-tenants represented by Buklod have continuously cultivated the
subject property. There was no cogent or valid reason for the Court oi'
Appeals to allow Buklod to present evidence to substantiate the foregoing
allegations. The DAR Region IV Hearing Officer already conducted extensive
hearings during which the farmers were duly represented. Likewise, Buklod
raises for the first time in its Petition before this Court the argument that the
Tenants Emancipation Decree prescribes a procedure for conversion which
EMRASON failed to comply with.

Lastly, EMRASON defends the issuance by the Court of Appeals of a writ of

preliminary injunction in CA-G.R. SP No. 40950. Section 55 of the CARL is
inapplicable to the case at bar because said provision only prohibits the
issuance by a court of a TRO or writ of preliminary injunction "against the
PARC or any ol^ its duly authorized or designated agencies." As the Court of
Appeals declared, the PARC is a policy-formulating and coordinating body.
There is no indication whatsoever that the DAR Secretary was acting herein
as an agent of the PARC. The DAR Secretary issued the orders of acquisition
for the subject property in the exercise of his quasi-judicial powers as
department head.

The Court, after consideration of the issues and arguments in the Petitions at
bar, affirms the Court of Appeals and rules in favor of EMRASON.

CARP  coverage limited to agricultural land

Section 4, Chapter II of the CARL, as amended,24 particularly defines the
coverage of the CARP, to wit:

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: Provided, That landholdings of landowners with a
total area of five (5) hectares and below shall not be covered for acquisition
and distribution to qualified beneficiaries.

More specifically, the following lands are covered by the CARP:

(a) All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until
Congress, taking into account ecological, developmental and equity
considerations, shall have determined by  law, the specific limits of the
public domain;

(b) All lands of the public domain in excess of the specific limits as
determined by Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for
agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless

of the agricultural products raised or that can be raised thereon.

A comprehensive inventory system in consonance with the national land use

plan shall be instituted by the Department of Agrarian Reform (DAR), in
accordance with the Local Government Code, for the purpose of properly
identifying and classifying farmlands within one (1) year from effectivity of
this /Vet. without prejudice to the implementation of the land acquisition and
distribution." (Emphases supplied.)

Section 3(c), Chapter I of the CARL further narrows down the definition
of agricultural land that is subject to CARP to "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest,
residential, commercial or industrial land."

The CARL took effect on June 15, 1988. To be exempt from the CARP, the
subject property should have already been reclassified as residential prior to
said date.
The Local Autonomy Act of 1959

The Local Autonomy Act of 1959, precursor of the Local Government Code of
1991, provided;

SEC. 3. Additional powers of provincial boards, municipal boards or city

councils and municipal and regularly organized municipal district councils. - x
x x

x x x x

Power to adopt zoning and planning ordinances. — Any provision of law to
the contrary notwithstanding, Municipal Boards or City Councils in cities, and
Municipal Councils in municipalities are hereby authorized to adopt zoning
and subdivision ordinances or regulations for their respective cities and
municipalities subject to the approval of the City Mayor or Municipal Mayor,
as the case may be. Cities and municipalities may, however, consult the
National Planning Commission on matters pertaining to planning and
zoning. (Emphases supplied.)

Pursuant to the foregoing provision, the Municipal Council of Dasmariñas

approved Ordinance No. 1 on July 13, 1971, which laid down the general
subdivision regulations for the municipality; and Resolution No. 29-
A on July 9, 1972, which approved the application for subdivision of the
subject property.

The Court observes that the OP, the Court of Appeals, and even the parties
themselves referred to Resolution No. 29-A as an ordinance. Although it may
not be its official designation, calling Resolution No. 29-A as Ordinance No.
29-A is not completely inaccurate. In the Ortigas & Co. case, the Court found
it immaterial that the then Municipal Council of Mandaluyong declared
certain lots as part of the commercial and industrial zone through a
resolution, rather than an ordinance, because:

Section 3 of R.A. No. 2264, otherwise known as the Local Autonomy Act,
empowers a Municipal Council "to adopt zoning and subdivision ordinances
or regulations" for the municipality. Clearly, the law docs not restrict the
exercise of the power through an ordinance. Therefore, granting that
Resolution No. 27 is not an ordinance, it certainly is a regulatory measure
within the intendment or ambit of the word "regulation" under the
provision. As a matter oi' fact the same section declares that the power
exists "(A)ny provision of law to the contrary notwithstanding x x
x."[25] (Emphases supplied.)
Zoning and reclassification

Section 3(c), Chapter I of the CARL provides that a parcel oi^ land
reclassified for non-agricultural uses prior to June 15, 1988 shall no longer
be considered agricultural land subject to CARP. The Court is now faced with
the question of whether Resolution No. 29-A of the Municipality of
Dasmariñas dated July 9, 1972, which approved the subdivision of the
subject property for residential purposes, had also reclassified the same
from agricultural to residential.

Zoning classification is an exercise by the local government of 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.[26]

The Court gave a more extensive explanation of zoning in Pampanga Bus

Company, Inc. v. Municipality of Tarlac,[27] thus:

The appellant argues that Ordinance No. 1 is a zoning ordinance which the
Municipal Council is authorized to adopt. McQuillin in his treaties on
Municipal Corporations (Volume 8, 3rd ed.) says:

Zoning is governmental regulation of the uses of land and buildings

according to districts or zones. It is comprehensive where it is governed by a
single plan for the entire municipality and prevails throughout the
municipality in accordance with that plan. It is partial or limited where it is
applicable only to a certain part of the municipality or to certain uses. Fire
limits, height districts and building regulations are forms of partial or limited
zoning or use regulation that are antecedents of modern comprehensive
zoning, (pp. 11-12.)

The term "zoning," ordinarily used with the connotation of comprehensive or

general zoning, refers to governmental regulation of the uses of land and
buildings according to districts or zones. This regulation must and does
utilize classification of uses within districts as well as classification of
districts, inasmuch as it manifestly is impossible to deal specifically with
each of the innumerable uses made of land and buildings.  Accordingly,
(zoning has been defined as the confining of certain classes of buildings and
uses to certain localities, areas, districts or zones.) It has been stated that
zoning is the regulation by districts of building development and uses of
property, and that the term "zoning" is not only capable of this definition but
has acquired a technical and artificial meaning in accordance therewith.
(Zoning is the separation of the municipality into districts and the regulation
of buildings and structures within the districts so created, in accordance with
their construction, and nature and extent of their use. It is a dedication of
districts delimited to particular uses designed to subserve the general
welfare.) Numerous other definitions of zoning more or less in accordance
with these have been given in the cases, (pp. 27-28.)[28]

According to Section 1(b) of Ordinance No. 1, "[s]ubdivision means the

division of a tract or parcel of land into two or more lots, sites or other
divisions for the purpose, whether immediate or future, o[f| a sale or
building development. It includes resubdivision, and when appropriate to the
context, relates to the process of subdividing as to the land of territory
subdivided." Subdivision ordinances or regulations such as Resolution No.
29-A, in relation to Ordinance No. 1, constitute partial or limited zoning,
for they are applicable to a specific property in the city or municipality to be
devoted for a certain use.

Section 9 of the Public Land Act - cited by the DAR and Buklod as the
purported delegation by the National Legislature of the power to reclassify -
is immaterial to the instant cases.  Said provision reads:

SEC. 9. For the purpose of their administration and disposition, the lands of
the public domain alienable or open to disposition shall be classified,
according to the use or purposes to which such lands are destined, as
follows:

(a)    Agricultural;

(b)    Residential,  commercial,  industrial,  or  for  similar productive

purposes;

(c)    Educational, charitable, or other similar purposes; and

(d)    Reservations for townsites and for public and quasi-public uses.

The President, upon recommendation by the Secretary of Agriculture and

Natural Resources, shall from time to time make the classifications provided
for in this section, and may, at any time and in a similar manner, transfer
lands from one class to another. (Emphasis supplied.)

The power delegated to the President under the aforequoted provision of the
Public Land Act is limited to the classification of lands of the public
domain that are alienable or open to disposition. It finds no application
in the present cases for the simple reason that the subject property involved
herein is no longer part of the public domain. The subject property is already
privately owned and accordingly covered by certificates of title.

The concept that concerns this Court in the instant cases is

the reclassification of agricultural lands. In Alarcon v. Court of Appeals,
[29]
 the Court had the occasion to define and
distinguish reclassification from conversion as follows:

Conversion is the act of changing the current use of a piece of agricultural

land into some other use as approved by the Department of Agrarian
Reform. Reclassification, on the other hand, is the act of specifying how
agricultural lands shall be utilized for non-agricultural uses such as
residential, industrial, commercial, as embodied in the land use plan, subject
to the requirements and procedure for land use conversion, x x x. (Italics
supplied.)

Reclassification also includes the reversion  of non-agricultural  lands to

agricultural use.[31]

Under the present Local Government Code, it is clear that the authority to
reclassify agricultural lands primarily resides in the sanggunian of the city or
municipality.  Said provision reads in full:

Sec. 20. Reclassification of Lands. - (a) A city or municipality may, through

an ordinance passed by the sanggunian after conducting public hearing
for the purpose, authorize the reclassification of agricultural lands and
provide for the manner of their utilization or disposition in the following
cases: (X) when the land ceases to be economically feasible and sound for
agricultural purposes as determined by the Department of Agriculture or (2)
where the land shall have substantially greater economic value for
residential, commercial, or industrial purposes, as determined by the
sanggunian concerned: Provided, That such reclassification shall be limited
to the following percentage of the total agricultural land area at the time of
the passage of the ordinance:

(1)    For highly urbanized and independent component cities, fifteen percent
(15%);

(2)    For component cities  and first to the third  class municipalities, ten
percent (10%); and

(3)    For fourth to sixth class municipalities, five percent (5%): Provided,

further,  That  agricultural lands  distributed  to agrarian  reform 
beneficiaries pursuant  to  Republic  Act Numbered Sixty-six hundred fifty-
seven (R.A. No. 6657), otherwise known as "The Comprehensive Agrarian
Reform Law", shall not be affected by the said reclassification and the
conversion of such lands into other purposes shall be governed by Section
65 of said Act.

(b)    The President may, when public interest so requires and upon
recommendation of  the National Economic and Development Authority,
authorize a city or municipality to reclassify lands in excess of the limits set
in the next preceding paragraph.

(c)    The local government units shall, in conformity with existing laws,
continue to prepare their respective comprehensive land use plans
enacted through zoning ordinances which  shall be  the primary and
dominant bases for the future use of land resources: Provided, That  the
requirements for food production, human settlements, and industrial
expansion shall be taken into consideration in the preparation of such plans.

(d)    When  approval by a national agency is required for reclassification,

such approval shall not be unreasonably withheld. Failure to act on a proper
and complete application for reclassification within three (3) months from
receipt of the same shall be deemed as approval thereof.

(e)    Nothing in this Section shall be construed as repealing, amending, or

modifying in any manner the provisions of R.A. No. 6657. (Emphases
supplied.)

Prior to the Local Government Code of 1991, the Local Autonomy Act of
1959 was silent on the authority to reclassify agricultural lands. What the
earlier statute expressly granted to city and municipal boards and councils,
under Section 3 thereof, was the power to adopt zoning and subdivision
ordinances and regulations.

DAR and Buklod insist that zoning is merely the regulation of land use based
on the existing character of the property and the structures thereon; and
that zoning is a lesser power compared to reclassification so that the
delegation of the former to the local government should not be deemed to
include the latter.

Such arguments are easily refuted by reference to the definitions of zoning

and reclassification earlier presented herein, which support a more extensive
concept of zoning than that which DAR and BUKLOD assert.

By virtue of a zoning ordinance, the local legislature may arrange, prescribe,

define, and apportion the land within its political jurisdiction into specific
uses based not only on the present, but also on the future projection of
needs. To limit zoning to the existing character of the property and the
structures thereon would completely negate the power of the local
legislature to plan land use in its city or municipality. Under such
circumstance, zoning would involve no planning at all, only the rubber-
stamping by the local legislature of the current use of the land.

Moreover, according to the definition of reclassification, the specified non-

agricultural use of the land must be embodied in a land use plan, and the
land use plan is enacted through a zoning ordinance. Thus, zoning and
planning  ordinances  take  precedence  over reclassification.  The
reclassification of land use is dependent on the zoning and land use plan, not
the other way around.

It may, therefore, be reasonably presumed that when city and municipal

boards and councils approved an ordinance delineating an area or district in
their cities or municipalities as residential, commercial, or industrial zone,
pursuant to the power granted to them under Section 3 of the Local
Autonomy Act of 1959, they were, at the same time, reclassifying any
agricultural lands within the zone for non-agri cultural use; hence, ensuring
the implementation of and compliance with their zoning ordinances.  The
logic and practicality behind such a presumption is more evident when
considering the approval by local legislative bodies of subdivision ordinances
and regulations. The approval by city and municipal boards and councils of
an application for subdivision through an ordinance should already be
understood to include approval of the reclassification of the land, covered by
said application, from agricultural to the intended non-agricultural use.
Otherwise, the approval of the subdivision application would serve no
practical effect; for as long as the property covered by the application
remains classified as agricultural, it could not be subdivided and developed
for non-agricultural use.

A liberal interpretation of the zoning power of city and municipal boards and
councils, as to include the power to accordingly reclassify the lands within
the zones, would be in accord with the avowed legislative intent behind the
Local Autonomy Act of 1959, which was to increase the autonomy of local
governments. Section 12 of the Local Autonomy Act of 1959 itself laid down
rules for interpretation of the said statute:

SEC. 12. Rules for the interpretation of the Local Autonomy Act. -

1.    Implied power of a province, a city or municipality shall be liberally

construed in its favor. Any fair and reasonable doubt as to the existence of
the power should be interpreted in favor of the local government and it shall
be presumed to exist.

2.   The general welfare clause shall be liberally interpreted in case of

doubt so as to give more power to local governments in promoting the
economic condition, social welfare and material progress of the people in the
community.

3.   Vested rights existing at the time of the promulgation of this law arising
out of a contract between a province, city or municipality on one hand and a
third party on the other, should be governed by the original terms and
provisions of the same, and in no case would this act infringe existing rights.

Moreover, the regulation by local legislatures of land use in their respective

territorial jurisdiction through zoning and reclassification is an exercise of
police power. In Binay v. Domingo,32] the Court recognized that police
power need not always be expressly delegated, it may also be inferred:

The police power is a governmental function, an inherent attribute of

sovereignty, which was born with civilized government. It is founded largely
on the maxims, "Sic utere tuo et alienum non laedas" and "Salus populi est
suprema lex" Its fundamental purpose is securing the general welfare,
comfort and convenience of the people.

Police power is inherent in the state but not in municipal corporations

(Balacuit v. CFI of Agusan del Norte, 163 SCRA 182). Before a municipal
corporation may exercise such power, there must be a valid delegation of
such power by the legislature which is the repository of the inherent powers
of the State. A valid delegation of police power may arise from
express delegation, or be inferred from the mere fact of the creation
of the municipal corporation; and as a general rule, municipal
corporations may exercise police powers within the fair intent and
purpose of their creation which are reasonably proper to give effect
to the powers expressly granted, and statutes conferring powers on
public corporations have been construed as empowering them to do
the things essential to the enjoyment of life and desirable for the
safety of the people. (62 C.J.S., p. 277). The so-called inferred police
powers of such corporations are as much delegated powers as arc those
conferred in express terms, the inference of their delegation growing out of
the fact of the creation of the municipal corporation and the additional fact
that the corporation can only fully accomplish the objects of its creation by
exercising such powers. (Crawfordsville vs. Braden, 28 N.E. 849).
Furthermore, municipal corporations, as governmental agencies, must
have such measures of the power as are necessary to enable them to
perform their governmental functions. The power is a continuing one,
founded on public necessity. (62 C.J.S. p. 273) Thus, not only does the State
effectuate its purposes through the exercise of the police power but the
municipality does also. (U.S. v. Salaveria, 39 Phil. 102).

Municipal governments exercise this power under the general welfare

clause: pursuant thereto they are clothed with authority to "enact such
ordinances and issue such regulations as may be necessary to carry out and
discharge the responsibilities conferred upon it by law, and such as shall be
necessary and proper to provide for the health, safety, comfort and
convenience, maintain peace and order, improve public morals, promote the
prosperity and general welfare of the municipality and the inhabitants
thereof, and insure the protection of property therein." (Sections 91, 149,
177 and 208, BP 337). And under Section 7 of BP 337, "every local
government unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary and proper for
governance such as to promote health and safety, enhance prosperity,
improve morals, and maintain peace and order in the local government unit,
and preserve the comfort and convenience of the inhabitants therein."

Police power is the power to prescribe regulations to promote the health,

morals, peace, education, good order or safety and general welfare of the
people. It is the most essential, insistent, and illimitable of powers. In a
sense it is the greatest and most powerful attribute of the government. It is
elastic and must be responsive to various social conditions. (Sangalang, el
al. vs. IAC, 176 SCRA 719). On it depends the security of social order, the
life and health of the citizen, the comfort of an existence in a thickly
populated community, the enjoyment of private and social life, and the
beneficial use of property, and it has been said to be the very foundation on
which our social system rests. (16 C.J.S., p. 896) However, it is not confined
within narrow circumstances of precedents resting on past conditions; it
must follow the legal progress of a democratic way of life. (Sangalang, el al.
vs. IAC, supra).

x x x x

In the case of Sangalang vs. IAC, supra, We ruled that police power is not
capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all-comprehensiveness. Its scope, over-expanding to
meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response
to conditions and circumstances thus assuring the greatest benefits.

The police power of a municipal corporation is broad, and has been said to
be commensurate with, but not to exceed, the duty to provide for the real
needs of the people in their health, safely, comfort, and convenience as
consistently as may be with private rights. It extends to all the great public
needs, and, in a broad sense includes all legislation and almost every
function of the municipal government. It covers a wide scope of subjects,
and, while it is especially occupied with whatever affects the peace, security,
health, morals, and general welfare of the community, it is not limited
thereto, but is broadened to deal with conditions which exists so as to bring
out of them the greatest welfare of the people by promoting public
convenience or general prosperity, and to everything worthwhile for the
preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec.
128). Thus, it is deemed inadvisable to attempt to frame any definition
which shall absolutely indicate the limits of police power. [33] (Emphases
supplied.)

Based on the preceding discussion, it cannot be said that the power to

reclassify agricultural land was first delegated to the city and municipal
legislative bodies under Section 26 of the Local Government Code of 1991.
Said provision only articulates a power of local legislatures, which,
previously, had only been implied or inferred.

Compliance with other requirements or conditions 

Resolution No. 29-A is a valid ordinance, which, upon its approval on July 9,
1972, immediately effected the zoning and reclassifying of the subject
property for residential use. It need not comply with any of the requirements
or conditions which DAR and Buklod are insisting upon.

DAR and Buklod aver that Resolution No. 29-A was not reviewed and
approved by the NPC, in violation of the line in Section 3 of the Local
Autonomy Act of 1959, stating that "[c]ities and municipalities may,
however, consult the National Planning Commission on matters pertaining to
planning and zoning." Consideration must be given, however, to the use of
the word "may" in the said sentence. Where the provision reads "may," this
word shows that it is not mandatory but discretionary. It is an auxiliary verb
indicating liberty, opportunity, permission and possibility. [34] The use of the
word "may" in a statute denotes that it is directory in nature and generally
permissive only. The "plain meaning rule" or verba legis in statutory
construction is thus applicable in this case. Where the words of a statute are
clear, plain, and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation. [35] Since consultation with the NPC
was merely discretionary, then there were only two mandatory requirements
for a valid zoning or subdivision ordinance or regulation under Section 3 of
the Local Autonomy Act of 1959, namely, that (1) the ordinance or
regulation be adopted by the city or municipal board or council; and (2) it be
approved by the city or municipal mayor, both of which were complied with
byl Resolution No. 29-A.

Section 16(a) of Ordinance No. 1 of the Municipality of Dasmariñas likewise

mentions the NPC, to wit:

a. Final plat of subdivision - As essential requirements before a subdivision is

accepted for verification by the Bureau of Lands, the final plat of the scheme
of the subdivision must comply with the provision of this
ordinance. Application for plat approval shall be submitted to the
Municipal Mayor and shall be forwarded to the National Planning
Commission thru the Highway District Engineer for comment and/or
recommendations, before action is taken by the Municipal Council.
The final approval of the plat shall be made by the Municipal Mayor upon
recommendation of the Municipal Council by means of a resolution.
(Emphasis supplied.)

The aforementioned provision of Ordinance No. 1 refers to the final plat of

the subdivision. The term plat includes "plat, plan, plot or replot." [36] It must
be distinguished from the application for subdivision.

The Court concurs with the analysis of the Court of Appeals that Resolution
No. 29-A actually contains two resolutions. The first reads:

Resolved, As it is hereby Resolved to approve the application for

subdivision containing an area of Three Hundred Seventy-Two Hectares
(372) situated in barrio Bocal and Langkaan, named as Travellers Life
Homes.[37]  (Efriphasis supplied.)

It is manifest, even from just a plain reading of said resolution, that the
application for subdivision covering the subject property was categorically
and unconditionally approved by the Municipality of Dasmarinas.  As a
consequence of such approval, the subject property is immediately deemed
zoned and reclassified as residential.

Meanwhile, the second resolution in Resolution No. 29-A states:

Resolved, that this municipal ordinance regarding subdivision

regulations existing in this municipality shall be strictly followed by
the subdivision.[38]  (Emphases supplied.)

Significantly, this second resolution already refers to a "subdivision,"

supporting the immediately executory nature of the First resolution.  The
municipal ordinance which the subdivision must follow is Ordinance No. 1,
the general subdivision regulations of the Municipality of Dasmarinas. Most
provisions of Ordinance No. 1 laid down the minimum standards for the
streets, roadways, sidewalks, intersections, lots and blocks, and other
improvements in the subdivision, with which the final plat must comply or
conform. Irrefragably, the review of the final plat of the subdivision calls for
a certain level of technical expertise; hence, the directive to the Municipal
Mayor to refer the final plat to the NPC, through the Highway District
Engineer, for comments and recommendation, before the same is approved
by the Municipal Council, then the Mayor.

In relation to the preceding paragraph, Administrative Order No. 152 dated

December 16, 1968 required city and municipal boards and councils to
submit proposed subdivision ordinances and plans or forward approved
subdivision ordinances to the NPC. The OP imposed such a requirement
because "it has come to the attention of [the] Office that the minimum
standards of such ordinances regarding design, servicing and streets, and
open spaces for parks and other recreational purposes are not being
complied with[.]"[39] Review by the NPC of the proposed subdivision plan was
for the purpose of determining "if it conforms with the subdivision
ordinance."[40]

It is apparent that Section 16(a) of Ordinance No. 1 and Administrative

Ordinance No. 152 contained the same directive: that the final plat of the
subdivision be reviewed by the NPC to determine its conformity with the
minimum standards set in the subdivision ordinance of the municipality. A
closer scrutiny will reveal that Section 16(a) of Ordinance No. 1 and
Administrative Order No. 152 related to the duties and responsibilities of
local government and NPC officials as regards the final plat of the
subdivision. There is no evidence to establish that the concerned public
officers herein did not follow the review process for the final plat as provided
in Section 16(a) of Ordinance No. 1 and Administrative Order No. 152 before
approving the same. Under Section 3(m), Rule 131 of the Rules of Court,
there is a presumption that official duty has been regularly performed. Thus,
in the absence of evidence to the contrary, there is a presumption that
public officers performed their official duties regularly and legally and in
compliance with applicable laws, in good faith, and in the exercise of sound
judgment.[41]  And - just as the Court of Appeals observed - even if it is
established that the accountable public officials failed to comply with their
duties and responsibilities under Section 16(a) of Ordinance No. 1 and
Administrative Order No. 152, it would be contrary to the fundamental
precepts of fair play to make EMRASON bear the consequences of such non-
compliance.
Although the two resolutions in Resolution No. 29-A may be related to the
same subdivision, they are independent and separate. Non-compliance with
the second resolution may result in the delay or discontinuance of
subdivision development, or even the imposition of the. penalties [42] provided
in Ordinance No. 1, but not the annulment or reversal of the first resolution
and its consequences.

The Court again agrees with the Court of Appeals that Resolution No. 29-A
need not be subjected to review and approval by the HSRC/HLURB.
Resolution No. 29-A was approved by the Municipality of Dasmarinas
on July 9, 1972, at which time, there was even no HSRC/HLURB to speak
of.

The earliest predecessor of the HSRC, the Task Force on Human

Settlements, was created through Executive Order No. 419 more than a year
later on September 19, 1973. And even then, the Task Force had no
power to review and approve zoning and subdivision ordinances and
regulations.

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 HSRC was eventually established on February 7, 1981. Section 5(b) of

the HSRC Charter43 contained the explicit mandate for the HSRC to:

b. Review, evaluate and approve or disapprove comprehensive land

use development plans and zoning ordinances of local government;
and the zoning component of civil works and infrastructure projects of
national, regional and local governments; subdivisions, condominiums or
estate development projects including industrial estates, of both the public
and private sectors and urban renewal plans, programs and projects:
Provided, that the land use Development Plans and Zoning Ordinances of
Local Governments herein subject to review, evaluation and approval of the
commission shall respect the classification of public lands for forest purposes
as certified by the Ministry of Natural Resources: Provided, further, that the
classification of specific alienable and disposable lands by the Bureau of
Lands shall be in accordance with the relevant zoning ordinance of: Local
government where it exists; and provided, finally, that in cities and
municipalities where there are as yet no zoning ordinances, the Bureau of
Lands may dispose of specific alienable and disposable lands in accordance
with its own classification scheme subject to the condition that the
classification of these lands may be subsequently change by the local
governments in accordance with their particular zoning ordinances which
may be promulgated later. (Emphases supplied.)

Neither the Ministry of Human Settlements nor the HSRC, however, could
have exercised its power of review retroactively absent an express provision
to that effect in Letter of Instructions No.  729 or the HSRC Charter,
respectively.  A sound cannon 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 oi' the
statute or by necessary implication. Article 4 of the Civil Code provides that:
"Laws shall have no retroactive effect, unless the contrary is provided."
Hence, 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
without 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. [44]

Subsequent zoning ordinances

Still by the authority vested upon it by Section 3 of the Local Autonomy Act,
the Sangguniang Bayan of Dasmariñas subsequently enacted a
Comprehensive Zoning Ordinance, ratified by the HLURB under Board
Resolution No. 42-A-3 dated February 11, 1981 (1981 Comprehensive
Zoning Ordinance of Dasmarinas). Upon the request of the DAR, Engr.
Alfredo Gil M. Tan, HLURB Regional Technical Coordinator, issued a
certification[45] dated September 10, 1992 stating that per the 1981
Comprehensive Zoning Ordinance of Dasmarinas, the subject property was
within the agricultural zone. Does this mean that the subject property
reverted from residential to agricultural classification?

The Court answers in the negative. While the subject property may be
physically located within an agricultural zone under the 1981 Comprehensive
Zoning Ordinance of Dasmarinas, said property retained its residential
classification.

According to Section 17, the Repealing Clause, of the 1981 Comprehensive

Zoning Ordinance of Dasmarinas: "AH other ordinances, rules or regulations
in conflict with the provision of this Ordinance are hereby repealed:
Provided, that rights that have vested before the cffectivity of this
Ordinance shall not be impaired."
In Ayog v. Cusi, Jr.,[46] the Court expounded on vested right and its
protection:

That vested right has to be respected. It could not be abrogated by the new
Constitution. Section 2, Article XIII of the 1935 Constitution allows private
corporations to purchase public agricultural lands not exceeding one
thousand and twenty-four hectares. Petitioners' prohibition action is barred
by the doctrine of vested rights in constitutional law.

"All right is vested when the right to enjoyment has become the property of
some particular person or persons as a present interest" (16 C.J.S. 1173). It
is "the privilege to enjoy property legally vested, to enforce contracts, and
enjoy the rights of property conferred by the existing law" (12 C.J.S. 955,
Note 46, No. 6) or "some right or interest in property which has become
fixed and established and is no longer open to doubt or controversy" (Downs
vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil. 498, 502).

The due process clause prohibits the annihilation of vested rights. "A state
may not impair vested rights by legislative enactment, by the
enactment or by the subsequent repeal of a municipal ordinance, or
by a change in the constitution of the State, except in a legitimate
exercise of the police power" (16 C.J.S. 1177-78).

It has been observed that, generally, the term "vested right" expresses the
concept of present fixed interest, which in right reason and natural justice
should be protected against arbitrary State action, or an innately just and
imperative right which an enlightened free society, sensitive to inherent and
irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5,
citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd
587).47 (Emphasis supplied.)

It is true that protection of vested rights is not absolute and must yield to
the exercise of police power:

A law enacted in the exercise of police power to regulate or govern certain

activities or transactions could be given retroactive effect and may
reasonably impair vested rights or contracts. Police power legislation is
applicable not only to future contracts, but equally to Ihose already in
existence. Non-impairment of contracts or vested rights clauses will have to
yield to the superior and legitimate exercise by the State of police power to
promote the health, morals, peace, education, good order, safety, and
general welfare of the people, x x x.[48]
Nonetheless, the Sangguniang Bayan of Dasmariñas in this case, in its
exercise of police power through the enactment of the 1981 Comprehensive
Zoning Ordinance, itself abided by the general rule and included in the very
same ordinance an express commitment to honor rights that had already
vested under previous ordinances, rules, and regulations. EMRASON
acquired the vested right to use and develop the subject property as a
residential subdivision on July 9, 1972 with the approval of Resolution No.
29-A by the Municipality of Dasmarinas. Such right cannot be impaired by
the subsequent enactment of the 1981 Comprehensive Zoning Ordinance of
Dasmarinas, in which the subject property was included in an agricultural
zone. Hence, the Municipal Mayor of Dasmariflas had been continuously and
consistently recognizing the subject property as a residential subdivision. [49]

Incidentally, EMRASON mentions Resolution No. 105, Defining and Declaring

the Boundaries of Industrial and Residential Land Use Plan in the
Municipalities of Imus and Parts of Dasmariflas, Carmona, Gen. Mariano
Alvarez, Gen. Trias, Silang, Tanza, Naic, Rosario, and Trece Martires City,
Province o[ Cavite, approved by the Sangguniang Panlalawigan of Cavite on
March 25, 1988. The Sangguniang Panlalawigan determined that "the lands
extending from the said designated industrial areas would have greater
economic value for residential and institutional uses, and would serve the
interest and welfare for the greatest good of the greatest number of
people."50 Resolution No. 105, approved by the HLURB in 1990, partly
reads:

Tracts of land in the Municipality of Carmona from the People's Technology

Complex to parts of the Municipality of Silang, parts of the Municipalities
of Dasmariñas, General Trias, Trece Martires City, Municipalities of Tanza
and Naic forming the strip of land traversed by the Puerto Azul Road
extending two kilometers more or less from each side of the road which are
hereby declared as industrial-residential-institutional mix. (Emphases
supplied.)

There is no question that the subject property is located within the afore-
described area.  And even though Resolution No. 105 has no direct bearing
on the classification of the subject property prior to the CARL - it taking
effect only in 1990 after being approved by the HLURB - it is a confirmation
that at present, the subject property and its surrounding areas are deemed
by the Province of Cavite better suited and prioritized for industrial and
residential development, than agricultural purposes.

CARP exemption
The Court reiterates that since July 9, 1972, upon approval of Resolution No.
29-A by the Municipality of Dasmarinas, the subject property had been
reclassified from agricultural to residential. The tax declarations covering the
subject property, classifying the same as agricultural, cannot prevail over
Resolution No. 29-A. The following pronouncements of the Court in
the Patalinghug case are of particular relevance herein:

The reversal by the Court of Appeals of the trial court's decision was based
on Tepoot's building being declared for taxation purposes as residential. It is
our considered view, however, that a tax declaration is not conclusive of
(he nature of the property for zoning purposes.  A property may have
been declared by its owner as residential for real estate taxation purposes
but it may well be within a commercial zone. A discrepancy may thus exist in
the determination of the nature of property for real estate taxation purposes
vis-a-vis the determination of a property for zoning purposes.

xxxx

The trial court's determination that Mr. Tepoot's building is commercial and,
therefore, Sec. 8 is inapplicable, is strengthened by the fact that the
Sangguniang Panlungsod has declared the questioned area as commercial or
C-2. Consequently, even if Tepoot's building was declared for taxation
purposes as residential, once a local government has reclassified an
area as commercial, that determination for zoning purposes must
prevail. While the commercial character of the questioned vicinity has been
declared thru the ordinance, private respondents have failed to present
convincing arguments to substantiate their claim that Cabaguio Avenue,
where the funeral parlor was constructed, was still a residential zone.
Unquestionably, the operation of a funeral parlor constitutes a "commercial
purpose," as gleaned from Ordinance No. 363.[52] (Emphases supplied.)

Since the subject property had been reclassified as residential land by virtue
of Resolution No. 29-A dated July 9, 1972, it is no longer agricultural land by
the time the CARL took effect on June 15, 1988 and is, therefore, exempt
from the CARP.

This is not the first time that the Court made such a ruling.

In the Natalia Realty case, Presidential Proclamation No. 1637 dated April

18, 1979 set aside land in the Municipalities of Antipolo, San Mateo, and
Montalban, Province of Rizal, as townsite areas. The properties owned by
Natalia Realty, Inc. (Natalia properties) were situated within the areas
proclaimed as townsite reservation.  The developer of the Natalia properties
was granted the necessary clearances and permits by the PJSRC for the
development of a subdivision in the area.  Thus, the Natalia properties later
became the Antipolo Hills Subdivision.  Following the effectivity of the CARL
on June 15, 1988, the DAR placed the undeveloped portions of the Antipolo
Hills Subdivision under the CARP. For having done so, the Court found that
the DAR committed grave abuse of discretion, thus:

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" arc only those lands which are "arable and suitable
agricultural lands" and "do not include commercial, industrial and residential
lands."

Based on the foregoing, it is clear that the undeveloped portions of the

Antipolo Hills Subdivision cannot in any language be considered as
"agricultural lands." These lots were intended for residential use. They
ceased to be agricultural lands upon approval of their inclusion in
the Lungsod Silangan Reservation. Even today, the areas in question
continue to be developed as a low-cost housing subdivision, albeit at a
snail's pace, x x x The enormity of the resources needed for
developing a subdivision may have delayed its completion but this
does not detract from the fact that these lands are still residential
lands and outside the ambit of the CARL.

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

"x x x Agricultural land 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 (BLURB) and its
preceding competent authorities prior to 15 June 1988 for residential,
commercial or industrial use."

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

Be that as it may, the Secretary of Justice, responding to a query by the

Secretary of Agrarian Reform, noted in an Opinion that lands covered by
Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands
are part, having been reserved for townsite purposes "to be developed as
human settlements by the proper land and housing agency," are "not
deemed 'agricultural lands' within the meaning and intent of Section 3 (c) of
R.A. No. 6657." Not being deemed "agricultural lands," they are outside the
coverage of CARL.[53]  (Emphases supplied.)

That the land in the Natalia Realty case was reclassified as residential by a

presidential proclamation, while the subject property herein was reclassified
as residential by a local ordinance, will not preclude the application of the
ruling of this Court in the former to the latter. The operative fact that places
a parcel of land beyond the ambit of the CARL is its valid reclassification
from agricultural to non-agricultural prior to the effectivity of the CARL on
June 15, 1988, not by how or whose authority it was reclassified.

In Pasong Bayabas Farmers Association, Inc. v. Court of Appeals [54] (Pasong

Bayabas case), the Court made the following findings:

Under Section 3(c) of Rep. Acl No. 6657. agricultural lands refer to lands
devoted to agriculture as conferred in the said law and not classified as
industrial land. Agricultural lands are only those lands which are arable or
suitable lands that do not include commercial, industrial and residential
lands. Section 4(e) of the law provides that it covers all private lands
devoted to or suitable for agriculture regardless of the agricultural products
raised or that can be raised thereon. Rep. Act No. 6657 took effect only on
June 15, 1988. But long before the law took effect, the property
subject of the suit had already been reclassified and converted from
agricultural to non-agricultural or residential land by the following
administrative agencies: (a) the Bureau of Lands, when it approved the
subdivision plan of the property consisting of 728 subdivision lots; (b) the
National Planning Commission which approved the subdivision plan
subdivided by the LDC/CAI for the development of the property into a low-
cost housing project; (c) the Municipal Council of Carmona, Cavite,
when it approved Kapasiyahang Blg. 30 on May 30, 1976; (d) Agrarian
Reform Minister Conrado F. Estrella, on July 3, 1979, when he granted the
application of the respondent for the development of the Hakone Housing
Project with an area of 35.80 hectares upon the recommendation of the
Agrarian Reform Team, Regional Director of Region IV, which found, after
verification and investigation, that the property was not covered by P.D. No.
27, it being untenanted and not devoted to the production of palay/or corn
and that the property was suitable for conversion to residential subdivision:
(e) by the Ministry of Local Government and Community Development; (f)
the Human Settlements Regulatory Commission which issued a location
clearance, development permit, Certificate of Inspection and License to Sell
to the LDC/private respondent: and, (g) the Housing and Land Use
Regulatory Board which also issued to the respondent CAI/LDC a license to
sell the subdivision lots." (Emphases supplied.)

Noticeably, there were several government agencies which reclassified and

converted the property from agricultural to non-agricultural in the Pasong
Bayabas case.  The CARL though does not specify which specific government
agency should have done the reclassification.  To be exempt from CARP, all
that is needed is one valid reclassification of the land from agricultural to
non-agricultural by a duly authorized government agency before June 15,
1988, when the CARL took effect.  All similar actions as regards the land
subsequently rendered by other government agencies shall merely serve as
confirmation of the reclassification. The Court actually recognized in
the Pasong Bayabas case the power of the local government to convert or
reclassify lands through a zoning ordinance:

Section 3 of Rep. Act No. 2264, amending the Local Government

Code, specifically empowers municipal and/or city councils to adopt
zoning and subdivision ordinances or regulations in consultation
with the National Planning Commission. A zoning ordinance prescribes,
defines, and apportions a given political subdivision into specific land uses as
present and future projection of needs. The power of the local
government to convert or reclassify lands to residential lands to
non-agricultural lands rcclassificd is not subject to the approval of
the Department of Agrarian Reform. Section 65 of Rep. Act No. 6657
relied upon by the petitioner applies only to applications by the landlord or
the beneficiary for the conversion of lands previously placed under the
agrarian reform law after the lapse of five years from its award. It docs not
apply to agricultural lands already converted as residential lands prior to the
passage of Rep. Act No. 6657.[56] (Emphases supplied.)

At the very beginning of Junto v. Garilao, [57] the  Court already declared

that:

Lands already classified and identified as commercial, industrial or

residential before June 15, 1988 - the date of effectivity of the
Comprehensive Agrarian Reform Law (CARL) - are outside the coverage of
this law. Therefore, they no longer need any conversion clearance from the
Department of Agrarian Reform (DAR).[58]
The Court then proceeded to uphold the authority of the City Council of
Bacolod to reclassify as residential a parcel of land through Resolution No.
5153-A, series of 1976. The reclassification was later affirmed by the HSRC.
Resultantly, the Court sustained the DAR Order dated September 13, 1994,
exempting the same parcel of land from CARP Coverage.

The writ of preliminary injunction

Any objection of Buklod against the issuance by the Court of Appeals of a

writ of preliminary injunction, enjoining then DAR Secretary Garilao and
Deputy Executive Secretary Corona from implementing the OP Decision of
February 7, 1996 and Resolution of May 14, 1996 during the pendency of
CA-G.R. SP No. 40950, had been rendered moot and academic when the
appellate court already promulgated its Decision in said case on March 26,
1997 which made the injunction permanent. As the Court held in Kho v.
Court of Appeals[59]:

We cannot likewise overlook the decision of the trial court in the case for
final injunction and damages. The dispositive portion of said decision held
that the petitioner does not have trademark rights on the name and
container of the beauty cream product. The said decision on the merits of
the trial court rendered the issuance of the writ of a preliminary injunction
moot and academic notwithstanding the fact that the same has been
appealed in the Court of Appeals. This is supported by our ruling in La Vista
Association, Inc. v. Court of Appeals, to wit:

Considering that preliminary injunction is a provisional remedy which may

be granted at any time after the commencement of the action and before
judgment when it is established that the plaintiff is entitled to the relief
demanded and only when his complaint shows facts entitling such reliefs xxx
and it appearing that the trial court had already granted the issuance of a
final injunction in favor of petitioner in its decision rendered after trial on the
merits xxx the Court resolved to Dismiss the instant petition having been
rendered moot and academic. An injunction issued by the trial court after it
has already made a clear pronouncement as to the plaintiffs right thereto,
that is, after the same issue has been decided on the merits, the trial court
having appreciated the evidence presented, is proper, notwithstanding the
fact that the decision rendered is not yet final xxx. Being an ancillary
remedy, the proceedings for preliminary injunction cannot stand separately
or proceed independently of the decision rendered on the merit of the main
case for injunction. The merit of the main case having been already
determined in favor of the applicant, the preliminary determination of its
non-existence ceases to have any force and effect, (italics supplied)
La Vista categorically pronounced that the issuance of a final injunction
renders any question on the preliminary injunctive order moot and academic
despite the fact that the decision granting a final injunction is pending
appeal. Conversely, a decision denying the applicant-plaintiffs right to a final
injunction, although appealed, renders moot and academic any objection to
the prior dissolution of a writ of preliminary injunction. [60]

Issues belatedly raised

Buklod sought to intervene in CA-G.R. SP No. 40950, then pending before

the Court of Appeals, by filing a Manifestation and Omnibus Motion in which
it argued only two points: (1) the writ of preliminary injunction be
immediately dissolved for having been issued in violation of Section 55 of
the CARL; and (2) that the Petition for Review of EMRASON be dismissed for
being the wrong remedy.

It was only after the Court of Appeals rendered its Decision dated March 26,
1997 unfavorable to both DAR and Buklod did Buklod raise in its Motion for
Reconsideration several other issues, both factual and legal, [61] directly
assailing the exemption of the subject property from the CARP.  The Court of
Appeals refused to consider said issues because they were raised by Buklod
for the first time in its Motion for Reconsideration.

Buklod persistently raises the same issues before this Court, and the Court,
once more, refuses to take cognizance of the same.

As a rule, no issue may be raised on appeal unless it has been brought

before the lower tribunal for its consideration. Higher courts are precluded
from entertaining matters neither alleged in the pleadings nor raised during
the proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal.[62]  The issues were first raised only in the
Motion for Reconsideration of the Decision of the Court of Appeals, thus, it is
as if they were never duly raised in that court at all. "Hence, this Court
cannot now, for the first time on appeal, entertain these issues, for to do so
would plainly violate the basic rule of fair play, justice and due process. The
Court reiterates and emphasizes the well-settled rule that an issue raised for
the first time on appeal and not raised timely in the proceedings in the lower
court is barred by estoppel.[63]

Indeed, there are exceptions to the aforecited rule that no question may be
raised for the first time on appeal. Though not raised below, the issue of lack
of jurisdiction over the subject matter may be considered by the reviewing
court, as it may be raised at any stage. The said court may also consider an
issue not properly raised during trial when there is plain error.  Likewise, it
may entertain such arguments when there are jurisprudential developments
affecting the issues, or when the issues raised present a matter of public
policy.[64] Buklod, however, did not allege, much less argue, that its case
falls under any of these exceptions.

Nonetheless, even when duly considered by this Court, the issues belatedly
raised by Buklod are without merit.

Contrary to the contention of Buklod, there is no necessity to carry out the

conversion of the subject property to a subdivision within one year, at the
risk of said property reverting to agricultural classification.

Section 36(1) of the Agricultural Land Reform Code, in effect since August

8, 1963, provided:

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
useful non-agricultural 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 dispossessions; xxx. (Emphasis
supplied.)

On September 10, 1971, the Agricultural Land Reform Code was amended
and it came to be known as the Code of Agrarian Reforms. After its
amendment, Section 36(1) stated:
(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: Provided,
That the agricultural lessee shall 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.

At the time Resolution No. 29-A was enacted by the Municipality of

Dasmarinas on July 9, 1972, the Code of Agrarian Reforms was already in
effect. The amended Section 36(3) thereof no longer contained the one-year
time frame within which conversion should be carried out.

More importantly, Section 36(1) of the Code o[ Agrarian Reforms would

apply only if the land in question was subject of an agricultural leasehold, a
fact that was not established in the proceedings below. It may do well for
the Buklod members to remember that they filed their present Petition to
seek award of ownership over portions of the subject property as qualified
farmer-beneficiaries under the CARP; and not payment of disturbance
compensation as agricultural lessees under the Code of Agrarian Reforms.
The insistence by Buklod on the requisites under Section 36(1) of the
Agricultural Land Reform Code/Code of Agrarian Reforms only serves to
muddle the issues rather than support its cause.

Buklod likewise invokes the vested rights of its members under the
Agricultural Land Reform Code/Code of Agrarian Reforms and the Tenants
Emancipation Decree, which preceded the CARP.  Yet, for the Buklod

members to be entitled to any of the rights and benefits under the said laws,
it is incumbent upon them to prove first that they qualify as agricultural
lessees or farm workers of the subject property, as defined in Section 166(2)
[65]
 and (15)[66]of the Code of Agrarian Reforms; and/or they are tenant-
farmers of private agricultural lands primarily devoted to rice and corn,
under a system of share-crop or lease tenancy, and are members of a duly
recognized farmer's cooperative, as required by the Tenants Emancipation
Decree. None of these determinative facts were established by Buklod.

Buklod counters that it precisely moved for a hearing before the Court of
Appeals so that it could present evidence to prove such facts, but the
appellate court erroneously denied its motion.

The Court finds that the Court of Appeals did not err on this matter.

In the recent case of Office of the Ombudsman v. Sison,[67] the Court

expounded on the rules on intervention:
It is fundamental that the allowance or disallowance of a Motion 10
Intervene is addressed to the sound discretion of the court. The permissive
tenor of the rules shows the intention lo give to the court the full measure of
discretion in permitting or disallowing the intervention, thus:

SECTION 1. Who may intervene, - A person who has a Icga) interest in the
mailer in litigation, or in the success of either of the parties, or an interest
against both, or is so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or of an officer
thereof may, with leave of court, be allowed to intervene in the action. The
court shall consider whether or not the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties, and whether
or not the intcrvenor's rights may be fully protected in a separate
proceeding.

SECTION 2. Time to intervene. - The motion to intervene may be filed al

any time before rendition of judgment by the trial court. A copy of the
pleading-in-intervention shall be attached to the motion and served on the
original parties. (Emphasis supplied.)

Simply, intervention is a procedure by which third persons, not originally

parties to the suit but claiming an interest in the subject matter, come into
the case in order to protect their right or interpose their claim. Its main
purpose is to settle in one action and by a single judgment all conflicting
claims of, or the whole controversy among, the persons involved.

To warrant intervention under Rule 19 of the Rules of Court, two requisites

must concur: (1) the movant has a legal interest in the matter in litigation;
and (2) intervention must not unduly delay or prejudice the adjudication of
the rights of the parties, nor should the claim of the intervenor be capable of
being properly decided in a separate proceeding. The interest,' which entitles
one to intervene, must involve the matter in litigation and of such direct and
immediate character that the intervenor will either gain or lose by the direct
legal operation and effect of the judgment.[68]

To apply the rules strictly, the motion of Buklod to intervene was filed too
late. According to Section 2, Rule 19 of the Rules of Civil Procedure, "a
motion to intervene may be filed at any time before rendition of judgment
by the trial court." Judgment was already rendered in DARAB Case No. IV-
Ca-0084-92 (the petition of EMRASON to nullify the notices of acquisition
over the subject property), not only by the DAR Hearing Officer, who
originally heard the case, but also the DAR Secretary, and then the OP, on
appeal.
Buklod only sought to intervene when the case was already before the Court
of Appeals. The appellate court, in the exercise of its discretion, still allowed
the intervention of Buklod in CA-G.R. SP No. 40950 only because it was "not
being in any way prejudicial to the interest of the original parties, nor will
such intervention change the factual legal complexion of the
case."[69] The intervention of Buklod challenged only the remedy availed by
EMRASON and the propriety of the preliminary injunction issued by the Court
of Appeals, which were directly and adequately addressed by the appellate
court in its Decision dated March 26, 1997.

The factual matters raised by Buklod in its Motion for Reconsideration of the
March 26, 1997 Decision of the Court of Appeals, and which it sought to
prove by evidence, inevitably changes "the factual legal complexion of the
case."  The allegations of Buklod that its members are tenant-farmers of the
subject property who acquired vested rights under previous agrarian reform
laws, go against the findings of the DAR Region IV Hearing Officer, adopted
by the DAR Secretary, the OP, and Court of Appeals, that the subject
property was being acquired under the CARP for distribution to the tenant-
farmers of the neighboring NDC property, after a determination that the
latter property was insufficient for the needs of both the NDC-Marubeni
industrial estate and the tenant-farmers.

Furthermore, these new claims of Buklod are beyond the appellate

jurisdiction of the Court of Appeals, being within the primary jurisdiction of
the DAR. As Section 50 of the CARL, as amended, reads:

SEC. 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).

In fact, records reveal that Buklod already sought remedy from the DARAB.
DARAB Case No. IV-CA-0261, entitled Buklod nang Magbubukid sa Lupaing
Ramos, rep. by Edgardo Mendoza, et at. v. E.M. Ramos and Sons, Inc., et
al., was pending at about the same time as DARAB Case No. lV-Ca-0084-92,
the petition of EMRASON for nullification of the notices of acquisition
covering the subject property. These two cases were initially consolidated
before the DARAB Region IV. The DARAB Region IV eventually dismissed
DARAB Case No. IV-Ca-0084-92 and referred the same to the DAR Region IV
Office, which had jurisdiction over the case. Records failed to reveal the
outcome of DARAB Case No. IV-CA-0261,
On a final note, this Court has stressed more than once that social justice -
or any justice for that matter - is for the deserving, whether he be a
millionaire in his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, the Court is called upon to tilt the balance in favor of the
poor to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor simply
because they are poor, or to reject the rich simply because they are rich, for
justice must always be served for poor and rich alike, according to the
mandate of the law.[70] Vigilance over the rights of the landowners is equally
important because social justice cannot be invoked to trample on the rights
of property owners, who under our Constitution and laws are also entitled to
protection.[71]

WHEREFORE, the Petitions for Review filed by the Buklod Nang Magbubukid
Sa Lupaing Ramos, Inc. in G.R. No. 131481 and the Department of Agrarian
Reform in G.R. No. 131624 are hereby DENIED. The Decision dated March
26, 1997 and the Resolution dated November 24, 1997 of the Court of
Appeals in CA-G.R. SP No. 40950 are hereby AFFIRMED.

SO ORDERED.

Velasco, Jr., J., (Acting Chairperson), Del Castillo, Perez,

and Mendoza,*  JJ., concur.

Endnotes:

*
 Per Raffle dated July 19,2010.

[1]
 Rollo (G.R. No. 131481), pp. 22-41; penned by Associate Justice Cancio
C. Garcia with Associate Justices Eugenio S. LAbitoria and Oswaldo D.
Agcaoili, concurring.

[2]
 Id. at 54-59.

[3]
 Rollo (G.R. No. 131624), pp. 89-109; penned by Deputy Executive
Secretary Renato C. Corona (now Chief Justice of this Court).

[4]
 Id. at 110-113.

[5]
 Rollo (G.R. No. 131481), pp. 22-27.
[6]
 CA rollo, p. 96; penned by Associate Justice Cancio C. Garcia with
Associate Justices Romeo J. Callejo and Anemia G. Tuquero, concurring.

[7]
 Now Chief Justice of the Supreme Court.

[8]
 CA rallo, p. 107-109.

[9]
 Id. at 164-165.

[10]
 Rollo (G.R. No. 131481), p. 29.

[11]
 Id. at 34-36.

[12]
 Id. at 36-37.

[13]
 Id. at 38.

[14]
 Id. at 40.

[15]
 Id. at 41.

[16]
 Id. al 103.

[17]
 Id. at 13-14.

[18]
 Rollo (G.R. No. 131624), pp. 16-17.

[19]
 G.R. No. 103302, August 12, 1993,225 SCRA 278.

[36]
 Section 1(d) of Ordinance No.1.

[37]
 Exhibit "G," Exhibits Folder, p. 42.

[38]
 Id.

[20]
 Section 72 of the Public Land Act, in particular, reads:

SEC. 72. The Secretary of Agriculture and Natural Resources, if he approves

the recommendations of the Director of Lands, shall submit the matter to
the President of the end that the latter may issue a proclamation reserving
the land surveyed, or such part thereof as he may deem proper, as a town
site, and a certified copy of such proclamation shall be sent to the Director of
Lands and another to the Register of Deeds of the province in which the
surveyed land lies.
[21]
 An Act Expanding the Jurisdiction of the Court of Appeals, Amending for
the Purpose Section Nine of Batas Pambansa Big. 129, as Amended. Known
as the Judiciary Reorganization Act of 1980. 22     

[22]
183 Phil. 176(1979).

[23]
 G.R. No. 104786, Januarv 27, 1994, 229 SCRA 554, 559.

[24]
 The latest amendment to the CARL is Republic Act "No. 9700, entitled
"An Act Strengthening the Comprehensive Agrarian Reform Program (CARP),
Extending the Acquisition and Distribution of All Agricultural Lands,
Instituting Necessary Reforms, Amending for the Purpose Certain Provisions
of Republic Act No. 6657, Otherwise Known as the Comprehensive Agrarian
Reform Law of 1988, as Amended, and Appropriating Funds Therefor[,]" or
more commonly known as the CARPER Law, which took effect on July 1,
2009 and extended CARP implementation for another five years, or until
June 30, 2014.

[25]
 Ortigas & Co., Ltd. Partnership v. Feati Bank and Trust Co., supra note 22
at 186-187.

[26]
 Sta. Rosa Realty Development Corporation v. Court of Appeals, 419 Phil.
457, 476 (2001).

[27]
 113 Phil. 789(1961).

[28]
 Id. at 800-801.

[29]
 453 Phil. 373(2003).

[30]
 Id. at 382-383.

[31]
 DAR Administrative Order No. 1, series of 1999.

[32]
 G.R. No. 92389, September 11, 1991,201 SCRA 508.

[33]
 Id. at 513-515.

[34]
 Caltex (Philippines), Inc. v. Court of Appeals, G.R. "No. 97753, August
10, 1992, 212 SCRA 448, 463.

[35]
 National Federation of Labor v. National Labor Relations Commission, 383
Phil. 910, 917-918 (2000).
[39]
 Office ofthe President Administrative Order No, 152, dated December 16,
1968.

[40]
 Id.

[41]
 United BF Homeowners' Association, Inc. v. The (Municipal) City Mayor,
Parañaque City, G.R. No. 141010, February 7,2007,515 SCRA 1, 12.

[42]
 PENALTY. Violation of any provision or provisions of this ordinance shall
upon conviction, be penalized by a fine of not more than TWO HUNDRED
PESOS (P200.00) or by imprisonment of not more than SIX MONTHS (6) or
by both fine and imprisonment in the discretion of the court. Each day that
the violation of this ordinance continues shall be deemed a separate offense,
after the date of the court decision is rendered.

If the violation is committed by a firm, a corporation, partnership or any

other juridical person, the manager managing partners of the person
changed with the management, of such firm, corporation, partnership or
juridical person shall be criminally reasonable.

[43]
 Executive Order No. 648.

[44]
 Lepanto Consolidated Mining Co. v. WMC Resources Int'l Ply. Ltd.,G.R.
No. 162331, November 20, 2006, 507 SCRA 315, 328.

[45]
 DAR records, p. 273.

[46]
 16 204 Phil. 126(1982).

[47]
  Id. at 135.

[48]
  Ortigas & Co., Ltd, v. Court of Appeals, 400 Phil. 615, 622-623 (2000).

[49]
 See the List of Subdivisions within the Jurisdiction of Dasmarinas, Cavite
(Exhibits Folder, Exhibit "QQ." pp. 195-200) and Certification dated
September 23, 1988 (Exhibits Folder, Exhibit "S,"p. 116).

[50]
 Resolution No. 105, Office of Sangguniang Panlalawigan, Province of
Cavite, Id.

[51]
 CA RP exemption

[52]
 Patalinghug v. Court of Appeals, supra note 23 at 558-559.
[53]
 Natalia Realty, Inc. v. Department of Agrarian Reform,, supra note 19 at
282-284.

[54]
 473 Phil. 64 (2004).

[55]
 Id. at 92-93.

[56]
 Id. at 94-95.

[57]
 503 Phil, 154(2005).

[58]
 Id. at 157.

[59]
 429 Phil. 1-10(2002).

[60]
 Id. at 151-152.

[61]
 1)     UNDER THE LAW APPLICABLE AT THE TIME OF THE  ALLEGED

CONVERSION, [EMRASON] HAD ONE (1) YEAR WITHIN WHICH TO

IMPLEMENT THE CONVERSION; OTHERWISE, THE CONVERSION IS DEEMED
TO BE IN BAD FAITH (Sec. 36 Agricultural Land Reform Code, R.A. 3844).

2)    BY VIRTUE OF THE AGRICULTURAL LAND REFORM CODE (R.A. 3844)

WHICH TOOK EFFECT ON AUGUST 8, 1963; THE FARMERS CULTIVATING
THE PROPERTY WERE GRANTED A LEGISLATIVE SECURITY OF TENURE AS
AGRICULTURAL LESSEE (Sec. 7) WHICH CANNOT BE NEGATED BY A MERE
MUNICIPAL ORDINANCE;

3)    SINCE 1972 TO THE PRESENT, [EMRASON] DID NOT PERFORM ANY
ACT TO IMPLEMENT  THE ALLEGED CONVERSION OF THE PROPERTY INTO  A
RESIDENTIAL  SUBDIVISION  SUCH  AS  SUBDIVIDING  THE TITLES  IN
ACCORDANCE WITH A SUBDIVISION PLAN; DECLARING THE PROPERTY AS
RESIDENTIAL LOTS AND OBTAINING THE PROPER DOCUMENTATION FROM
GOVERNMENT OFFICES;

4)    [EMRASON] IS ESTOPPED FROM INVOKING THE ALLEGED

CONVERSION IN 1972 BECAUSE IT CONTINUED TO USE THE FOR
AGRICULTURAL ACTIVITY BY LEASING THE SAME FOR AGRICULTURAL
PURPOSES AND PAYING REAL ESTATE TAX THEREON UNDER
"AGRICULTURAL PROPERTY;"

5)     THE LEASEHOLD TENANCY UNDER R.A. 3844 IS MANDATORY SO THAT

THE FARMERS REPRESENTED BY HEREIN INTERVENOR HAVE A VESTED
RIGHT OVER. THE PROPERTY (Sec. 4);

6)     GIVEN THE MANDATE OF THE 1987 CONSTITUTION FOR A

MEANINGFUL LAND REFORM, IT IS INEVITABLE THAT THE PROPERTY IN
QUESTION IS SUBJECT TO LAND REFORM;

7)     FINDINGS OF FACT BY THE DAR IS CONCLUSIVE WHICH SHOULD NOT

BE IGNORED IN THE ABSENCE OF COMPELLING REASONS, THE PRESENCE
OF MORE THAN 300 FARMERS WITHIN THE PROPERTY IN QUESTION WHO
HAVE  CULTIVATED  THE  LAND FOR  DECADES  CLEARLY SHOWS THE
IMPERATIVE NECESSITY  OF  GRANTING  THE  FARMERS  THE  SALUTARY
EFFECTS OF LAND REFORM. (CA rollo, pp. 281-282.)

[62]
 Prudential Bank v. Lim, G.R. No. 136371, November 11, 2005, 474 SCRA
485, 498.

[63]
 Sanchez v. Court of Appeals, 345 Phil. 155, 185-186 (1997).

[64]
 Del Rosario v. Bonga, 402 Phil. 949, 960 (2001).

[65]
 SEC. 166. Definition of Terms. -As used in Chapter 1 of this Code:

x x x x

(2) "Agricultural lessee" means a person who, by himself and with the aid
available from within his immediate farm household, cultivates the land
belonging to, or possessed by, another with the latter's consent for purposes
of production, for a price certain in money or in produce or both. It is
distinguished from civil Jaw lessee as understood in the Civil Code of the
Philippines.

[66]
 SEC. 166. Definition of Terms. - As used in Chapter I of this Code:

x x x x

(15) "Farm worker" includes any agricultural wage, salary or piece worker
but is not limited to a farm worker of a particular farm employer unless this
Code explicitly stales otherwise and any individual whose work has ceased
as consequence of, or in connection with, a current agrarian dispute or an
unfair labor practice and who has not obtained a substantially equivalent and
regular employment.

[67]
 G.R. No. 185954, February 16,2010, 612 SCRA 702.
[68]
 Id. at 712-713.

[69]
 Rollo (G.R. No. 131481), p. 29.

[70]
 Gelos v. Court of Appeals, G.R. No. 86186, May 8, 1992, 208 SCRA 608,
616.

[71]
 Land Bank of the Philippines v. Court of Appeals, 319 Phil. 246, 262
(1995).

17.

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.

G.R. No. 100091 October 22, 1992

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.

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:

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.

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 those already developed shall be exempt
from the coverage of this Act. (Emphasis supplied).

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.

In line with its avowed purpose as an agricultural and technical school, the
University adopted a land utilization program to develop and exploit its
3080-hectare 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" (CMU-
KSSP). 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
MM-Agraplex) 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 quasi-judicial 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

Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea,

Regalado, Davide, Jr., Romero, Nocon, and Melo, JJ., concur.

Bellosillo, J., took no part.

Narvasa, C.J., is on leave.

Footnotes

* Justice Alfredo Marigomen, ponente; Justices Josue N.

Bellosillo and Filemon H. Mendoza, concurring.

1 Exhibits 1, 1-A and 1-B.

2 Exhibit "U".

3 Exhibit "V".

4 Mayor and Council of City of Forsyth, et. al. vs. Hooks, 184

S.E. 724 (1936).

5 Rollo, p. 84.

6 Rollo, Ibid.
 7 Taken from U.S. DHEW Bulletin, "Status of Land Grant
Colleges and Universities", LEBA.

8 Annex C of Exhibit W.

9 Rollo, petition. 206-207.

10 Section 3, R.A. 6657.

18..
G.R. No. 182332               February 23, 2011
MILESTONE FARMS, INC., Petitioner,
vs.
OFFICE OF THE PRESIDENT, Respondent.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Amended Decision2 dated October 4, 2006 and its Resolution3 dated March
27, 2008.
The Facts
Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the
Securities and Exchange Commission on January 8, 1960.4 Among its
pertinent secondary purposes are: (1) to engage in the raising of cattle,
pigs, and other livestock; to acquire lands by purchase or lease, which may
be needed for this purpose; and to sell and otherwise dispose of said cattle,
pigs, and other livestock and their produce when advisable and beneficial to
the corporation; (2) to breed, raise, and sell poultry; to purchase or acquire
and sell, or otherwise dispose of the supplies, stocks, equipment,
accessories, appurtenances, products, and by-products of said business; and
(3) to import cattle, pigs, and other livestock, and animal food necessary for
the raising of said cattle, pigs, and other livestock as may be authorized by
law.5
On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL), took
effect, which included the raising of livestock, poultry, and swine in its
coverage. However, on December 4, 1990, this Court, sitting en banc, ruled
in Luz Farms v. Secretary of the Department of Agrarian Reform6 that
agricultural lands devoted to livestock, poultry, and/or swine raising are
excluded from the Comprehensive Agrarian Reform Program (CARP).
Thus, in May 1993, petitioner applied for the exemption/exclusion of its
316.0422-hectare property, covered by Transfer Certificate of Title Nos. (T-
410434) M-15750, (T-486101) M-7307, (T-486102) M-7308, (T-274129) M-
15751, (T-486103) M-7309, (T-486104) M-7310, (T-332694) M-15755, (T-
486105) M-7311, (T-486106) M-7312, M-8791, (T-486107) M-7313, (T-
486108) M-7314, M-8796, (T-486109) M-7315, (T-486110) M-9508, and M-
6013, and located in Pinugay, Baras, Rizal, from the coverage of the CARL,
pursuant to the aforementioned ruling of this Court in Luz Farms.
Meanwhile, on December 27, 1993, the Department of Agrarian Reform
(DAR) issued Administrative Order No. 9, Series of 1993 (DAR A.O. No. 9),
setting forth rules and regulations to govern the exclusion of agricultural
lands used for livestock, poultry, and swine raising from CARP coverage.
Thus, on January 10, 1994, petitioner re-documented its application
pursuant to DAR A.O. No. 9.7
Acting on the said application, the DAR’s Land Use Conversion and
Exemption Committee (LUCEC) of Region IV conducted an ocular inspection
on petitioner’s property and arrived at the following findings:
[T]he actual land utilization for livestock, swine and poultry is 258.8422
hectares; the area which served as infrastructure is 42.0000 hectares; ten
(10) hectares are planted to corn and the remaining five (5) hectares are
devoted to fish culture; that the livestock population are 371 heads of cow,
20 heads of horses, 5,678 heads of swine and 788 heads of cocks; that the
area being applied for exclusion is far below the required or ideal area which
is 563 hectares for the total livestock population; that the approximate area
not directly used for livestock purposes with an area of 15 hectares, more or
less, is likewise far below the allowable 10% variance; and, though not
directly used for livestock purposes, the ten (10) hectares planted to sweet
corn and the five (5) hectares devoted to fishpond could be considered
supportive to livestock production.
The LUCEC, thus, recommended the exemption of petitioner’s 316.0422-
hectare property from the coverage of CARP. Adopting the LUCEC’s findings
and recommendation, DAR Regional Director Percival Dalugdug (Director
Dalugdug) issued an Order dated June 27, 1994, exempting petitioner’s
316.0422-hectare property from CARP.8
The Southern Pinugay Farmers Multi-Purpose Cooperative, Inc. (Pinugay
Farmers), represented by Timiano Balajadia, Sr. (Balajadia), moved for the
reconsideration of the said Order, but the same was denied by Director
Dalugdug in his Order dated November 24, 1994.9 Subsequently, the
Pinugay Farmers filed a letter-appeal with the DAR Secretary.
Correlatively, on June 4, 1994, petitioner filed a complaint for Forcible Entry
against Balajadia and company before the Municipal Circuit Trial Court
(MCTC) of Teresa-Baras, Rizal, docketed as Civil Case No. 781-T.10 The
MCTC ruled in favor of petitioner, but the decision was later reversed by the
Regional Trial Court, Branch 80, of Tanay, Rizal. Ultimately, the case
reached the CA, which, in its Decision11 dated October 8, 1999, reinstated
the MCTC’s ruling, ordering Balajadia and all defendants therein to vacate
portions of the property covered by TCT Nos. M-6013, M-8796, and M-8791.
In its Resolution12 dated July 31, 2000, the CA held that the defendants
therein failed to timely file a motion for reconsideration, given the fact that
their counsel of record received its October 8, 1999 Decision; hence, the
same became final and executory.
In the meantime, R.A. No. 6657 was amended by R.A. No. 7881,13 which
was approved on February 20, 1995. Private agricultural lands devoted to
livestock, poultry, and swine raising were excluded from the coverage of the
CARL. On October 22, 1996, the fact-finding team formed by the DAR
Undersecretary for Field Operations and Support Services conducted an
actual headcount of the livestock population on the property. The headcount
showed that there were 448 heads of cattle and more than 5,000 heads of
swine.
The DAR Secretary’s Ruling
On January 21, 1997, then DAR Secretary Ernesto D. Garilao (Secretary
Garilao) issued an Order exempting from CARP only 240.9776 hectares of
the 316.0422 hectares previously exempted by Director Dalugdug, and
declaring 75.0646 hectares of the property to be covered by CARP.14
Secretary Garilao opined that, for private agricultural lands to be excluded
from CARP, they must already be devoted to livestock, poultry, and swine
raising as of June 15, 1988, when the CARL took effect. He found that the
Certificates of Ownership of Large Cattle submitted by petitioner showed
that only 86 heads of cattle were registered in the name of petitioner’s
president, Misael Vera, Jr., prior to June 15, 1988; 133 were subsequently
bought in 1990, while 204 were registered from 1992 to 1995. Secretary
Garilao gave more weight to the certificates rather than to the headcount
because "the same explicitly provide for the number of cattle owned by
petitioner as of June 15, 1988."
Applying the animal-land ratio (1 hectare for grazing for every head of
cattle/carabao/horse) and the infrastructure-animal ratio (1.7815 hectares
for 21 heads of cattle/carabao/horse, and 0.5126 hectare for 21 heads of
hogs) under DAR A.O. No. 9, Secretary Garilao exempted 240.9776 hectares
of the property, as follows:
1. 86 hectares for the 86 heads of cattle existing as of 15 June 1988;
2. 8 hectares for infrastructure following the ratio of 1.7815 hectares for
every 21 heads of cattle;
3. 8 hectares for the 8 horses;
4. 0.3809 square meters of infrastructure for the 8 horses; [and]
5. 138.5967 hectares for the 5,678 heads of swine.15
Petitioner filed a Motion for Reconsideration,16 submitting therewith copies
of Certificates of Transfer of Large Cattle and additional Certificates of
Ownership of Large Cattle issued to petitioner prior to June 15, 1988, as
additional proof that it had met the required animal-land ratio. Petitioner
also submitted a copy of a Disbursement Voucher dated December 17, 1986,
showing the purchase of 100 heads of cattle by the Bureau of Animal
Industry from petitioner, as further proof that it had been actively operating
a livestock farm even before June 15, 1988. However, in his Order dated
April 15, 1997, Secretary Garilao denied petitioner’s Motion for
Reconsideration.17
Aggrieved, petitioner filed its Memorandum on Appeal18 before the Office of
the President (OP).
The OP’s Ruling
On February 4, 2000, the OP rendered a decision19 reinstating Director
Dalugdug’s Order dated June 27, 1994 and declared the entire 316.0422-
hectare property exempt from the coverage of CARP.
However, on separate motions for reconsideration of the aforesaid decision
filed by farmer-groups Samahang Anak-Pawis ng Lagundi (SAPLAG) and
Pinugay Farmers, and the Bureau of Agrarian Legal Assistance of DAR, the
OP issued a resolution20 dated September 16, 2002, setting aside its
previous decision. The dispositive portion of the OP resolution reads:
WHEREFORE, the Decision subject of the instant separate motions for
reconsideration is hereby SET ASIDE and a new one entered REINSTATING
the Order dated 21 January 1997 of then DAR Secretary Ernesto D. Garilao,
as reiterated in another Order of 15 April 1997, without prejudice to the
outcome of the continuing review and verification proceedings that DAR,
thru the appropriate Municipal Agrarian Reform Officer, may undertake
pursuant to Rule III (D) of DAR Administrative Order No. 09, series of 1993.
SO ORDERED.21
The OP held that, when it comes to proof of ownership, the reference is the
Certificate of Ownership of Large Cattle. Certificates of cattle ownership,
which are readily available – being issued by the appropriate government
office – ought to match the number of heads of cattle counted as existing
during the actual headcount. The presence of large cattle on the land,
without sufficient proof of ownership thereof, only proves such presence.
Taking note of Secretary Garilao’s observations, the OP also held that,
before an ocular investigation is conducted on the property, the landowners
are notified in advance; hence, mere reliance on the physical headcount is
dangerous because there is a possibility that the landowners would increase
the number of their cattle for headcount purposes only. The OP observed
that there was a big variance between the actual headcount of 448 heads of
cattle and only 86 certificates of ownership of large cattle.
Consequently, petitioner sought recourse from the CA.22
The Proceedings Before the CA and Its Rulings
On April 29, 2005, the CA found that, based on the documentary evidence
presented, the property subject of the application for exclusion had more
than satisfied the animal-land and infrastructure-animal ratios under DAR
A.O. No. 9. The CA also found that petitioner applied for exclusion long
before the effectivity of DAR A.O. No. 9, thus, negating the claim that
petitioner merely converted the property for livestock, poultry, and swine
raising in order to exclude it from CARP coverage. Petitioner was held to
have actually engaged in the said business on the property even before June
15, 1988. The CA disposed of the case in this wise:
WHEREFORE, the instant petition is hereby GRANTED. The assailed
Resolution of the Office of the President dated September 16, 2002 is hereby
SET ASIDE, and its Decision dated February 4, 2000 declaring the entire
316.0422 hectares exempt from the coverage of the Comprehensive
Agrarian Reform Program is hereby REINSTATED without prejudice to the
outcome of the continuing review and verification proceedings which the
Department of Agrarian Reform, through the proper Municipal Agrarian
Reform Officer, may undertake pursuant to Policy Statement (D) of DAR
Administrative Order No. 9, Series of 1993.
SO ORDERED.23
Meanwhile, six months earlier, or on November 4, 2004, without the
knowledge of the CA – as the parties did not inform the appellate court –
then DAR Secretary Rene C. Villa (Secretary Villa) issued DAR Conversion
Order No. CON-0410-001624 (Conversion Order), granting petitioner’s
application to convert portions of the 316.0422-hectare property from
agricultural to residential and golf courses use. The portions converted –
with a total area of 153.3049 hectares – were covered by TCT Nos. M-15755
(T-332694), M-15751 (T-274129), and M-15750 (T-410434). With this
Conversion Order, the area of the property subject of the controversy was
effectively reduced to 162.7373 hectares.
On the CA’s decision of April 29, 2005, Motions for Reconsideration were
filed by farmer-groups, namely: the farmers represented by Miguel
Espinas25 (Espinas group), the Pinugay Farmers,26 and the SAPLAG.27 The
farmer-groups all claimed that the CA should have accorded respect to the
factual findings of the OP. Moreover, the farmer-groups unanimously
intimated that petitioner already converted and developed a portion of the
property into a leisure-residential-commercial estate known as the Palo Alto
Leisure and Sports Complex (Palo Alto).
Subsequently, in a Supplement to the Motion for Reconsideration on Newly
Secured Evidence pursuant to DAR Administrative Order No. 9, Series of
199328 (Supplement) dated June 15, 2005, the Espinas group submitted the
following as evidence:
1) Conversion Order29 dated November 4, 2004, issued by Secretary Villa,
converting portions of the property from agricultural to residential and golf
courses use, with a total area of 153.3049 hectares; thus, the Espinas group
prayed that the remaining 162.7373 hectares (subject property) be covered
by the CARP;
2) Letter30 dated June 7, 2005 of both incoming Municipal Agrarian Reform
Officer (MARO) Bismark M. Elma (MARO Elma) and outgoing MARO Cesar C.
Celi (MARO Celi) of Baras, Rizal, addressed to Provincial Agrarian Reform
Officer (PARO) II of Rizal, Felixberto Q. Kagahastian, (MARO Report),
informing the latter, among others, that Palo Alto was already under
development and the lots therein were being offered for sale; that there
were actual tillers on the subject property; that there were agricultural
improvements thereon, including an irrigation system and road projects
funded by the Government; that there was no existing livestock farm on the
subject property; and that the same was not in the possession and/or
control of petitioner; and
3) Certification31 dated June 8, 2005, issued by both MARO Elma and MARO
Celi, manifesting that the subject property was in the possession and
cultivation of actual occupants and tillers, and that, upon inspection,
petitioner maintained no livestock farm thereon.
Four months later, the Espinas group and the DAR filed their respective
Manifestations.32 In its Manifestation dated November 29, 2005, the DAR
confirmed that the subject property was no longer devoted to cattle raising.
Hence, in its Resolution33 dated December 21, 2005, the CA directed
petitioner to file its comment on the Supplement and the aforementioned
Manifestations. Employing the services of a new counsel, petitioner filed a
Motion to Admit Rejoinder,34 and prayed that the MARO Report be
disregarded and expunged from the records for lack of factual and legal
basis.
With the CA now made aware of these developments, particularly Secretary
Villa’s Conversion Order of November 4, 2004, the appellate court had to
acknowledge that the property subject of the controversy would now be
limited to the remaining 162.7373 hectares. In the same token, the Espinas
group prayed that this remaining area be covered by the CARP.35
On October 4, 2006, the CA amended its earlier Decision. It held that its
April 29, 2005 Decision was theoretically not final because DAR A.O. No. 9
required the MARO to make a continuing review and verification of the
subject property. While the CA was cognizant of our ruling in Department of
Agrarian Reform v. Sutton,36 wherein we declared DAR A.O. No. 9 as
unconstitutional, it still resolved to lift the exemption of the subject property
from the CARP, not on the basis of DAR A.O. No. 9, but on the strength of
evidence such as the MARO Report and Certification, and the
Katunayan37 issued by the Punong Barangay, Alfredo Ruba (Chairman
Ruba), of Pinugay, Baras, Rizal, showing that the subject property was no
longer operated as a livestock farm. Moreover, the CA held that the lease
agreements,38 which petitioner submitted to prove that it was compelled to
lease a ranch as temporary shelter for its cattle, only reinforced the DAR’s
finding that there was indeed no existing livestock farm on the subject
property. While petitioner claimed that it was merely forced to do so to
prevent further slaughtering of its cattle allegedly committed by the
occupants, the CA found the claim unsubstantiated. Furthermore, the CA
opined that petitioner should have asserted its rights when the irrigation and
road projects were introduced by the Government within its property.
Finally, the CA accorded the findings of MARO Elma and MARO Celi the
presumption of regularity in the performance of official functions in the
absence of evidence proving misconduct and/or dishonesty when they
inspected the subject property and rendered their report. Thus, the CA
disposed:
WHEREFORE, this Court’s Decision dated April 29, 2005 is hereby amended
in that the exemption of the subject landholding from the coverage of the
Comprehensive Agrarian Reform Program is hereby lifted, and the 162.7373
hectare-agricultural portion thereof is hereby declared covered by the
Comprehensive Agrarian Reform Program.
SO ORDERED.39
Unperturbed, petitioner filed a Motion for Reconsideration.40 On January 8,
2007, MARO Elma, in compliance with the Memorandum of DAR Regional
Director Dominador B. Andres, tendered another Report41 reiterating that,
upon inspection of the subject property, together with petitioner’s counsel-
turned witness, Atty. Grace Eloisa J. Que (Atty. Que), PARO Danilo M.
Obarse, Chairman Ruba, and several occupants thereof, he, among others,
found no livestock farm within the subject property. About 43 heads of cattle
were shown, but MARO Elma observed that the same were inside an area
adjacent to Palo Alto. Subsequently, upon Atty. Que’s request for
reinvestigation, designated personnel of the DAR Provincial and Regional
Offices (Investigating Team) conducted another ocular inspection on the
subject property on February 20, 2007. The Investigating Team, in its
Report42 dated February 21, 2007, found that, per testimony of petitioner’s
caretaker, Rogelio Ludivices (Roger),43 petitioner has 43 heads of cattle
taken care of by the following individuals: i) Josefino Custodio (Josefino) –
18 heads; ii) Andy Amahit – 15 heads; and iii) Bert Pangan – 2 heads; that
these individuals pastured the herd of cattle outside the subject property,
while Roger took care of 8 heads of cattle inside the Palo Alto area; that 21
heads of cattle owned by petitioner were seen in the area adjacent to Palo
Alto; that Josefino confirmed to the Investigating Team that he takes care of
18 heads of cattle owned by petitioner; that the said Investigating Team saw
9 heads of cattle in the Palo Alto area, 2 of which bore "MFI" marks; and
that the 9 heads of cattle appear to have matched the Certificates of
Ownership of Large Cattle submitted by petitioner.
Because of the contentious factual issues and the conflicting averments of
the parties, the CA set the case for hearing and reception of evidence on
April 24, 2007.44 Thereafter, as narrated by the CA, the following events
transpired:
On May 17, 2007, [petitioner] presented the Judicial Affidavits of its
witnesses, namely, [petitioner’s] counsel, [Atty. Que], and the alleged
caretaker of [petitioner’s] farm, [Roger], who were both cross-examined by
counsel for farmers-movants and SAPLAG. [Petitioner] and SAPLAG then
marked their documentary exhibits.
On May 24, 2007, [petitioner’s] security guard and third witness, Rodolfo G.
Febrada, submitted his Judicial Affidavit and was cross-examined by counsel
for fa[r]mers-movants and SAPLAG. Farmers-movants also marked their
documentary exhibits.
Thereafter, the parties submitted their respective Formal Offers of Evidence.
Farmers-movants and SAPLAG filed their objections to [petitioner’s] Formal
Offer of Evidence. Later, [petitioner] and farmers-movants filed their
respective Memoranda.
In December 2007, this Court issued a Resolution on the parties’ offer of
evidence and considered [petitioner’s] Motion for Reconsideration submitted
for resolution.45
Finally, petitioner’s motion for reconsideration was denied by the CA in its
Resolution46 dated March 27, 2008. The CA discarded petitioner’s reliance
on Sutton. It ratiocinated that the MARO Reports and the DAR’s
Manifestation could not be disregarded simply because DAR A.O. No. 9 was
declared unconstitutional. The Sutton ruling was premised on the fact that
the Sutton property continued to operate as a livestock farm. The CA also
reasoned that, in Sutton, this Court did not remove from the DAR the power
to implement the CARP, pursuant to the latter’s authority to oversee the
implementation of agrarian reform laws under Section 5047 of the CARL.
Moreover, the CA found:
Petitioner-appellant claimed that they had 43 heads of cattle which are being
cared for and pastured by 4 individuals. To prove its ownership of the said
cattle, petitioner-appellant offered in evidence 43 Certificates of Ownership
of Large Cattle. Significantly, however, the said Certificates were all dated
and issued on November 24, 2006, nearly 2 months after this Court
rendered its Amended Decision lifting the exemption of the 162-hectare
portion of the subject landholding. The acquisition of such cattle after the
lifting of the exemption clearly reveals that petitioner-appellant was no
longer operating a livestock farm, and suggests an effort to create a
semblance of livestock-raising for the purpose of its Motion for
Reconsideration.48
On petitioner’s assertion that between MARO Elma’s Report dated January 8,
2007 and the Investigating Team’s Report, the latter should be given
credence, the CA held that there were no material inconsistencies between
the two reports because both showed that the 43 heads of cattle were found
outside the subject property.
Hence, this Petition assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT
LANDS DEVOTED TO LIVESTOCK FARMING WITHIN THE MEANING OF LUZ
FARMS AND SUTTON, AND WHICH ARE THEREBY EXEMPT FROM CARL
COVERAGE, ARE NEVERTHELESS SUBJECT TO DAR’S CONTINUING
VERIFICATION AS TO USE, AND, ON THE BASIS OF SUCH VERIFICATION,
MAY BE ORDERED REVERTED TO AGRICULTURAL CLASSIFICATION AND
COMPULSORY ACQUISITION[;]
II.
GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO REVERTED TO
AGRICULTURAL CLASSIFICATION, STILL THE PROCEEDINGS FOR SUCH
PURPOSE BELONGS TO THE EXCLUSIVE ORIGINAL JURISDICTION OF THE
DAR, BEFORE WHICH THE CONTENDING PARTIES MAY VENTILATE FACTUAL
ISSUES, AND AVAIL THEMSELVES OF USUAL REVIEW PROCESSES, AND NOT
TO THE COURT OF APPEALS EXERCISING APPELLATE JURISDICTION OVER
ISSUES COMPLETELY UNRELATED TO REVERSION [; AND]
III.
IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND COMMITTED
GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT THE PROPERTY IN
DISPUTE IS NO LONGER BEING USED FOR LIVESTOCK FARMING.49
Petitioner asseverates that lands devoted to livestock farming as of June 15,
1988 are classified as industrial lands, hence, outside the ambit of the CARP;
that Luz Farms, Sutton, and R.A. No. 7881 clearly excluded such lands on
constitutional grounds; that petitioner’s lands were actually devoted to
livestock even before the enactment of the CARL; that livestock farms are
exempt from the CARL, not by reason of any act of the DAR, but because of
their nature as industrial lands; that petitioner’s property was admittedly
devoted to livestock farming as of June 1988 and the only issue before was
whether or not petitioner’s pieces of evidence comply with the ratios
provided under DAR A.O. No. 9; and that DAR A.O. No. 9 having been
declared as unconstitutional, DAR had no more legal basis to conduct a
continuing review and verification proceedings over livestock farms.
Petitioner argues that, in cases where reversion of properties to agricultural
use is proper, only the DAR has the exclusive original jurisdiction to hear and
decide the same; hence, the CA, in this case, committed serious errors when
it ordered the reversion of the property and when it considered pieces of
evidence not existing as of June 15, 1988, despite its lack of jurisdiction;
that the CA should have remanded the case to the DAR due to conflicting
factual claims; that the CA cannot ventilate allegations of fact that were
introduced for the first time on appeal as a supplement to a motion for
reconsideration of its first decision, use the same to deviate from the issues
pending review, and, on the basis thereof, declare exempt lands reverted to
agricultural use and compulsorily covered by the CARP; that the "newly
discovered [pieces of] evidence" were not introduced in the proceedings
before the DAR, hence, it was erroneous for the CA to consider them; and
that piecemeal presentation of evidence is not in accord with orderly justice.
Finally, petitioner submits that, in any case, the CA gravely erred and
committed grave abuse of discretion when it held that the subject property
was no longer used for livestock farming as shown by the Report of the
Investigating Team. Petitioner relies on the 1997 LUCEC and DAR findings
that the subject property was devoted to livestock farming, and on the 1999
CA Decision which held that the occupants of the property were squatters,
bereft of any authority to stay and possess the property.50
On one hand, the farmer-groups, represented by the Espinas group, contend
that they have been planting rice and fruit-bearing trees on the subject
property, and helped the National Irrigation Administration in setting up an
irrigation system therein in 1997, with a produce of 1,500 to 1,600 sacks of
palay each year; that petitioner came to court with unclean hands because,
while it sought the exemption and exclusion of the entire property, unknown
to the CA, petitioner surreptitiously filed for conversion of the property now
known as Palo Alto, which was actually granted by the DAR Secretary; that
petitioner’s bad faith is more apparent since, despite the conversion of the
153.3049-hectare portion of the property, it still seeks to exempt the entire
property in this case; and that the fact that petitioner applied for conversion
is an admission that indeed the property is agricultural. The farmer-groups
also contend that petitioner’s reliance on Luz Farms and Sutton is unavailing
because in these cases there was actually no cessation of the business of
raising cattle; that what is being exempted is the activity of raising cattle
and not the property itself; that exemptions due to cattle raising are not
permanent; that the declaration of DAR A.O. No. 9 as unconstitutional does
not at all diminish the mandated duty of the DAR, as the lead agency of the
Government, to implement the CARL; that the DAR, vested with the power
to identify lands subject to CARP, logically also has the power to identify
lands which are excluded and/or exempted therefrom; that to disregard
DAR’s authority on the matter would open the floodgates to abuse and fraud
by unscrupulous landowners; that the factual finding of the CA that the
subject property is no longer a livestock farm may not be disturbed on
appeal, as enunciated by this Court; that DAR conducted a review and
monitoring of the subject property by virtue of its powers under the CARL;
and that the CA has sufficient discretion to admit evidence in order that it
could arrive at a fair, just, and equitable ruling in this case.51
On the other hand, respondent OP, through the Office of the Solicitor
General (OSG), claims that the CA correctly held that the subject property is
not exempt from the coverage of the CARP, as substantial pieces of evidence
show that the said property is not exclusively devoted to livestock, swine,
and/or poultry raising; that the issues presented by petitioner are factual in
nature and not proper in this case; that under Rule 43 of the 1997 Rules of
Civil Procedure, questions of fact may be raised by the parties and resolved
by the CA; that due to the divergence in the factual findings of the DAR and
the OP, the CA was duty bound to review and ascertain which of the said
findings are duly supported by substantial evidence; that the subject
property was subject to continuing review and verification proceedings due
to the then prevailing DAR A.O. No. 9; that there is no question that the
power to determine if a property is subject to CARP coverage lies with the
DAR Secretary; that pursuant to such power, the MARO rendered the
assailed reports and certification, and the DAR itself manifested before the
CA that the subject property is no longer devoted to livestock farming; and
that, while it is true that this Court’s ruling in Luz Farms declared that
agricultural lands devoted to livestock, poultry, and/or swine raising are
excluded from the CARP, the said ruling is not without any qualification.52
In its Reply53 to the farmer-groups’ and to the OSG’s comment, petitioner
counters that the farmer-groups have no legal basis to their claims as they
admitted that they entered the subject property without the consent of
petitioner; that the rice plots actually found in the subject property, which
were subsequently taken over by squatters, were, in fact, planted by
petitioner in compliance with the directive of then President Ferdinand
Marcos for the employer to provide rice to its employees; that when a land is
declared exempt from the CARP on the ground that it is not agricultural as of
the time the CARL took effect, the use and disposition of that land is entirely
and forever beyond DAR’s jurisdiction; and that, inasmuch as the subject
property was not agricultural from the very beginning, DAR has no power to
regulate the same. Petitioner also asserts that the CA cannot
uncharacteristically assume the role of trier of facts and resolve factual
questions not previously adjudicated by the lower tribunals; that MARO Elma
rendered the assailed MARO reports with bias against petitioner, and the
same were contradicted by the Investigating Team’s Report, which
confirmed that the subject property is still devoted to livestock farming; and
that there has been no change in petitioner’s business interest as an entity
engaged in livestock farming since its inception in 1960, though there was
admittedly a decline in the scale of its operations due to the illegal acts of
the squatter-occupants.
Our Ruling
The Petition is bereft of merit.
Let it be stressed that when the CA provided in its first Decision that
continuing review and verification may be conducted by the DAR pursuant to
DAR A.O. No. 9, the latter was not yet declared unconstitutional by this
Court. The first CA Decision was promulgated on April 29, 2005, while this
Court struck down as unconstitutional DAR A.O. No. 9, by way of Sutton, on
October 19, 2005. Likewise, let it be emphasized that the Espinas group filed
the Supplement and submitted the assailed MARO reports and certification
on June 15, 2005, which proved to be adverse to petitioner’s case. Thus, it
could not be said that the CA erred or gravely abused its discretion in
respecting the mandate of DAR A.O. No. 9, which was then subsisting and in
full force and effect.
While it is true that an issue which was neither alleged in the complaint nor
raised during the trial cannot be raised for the first time on appeal as it
would be offensive to the basic rules of fair play, justice, and due
process,54 the same is not without exception,55 such as this case. The CA,
under Section 3,56 Rule 43 of the Rules of Civil Procedure, can, in the
interest of justice, entertain and resolve factual issues. After all, technical
and procedural rules are intended to help secure, and not suppress,
substantial justice. A deviation from a rigid enforcement of the rules may
thus be allowed to attain the prime objective of dispensing justice, for
dispensation of justice is the core reason for the existence of
courts.57 Moreover, petitioner cannot validly claim that it was deprived of
due process because the CA afforded it all the opportunity to be
heard.58 The CA even directed petitioner to file its comment on the
Supplement, and to prove and establish its claim that the subject property
was excluded from the coverage of the CARP. Petitioner actively participated
in the proceedings before the CA by submitting pleadings and pieces of
documentary evidence, such as the Investigating Team’s Report and judicial
affidavits. The CA also went further by setting the case for hearing. In all
these proceedings, all the parties’ rights to due process were amply
protected and recognized.
With the procedural issue disposed of, we find that petitioner’s arguments
fail to persuade. Its invocation of Sutton is unavailing. In Sutton, we held:
In the case at bar, we find that the impugned A.O. is invalid as it
contravenes the Constitution. The A.O. sought to regulate livestock farms by
including them in the coverage of agrarian reform and prescribing a
maximum retention limit for their ownership. However, the deliberations of
the 1987 Constitutional Commission show a clear intent to exclude, inter
alia, all lands exclusively devoted to livestock, swine and poultry-raising. The
Court clarified in the Luz Farms case that livestock, swine and poultry-raising
are industrial activities and do not fall within the definition of "agriculture" or
"agricultural activity." The raising of livestock, swine and poultry is different
from crop or tree farming. It is an industrial, not an agricultural, activity. A
great portion of the investment in this enterprise is in the form of industrial
fixed assets, such as: animal housing structures and facilities, drainage,
waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts
and generators, extensive warehousing facilities for feeds and other
supplies, anti-pollution equipment like bio-gas and digester plants
augmented by lagoons and concrete ponds, deepwells, elevated water tanks,
pumphouses, sprayers, and other technological appurtenances.
Clearly, petitioner DAR has no power to regulate livestock farms which have
been exempted by the Constitution from the coverage of agrarian reform. It
has exceeded its power in issuing the assailed A.O.59
Indeed, as pointed out by the CA, the instant case does not rest on facts
parallel to those of Sutton because, in Sutton, the subject property remained
a livestock farm. We even highlighted therein the fact that "there has been
no change of business interest in the case of respondents."60 Similarly, in
Department of Agrarian Reform v. Uy,61 we excluded a parcel of land from
CARP coverage due to the factual findings of the MARO, which were
confirmed by the DAR, that the property was entirely devoted to livestock
farming. However, in A.Z. Arnaiz Realty, Inc., represented by Carmen Z.
Arnaiz v. Office of the President; Department of Agrarian Reform; Regional
Director, DAR Region V, Legaspi City; Provincial Agrarian Reform Officer,
DAR Provincial Office, Masbate, Masbate; and Municipal Agrarian Reform
Officer, DAR Municipal Office, Masbate, Masbate,62 we denied a similar
petition for exemption and/or exclusion, by according respect to the CA’s
factual findings and its reliance on the findings of the DAR and the OP that
the subject parcels of land were not directly, actually, and exclusively used
for pasture.63
Petitioner’s admission that, since 2001, it leased another ranch for its own
livestock is fatal to its cause.64 While petitioner advances a defense that it
leased this ranch because the occupants of the subject property harmed its
cattle, like the CA, we find it surprising that not even a single police and/or
barangay report was filed by petitioner to amplify its indignation over these
alleged illegal acts. Moreover, we accord respect to the CA’s keen
observation that the assailed MARO reports and the Investigating Team’s
Report do not actually contradict one another, finding that the 43 cows,
while owned by petitioner, were actually pastured outside the subject
property.
Finally, it is established that issues of Exclusion and/or Exemption are
characterized as Agrarian Law Implementation (ALI) cases which are well
within the DAR Secretary’s competence and jurisdiction.65 Section 3, Rule II
of the 2003 Department of Agrarian Reform Adjudication Board Rules of
Procedure provides:
Section 3. Agrarian Law Implementation Cases.
The Adjudicator or the Board shall have no jurisdiction over matters
involving the administrative implementation of RA No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law (CARL) of 1988 and
other agrarian laws as enunciated by pertinent rules and administrative
orders, which shall be under the exclusive prerogative of and cognizable by
the Office of the Secretary of the DAR in accordance with his issuances, to
wit:
xxxx
3.8 Exclusion from CARP coverage of agricultural land used for livestock,
swine, and poultry raising.
Thus, we cannot, without going against the law, arbitrarily strip the DAR
Secretary of his legal mandate to exercise jurisdiction and authority over all
ALI cases. To succumb to petitioner’s contention that "when a land is
declared exempt from the CARP on the ground that it is not agricultural as of
the time the CARL took effect, the use and disposition of that land is entirely
and forever beyond DAR’s jurisdiction" is dangerous, suggestive of self-
regulation. Precisely, it is the DAR Secretary who is vested with such
jurisdiction and authority to exempt and/or exclude a property from CARP
coverage based on the factual circumstances of each case and in accordance
with law and applicable jurisprudence. In addition, albeit parenthetically,
Secretary Villa had already granted the conversion into residential and golf
courses use of nearly one-half of the entire area originally claimed as
exempt from CARP coverage because it was allegedly devoted to livestock
production.lawphil1
In sum, we find no reversible error in the assailed Amended Decision and
Resolution of the CA which would warrant the modification, much less the
reversal, thereof.
WHEREFORE, the Petition is DENIED and the Court of Appeals Amended
Decision dated October 4, 2006 and Resolution dated March 27, 2008 are
AFFIRMED. No costs.
SO ORDERED.

19.
AGRA LAW (CASES #19-20) FULL TEXTS

STA. ROSA REALTY DEVELOPMENT CORPORATION (Petitioner) vs

AMANTE (et. al)
G.R. No. 112526             March 16, 2005
STA. ROSA REALTY DEVELOPMENT CORPORATION, Petitioner,
vs.
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.
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 A. 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 B.
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,
MARIANITO T. PEREZ, INOCENCIA S. PASQUIZA, AQUILINO B.
SUBOL, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B.
FERNANDEZ, 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 COURT OF APPEALS, 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.

x-------------------x

G.R. No. 118838             March 16, 2005

JUAN B. AMANTE, IGNACIO PETATE, DOMINGO CANUBAS,
FLORENCIO CANUBAS, CRESENCIO AMANTE, QUIRINO CASALME,
LEODEGARIO GONZALES, DOMINGO VILLA, JAIME BURGOS,
NICOMEDES PETATE, MAXIMINO MATIENZO, MAXIMO CANUBAS,
ELINO CRUZAT, RUFINO CRUZAT, FELICISIMO GONZALES,
QUINTILLANO LANGUE, TEODORO MANDANAS, SERGIO CRUZAT,
AGAPITO MATIENZO and SEVERINO DE SAGUM, Petitioner,
vs.
LUIS YULO, JESUS MIGUEL YULO, C-J YULO & SONS, INC., STA. ROSA
REALTY DEVELOPMENT CORPORATION, JOSE LAMBATIN, LAUREANO
LAUREL, GALICANO MAILOM, JR., REYNALDO OPENA, AGAPITO
PRECILLA, DANILO SUMADSAD, ALFREDO SUMADSAD, JUAN CANTAL,
INIGO MENDOZA, ALEJANDRO SANCHEZ, SENADOR RODRIGUEZ,
VICTOR MOLINAR, DANILO CANLOBO, RESTING CARAAN, IGNACIO
VERGARA, HANDO MERCADO, FAUSTINO MAILOM, CONRADO
BARRIENTOS, RENATO VISAYA, DANTE BATHAN, SERAPIO
NATIVIDAD, HONESTO TENORIO, NESTOR MERCADO, BIENVENIDO
OLFATO, RENE LIRAZAN, RUDY CANLOBO, BASIOLIO
MULINGTAPANG, ITO GONZALES, RENATO RINO, TINOY MABAGA,
PACIO PADILLA, JOHNNY REAMILLO, ROLANDO CARINGAL, IGNOY
VILLAMAYOR, ROMEO TANTENGCO, LODRING CARAAN, FREDO
MERCADO, TOMMY MENDOZA, RAFAEL ONTE, REY MANAIG, DICK
GASPAR, ANTONIO MALLARI, ALFREDO ANIEL, BARIT, ALBERTO
MANGUE, AGATON LUCIDO, ONYONG CANTAL, BAYANI LACSON,
ISKO CABILION, MANGUIAT, IGME OPINA, VILARETE, PEDRO
BENEDICTO, HECTOR BICO, RUFO SANCHEZ, LARRY DE LEON,
BARIVAR SAMSON and ROMEO NAVARRO, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

By virtue of the En Banc Resolution issued on January 13, 2004, the Court

authorized the Special First Division to suspend the Rules so as to allow it to
consider and resolve the second Motion for Reconsideration of
respondents,1 after the motion was heard on oral arguments on August 13,
2003. On July 9, 2004, 2 the Court resolved to submit for resolution the
second Motion for Reconsideration in G.R. No. 112526 together with G.R.
No. 118338 in view of the Resolution of the Court dated January 15, 2001
issued in G.R. No. 118838,3 consolidating the latter case with G.R. No.
112526, the issues therein being interrelated. 4 Hence, the herein Amended
Decision.

The factual background of the two cases is as follows:

The Canlubang Estate in Laguna is a vast landholding previously titled in the
name of the late Speaker and Chief Justice Jose Yulo, Sr. Within this estate
are two parcels of land (hereinafter referred to as the "subject property")
covered by TCT Nos. 81949 and 84891 measuring 254.766 hectares and
part of Barangay Casile, subsequently titled in the name of Sta. Rosa Realty
Development Corporation (SRRDC), the majority stockholder of which is C.J.
Yulo and Sons, Inc.

The subject property was involved in civil suits and administrative

proceedings that led to the filing of G.R. Nos. 112526 and 118838, thus:

Injunction Case  Filed by Amante, et al.

On December 6, 1985, Amante, et al., who are the private respondents

in G.R. No. 112526 and petitioners in G.R. No. 118838, instituted an
action for injunction with damages in the Regional Trial Court of Laguna
(Branch 24) against Luis Yulo, SRRDC, and several SRRDC security
personnel, docketed as Civil Case No. B-2333. Amante, et al. alleged that:
they are residents of Barangay Casile, Cabuyao, Laguna, which covers an
area of around 300 hectares; in 1910, their ancestors started occupying the
area, built their houses and planted fruit-bearing trees thereon, and since
then, have been peacefully occupying the land; some time in June 3, 1985,
SRRDC’s security people illegally entered Bgy. Casile and fenced the area;
SRRDC’s men also entered the barangay on November 4, 1985, cut down
the trees, burned their huts, and barred the lone jeepney from entering the
Canlubang Sugar Estate; as a result of these acts, Amante, et al. were
deprived of possession and cultivation of their lands. Thus, they claimed
damages, sought the issuance of permanent injunction and proposed that a
right of way be declared.5

In their Answer, the defendants denied the allegations and disclaimed any
control and supervision over its security personnel. Defendant SRRDC also
alleged that as the real owner of the property, it was the one that suffered
damages due to the encroachment on the property.6

A writ of preliminary injunction was issued by the trial court on August 17,
1987,7 but this was subsequently dissolved by the Court of Appeals (CA) on
April 22, 1988 in its decision in CA-G.R. SP No. 13908. 8

After trial on the merits, the trial court, on January 20, 1992, rendered a
decision ordering Amante, et al. to vacate the property, the dispositive
portion of which reads:
 WHEREFORE, premises considered, judgment is hereby rendered in
favor of the defendants and against the plaintiffs hereby dismissing the
complaint and amended complaint.

The plaintiffs are hereby ordered to vacate the parcels of land

belonging to the defendants Luis Yulo and Sta. Rosa Realty. They are
likewise enjoined from entering the subject parcels of land.

Although attorney’s fees and expenses of litigation are recoverable in

case of a clearly unfounded civil action against the plaintiff (Enervida
vs. De la Torre, 55 SCRA 339), this Court resolves not to award
attorney’s fees etc. in favor of the defendants because the plaintiffs
appear to have acted in good faith in filing the present civil action
(Salao vs. Salao, 70 SCRA 65) and that it would not be just and
equitable to award the same in the case at bar. (Liwanag vs. Court of
Appeals, 121 SCRA 354) Accordingly, the other reliefs prayed for by
the defendants are hereby dismissed.

SO ORDERED.9

Amante, et al. appealed the aforesaid decision to the CA, docketed as CA-
G.R. CV No. 38182.

On June 28, 1994, the CA affirmed with modification the decision of the trial
court in the injunction case. The dispositive portion of the appellate court’s
decision10 reads as follows:

WHEREFORE, the judgment herein appealed from is hereby AFFIRMED,

with the modification that the defendants-appellees are hereby
ordered, jointly and severally, to pay the plaintiffs-appellants nominal
damages in the amount of P5,000.00 per plaintiff. No pronouncement
as to costs.

SO ORDERED.11

Nominal damages were awarded by the CA because it found that SRRDC

violated Amante, et al.’s rights as possessors of the subject property. 12

Amante, et al. filed a motion for reconsideration thereof, pointing out the
DARAB’s decision placing the property under compulsory acquisition, and the
CA decision in CA-G.R. SP No. 27234, affirming the same.13 The CA,
however, denied the motion, with the modification that only SRRDC and the
defendants-security guards should be held jointly and severally liable for the
nominal damages awarded. It also made the clarification that the decision
should not preempt any judgment or prejudice the right of any party in the
agrarian reform case pending before the Supreme Court (G.R. No.
112526).14

Thus, Amante, et al. filed on March 2, 1995, herein petition, docketed

as G.R. No. 118838 on the following grounds:

4.1. The Court of Appeals decided the case contrary to law or

applicable Supreme Court decisions because:

4.1.1 First, petitioners may not be lawfully evicted from their

landholdings considering that:

-- (a) Petitioners are already the registered owners under the

torrens system of the properties in question since February 26,
1992 by virtue of RA 6657 or the Comprehensive Agrarian
Reform Law;

-- (b) The Court of Appeals has affirmed the Regional Trial Court
of Laguna’s dismissal of the ejectment cases filed by respondent
SRRDC against petitionerS; and

-- (c) Assuming for the sake of argument only that petitioners

are not yet the registered owners of the properties in question,
respondents may not raise the issue of ownership in this case for
injunction with damages, the same to be ventilated in a separate
action, not in this case brought to prevent respondents from
committing further acts of dispossession [Bacar v. del Rosario et
al., 171 SCRA 451 (1989)].

4.1.2 Second, petitioners are entitled to moral, exemplary damages

and attorney’s fees, instead of mere nominal damages, considering
that the Court of Appeals found respondents to have unlawfully and
illegally disturbed petitioners’ peaceful and continuous possession. 15

Ejectment Cases  Filed by SRRDC

Between October 1986 and August 1987, after the injunction case was filed
by Amante, et al., SRRDC filed with the Municipal Trial Court (MTC) of
Cabuyao, Laguna, several complaints for forcible entry with preliminary
injunction and damages against Amante, et al., docketed as Civil Cases Nos.
250, 258, 260, 262 and 266. SRRDC alleged that some time in July 1987,
they learned that Amante, et al., without their authority and through stealth
and strategy, were clearing, cultivating and planting on the subject property;
and that despite requests from SRRDC’s counsel, Amante, et al. refused to
vacate the property, prompting them to file the ejectment cases. 16 Amante,
et al. denied that SRRDC are the absolute owners of the property, stating
that they have been in peaceful possession thereof, through their
predecessors-in-interest, since 1910.17

On May 24, 1991, the MTC-Cabuyao rendered its decision in favor of SRRDC.
Amante, et al. were ordered to surrender possession and vacate the subject
property. The decision was appealed to the Regional Trial Court of Biñan,
Laguna (Assisting Court).

On February 18, 1992, the RTC dismissed the ejectment cases on the
ground that the subject property is an agricultural land being tilled by
Amante, et al., hence it is the Department of Agrarian Reform (DAR), which
has jurisdiction over the dispute.18 The RTC’s dismissal of the complaints was
brought to the CA via a petition for review, docketed as CA-G.R. SP No.
33382.19 In turn, the CA dismissed the petition per its Decision dated
January 17, 1995 on the ground that SRRDC failed to show any prior
physical possession of the subject property that would have justified the
filing of the ejectment cases.20 Also, the CA did not sustain the RTC’s finding
that the subject properties are agricultural lands and Amante, et al. are
tenant/farmers thereof, as the evidence on record does not support such
finding. The parties did not file any motion for reconsideration from the
Court of Appeals’ dismissal, hence, it became final and executory. 21

Administrative Proceedings

While the injunction and ejectment cases were still in process, it appears
that in August, 1989, the Municipal Agrarian Reform Office (MARO) issued a
Notice of Coverage to SRRDC, informing petitioners that the property
covered by TCT Nos. T-81949, T-84891 and T-92014 is scheduled for
compulsory acquisition under the Comprehensive Agrarian Reform Program
(CARP).22 SRRDC filed its "Protest and Objection" with the MARO on the
grounds that the area was not appropriate for agricultural purposes, as it
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.23 Thereafter, as narrated in the Decision of the Court dated
October 12, 2001 in G.R. No. 112526, the following proceedings ensued:

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.

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).

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.

On December 12, 1989, Secretary of Agrarian Reform Miriam

Defensor Santiago sent two (2) notices of acquisition to
petitioner, stating that petitioner’s landholdings covered by
TCT Nos. T-81949 and T-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 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 the 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 (CACF’s) to the Executive Director of the DAR
Adjudication Board for proper administrative valuation. Acting on the
CACF’s, 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.

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
counsel’s request and moved the hearing on April 4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board

for the latter to resolve SRRDC’s 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 Sangguniang Bayan
Resolution No. 45-89 dated March 29, 1989.

To avert any opportunity that the DARAB might distribute the lands to
the farmer beneficiaries, on April 30, 1991, petitioner filed a petition
with DARAB to disqualify private respondents as beneficiaries.
However, DARAB refused to address the issue of beneficiaries.24

...

On December 19, 1991, the DARAB promulgated a decision, affirming the

dismissal of the protest of SRRDC against the compulsory coverage of the
property covered by TCT Nos. 81949 and 84891. The decretal portion of the
decision 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.25

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum

directing the Land Bank of the Philippines (LBP) to open a trust account in
favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC property.

The titles in the name of SRRDC were cancelled and corresponding

TCTs were issued in the name of the Republic of the Philippines on
February 11, 1992,26 after which Certificates of Land Ownership
Award (CLOA) were issued in the name of the farmers-beneficiaries
on February 26, 1992.27

In the meantime, SRRDC had filed with the CA a petition for review of the
DARAB’s decision, docketed as CA-G.R. SP No. 27234.

On November 5, 1993, the CA affirmed the decision of DARAB, to wit:

 WHEREFORE, premises considered, the DARAB decision dated
December 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. 28

Hence, SRRDC filed on November 24, 1993, herein petition, docketed

as G.R. No. 112526 on the following grounds:

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS
JURISDICTION IN RULING THAT THE SRRDC PROPERTIES, DESPITE
THE UNDISPUTED FACT OF THEIR NON-AGRICULTURAL
CLASSIFICATION PRIOR TO RA 6657, ARE COVERED BY THE CARP
CONTRARY TO THE NATALIA REALTY DECISION OF THIS HONORABLE
COURT.

i. The SRRDC properties have been zoned and approved as

‘PARK’ since 1979.

ii. The SRRDC properties form part of a watershed area.

II

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS
JURISDICTION IN DISREGARDING ECOLOGICAL CONSIDERATIONS AS
MANDATED BY LAW.

III

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS
JURISDICTION IN AFFIRMING THE DISTRIBUTION OF THE SRRDC
PROPERTIES TO PRIVATE RESPONDENTS WHO HAVE BEEN
JUDICIALLY DECLARED AS SQUATTERS AND THEREFORE ARE NOT
QUALIFIED BENEFICIARIES PURSUANT TO THE CENTRAL MINDANAO
UNIVERSITY DECISION OF THIS HONORABLE COURT.

i. The acquisition of the SRRDC properties cannot be valid for

future beneficiaries.
 ii. Section 22 of RA 6657 insofar as it expands the coverage of
the CARP to ‘landless residents’ is unconstitutional.

IV

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS
JURISDICTION IN HOLDING THAT THE DARAB HAS JURISDICTION TO
PASS UPON THE ISSUE OF WHETHER THE SRRDC PROPERTIES ARE
SUBJECT TO CARP COVERAGE.29

On October 12, 2001, the Court rendered its Decision in G.R. No.
112526 only, setting aside the decision of the CA in CA-G.R. SP No. 27234
and ordering the remand of the case to the DARAB for re-evaluation and
determination of the nature of the land. The dispositive portion of the
Decision reads as follows:

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 re-
evaluation 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.30

It is the opinion of the Court in G.R. No. 112526, that the property is part
of a watershed, and that during the hearing at the DARAB, "there was proof
that the land may be excluded from the coverage of the CARP because of its
high slopes."31 Thus, the Court concluded that a remand of the case to the
DARAB for re-evaluation of the issue of coverage is appropriate in order to
resolve the true nature of the subject property. 32

In their Memorandum, Amante, et al. argues that there exist compelling

reasons to grant the second motion for reconsideration of the assailed
decision of the Court, to wit:
 2.1 Only QUESTIONS OF LAW are admittedly and undeniably at issue;
yet the Honorable Court reviewed the findings of facts of the Court
of Appeals and the DARAB although the case does not fall into any of
the well-recognized exceptions to conduct a factual review. Worse, the
12 October 2001 Decision assumed facts not proven before any
administrative, quasi-judicial or judicial bodies;

2.2 The DARAB and the Court of Appeals already found the land to be
CARPable; yet the Honorable Court remanded the case to DARAB
to re-evaluate if the land is CARPable;

2.3 The Decision did not express clearly and distinctly the facts and
the law on which it is based;

2.4 The Decision renewed the Temporary Restraining Order issued on

15 December 1993, issuance of which is barred by Sec. 55 of R.A.
6657; and

2.5 This Honorable Court denied private respondents’ Motion for

Reconsideration although issues raised therein were never passed
upon in the 12 October 2001 Decision or elsewhere. 33

The DAR and the DARAB, through the Office of the Solicitor General, did not
interpose any objection to the second motion for reconsideration. It also
maintained that if SRRDC’s claim that the property is watershed is true, then
it is the DENR that should exercise control and supervision in the disposition,
utilization, management, renewal and conservation of the property. 34

SRRDC meanwhile insists that there are no compelling reasons to give due
course to the second motion for reconsideration. 35

At the outset, the Court notes that petitioner designated its petition in G.R.
No. 112526 as one for review on certiorari of the decision of the CA. In the
same breath, it likewise averred that it was also being filed as a special civil
action for certiorari as public respondents committed grave abuse of
discretion.36 Petitioner should not have been allowed, in the first place, to
pursue such remedies simultaneously as these are mutually exclusive. 37

It is SRRDC’s claim that the CA committed grave abuse of discretion in

holding that the subject property is agricultural in nature. In support of its
contention, it argued, among others, that the subject property had already
been classified as "park" since 1979 under the Zoning Ordinance of Cabuyao,
as approved by the Housing and Land Use Regulatory Board (HLURB); that it
forms part of a watershed; and that the CA disregarded ecological
considerations.38 SRRDC also claimed that Amante, et al. are not qualified
beneficiaries.39

Clearly, these issues are factual in nature, which the Court, as a rule, should
not have considered in this case. However, there are recognized exceptions,
e.g., when the factual inferences of the appellate court are manifestly
mistaken; the judgment is based on a misapprehension of facts; or the CA
manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different legal conclusion. 40 The present cases fall
under the above exceptions.

Thus, in order to finally set these cases to rest, the Court shall resolve the
substantive matters raised, which in effect comes down to the issue of the
validity of the acquisition of the subject property by the Government under
Republic Act (R.A.) No. 6657, or the Comprehensive Agrarian Reform Law of
1988 (CARL).

As noted earlier, the DARAB made its finding regarding the nature of the
property in question, i.e., the parcels of land are agricultural and may be the
subject of compulsory acquisition for distribution to farmer-beneficiaries,
thus:

Ocular inspections conducted by the Board show that the subject

landholdings have been under the possession and tillage of the DAR
identified potential beneficiaries which they inherited from their
forebears (workers of the Yulo Estate). They are bonafide residents
and registered voters (DARAB Exhibits "C" and "J") of Barangay Casile,
Cabuyao, Laguna. There is a barangay road leading toward the
barangay school and sites and the settlement has a barangay hall,
church, elementary school buildings (DARAB Exhibit "Q"), Comelec
precincts (DARAB Exhibits "J-1" and J-2"), and other structures extant
in progressive communities. The barangay progressive development
agencies, like the DECS, DA, COMELEC, DAR and Support Services of
Land Bank, DPWH, DTI and the Cooperative Development Authority
have extended support services to the community (DARAB Exhibits "I",
"K" to "K-3", "L", "M", "N", "O", "P" to "P-6"). More importantly,
subject landholdings are suitable for agriculture. Their
topography is flat to undulating 3-15% slope. (Testimony of
Rosalina Jumaquio, Agricultural Engineer, DAR, TSN, June 21,
1991, DARAB Exhibits "F" and "H"). Though some portions are
over 18% slope, nevertheless, clearly visible thereat are fruit-
bearing trees, like coconut, coffee, and pineapple plantations,
etc. (see Petitioners Exhibits "A" to "YYY" and DARAB Exhibits
 "A" to "S", Records). In other words, they are already
productive and fully developed.

...

As the landholdings of SRRDC subject of the instant

proceedings are already developed not only as a community
but also as an agricultural farm capable of sustaining daily
existence and growth, We find no infirmity in placing said
parcels of land under compulsory coverage. They do not belong
to the exempt class of lands. The claim that the landholding of
SRRDC is a watershed; hence, belonging to the exempt class of
lands is literally "throwing punches at the moon" because the
DENR certified that "the only declared watershed in Laguna
Province and San Pablo City is the Caliraya-Lumot Rivers
(Petitioner’s Exhibit "A"). A sensu contrario, the landholdings
subject herein are not.41 (Emphasis supplied)

The evidence on record supports these findings, to wit:

1. Certification dated January 16, 1989 by the OIC Provincial

Environment and Natural Resources Office of Laguna that the only
declared watershed in the Laguna province and San Pablo City is the
Caliraya-Lumot Rivers No. 1570 dated September 1, 1976;42

2. Map prepared by Agricultural Engineer Rosalina H. Jumaquio

showing that: a) the topography of the property covered by TCT No. T-
84891 topography is flat to undulating with a 5 to 10% slope; (b) it is
suitable to agricultural crops; and (c) the land is presently planted with
diversified crops;43

3. Certification dated August 28, 1989 by APT Felicito Buban of the

Department of Agriculture of Laguna that, per his ocular inspection,
the subject property is an agricultural area, and that the inhabitants’
main occupation is farming;44

4. Pictures taken by MARO Belen La Torre of Cabuyao, Laguna,

showing that the property is cultivated and inhabited by the farmer-
beneficiaries;45

SRRDC however, insists that the property has already been classified as a
"municipal park" and beyond the scope of CARP. To prove this, SRRDC
submitted the following:
 1. Certification dated March 1, 1991 by the Municipality of Cabuyao,
Laguna that the entire barangay of Casile is delineated as Municipal
Park;46

2. Certification dated March 11, 1991 by the Housing and Land Use
Regulatory Board that the parcels of land located in Barangay Casile
are within the Municipal Park, based on the municipality’s approved
General Land Use Plan ratified by the Housing and Land Use
Regulatory Board as per Resolution No. 38-2 dated June 25, 1980; 47

3. Photocopies of pictures taken by Mr. Ernesto Garcia, Officer-in-

Charge of the Special Project Section of CJ Yulo and Sons, Inc., of
portions of Barangay Casile;48

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.49 Municipal Ordinance No. 110-54 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. 50 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,51 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 lands. Thus, it was stated:

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 …52 (Emphasis supplied)
Under Section 3 (c) of R.A. No. 6657, agricultural land is defined as land
devoted to agricultural activity and not classified as mineral, forest,
residential, commercial or industrial land. Section 3 (b) meanwhile defines
agricultural activity as the cultivation of the soil, planting of crops, growing
of fruit trees, raising of livestock, poultry or fish, including the harvesting of
such products, and other farm activities, and practices performed by a
farmer in conjunction with such farming operations done by persons whether
natural or juridical.

Before Barangay Casile was classified into a municipal park by the local
government of Cabuyao, Laguna in November 1979, it was part of a vast
property popularly known as the Canlubang Sugar Estate. SRRDC claimed
that in May 1979, "the late Miguel Yulo … allowed the employees of the Yulo
group of companies to cultivate a maximum area of one hectare each
subject to the condition that they should not plant crops being grown by the
Canlubang Sugar Estate, like coconuts and coffee, to avoid confusion as to
ownership of crops."53 The consolidation and subdivision plan surveyed for
SRRDC on March 10-15, 198454 also show that the subject property is sugar
land. Evidently, the subject property is already agricultural at the time the
municipality of Cabuyao enacted the zoning ordinance, and such ordinance
should not affect the nature of the land. More so since the municipality
of Cabuyao did not even take any step to utilize the property as a
park.

SRRDC cites the case of Natalia Realty, Inc. vs. DAR,55 wherein it was ruled
that lands not devoted to agricultural activity and not classified as mineral or
forest by the DENR and its predecessor agencies, and not classified in town
plans and zoning ordinances as approved by the HLURB and its preceding
competent authorities prior to the enactment of R.A. No. 6657 on June 15,
1988, are outside the coverage of the CARP. Said ruling, however, finds no
application in the present case. As previously stated, Municipal Ordinance
No. 110-54 of the Municipality of Cabuyao did not provide for any retroactive
application nor did it convert existing agricultural lands into residential,
commercial, industrial, or institutional. Consequently, the subject property
remains agricultural in nature and therefore within the coverage of the
CARP.

Only on March 9, 2004, SRRDC filed with the Court a Manifestation pointing
out DAR Order No. (E)4-03-507-309 dated February 17, 2004, exempting
from CARP coverage two parcels of land owned by SRRDC and covered by
TCT Nos. T-85573 and T-92014. 56 The DAR found that these properties have
been re-classified into Municipal Parks by the Municipal Ordinance of
Cabuyao, Laguna, and are part of the Kabangaan-Casile watershed, as
certified by the DENR.57
The Court notes however that the said DAR Order has absolutely no bearing
on these cases. The herein subject property is covered by TCT Nos. 81949
and 34891, totally different, although adjacent, from the property referred
to in said DAR Order.

SRRDC also contends that the property has an 18% slope and over and
therefore exempt from acquisition and distribution under Section 10 of R.A.
No. 6657. What SRRDC opted to ignore is that Section 10, as implemented
by DAR Administrative Order No. 13 dated August 30, 1990, also
provides that those with 18% slope and over but already developed
for agricultural purposes as of June 15, 1988, may be allocated to
qualified occupants.58 Hence, even assuming that the property has an
18% slope and above, since it is already developed for agricultural purposes,
then it cannot be exempt from acquisition and distribution. Moreover, the
topography maps prepared by Agricultural Engineer Rosalina H. Jumaquio
show that the property to be acquired has a 5-10% flat to undulating
scope;59 that it is suitable to agricultural crops; 60 and it is in fact already
planted with diversified crops.61

Also, the Certification dated July 1, 1991 by Geodetic Engineer Conrado R.

Rigor that the top portion of Barangay Casile has a 0 to 18% slope while the
side of the hill has a 19 to 75% slope, 62 was presented by SRRDC only
during the proceedings before the CA which had no probative value in a
petition for review proceedings. The Court notes that SRRDC had been given
ample time and opportunity by the DARAB to prove the grounds for its
protest and objection but miserably failed to take advantage of such time
and opportunity63 in the DARAB proceedings.

SRRDC also contends that the property is part of a watershed, citing as

evidence, the Certification dated June 26, 1991 by the Laguna Lake
Development Authority that Barangay Casile is part of the watershed area of
the Laguna Lake Basin,64 and the Final Report for Watershed Area
Assessment Study for the Canlubang Estate dated July 1991 undertaken by
the Engineering & Development Corporation of the Philippines. 65 It must be
noted, however, that these pieces of evidence were likewise brought to
record only when petitioner filed its petition for review with the CA. The
DARAB never had the opportunity to assess these pieces of evidence.

The DARAB stated:

Noting the absence of evidence which, in the nature of things, should

have been submitted by landowner SRRDC and to avoid any claim of
deprivation of its right to prove its claim to just compensation (Uy v.
Genato, 57 SCRA 123). We practically directed its counsel in not only
 one instance, during the series of hearings conducted, to do so. We
even granted continuances to give it enough time to prepare and be
ready with the proof and documents. To Our dismay, none was
submitted and this constrained Us to take the failure/refusal of SRRDC
to present evidence as a waiver or, at least, an implied acceptance of
the valuation made by the DAR.66

The same goes with the CA, which did not have the discretion to consider
evidence in a petition for certiorari or petition for review on certiorari outside
than that submitted before the DARAB. The CA noted petitioner’s failure to
present evidence in behalf of its arguments, thus:

. . . It must be recalled that petitioner Sta. Rosa Realty itself had

asked the DARAB in a petition dated March 18, 1991 to allow it ‘to
adduce evidence in support of its position that the subject parcels of
land are not covered by the CARP beginning on the scheduled hearing
dated April 4, 1991.’ And DARAB obliged as in fact the petitioner
commenced to introduce evidence. If petitioner failed to complete the
presentation of evidence to support its claim of exemption from CARP
coverage, it has only itself to blame for which DARAB cannot be
accused of not being impartial.67

Consequently, there is no need to order the remand of the case to the

DARAB "for re-evaluation and determination of the nature of the parcels of
land involved." It runs contrary to orderly administration of justice and
would give petitioner undue opportunity to present evidence in support of its
stance, an opportunity it already had during the DARAB proceedings, and
which opportunity it regrettably failed to take advantage of.

More significantly however, it is the DAR Secretary that originally

declared the subject property as falling under the coverage of the
CARP.

Moreover, DAR Administrative Order No. 13, Series of 1990 (Rules and
Procedure Governing Exemption of Lands from CARP Coverage under Section
10, R.A. No. 6657) provides:

I. LEGAL MANDATE

The general policy under CARP is to cover as much lands suitable for
agriculture as possible. However, Section 10, RA 6657 excludes and
exempts certain types of lands from the coverage of CARP, to wit:
 A. Lands actually, directly and exclusively used and found to be
necessary for parks, wildlife, forest reserves, reforestation, 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 thereof, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by the
inmates, government and private research and quarantine centers;
and

...

II. POLICIES

In the application of the aforecited provision of law, the following

guidelines shall be observed:

A. For an area in I.A to be exempted from CARP coverage, it must be

"actually, directly and exclusively used and found to be necessary" for
the purpose so stated.

...

C. Lands which have been classified or proclaimed, and/or actually

directly and exclusively used and found to be necessary for parks,
wildlife, forest reserves, fish sanctuaries and breeding grounds, and
watersheds and mangroves shall be exempted from the coverage of
CARP until Congress, taking into account ecological, developmental
and equity considerations, shall have determined by law, the specific
limits of public domain, as provided for under Sec. 4(a) of RA 6657,
and a reclassification of the said areas or portions thereof as alienable
and disposable has been approved. (Emphasis supplied)

In order to be exempt from coverage, the land must have been classified or

proclaimed and actually, directly and exclusively used and found to be
necessary for watershed purposes.68 In this case, at the time the DAR issued
the Notices of Coverage up to the time the DARAB rendered its decision on
the dispute, the subject property is yet to be officially classified or
proclaimed as a watershed and has in fact long been used for agricultural
purposes. SRRDC relies on the case of Central Mindanao University (CMU)
vs. DARAB,69 wherein the Court ruled that CMU is in the best position to
determine what property is found necessary for its use. SRRDC claims that it
is in the best position to determine whether its properties are "necessary"
for development as park and watershed area.70

But SRRDC’s reliance on the CMU case is flawed. In the CMU case, the
subject property from the very beginning was not alienable and disposable
because Proclamation No. 476 issued by the late President Carlos P. Garcia
already reserved the property for the use of the school. Besides, the subject
property in the CMU case was actually, directly and exclusively used and
found to be necessary for educational purposes.

In the present case, the property is agricultural and was not actually and
exclusively used for watershed purposes. As records show, the subject
property was first utilized for the purposes of the Canlubang Sugar
Estate.71 Later, petitioner claimed that the occupants were allowed to
cultivate the area so long as they do not plant crops being grown by the
Canlubang Sugar Estate in order to avoid confusion as to ownership
thereof.72 Thus, based on its own assertions, it appears that it had benefited
from the fruits of the land as agricultural land. Now, in a complete
turnaround, it is claiming that the property is part of a watershed.

Furthermore, in a belated attempt to prove that the subject property is part

of a watershed that must be environmentally protected, SRRDC submitted
before the Court a Final Report dated February 1994 undertaken by the
Ecosystems Research and Development Bureau (ERDB) of the DENR entitled,
"Environmental Assessment of the Casile and Kabanga-an River
Watersheds."73 The study, according to SRRDC, was made pursuant to a
handwritten instruction issued by then President Fidel V. Ramos. The study
noted that, "the continuing threat of widespread deforestation and unwise
land use practices have resulted in the deteriorating condition of the
watersheds."74 But the Court also notes the Memorandum for the President
dated September 1993 by then DENR Secretary Angel C. Alcala that, after a
field inspection conducted by the DENR’s Regional Executive Director and the
Provincial and Community Natural Resource Officers, it was found that:

...

2. Many bankal trees were found growing in the watershed/CARP

areas, including some which have been coppiced, and that water
conduits for domestic and industrial uses were found installed at the
watershed area claimed by the Yulos. Records further show that in the
1970s, a Private Land Timber Permit was issued to Canlubang Sugar
Estate thru its marketing arm, the Sta. Rosa Realty Devpt. Corp.
 3. Resident farmers denied that they have been cutting bankal trees
and volunteered the information that one of the Estates’ security
guards was dismissed for cutting and transporting bankal trees. The
trees cut by the dismissed security guard were found stacked adjacent
to the Canlubang Security Agency’s headquarters.75

Evidently, SRRDC had a hand in the degradation of the area, and now wants
to put the entire blame on the farmer-beneficiaries. It is reasonable to
conclude that SRRDC is merely using "ecological considerations" to avert any
disposition of the property adverse to it.

SRRDC also objects to the identification of Amante, et al. as beneficiaries of

the subject property. Suffice it to say that under Section 15 of R.A. No.
6657, the identification of beneficiaries is a matter involving strictly the
administrative implementation of the CARP, a matter which is exclusively
vested in the Secretary of Agrarian Reform, through its authorized offices.
Section 15 reads:

SECTION 15. Registration of Beneficiaries. — The DAR in coordination

with the Barangay Agrarian Reform Committee (BARC) as organized in
this Act, shall register all agricultural lessees, tenants and farmworkers
who are qualified to be beneficiaries of the CARP. These potential
beneficiaries with the assistance of the BARC and the DAR shall
provide the following data:

(a) names and members of their immediate farm household;

(b) owners or administrators of the lands they work on and the

length of tenurial relationship;

(c) location and area of the land they work;

(d) crops planted; and

(e) their share in the harvest or amount of rental paid or wages

received.

A copy of the registry or list of all potential CARP beneficiaries in the

barangay shall be posted in the barangay hall, school or other public
buildings in the barangay where it shall be open to inspection by the
public at all reasonable hours.

Meanwhile, Administrative Order No. 10 (Rules and Procedures Governing

the Registration of Beneficiaries), Series of 1989, provides:
 SUBJECT: I. PREFATORY STATEMENT

Pursuant to Section 15, Chapter IV, of the Comprehensive Agrarian

Reform Law of 1988, the DAR, in coordination with the Barangay
Agrarian Reform Committee (BARC), as organized pursuant to RA
6657, shall register all agricultural lessees, tenants and farmworkers
who are qualified beneficiaries of the CARP. This Administrative Order
provides the Implementing Rules and Procedures for the said
registration.

...

B. Specific

1. Identify the actual and potential farmer-beneficiaries of the CARP.

In Lercana vs. Jalandoni,76 the Court categorically stated that:

… the identification and selection of CARP beneficiaries are matters

involving strictly the administrative implementation of the CARP, a
matter exclusively cognizable by the Secretary of the Department of
Agrarian Reform, and beyond the jurisdiction of the DARAB. 77

The farmer-beneficiaries have already been identified in this case. Also, the
DAR Secretary has already issued Notices of Coverage and Notices of
Acquisition pertaining to the subject property. It behooves the courts to
exercise great caution in substituting its own determination of the issue,
unless there is grave abuse of discretion committed by the administrative
agency,78 which in these cases the Court finds none.

SRRDC questions the constitutionality of Section 22 of R.A. No. 6657, which

reads in part:

SECTION 22. Qualified Beneficiaries. The lands covered by the CARP

shall be distributed as much as possible to landless residents of the
same barangay, or in the absence thereof, landless residents of the
same municipality in the following order of priority.

(a) agricultural lessees and share tenants;

(b) regular farmworkers;

(c) seasonal farmworkers;

 (d) other farmworkers;

(e) actual tillers or occupants of public lands;

(f) collectives or cooperatives of the above beneficiaries; and

(g) others directly working on the land.

...

SRRDC argues that Section 22 "sweepingly declares landless residents as

beneficiaries of the CARP (to mean also squatters)," in violation of Article
XIII, Section 4 of the Constitution, which aims to benefit only the landless
farmers and regular farmworkers.79

The Court cannot entertain such constitutional challenge. The requirements

before a litigant can challenge the constitutionality of a law are well-
delineated, viz.:

(1) The existence of an actual and appropriate case;

(2) A personal and substantial interest of the party raising the

constitutional question;

(3) The exercise of judicial review is pleaded at the earliest

opportunity; and

(4) The constitutional question is the lis mota of the

case.80 (Emphasis supplied)

Earliest opportunity means that the question of unconstitutionality of the act

in question should have been immediately raised in the proceedings in the
court below,81 in this case, the DAR Secretary. It must be pointed out that all
controversies on the implementation of the CARP fall under the jurisdiction
of the DAR, even though they raise questions that are also legal or
constitutional in nature.82 The earliest opportunity to raise a constitutional
issue is to raise it in the pleadings before a competent court that can resolve
the same, such that, "if it is not raised in the pleadings, it cannot be
considered at the trial, and, if not considered at the trial, it cannot be
considered on appeal."83 Records show that SRRDC raised such constitutional
challenge only before this Court despite the fact that it had the opportunity
to do so before the DAR Secretary. The DARAB correctly refused to deal on
this issue as it is the DAR Secretary who, under the law, has the authority to
determine the beneficiaries of the CARP. This Court will not entertain
questions on the invalidity of a statute where that issue was not specifically
raised, insisted upon, and adequately argued84 in the DAR.

Likewise, the constitutional question raised by SRRDC is not the very lis

mota in the present case. Basic is the rule that every law has in its favor the
presumption of constitutionality, and to justify its nullification, there must be
a clear and unequivocal breach of the Constitution, and not one that is
doubtful, speculative or argumentative. 85 The controversy at hand is
principally anchored on the coverage of the subject property under the
CARP, an issue that can be determined without delving into the
constitutionality of Section 22 of R.A. No. 6657. While the identification of
Amante, et al. as farmer-beneficiaries is a corollary matter, yet, the same
may be resolved by the DAR.

SRRDC questions the DARAB’s jurisdiction to entertain the question of

whether the subject property is subject to CARP coverage.

According to SRRDC, such authority is vested with the DAR Secretary who
has the exclusive prerogative to resolve matters involving the administrative
implementation of the CARP and agrarian laws and regulations. 86

There is no question that the power to determine whether a property is

subject to CARP coverage lies with the DAR Secretary. Section 50 of R.A. No.
6657 provides that:

SEC. 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).

...

The DAR’s jurisdiction under Section 50 of R.A. No. 6657 is two-fold. The
first is essentially executive and pertains to the enforcement and
administration of the laws, carrying them into practical operation and
enforcing their due observance, while the second is judicial and involves the
determination of rights and obligations of the parties. 87

Pursuant to its judicial mandate of achieving a just, expeditious and

inexpensive determination of every action or proceeding before it, 88 the DAR
adopted the DARAB Revised Rules, Rule II (Jurisdiction of the Adjudication
Board) of which provides:
SECTION 1. Primary, Original and Appellate Jurisdiction. – The
Agrarian Reform Adjudication Board shall have primary jurisdiction,
both original and appellate, to determine and adjudicate all agrarian
disputes, cases, controversies, and matters or incidents involving the
implementation of the Comprehensive Agrarian Reform Program under
Republic Act No. 6657, Executive Order Nos. 229, 228 and 129-A,
Republic Act No. 3844 as amended by Republic Act No. 6389,
Presidential Decree No. 27 and other agrarian laws and their
implementing rules and regulations.

Specifically, such jurisdiction shall extend over but not be limited to

the following:

a) Cases involving the rights and obligations of persons engaged in the

cultivation and use of agricultural land covered by the Comprehensive
Agrarian Reform Program (CARP) and other agrarian laws;

b) Cases involving the valuation of land, and determination and

payment of just compensation, fixing and collection of lease rentals,
disturbance compensation, amortization payments, and similar
disputes concerning the functions of the Land Bank;

c) Cases involving the annulment or cancellation of orders or decisions

of DAR officials other than the Secretary, lease contracts or deeds of
sale or their amendments under the administration and disposition of
the DAR and LBP;

d) Cases arising from, or connected with membership or

representation in compact farms, farmers’ cooperatives and other
registered farmers’ associations or organizations, related to land
covered by the CARP and other agrarian laws;

e) Cases involving the sale, alienation, mortgage, foreclosure, pre-

emption and redemption of agricultural lands under the coverage of
the CARP or other agrarian laws;

f) Cases involving the issuance of Certificate of Land Transfer (CLT),

Certificate of Land Ownership Award (CLOA) and Emancipation Patent
(EP) and the administrative correction thereof;

g) And such other agrarian cases, disputes, matters or concerns

referred to it by the Secretary of the DAR.
 Provided, however, that matters involving strictly the
administrative implementation of the CARP and other agrarian
laws and regulations, shall be the exclusive prerogative of and
cognizable by the Secretary of the DAR. (Emphasis supplied)

On the other hand, Administrative Order No. 06-00, 89 which provides for the
Rules of Procedure for Agrarian Law Implementation (ALI) Cases, govern the
administrative function of the DAR. Under said Rules of Procedure, the DAR
Secretary has exclusive jurisdiction over classification and identification of
landholdings for coverage under the CARP, including protests or oppositions
thereto and petitions for lifting of coverage. Section 2 of the said Rules
specifically provides, inter alia, that:

SECTION 2. Cases Covered. - These Rules shall govern cases falling

within the exclusive jurisdiction of the DAR Secretary which shall
include the following:

(a) Classification and identification of landholdings for coverage

under the Comprehensive Agrarian Reform Program (CARP),
including protests or oppositions thereto and petitions for
lifting of coverage;

(b) Identification, qualification or disqualification of potential

farmer-beneficiaries;

(c) Subdivision surveys of lands under CARP;

(d) Issuance, recall or cancellation of Certificates of Land Transfer

(CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the
purview of Presidential Decree (PD) No. 816, including the issuance,
recall or cancellation of Emancipation Patents (EPs) or Certificates of
Land Ownership Awards (CLOAs) not yet registered with the Register
of Deeds;

(e) Exercise of the right of retention by landowner; . . . (Emphasis

supplied)

Thus, the power to determine whether a property is agricultural and subject

to CARP coverage together with the identification, qualification or
disqualification of farmer-beneficiaries lies with the DAR Secretary. 90

Significantly, the DAR had already determined that the properties

are subject to expropriation under the CARP and has distributed the
same to the farmer-beneficiaries.
Initially, the LBP forwarded the two Compulsory Acquisition Claim Folders
(CACF) covering the subject properties to the DARAB for summary
proceedings for the sole purpose of determining just compensation. SRRDC
then sent a letter to the LBP claiming that the subject properties were
exempt from CARP coverage and subject of a pending petition for land
conversion. As a consequence, the DARAB asked the DAR Secretary to first
resolve the issues raised by SRRDC before it can proceed with the land
valuation proceedings. In response, the DAR, through the Undersecretary for
Operations and the Regional Director of Region IV, submitted its report
stating that: (1) the property is subject to compulsory acquisition by virtue
of the Notice of Coverage issued on August 11, 1989, and Notice of
Acquisition issued on December 12, 1989, and that it was subject to CARP
coverage per Section IV D of DAR Administrative Order No. 1, Series of
1990; and (2) there was no pending petition for land conversion involving
the subject property. When SRRDC petitioned the DARAB to resolve the
issue of exemption from coverage, it was only then that the DARAB took
cognizance of said issue.91

As the DARAB succinctly pointed out, it was SRRDC that initiated and
invoked the DARAB’s jurisdiction to pass upon the question of CARP
coverage. As stated by the DARAB:

4.5.2.2. The ISSUE ON CARP COVERAGE was initiated and

incorporated in said proceeding, at the instance of petitioner itself,
by filing a petition dated March 18, 1991, … Prayed therein were that
DARAB:

1. Take cognizance and assume jurisdiction  over the question of

CARP coverage of the subject parcels of land;

2. Defer or hold in abeyance the proceedings for administrative

valuation of the subject properties pending determination of the
question of CARP coverage;

3. Allow respondent SRRDC to adduce evidence in support of its

position that the subject parcels of land are not covered by the CARP
beginning on the scheduled hearing date of April 4, 1991" (p.3;
emphasis and underscoring supplied).

Upon persistent request of petitioner SRRDC, it was accommodated by

DARAB and a counsel of SRRDC even took the witness stand. Its
lawyers were always in attendance during the scheduled hearings until
it was time for SRRDC to present its own evidence.
4.5.2.3. But, as earlier stated, despite the open session proddings by
DARAB for SRRDC to submit evidence and the rescheduling for,
allegedly, they are still collating the evidence, nay, the request that it
be allowed to adduce evidence, none was adduced and this
constrained public respondent to declare SRRDC as having waived its
right to present evidence. And, after the remaining parties were heard,
the hearing was formally terminated.

...

4.5.3. Needless to state, the jurisdictional objection (CARP

coverage), now being raised herein was not one of the original
matters in issue. Principally, DARAB was called upon under
Section 16 of Republic Act No. 6657 to resolve a land valuation
case. But SRRDC itself insisted that DARAB should take
cognizance thereof in the same land valuation proceeding. And,
SRRDC, through its lawyers, actively participated in the
hearings conducted.

4.5.4. It was only when an adverse decision was rendered by

DARAB that the jurisdictional issue was raised in the petition
for review it filed with the Honorable Court of Appeals. It was
also only then that petitioner presented proof/evidence.

...

4.5.6. Public respondents (DAR/DARAB) are not unmindful of the rule

that matter of jurisdiction may be raised at any stage of the
proceeding. But for two serious considerations, the applicability thereof
in the case at bar should not be allowed.

4.5.6.1. The fact [part (municipal/industrial) and/or watershed] upon

which the jurisdictional issue interchangeably hinges were not
established during the hearing of the case. No proof was adduced.
That the matter of CARP coverage is strictly administrative
implementation of CARP and, therefore, beyond the competence of
DARAB, belonging, as it does, to the DAR Secretary, was not even
alleged, either before DARAB or the Honorable Court of Appeals, the
numerous petitions/incidents filed notwithstanding. Be it that as it
may, the records of the case show that initially DARAB refused to take
cognizance thereof and, in fact, forwarded the issue of CARP coverage
to the office of the DAR Secretary. It was only when it was returned to
DARAB by said office that proceedings thereon commenced pursuant
to Section 1(g) of Rule II of the DARAB Revised Rules of Procedure.
 4.5.6.2. Petitioner is now estopped from assailing the
jurisdiction of DARAB. First, it expressly acknowledged the
same, in fact invoked it, when it filed its petition (Annex "4");
and, second, during the scheduled hearings, SRRDC, through its
counsel, actively participated, one of its counsel (sic) even
testifying. It may not now be allowed to impugn the
jurisdiction of public respondent …92 (Emphasis supplied)

In CA-G.R. SP No. 27234, the CA likewise found that it was SRRDC that
called upon the DARAB to determine the issue and it, in fact, actively
participated in the proceedings before it. 93 It was SRRDC’s own act of
summoning the DARAB’s authority that cured whatever jurisdictional defect
it now raises. It is elementary that the active participation of a party in a
case pending against him before a court or a quasi-judicial body, is
tantamount to a recognition of that court’s or body’s jurisdiction and a
willingness to abide by the resolution of the case and will bar said party from
later on impugning the court’s or body’s jurisdiction. 94

Moreover, the issue of jurisdiction was raised by SRRDC only before the CA.
It was never presented or discussed before the DARAB for obvious reasons,
i.e., it was SRRDC itself that invoked the latter’s jurisdiction. As a rule, when
a party adopts a certain theory, and the case is tried and decided upon that
theory in the court below, he will not be permitted to change his theory on
appeal.95 Points of law, theories, issues and arguments not brought to the
attention of the lower court need not be, and ordinarily will not be,
considered by a reviewing court, as these cannot be raised for the first time
at such late stage.96 To permit SRRDC to change its theory on appeal would
not only be unfair to Amante, et al. but would also be offensive to the basic
scales of fair play, justice and due process.97

Finally, the Court notes that then DAR Secretary Benjamin T. Leong issued a
Memorandum on July 11, 1991, ordering the opening of a trust account in
favor of SRRDC. In Land Bank of the Philippines vs. Court of Appeals, this
Court struck down as void DAR Administrative Circular No. 9, Series of 1990,
providing for the opening of trust accounts in lieu of the deposit in cash or in
bonds contemplated in Section 16 (e) of R.A. No. 6657. As a result, the DAR
issued Administrative Order No. 2, Series of 1996, converting trust accounts
in the name of landowners into deposit accounts. 98 Thus, the trust account
opened by the LBP per instructions of DAR Secretary Benjamin T. Leong
should be converted to a deposit account, to be retroactive in application in
order to rectify the error committed by the DAR in opening a trust account
and to grant the landowners the benefits concomitant to payment in cash or
LBP bonds prior to the ruling of the Court in Land Bank of the Philippines vs.
Court of Appeals. The account shall earn a 12% interest per annum from the
time the LBP opened a trust account up to the time said account was
actually converted into cash and LBP bonds deposit accounts.

Given the foregoing conclusions, the petition filed in G.R. No. 118838,
which primarily rests on G.R. No. 112526, should be granted.

The judgments of the trial court in the injunction case (Civil Case No. B-
2333) and the CA in CA-G.R. SP No. 38182 were premised on SRRDC’s
transfer certificates of title over the subject property. The trial court and the
CA cannot be faulted for denying the writ of injunction prayed for by
Amante, et al. since at the time the trial court rendered its decision in the
injunction case on January 20, 1992, SRRDC was still the holder of the titles
covering the subject property. The titles in its name were cancelled and
corresponding TCTs were issued in the name of the Republic of the
Philippines on February 11, 1992, and CLOAs were issued to the farmer-
beneficiaries on February 26, 1992. When Amante, et al., in their motion for
reconsideration filed in CA-G.R. SP No. 38182, brought to the CA’s attention
the issuance of the CLOAs, the CA, per Resolution dated January 19, 1995,
reiterated its ruling that "whether or not the subject property is covered by
the Comprehensive Agrarian Reform Law (R.A. No. 6657) is the subject
matter of a separate case, and we cannot interfere with the same at the
present time." The CA further stated that "(O)ur present decision is,
therefore, not intended to preempt any judgment or prejudice the right of
any party in the said case."99 It must be noted that at that juncture, the
DARAB Decision and the CA decision in CA-G.R. SP No. 27234, finding the
subject property covered by the CARP Law, is yet to be finally resolved by
this Court in G.R. No. 112526 and in fact, a temporary restraining order
was issued by the Court on December 15, 1993, enjoining the DARAB from
enforcing the effects of the CLOAs. Amante, et al. was likewise restrained
from further clearing the subject property. 100 Hence, the decision of the trial
court and the CA denying the writ of injunction was warranted.

Nevertheless, considering that the subject property is agricultural and may

be acquired for distribution to farmer-beneficiaries identified by the DAR
under the CARP, the transfer certificates of title issued in the name of the
Republic of the Philippines and the CLOAs issued by the DAR in the names of
Amante, et al.,101 are valid titles and therefore must be upheld. By virtue
thereof, Amante, et al. who have been issued CLOAs are now the
owners of the subject property. Consequently, the decisions of the trial
court in the injunction case and the CA in CA-G.R. SP No. 38182 must now
be set aside, insofar as it orders Amante, et al. to vacate and/or enjoins
them from entering the subject property.
The Court, however, agrees with the CA that Amante, et al. is not entitled to
actual, moral and exemplary damages, as well as attorney’s fees. SRRDC’s
right of possession over the subject property was predicated on its claim of
ownership, and it cannot be sanctioned in exercising its rights or protecting
its interests thereon. As was ruled by the CA, Amante, et al. is merely
entitled to nominal damages as a result of SRRDC’s acts.102

All is not lost in this case. In its Memorandum dated September 29, 1993, to
the DAR Secretary, the DENR manifested that:

. . . the farmers themselves could be tapped to undertake watershed

management and protection. This community-based approach in
natural resource management, is in fact, being used in numerous
watershed management projects nationwide. Adopting the same
approach in the area is deemed the best possible solution to the case
since it will not prejudice the CLOAs issued to the farmer-beneficiaries.
They should, however, be required to undertake the necessary
reforestation and other watershed management/rehabilitation
measures in the area.

In view of the foregoing, we recommend that a watershed management plan

for the area espousing the community-based approach be drawn-up jointly
by the DAR and DENR. . . .103

If SRRDC sincerely wants to preserve the property for ecological

considerations, it can be done regardless of who owns it. After all, we are all
stewards of this earth, and it rests on all of us to tend to it.

WHEREFORE, the Second Motion for Reconsideration is GRANTED. The

Court’s Decision dated October 12, 2001 in G.R. No. 112526 is SET ASIDE
and the Decision of the Court of Appeals dated November 5, 1993 in CA-
G.R. SP No. 27234 is AFFIRMED with MODIFICATION, in that the Land Bank
of the Philippines is ordered to convert the trust account in the name of Sta.
Rosa Realty Development Corporation to a deposit account, subject to a
12% interest per annum from the time the LBP opened a trust account up to
the time said account was actually converted into cash and LBP bonds
deposit accounts. The temporary restraining order issued by the Court on
December 15, 1993, is LIFTED.

The petition filed by Amante, et al. in G.R. No. 118838 is GRANTED in that

Sta. Rosa Realty Development Corporation is hereby ENJOINED from
disturbing the peaceful possession of the farmer-beneficiaries with CLOAs.
The Decision of the Court of Appeals dated June 28, 1994 in CA-G.R. CV No.
38182 is AFFIRMED insofar as the award of nominal damages is concerned.
The Department of Environment and Natural Resources and the Department
of Agrarian Reform, in coordination with the farmer-beneficiaries identified
by the DAR, are URGED to formulate a community-based watershed plan for
the management and rehabilitation of Barangay Casile.

20.

DAR VS ROBLES (GR No. 190482)

PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court, seeking to reverse and set aside the Court of Appeals (CA)
Decision[1] dated May 29, 2009 and its Resolution[2] dated December 2, 2009
in CA-G.R. SP No. 104896.

The facts are as follows:

During his lifetime, Eduardo Reyes, married to Nenita P. Reyes, was the
registered owner of certain properties located at Barangay Ambiling,
Magdalena, Laguna, covered by Transfer Certificate of Title (TCT) Nos. T-
85055 and T-116506, with areas of about 195,366 and 7,431 square meters
(sq. m.), respectively. He later caused the subdivision of the land covered by
TCT No. T-85055 into five (5) lots.

On April 17, 1997, Eduardo sold the said properties to respondents, as

follows:

1. Igmidio D. Robles - Lot 6-B-1 of TCT No. T-85055, 38,829 sq. m.;

2. Randy V. Robles - Lot 6-B-2 of TCT No. T-85055, 39,896 sq. m.;

3. Mary Krist B. Malimban - Lot No 6-B-3 of TCT No. T-85055, 38,904 sq.
m.;

4. Anne Jamaca G. Robles - Lot No. 6-B-4 of TCT No. T-85055, 38,595 sq.
m.;

5. John Carlo S. Robles - Lot No. 6-B-5 of TCT No. T-85055, 39,142 sq. m.;
and

6. Christine Anne V. Robles - Lot No. 3-1-2-C-2-G-3 of TCT No. T-116506,

7,431 sq. m.
On May 3, 2005, the deeds of absolute sale covering the properties were
duly registered with the Registry of Deeds for the Province of Laguna in the
names of respondents under the following TCT Nos.:

1. Igmidio D. Robles - TCT No. T-238504;

2. Randy V. Robles - TCT No. T-238305;

3. Mary Krist B. Malimban - TCT No. T-238506:

4. Anne Jamaca G Robles - TCT No. T-238507;

5. John Carlo S. Robles - TCT No. T-238503; and

6. Christine Anne V. Robles - TCT No. 238502.

On May 26, 2006, petitioner Department of Agrarian Reform (DAR) Region
IV-A Laguna Provincial Office, represented by Fritzi C. Pantoja in her
capacity as Provincial Agrarian Reform Officer II (PARO), filed Petition for
Annulment of Deeds of Absolute Sale and Cancellation of Transfer
Certificates of Title Nos. T-238502, T-238503, T-238504, T-238505, T-
238506 and T-238507. It alleged that the deeds of absolute sale were
executed by Eduardo without prior DAR clearance under Administrative
Order No. 01-89, series of 1989,[3] in violation of Section 6, paragraph 4 [4] of
Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, as amended (CARL).

On September 9, 2006, respondents received a Summons and Notice of

Hearing, together with a copy of the said petition from the Office of the
Provincial Adjudicator, Department of Agrarian Reform Adjudication Board
(DARAB), Region IV, requiring them to answer the petition and appear for
the initial preliminary conference set on October 10, 2006. Thus, they filed
their Answer and Supplemental Answer to the petition.

On October 10 and 23, 2006, Julieta R. Gonzales and Nenita Reyes, the
surviving spouse and the daughter of Eduardo, respectively, filed a motion to
dismiss on the ground that the DARAB has no jurisdiction over the nature of
the action and the subject matter of the case, and that the DAR has no
cause of action against them.

On November 2, 2006, respondents filed a Manifestation adopting the

motion to dismiss filed by Julieta and Nenita.

On November 30, 2006, the DARAB Provincial Adjudicator issued a

Resolution denying the motion to dismiss for lack of merit.

Julieta and Nenita filed a motion for reconsideration.

At the hearing on January 24, 2008, respondents, through counsel,

manifested that they are joining the motion for reconsideration filed by
Julieta and Nenita.

On February 7, 2008, the Provincial Adjudicator issued another Resolution

dismissing the case against Julieta and Nenita for lack of cause of action, but
not against respondents.

Respondents then filed their motion to reconsider the Resolution dated

February 7, 2008 and to defer the preliminary conference set on March 13,
2008.

On June 26, 2008, the Provincial Adjudicator issued a Resolution denying

respondents' motion for reconsideration, and setting the preliminary
conference anew on August 28, 2008.

Aggrieved by the Provincial Adjudicator's Resolutions, respondents filed with

the CA a petition for review under Rule 43 of the Rules of Court.

On May 29, 2009, the CA rendered the assailed Decision, the dispositive
portion of which reads:

WHEREFORE, the instant petition is GRANTED. The three (3) questioned

Resolutions of the PARAD dated 30 November 2006, 7 February 2008 and 26
June 2008 are all REVERSED AND SET ASIDE. The DAR's petition before
the PARAD is hereby DISMISSED for lack of jurisdiction.

SO ORDERED.[5]
In dismissing the DAR's petition for annulment of deeds of sale and
cancellation of titles before the PARAD for lack of jurisdiction, the CA held:

In this case before us, the DAR's petition before the PARAD sought to annul
the deeds of absolute sale as well as the subsequently issued torrens titles.
Surprisingly, however, the said petition was not brought for or on behalf of
any purported tenants, farmworkers or some other beneficiaries under RA
6657. While the said petition claimed, without any supporting
documents/evidence however, that DAR was in the process of generating
CLOAs for the said landholding, it did subsequently admit that the same
petition does not seek to place the subject land "immediately under CARP"
but rather to annul the conveyance of the original owner in favor of the
petitioners since this was allegedly in violation of RA 6657. Without any
averment of some tenurial arrangement/relationship between the original
owner and some definite leaseholder, tenant or CARL beneficiary plus the
admission that the land has not yet been placed under CARP, neither DARAB
nor its adjudicators would have jurisdiction over a simple case of annulment
of sale and cancellation of title. Considering that the subject landholding
were sold to petitioners way before any notice of coverage was ever issued
and torrens titles have subsequently been issued in their favor, it is the
regular courts who should determine if indeed there were certain violations
of the law which would justify annulment of the sales and cancellation of the
titles.

Still on the said notice of coverage, a review of the pertinent documents

reveals that the same was not issued to the present owners but to the heirs
of the late Eduardo Reyes. Thus, not only was the notice of coverage
belatedly issued to the wrong person/s for the said heirs to whom the notice
of coverage was issued were in fact dismissed from the original petition
before the PARAD. Next, DAR argues that a notice of coverage need not be
issued to the present owners/petitioners otherwise it would validate or
recognize the purported irregular or illegal transfer or conveyance. We find it
foolhardy for DAR to argue this way when the very fact of issuance of
the notice of coverage was one of its main anchors in its petition for
annulment and cancellation of title before the PARAD.

DAR also cites Section 4 of RA 6657 which refers to the scope of CARL. While
the scope under the said provision is quite encompassing, the same will not
automatically include every agricultural land. In Dandoy v. Tongson, the
High Tribunal was explicit,

"(T)he fact that Lot No. 294 is an agricultural land does not ipso facto make
it an agrarian dispute within the jurisdiction of the DARAB. For the present
case to fall within the DARAB jurisdiction, there must exist a tenancy
relationship between the parties. An allegation that an agricultural tenant
tilled the land in question does not make the case an agrarian dispute."
Again, the High Court reiterated the necessity of a tenurial
arrangement/relationship in order for a case to be classified as an agrarian
dispute within the jurisdiction of the DARAB or its adjudicators. While we are
mindful not to preempt any subsequent inquiry on the matter, we would just
like to take note of the fact that petitioners also offered documents to show
that the subject land/s were free of any tenants at the time these were sold
to them. Even without ruling on the authenticity of this evidence, the same
further casts doubt on the existence of any tenurial arrangement or
relationship which could or may bring the present controversy into the folds
of the DARAB.

Besides, RA 6657, particularly Section 16 thereof, lays down the very

procedure for the acquisition of private lands for coverage of the CARL. And
DAR's belated issuance of the notice of coverage miserably falls short of the
above-cited procedures.

It is very clear that the relief sought by the DAR, annulment of the contracts
and cancellation of titles, would necessarily involve the
adjustment/adjudication of the private rights of the parties to the sale, which
is beyond the jurisdiction of the DARAB to resolve. [6]
The DAR filed a motion for reconsideration, but the CA denied it in a
Resolution[7] dated December 2, 2009.

Dissatisfied with the CA Decision, the DAR filed a petition for review
on certiorari raising the sole issue, to wit:

WHETHER OR NOT THE DAR ADJUDICATION BOARD HAS JURISDICTION

OVER ANNULMENT OF DEEDS OF ABSOLUTE SALE AND THE SUBSEQUENT
CANCELLATION OF TITLES INVOLVING LANDS UNDER THE
ADMINISTRATION AND DISPOSITION OF THE DEPARTMENT OF AGRARIAN
REFORM.[8]
Citing the DAR Memorandum Circular No. 2,[9] Series of 2001,[10] the DAR
argues that its petition for annulment of deeds of sale and cancellation of
titles falls under the jurisdiction of the DARAB; and that such jurisdiction is
not limited to agrarian disputes, but also on other matters or incident
involving the implementation of all agrarian laws. Invoking Section 1, [11] Rule
II of the 2003 DARAB Rules of Procedure, it questions the CA ruling that
disputes cognizable by the DARAB are limited to those which involve some
kind of tenurial arrangement/relationship, and that only lands under the
administration and disposition of the DAR or the Land Bank of the Philippines
(LBP) are subject to the DARAB jurisdiction.

The DAR also claims that the CA overlooked that the notices of coverage
issued by the Municipal Agrarian Reform Officer (MARO) of Magdalena,
Laguna, were duly served to the heirs of Eduardo, namely, Julieta and
Nenita. It stresses that despite claiming no interest as successors over the
subject properties in their motion to dismiss filed before the DARAB, the
letter of Atty. Norberto Gonzales dated February 21, 2005 to MARO
Cuaresma showed that Julieta and Nenita were opposing the coverage of the
said properties under the CARL. It thus concludes that the subject properties
were placed under the coverage of the compulsory acquisition scheme of the
CARL.

The DAR further takes exception to the CA ruling that the notice of coverage
was issued to the heirs of Eduardo, instead of the present owners,
respondents. It explains that only after such notice was issued to the said
heirs in 2005 and upon verification with the Register of Deeds that it found
out that the property was already transferred to respondents. It further
argues that the notice of coverage need not be issued to the present title
holders (respondents) because if such notice will be issued to them, then it
would validate or recognize the purported irregular or illegal transfer or
conveyance.

Finally, the DAR contends that under Section 4 of RA 6657, the CARP covers,
among other things, all private lands devoted to or suitable for agriculture,
regardless of the agricultural products raised or that can be raised thereon,
and that such provision makes no qualification that only lands issued with
notice of coverage are covered. Applying the statutory construction principle
of exclusio unius est exclusio alterius, it posits that there being no showing
that the subject agricultural lands are exempted from the CARP, then they
are covered and deemed under the administration and disposition of the
DAR. Hence, its petition for annulment of deeds of sale and cancellation of
titles is cognizable by the DARAB.

On the other hand, respondents counter that the CA did not err in dismissing
for lack of jurisdiction DAR's petition for annulment of deeds of sale and
cancellation of titles before the DARAB because such case neither involves
an agrarian dispute nor does the case concern; an agricultural land under
the administration and disposition of the DAR or the LBP. Citing the
definition of "agrarian dispute" under Section 3 (d) [12] of R.A. No. 6657 and
jurisprudence to the effect that there must exist a tenancy relationship
between the parties for DARAB to have jurisdiction over a case, respondents
point out that the petition was not brought for and on behalf of any
purported tenants, farmworker or some other beneficiaries and the notice of
coverage was belatedly issued to the wrong persons, the heirs of Eduardo,
and not to them who are the present owners. Hence, there was no valid
notice of coverage to place the properties within the coverage of agrarian
reform and of DARAB's jurisdiction.

Respondents also reject as inaccurate and misleading petitioner's contention

that the DARAB has jurisdiction over cases involving the sale of agricultural
lands and those cases involving the annulment or rescission of deeds of sale,
and the cancellation of titles pertaining to such lands, pursuant to Section 1
(1.5) and (1.9), Rule II of the 2003 DARAB Rules of Procedure. [13] They insist
that for the Adjudicator to have jurisdiction over a case, the agricultural land
involved—unlike the subject properties—must be under the coverage of the
CARL or other agrarian laws, or under the administration and disposition of
the DAR or the LBP, i.e., the land involved must already be taken or
acquired for CARP purposes for distribution to qualified farmer-beneficiaries.

Respondents stress that the certificates of title of Eduardo and the derivative
TCTs issued to them were all free from liens and encumbrances, and that
there was no annotation of any disposition of the properties or limitation on
the use thereof by virtue of, or pursuant to Presidential Decree (P.D.) No.
27, CARL or any other law or regulations on agrarian reform inscribed on the
titles. They argue that since no such annotations, like a notice of coverage or
acquisition by DAR, were inscribed on Eduardo's titles which will caution
respondents and/or the Register of Deeds of the Province of Laguna from
registering the titles and deeds, prior DAR clearance is unnecessary. Thus,
the properties embraced by Eduardo's titles are outside the coverage of
CARP and registerable.

Lastly, respondents claim to be innocent purchasers in good faith and for

value because they bought the subject properties and paid a full and fair
price without notice of some other person's claim on or interest in them.
They also seek refuge under Section 32 of P.D. No. 1529 which provides that
after the expiration of one (1) year from and after the date of entry of the
decree of registration, not only such decree but also the corresponding
certificate of title, becomes incontrovertible and infeasible, and cannot be
altered, modified, cancelled, or subject to any collateral attack, except in a
direct proceeding in accordance with law.

The petition is meritorious.

In resolving the sole issue of whether or not the DARAB has jurisdiction over
the DAR's petition for annulment of deeds of sale and cancellation of titles,
the Court is guided by the following rules on jurisdiction laid down in Heirs of
Julian dela Cruz v. Heirs of Alberto Cruz:[14]

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial

officer or government agency, over the nature and subject matter of a
petition or complaint is determined by the material allegations therein and
the character of the relief prayed for, irrespective of whether the petitioner
or complainant is entitled to any or all such reliefs. Jurisdiction over the
nature and subject matter of an action is conferred by the Constitution and
the law, and not by the consent or waiver of the parties where the court
otherwise would have no jurisdiction over the nature or subject matter of the
action. Nor can it be acquired through, or waived by, any act or omission of
the parties. Moreover, estoppel does not apply to confer jurisdiction to a
tribunal that has none over the cause of action. The failure of the parties to
challenge the jurisdiction of the DARAB does not prevent the court from
addressing the issue, especially where the DARAB's lack of jurisdiction is
apparent on the face of the complaint or petition.

Indeed, the jurisdiction of the court or tribunal is not affected by the

defenses or theories set up by the defendant or respondent in his answer or
motion to dismiss. Jurisdiction should be determined by considering not only
the status or the relationship of the parties but also the nature of the issues
or questions that is the subject of the controversy. If the issues between the
parties are intertwined with the resolution of an issue within the exclusive
jurisdiction of the DARAB, such dispute must be addressed and resolved by
the DARAB. The proceedings before a court or tribunal without jurisdiction,
including its decision, are null and void, hence, susceptible to direct and
collateral attacks.[15]
In Department of Agrarian Reform v. Paramount Holdings Equities, Inc.,
[16]
 the Court defined the limits of the quasi-judicial power of DARAB, thus:

The jurisdiction of the DARAB is limited under the law, as it was created
under Executive Order (E.O.) No. 129-A specifically to assume powers and
functions with respect to the adjudication of agrarian reform cases under
E.O. No. 229 and E.O. No. 129-A. Significantly, it was organized under the
Office of the Secretary of Agrarian Reform. The limitation on the authority of
it to mere agrarian reform matters is only consistent with the extent of
DAR's quasi-judicial powers under R.A. No. 6657 and E.O. No. 229, which
read:

SECTION 50 [of R.A. No. 6657]. Quasi-Judicial Powers of the DAR.—The DAR
is hereby vested with the 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).

SECTION 17 [of E.O. No. 229]. 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 involving implementation of agrarian reform,
except those falling under the exclusive original jurisdiction of the DENR and
the Department of Agriculture (DA).[17]
In Sta. Rosa Realty Development Corporation v. Amante,[18] the Court
pointed out that the jurisdiction of the DAR under the aforequoted provisions
is two-fold. The first is essentially executive and pertains to the enforcement
and administration of the laws, carrying them into practical operation and
enforcing their due observance, while the second is quasi-judicial and
involves the determination of rights and obligations of the parties.

At the time the petition for annulment of deeds of sale and cancellation of
titles was filed on May 26, 2006, the administrative function of the DAR was
governed by Administrative Order No. 03, Series of 2003 which provides for
the 2003 Rules of Procedure for Agrarian Law Implementation (ALI) Cases.
Under said Rules of Procedure, the Regional Director [19] has primary
jurisdiction over all ALI cases, while the DAR Secretary [20] has appellate
jurisdiction over such cases. Section 2 of the said Rules provides:

Section 2. ALI Cases. These Rules shall govern all cases arising from or
involving:

2.1 Classification and identification of landholdings for coverage under the

agrarian reform program and the initial issuance of Certificate of Land
Ownership Awards (CLOAs) and Emancipation Patents (EPs), including
protests or oppositions thereto and petitions for lifting of such coverage.
2.2 Classification, identification, inclusion, exclusion, qualification or
disqualification of potential/actual farmer-beneficiaries;
2.3 Subdivision surveys of land under Comprehensive Agrarian Reform
Program (CARP)
2.4 Recall, or cancellation of provisional release rentals, Certificates of Land
Transfers (CLTs), and CARP Beneficiary Certificates (CBCs) in cases outside
the purview of Presidential Decree (P.D.) No. 816, including the issuance,
recall or cancellation of Emancipation Patents (EPs) or Certificates of Land
Ownership Awards (CLOAs) not yet registered with the Register of Deeds;
2.5 Exercise of the right of retention by the landowner;
2.6 Application for exemption from coverage under Section 10 of RA 6657;
2.7 Application for exemption pursuant to Department of Justice (DOJ)
Opinion No. 44 (1990)
2.8 Exclusion from CARP coverage of agricultural land used for livestock,
swine, and poultry raising;
2.9 Cases of exemption/exclusion of fishpond and prawn farms from the
coverage of CARP pursuant to RA 7881;
2.10 Issuance of Certificate of Exemption for land subject to Voluntary Offer
to Sell (VOS) and Compulsory Acquisition (CA) found unsuitable for
agricultural purposes;
2.11 Application for conversion of agricultural land to residential,
commercial, industrial or other non agricultural uses and purposes including
protests or oppositions thereto;
2.12 Determination of rights of agrarian reform beneficiaries to homelots;
2.13 Disposition of excess area of the tenant's/farmer-beneficiary's
landholdings;
2.14 Increase in area of tillage of a tenant/farmer-beneficiary;
2.15 Conflict of claims in landed estates administered by the DAR and its
predecessors; and
2.16 Such other agrarian cases, disputes, matters or concerns referred to it
by the Secretary of the DAR.
On the other hand, in the exercise of its quasi-judicial function, the DAR,
through its adjudication arm, i.e., the DARAB and its regional and provincial
adjudication boards, adopted the 2003 DARAB Rules of Procedure. Under
Section 2, Rule II of the said Rules of Procedure, the DARAB shall have
exclusive appellate jurisdiction to review, reverse, modify, alter, or affirm
resolutions, orders, and decisions of its Adjudicators who have primary and
exclusive original jurisdiction over the following cases:

Rule II
Jurisdiction of the Board and its Adjudicators

SECTION 1. Primary and Exclusive Original Jurisdiction. — The Adjudicator

shall have primary and exclusive original jurisdiction to determine and
adjudicate the following cases:

1.1 The rights and obligations of persons, whether natural or juridical,

engaged in the management, cultivation, and use of all agricultural lands
covered by Republic Act (RA) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), and other related agrarian
laws;
1.2 The preliminary administrative determination of reasonable and just
compensation of lands acquired under Presidential Decree (PD) No. 27 and
the Comprehensive Agrarian Reform Program (CARP);
1.3 The annulment or cancellation of lease contracts or deeds of sale or their
amendments involving lands under the administration and disposition of the
DAR or Land Bank of the Philippines (LBP);
1.4 Those cases involving the ejectment and dispossession of tenants and/or
leaseholders;
1.5 Those cases involving the sale, alienation, pre-emption, and redemption
of agricultural lands under the coverage of the CARL or other agrarian laws;
1.6 Those involving the correction, partition, cancellation, secondary and
subsequent issuances of Certificates of Land Ownership Award (CLOAs) and
Emancipation-Patents (EPs) which are registered with the Land Registration
Authority;
1.7 Those cases involving the review of leasehold rentals;
1.8 Those cases involving the collection of amortizations on payments for
lands awarded under PD No. 27, as amended, RA No. 3844, as amended,
and RA No. 6657, as amended, and other related laws, decrees, orders,
instructions, rules, and regulations, as well as payment for residential,
commercial, and industrial lots within the settlement and resettlement areas
under the administration and disposition of the DAR;
1.9 Those cases involving the annulment or rescission of lease contracts and
deeds of sale, and the cancellation or amendment of titles pertaining to
agricultural lands under the administration and disposition of the DAR and
LBP; as well as EPs issued under PD 266, Homestead Patents, Free Patents,
and miscellaneous sales patents to settlers in settlement and' re-settlement
areas under the administration and disposition of the DAR;
1.10 Those cases involving boundary disputes over lands under the
administration and disposition of the DAR and the LBP, which arc
transferred, distributed, and/or sold to tenant-beneficiaries and are covered
by deeds of sale, patents, and certificates of title;
1.11 Those cases involving the determination of title to agricultural lands
where this issue is raised in an agrarian dispute by any of the parties or a
third person in connection with the possession thereof for the purpose of
preserving the tenure of the agricultural lessee or actual tenant-farmer or
farmer-beneficiaries and effecting the ouster of the interloper or intruder in
one and the same proceeding; and
1.12 Those cases previously falling under the original and exclusive
jurisdiction of the defunct Court of Agrarian Relations under Section 12 of PD
No. 946 except those cases falling under the proper courts or other quasi-
judicial bodies;
1.13 Such other agrarian cases, disputes, matters or concerns referred to it
by the Secretary of the DAR.
Section 3, Rule II of the 2003 DARAB Rules of Procedure further states that
the Adjudicator or the Board shall have no jurisdiction over matters involving
the administrative implementation of R.A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988 and other agrarian laws as
enunciated by pertinent rules and administrative orders, which shall be
under the exclusive prerogative of and cognizable by the Office of the
Secretary of the DAR in accordance with his issuances.

Meanwhile, the Regional Trial .Courts (RTCs) have not been completely
divested of jurisdiction over agrarian reform matters. [21] Section 56 of RA
6657 confers "special jurisdiction" on "Special Agrarian Courts," which are
RTCs designated by the Court — at least one (1) branch within each
province — to act as such. As Special Agrarian Courts (SACs), these RTCs
have, according to Section 57 of the same law, original and exclusive
jurisdiction over "all-petitions for the determination of just compensation to
land-owners" and "the prosecution of all criminal offenses under . . [the]
Act."[22]

In order to determine in accordance with the foregoing provisions which

among the DARAB and the Office of the Secretary of DAR, and the SACs has
jurisdiction over the nature and subject matter of the petition for annulment
of the deeds of sale executed by Eduardo in favor of respondents and the
cancellation of the TCTs issued to them, it is necessary to examine the
following allegations therein and the character of the relief sought,
irrespective whether the petitioner is entitled thereto: [23]

4.1 The late Eduardo Reyes was the original registered owner of TCT
85055 and TCT 116506, an agricultural land situated at Brgy. Ambling,
Magdalena, Laguna, consisting of 195,366 sq. meters and 7,431 sq.
meters, respectively.

4.2 The land described under TCT 85055 was issued a notice of coverage
under the Compulsory Acquisition (CA) scheme pursuant to Section 7 of R.A.
6657. Subdivision plan over this property has been approved and the DAR is
now on the process of generating the Certificate of Land Ownership Award
(CLOA) to the qualified recipient of the government's land reform program.
However, pending processing of the case folder, the DAR Municipal Office in
Magdalena received on September 8, 2005 a letter coming from Atty. Homer
Antazo, the alleged counsel of Igmidio Robles and Christina Robles informing
the MAR Office of the subsequent sale of the property in their favor attaching
documents in support of their claim. It was only then, after proper
verification with the Register of Deeds that the DAR found out that
indeed the properties under TCT-T-85055 and TCT T-116506 were all
conveyed and transferred in favor of the herein private respondents
by well intentioned deeds of absolute sale executed in 1997. xxx
Subsequently, by virtue of such deeds of sale the Registry of Deeds
caused the cancellation of TCT T-85055 and TCT 116506 and the
issuance of new titles in private respondents' favor without securing
the necessary clearance from the DAR as mandated under
Administrative Order No. 1 series of 1989. xxx The said titles were
issued arbitrarily and in clear violation of Section 6 of R.A. 6657,
hence null and void. xxx

4.3 Public respondent Registry of Deeds might [have] overlooked the

transaction entered into and misplaced knowledge on these big track of
landholdings when it proceeded with the registration of the deeds of sale and
the subsequent cancellation of TCT 85055 and TCT 116506.

4.4 The Registry of Deeds was probably not aware and mindful on the
extent of properties of Eduardo Reyes, that it exceeded more than
the retention limit but, thru machinations and crafty action exerted to by
the parties to accomplish an evil end, the immediate cancellation was
brought to completion.

4.5 Hence, because it was tainted with fraud and bad faith, said certificate of
titles cannot enjoy the presumption of having been issued by the register of
deeds in the regular performance of its official duty;

4.6 That, as a consequence of swift and speedy cancellation of TCT 85055

and TCT 116506 and the instantaneous issuance of titles, the DAR, because
of this intervening development cannot now continue with the generation of
CLOA, prompting the filing of the instant petition.

5. PRAYER

WHEREFORE, above premises considered, it is most respectfully prayed of

this Honorable Adjudication Board that after due notice and hearing,
judgment be rendered annulling the Deeds of Absolute Sale executed by the
late Eduardo Reyes in favor of the herein private respondents and the
subsequent cancellation of the issued transfer certificate of titles.

Petitioner likewise pray for such other relief and remedies as this Honorable
Board may deem just and equitable under the premises. [24]

Although no tenancy or agrarian relationship between the parties can be

gleaned from the allegations of the petition in order to be considered an
agrarian dispute within the DARAB's jurisdiction, the Court notes that the
petition is anchored on the absence of a clearance for the sale and
registration of the subject agricultural lands in favor of respondents, as
required by DAR Administrative Order No. 1, series of 1989 (A.O. No. 01-89)
[25]
 or the Rules and Procedures Governing Land Transaction. Clearly, such
petition involves the matter of implementation of agrarian laws which is, as
a general rule, within the primary jurisdiction of the DAR Regional Director.

It bears stressing that while the rule is that DARAB's jurisdiction is limited to
agrarian disputes where tenancy relationship between the parties exists,
Section 50 of R.A. No. 6657 and Section 17 of E.O. No. 229 both plainly
state that the DAR is vested with the primary jurisdiction to determine and
adjudicate agrarian reform matters. It is also noteworthy that while Section
3(d)[26] of R.A. No. 6657 defined the term "agrarian dispute," no specific
definition was given by the same law to the term "agrarian reform matters."
In view thereof, the Court cannot restrict the DARAB's quasi-judicial
jurisdiction only to those involving agrarian disputes where tenancy
relationship exists between the parties, for it should also include other
"agrarian reform matters" which do not fall under the exclusive jurisdiction
of the Office of the Secretary of DAR, the Department of Agriculture and the
Department of Environment and Natural Resources, as well as the Special
Agrarian Courts.
Although they are not deemed as "agrarian disputes" falling under the
DARAB's jurisdiction, "[s]uch other agrarian cases, disputes, matters or
concerns" referred to the Adjudicator by the Secretary of the DAR pursuant
to Section 1 (1.13), Rule II of the 2003 DARAB Rules of Procedure, are still
considered as "agrarian reform matters." A case in point is the DAR's
petition for annulment of deeds of sale and annulment of titles executed in
violation of the provision Section 6, par. 4 of RA 6657. Despite being an
agrarian law implementation case, the Secretary of the DAR expressly
referred jurisdiction over such petition to the Provincial Adjudicator of the
DARAB through Memorandum Circular (M.C.) No. 02-01[27] on the Guidelines
on Annulment of Deeds of Conveyance of Lands Covered by the
Comprehensive Agrarian Reform Program (CARP) Executed in Violation of
Section 6, Paragraph 4 of Republic Act (RA) No. 6657. Section 4 of DAR M.C.
No. 02-01 pertinently provides:

b) The Chief, Legal Division, of the Provincial Agrarian Reform Office, shall
have the following responsibilities:

1. Upon receipt of the MARO report, determine whether or not there was
illegal transfer of agricultural lands pursuant to Sec. 6, par. 4 of RA 6657;

2. If there was illegal transfer, file a petition for annulment of the
deed of conveyance in behalf of the PARO before the Provincial
Agrarian Reform Adjudicator (PARAD). The petition shall state the
material facts constituting the violation and pray for the issuance of an order
from the PARAD directing the ROD to cancel the deed of conveyance and the
TCT generated as a result thereof. As legal basis therefor, the petition shall
cite Section 50 of RA 6657 and Rule II, Section 1(c) and (e) of the [1994]
DARAB New Rules of Procedure;[28]
Concededly, the properties subject of the petition for annulment of deeds of
sale and cancellation of titles cannot be considered as lands under the
administration of the DAR or LBP, i.e., those already acquired for CARP
purposes and distributed to qualified farmer-beneficiaries. [29] Hence, such
petition is outside the DARAB jurisdiction under Section 1 (1.9), [30] Rule II of
the 2003 DARAB Rules of Procedure.

Nevertheless, it can be gathered from the allegations in the petition that the
subject properties Eduardo conveyed and transferred to respondents are
agricultural lands in excess of the 5-hectare (50,000 sq. m.) retention limit
of the CARL, and that the corresponding TCTs were later issued and
registered in their names without the necessary clearance under DAR A.O.
No. 1, series of 1989.

In Sarne v. Hon. Maquiling,[31] the Court construed the phrase "agricultural

lands under the coverage of the CARP" under Section 1(e), [32] in relation to
Section 1 (c),[33] Rule II of the 1994 DARAB Rules of Procedure, which are
similarly-worded as Sections 1 (1.3) and (1.5), Rule II of the 2003 DARAB
Rules of Procedure, thus:[34]

It is clear that the jurisdiction of the DARAB in this case is anchored on

Section 1, paragraph (e), Rule II of the [1994] DARAB New Rules of
Procedure covering agrarian disputes involving the sale, alienation,
mortgage, foreclosure, preemption and redemption of agricultural lands
under the coverage of the CARP or other agrarian laws. There is nothing in
the provision from which it can be inferred that the jurisdiction of the DARAB
is limited only to agricultural lands under the administration and disposition
of DAR and LBP. We should not distinguish where the law does not
distinguish. The phrase "agricultural lands under the coverage of the
CARP" includes all private lands devoted to or suitable for
agriculture, as defined under Section 4 of R.A. No. 6657. It is worthy
to note that in the enumeration defining the DARAB's jurisdiction, it is only
in paragraph (c), that is, cases involving the annulment or cancellation of
lease contracts or deeds of sale or their amendments involving lands, that
the phrase "involving lands under the administration and disposition of the
DAR or LBP" is used. That the same proviso does not appear in paragraph
(e), which is the basis of respondents' cause of action, could only mean that
it was never intended to be so limited. xxx[35]
Contrary to the view of the CA and the respondents, therefore, a notice of
coverage is not necessary in order for the DARAB to have jurisdiction over a
case that involves the sale or alienation of agricultural lands "under the
coverage of the CARP" pursuant to Section 1 (1.5), [36] Rule II of the 2003
DARAB Rules of Procedure, as such phrase includes all private lands devoted
to or suitable for agriculture, as defined under Section 4 of R.A. No. 6657:

CHAPTER II
Coverage.

Section 4. Scope. — The Comprehensive Agrarian Reform Law of 1989 shall

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

More specifically the following lands are covered by the Comprehensive

Agrarian Reform Program:

(a) All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until
Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the public
domain.

(b) All lands of the public domain in excess of the specific limits as
determined by Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for
agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the
agricultural products raised or that can be raised thereon.
In light of the principle that jurisdiction over the subject matter and nature
of the petition is conferred by law and determined by the material
allegations therein, and is not affected by the defenses or theories set up in
the respondent's answer or motion to dismiss, the Court finds that the DAR's
petition for annulment of deeds of sale and cancellation of titles falls under
the jurisdiction of the PARAD under Section 1 (1.5), Rule II of the 2003
DARAB Rules of Procedure, as it contains sufficient allegations to the effect it
involves sales of agricultural lands under the coverage of the CARL.

To be sure, the Court does not undermine the significance of the notice of
coverage for purposes of acquisition of lands under the CARP. A letter
informing a landowner that his/her land is covered by CARP, and is subject
to acquisition and distribution to beneficiaries, and that he/she has rights
under the law, including the right to retain 5 hectares, the notice of coverage
first sprung from DAR A.O. No. 12, Series of 1989, [37] to fill in the gap under
Section 16 of the CARL on the identification process of lands subject to
compulsory acquisition. In Roxas & Co., Inc. v. Court of Appeals,[38] the
Court stressed the importance of such notice as a step designed to comply
with the requirements of administrative due process:

The importance of the first notice, i.e., the Notice of Coverage and the letter
of invitation to the conference, and its actual conduct cannot be understated.
They are steps designed to comply with the requirements of administrative
due process. The implementation of the CARL is an exercise of the State's
police power and the power of eminent domain. To the extent that the CARL
prescribes retention limits to the landowners, there is an exercise of police
power for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, the owners are
deprived of lands they own in excess of the maximum area allowed, there is
also a taking under the power of eminent domain. The taking contemplated
is not a mere limitation of the use of the land. What is required is the
surrender of the title to and physical possession of the said excess and all
beneficial rights accruing to the owner in favor of the farmer beneficiary. The
Bill of Rights provides that "if no person shall be deprived of life, liberty or
property without due process of law." The CARL was not intended to take
away property without due process of law. The exercise of the power of
eminent domain requires that due process be observed in the taking of
private property.[39]
Given that the notices of coverage were issued to the wrong persons, the
heirs of the former owner, Eduardo, instead of respondents who are the
present owners of the subject properties, the DAR can hardly be faulted for
such mistake. It bears emphasis that while Eduardo executed the
corresponding deeds of absolute sale in favor of respondents as early as
April 17, 1997, it was only on May 3, 2005 that said deeds were registered
in the names of respondents. Meantime, in view of the death of Eduardo on
October 28, 2000, the DAR had no choice but to send the Notices of
Coverage dated September 8, 2004 and November 23, 2004 to his heirs,
Julieta and Nenita, respectively. While said deeds of sale are binding
between the said heirs of Eduardo and respondents, the DAR could not have
been aware thereof for lack of registration which is the operative act that
binds or affects the land insofar as third persons are concerned. Thus, the
DAR cannot be blamed for erroneously issuing such notices to the said heirs
because it merely relied on available public records at the Register of Deeds,
showing that the original landowner of the said properties is the late
Eduardo.

For its part, despite the DAR's allegation that it only found out that the
subject properties were already conveyed and transferred in favor of
respondents when its Municipal Office in Magdalena, Laguna, received on
September 8, 2005 a letter from the counsel of respondent Igmedio Robles
and Christina Robles; it should be deemed to have constructive notice of
said deeds only from the time of their registration on May 3, 2005. From the
date of such registration, the DAR should have also issued respondents
notices of coverage pursuant to DAR M.C. No. 18-04 (Clarificatory Guidelines
on the Coverage, Acquisition and Distribution of Agricultural Lands Subject
of Conveyance Executed in Violation of Sec. 6, Par. 4 of R.A. No. 6657)
which modified DAR M.C. No. 02-01,

3. Notwithstanding the pendency of the investigation and/or the petition for

annulment of deed of conveyance, the DAR shall issue a notice of coverage
to both old and new landowner/s in order for the LBP to proceed with the
valuation of the property. For this purpose, the DAR Provincial or Regional
Office and the Land Bank of the Philippines may execute an agreement for
purposes of issuing memorandum of valuation and certificate of deposit to
be held in trust for the rightful owner/s.
The Court, however, holds that the DAR cannot be taken to task for failing to
issue notices of coverage to respondents because the land areas of the
subject properties sold to them, respectively, are all within the 5-hectare
(50,000 sq. m.) retention limit. Respondents cannot, therefore, contend that
a notice of coverage is necessary in order for a land to be considered under
the coverage of the CARP for purposes of filing a petition under DAR M.C.
No. 02-01 in relation to violation of Section 6, paragraph 4 of RA 6651. To
sustain respondents' contention would subvert the objectives of the said
provision to prevent circumvention of the retention limits set by law on
ownership of agricultural lands after the effectivity of CARL on June 15,
1988, and to prevent the landowner from evading CARP coverage. Hence,
the Court cannot uphold such contention, as it would ultimately defeat the
purpose of the agrarian reform program of achieving social justice through
equitable distribution of large landholdings to tenants or farmers tilling the
same.

Furthermore, at the time of the sale of the subject properties on April 17,
1997, there were existing tenants thereon as shown by the Deeds of
Surrender of Tenancy Rights[40] dated July 10, 1997 later executed in favor
of the buyers, respondents Igmidio and Cristina Robles. Then, in identically-
worded certifications dated August 29, 1997, the BARC Chairman and the
Barangay Chairman of Ambiling, Magdalena, Laguna, both stated that the
property covered by TCT No. 85055 with an area of 195,366 sq. m. is a
coconut land without any tenant and may be converted into an industrial,
resort, low-cost housing or residential subdivision. [41] Without ruling on the
validity of the deeds of surrender of tenancy rights, the Court finds that the
execution thereof subsequent to that of the deeds of sale, alongside the
certifications of the BARC Chairman and Barangay Chairman, casts doubt on
the validity of the transfer and conveyance of the subject properties as a
ploy to circumvent the retention limits and. coverage under the CARP.

It is noteworthy that in Department of Agrarian Reform v. Paramount

Holdings Equities, Inc.,[42] the Court had resolved in the negative the issue of
whether or not the DARAB has jurisdiction over a dispute that seeks the
nullification of the sale of agricultural lands because (1) the PARO's petition
failed to sufficiently allege any tenurial or agrarian relations and to indicate
an agrarian dispute, and (2) the said lands had not been the subject of any
notice of coverage under the CARP.

Despite the fact that the same jurisdictional issue is involved in this case,
the Court's ruling in Paramount is inapplicable because of the difference
between the material allegations in the PARO's petitions in both cases.

Given that the PARO's petition in this case likewise failed to allege any
tenancy or agrarian relations and to indicate an agrarian dispute, and its
cause of action is merely founded on the absence of a clearance to cover the
sale and registration of the subject lands, it bears emphasis that the D
ARAB'S jurisdiction is not limited to agrarian disputes where tenancy
relationship between the parties exists. Under Section 1 (1.13), [43] Rule II of
the 2003 DARAB Rules of Procedure, the DARAB also has jurisdiction over
agrarian reform matters referred to it by the Secretary of DAR, such as the
PARO's petition for annulment of deeds of sale and annulment of titles filed
pursuant to DAR A.O. No. 01-89 [44] and DAR M.C. No. 02-01[45] for violation
of the legal requirement for clearances in the sale and transfer of agricultural
lands.

In contrast to Paramount where it is undisputed that the subject lands had

not been subject of any notice of coverage under the CARP, the PARO's
petition in this case alleged that one of the subject lands was issued a notice
of coverage.[46] At any rate, the Court holds that such notice is unnecessary
in order for the DARAB to have jurisdiction over a case that involves the sale
of "agricultural lands under the coverage of the CARP," arsuant to Section 1
(1.5),[47] Rule II of the 2003 DARAB Rules of Procedure. As held in Sarne v.
Maquiling,[48] the said phrase includes all private lands devoted to or suitable
for agi iculture, as defined under Section 4[49] of RA No. 6657. In view of the
rule that jurisdiction over the subject matter and nature of the petition is
determined by the allegations therein and the character of the relief prayed
for, irrespective of whether the petitioner entitled to any or all such reliefs,
[50]
 the Court finds that the PARO's petition for annulment of sale and
cancellation of titles falls under the jurisdiction of the DARAB, as it contains
allegations to the effect that it involves sales of agricultural lands under the
coverage of the CARL.

Significantly, unlike in this case where the transfer of the subject properties
appears to have been done to evade the retention limits and coverage under
CARP, the Court found the original petition in Paramount dismissible on the
merits as the records clearly showed that the subject lands were already
classified as "industrial" long before the effectivity of the CARL.
The Court also overrules respondents' argument that the subject properties
are outside the coverage of CARP and registerable, since no annotation of
any disposition of the properties or limitation on the use thereof by virtue of,
or pursuant to P.D. No. 27, CARL or any other law or regulations on agrarian
reform was inscribed on Eduardo's titles and their derivative titles. Quite the
contrary, TCT Nos. T-85055 and T-116506 under the name of Eduardo
contain provisions stating that he is the owner thereof in fee simple, subject
to the encumbrances mentioned in Section 39 of Act No. 496, or the Land
Registration Act,[51] and Section 44 of P.D. 1529, or the Property Registration
Decree, respectively.

Section 39 of Act No. 496 and Section 44 of P.D. No. 1529 similarly provide
for statutory liens which subsist and bind the whole world, even without the
benefit of registration under the Torrens System:

Section 39. Every applicant receiving a certificate of title in pursuance of a

decree of registration, and every subsequent purchaser of registered land
who takes a certificate of title for value in good faith, shall hold the same
free of all encumbrance except those noted on said certificate, and any of
the following encumbrances which may be subsisting, namely:

First. Liens, claims, or rights arising or existing under the laws or

Constitution of the United States or of the Philippine Islands which
the statutes of the Philippine Islands cannot require to appear of
record in the registry. x x x[52]

SEC. 44. Statutory liens affecting title. - 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 in said certificate and any of the following encumbrances which
may be subsisting, namely: x x x

Fourth. Any disposition of the property or limitation on the use

thereof by virtue of, or pursuant to, Presidential Decree No. 27 or
any other law or regulations on agrarian reform.[53]
The Court is of the view that the provision on retention limits under Section
6 of RA 6657 constitutes as statutory liens on Eduardo's titles, which were
carried over to respondents' derivative titles, even if no such annotations
were inscribed on all of the said titles. In particular, such statutory liens
pertain to paragraph 4 of Section 6 of RA 6657 in relation to Section 73 of
the same law, which read:

Section 6. Retention Limits. — Except as otherwise provided in this Act,

no person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors governing
a viable family-size 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 areas originally retained by them thereunder: provided, further;
that original homestead grantees or their direct compulsory heirs who still
own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead.

x x x x

Upon the effectivity of this Act, any sale, disposition, lease,

management, contract or transfer of possession of private lands
executed by the original landowner in violation of the Act shall be
null and void: provided, however, that those executed prior to this Act shall
be valid only when registered with the Register of Deeds within a period of
three (3) months after the effectivity of this Act. Thereafter, all Registers of
Deeds shall inform the Department of Agrarian Reform (DAR) within thirty
(30) days of any transaction involving agricultural lands in excess of five (5)
hectares.

Section 73. Prohibited Acts and Omissions. — The following are

prohibited: (a) The ownership or possession, for the purpose of
circumventing the provisions of this Act, of agricultural lands in
excess of the total retention limits or award ceilings by any person,
natural or juridical, except those under collective ownership by farmer-
beneficiaries.

x x x x

(e) The sale, transfer, conveyance or change of the nature of lands

outside of urban centers and city limits either in whole or in part
after the effectivity of this Act. The date of the registration of the deed of
conveyance in the Register of Deeds with respect to titled lands and the date
of the issuance of the tax declaration to the transferee of the property with
respect to unregistered lands, as the case may be. shall be conclusive for
the purpose of this Act.[54]
As Eduardo's titles contain such statutory liens, respondents have imputed
knowledge that the transfer of the subject properties in excess of the
landowner's 5-hectare (50,000 sq. m.) retention limit under the CARL could
have been illegal as it appears to circumvent the coverage of CARP. Thus,
until the PARAD has decided with finality the DAR's petition for annulment of
deeds of sale and cancellation of titles for alleged violation of Section 6,
paragraph 4 of RA 6657, respondents cannot claim that they are innocent
purchasers for value and in good faith.

There is also no merit in respondents' contention that the TCTs issued in

their favor have become incontrovertible and indefeasible, and can no longer
be altered, canceled or modified or subject to any collateral attack after the
expiration of one (1) year from the date of entry of the decree of
registration, pursuant to Section 32 of P.D. No. 1529. In Heirs of Clemente
Ermac v. Heirs of Vicente Ermac,[55] the Court clarified the foregoing principle
in this wise:

While it is true that Section 32 of PD 1529 provides that the decree of

registration becomes incontrovertible after a year, it does not altogether
deprive an aggrieved party of a remedy in law. The acceptability of the
Torrens System would be impaired, if it is utilized to perpetuate fraud
against the real owners.

Furthermore, ownership is not the same as a certificate of title. Registering a

piece of land under the Torrens System does not create or vest title,
because registration is not a mode of acquiring ownership. A certificate of
title is merely an evidence of ownership or title over the particular property
described therein. Its issuance in favor of a particular person does not
foreclose the possibility that the real property may be co-owned with
persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.[56]
In Lacbayan v. Samoy, Jr.,[57] the Court noted that what cannot be
collaterally attacked is the certificate of title, and not the title itself:

x x x The certificate referred to is that document issued by the Register of

Deeds known as the TCT. In contrast, the title referred to by law means
ownership which is, more often than not, represented by that document, xxx
Title as a concept of ownership should not be confused with the certificate of
title as evidence of such ownership although both, are interchangeably used.
In this case, what is being assailed in the DAR's petition for annulment of
deeds of sale and cancellation of titles is the legality of the transfer of title
over the subject properties in favor of respondents, and not their
corresponding TCTs, due to the absence of DAR clearance and for possible
violation of Section 6, paragraph 4 of R.A. No. 6657.

All told, the CA erred in dismissing for lack of jurisdiction the DAR's petition
for annulment of deeds of sale and cancellation of titles before the PARAD,
and in holding that it is the regular courts that should determine if indeed
there were violations of the agrarian laws which would justify the grant of
such petition. As can be determined from the allegations of the petition, the
DARAB has jurisdiction over such case which involves agrarian reform
matters under Section 1 (1.5)[58] and (1.13),[59] Rule II of the 2003 DARAB
Rules of Procedure.

WHEREFORE, the petition is GRANTED, and the Court of Appeals Decision

dated May 29, 2009 and its Resolution dated December 2, 2009 in CA-G.R.
SP No. 104896, are REVERSED and SET ASIDE. The Resolutions dated
February 7, 2008 and June 26, 2008 of the Provincial Adjudicator of the
Department of Agrarian Reform Adjudication Board, Region IV-A,
are REINSTATED. The said Adjudicator is ORDERED to proceed with
dispatch in the resolution of the Petition for Annulment of Deeds of Sale and
Cancellation of TCT Nos. T-238504, T-238505, T-238506, T-238507, T-
238503, and T-238502, docketed as DARAB Case No. R-0403-0032-0037-
06.

SO ORDERED.

Velasco, Jr., (Chairperson), Villarama, Jr., Reyes, and Jardeleza, JJ., concur.

January 28, 2016

NOTICE OF JUDGMENT
Sirs / Mesdames:

Please take notice that on December 9, 2015 a Decision, copy attached

hereto, was rendered by the Supreme Court in the above-entitled cases, the
original of which was received by this Office on January 28, 2016 at 2:38
p.m.

Very truly yours,

(SGD)WILFREDO V. LAPITAN
Division Clerk of Court

[1]
 Penned by Associate Justice Rosmari D. Carandang, with Associate
Justices Mariflor P. Punzalan Castillo and Marlene Gonzales-Sison,
concurring. CA rollo, pp. 48-59.

[2]
 Id. at 67-69.

[3]
 Rules of Procedure Governing Land Transactions.

[4]
 Section 6. Retention Limits. — Except as otherwise provided in this Act, no
person may own or retain, directly or indirectly, any public or private
agricultural land, the size of which shall vary according to factors governing
a viable family-size 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 areas originally retained by them thereunder: provided, further,
that original homestead grantees or their direct compulsory heirs who still
own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead.

x x x x
Upon the effectivity of this Act, any sale, disposition, lease,
management, contract or transfer of possession of private lands
executed by the original landowner in violation of the Act shall be
null and void: provided, however, that those executed prior to this
Act shall be valid only when registered with the Register of Deeds
within a period of three (3) months after the effectivity of this Act.
Thereafter, all Registers of Deeds shall inform the Department of
Agrarian Reform (DAR) within thirty (30) days of any transaction
involving agricultural lands in excess of five (5) hectares. (Emphasis
added)

[5]
 Rollo, p. 58. (Emphasis ours)

[6]
 Id. at 55-58.

[7]
 Id. at 67-70.

[8]
 Id. at 13.

[9]
 If there was illegal transfer, file a petition for annulment of deed of
conveyance in behalf of the PARO before the Provincial Agrarian Reform
Adjudicator-(PARAD). The petition shall state the material facts constituting
the violation and pray for the issuance of an order from the PARAD directing
the ROD to cancel the deed of conveyance and the TCT generated as a result
thereof. As legal basis therefore, the petition shall cite Section 50 of RA 6657
and Rule II, Section 1(c) and (e) of the DARAB Rules of Procedure.

[10]
 Guidelines on Annulment of Deeds of Conveyance of Lands covered by
the Comprehensive Agrarian Reform Program (CARP) executed in violation of
Section 6, Paragraph 4 of Republic Act No. 6657.

[11]
 Section 1. Primary and Exclusive Original Jurisdiction.

The Adjudicator shall have the primary and exclusive original jurisdiction to
determine and adjudicate the following case:

x x x x

1.3 The annulment: or cancellation of lease contracts or deeds of sale or

their amendments involving lands under the administration and disposition
of the DAR or Land Bank of the Philippines (LBP); xxx

1.5 Those involving the sale, alienation, pre-emption and redemption of

agricultural lands under the coverage of the CARL or other agrarian laws;

x x x x

1.9 Those cases involving the annulment or rescission of lease contracts and
deeds of sale, and the cancellation or amendment of titles pertaining to
agricultural lands under the administration and disposition of the DAR and
LBP; as well as EPs issued under PD 266, Homestead Patents, Free Patents,
and miscellaneous sales patents to settlers in settlements and resettlement
areas under the administration and disposition of the DAR.

[12]
 (d) Agrarian Dispute refers to any controversy relating to tenurial
arrangements, whether leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes concerning farmworkers'
associations or representation of persons in negotiating, fixing, maintaining,
changing, or seeking to arrange terms or conditions of such tenurial
arrangements. It includes any controversy relating to compensation of lands
acquired under this Act and other terms and conditions of transfer of
ownership from landowners to farmworkers, tenants and other agrarian
reform beneficiaries, whether the disputants stand in the proximate relation
of farm operator and beneficiary, landowner and tenant, or lessor and
lessee.

[13]
 Section 1. Primary and Exclusive Original Jurisdiclion.

The Adjudicator shall have the primary and exclusive original jurisdiction to
determine and adjudicate the following case:

x x x x

1.5 Those involving the sale, alienation, pre-emption and redemption of

agricultural lands under the coverage of the CARL or other agrarian laws;

x x x x

1.9 Those cases involving the annulment or rescission of lease contracts and
deeds of sale, and the cancellation or amendment of titles pertaining to
agricultural lands under the administration and disposition of the DAR and
LBP; as well as Eps issued under PD 266, Homestead Patents, Free Patents,
and miscellaneous sales patents to settlers in settlements and resettlement
areas under the administration and disposition of the DAR.

[14]
 512 Phil. 389, 400-401 (2005).
[15]
 Heirs of Julian dela Cruz v. Heirs of Alberto Cruz, supra, at 755-757.

[16]
 G.R.No. 176838, June 13, 2013, 698 SCRA 324, 333.

[17]
 Emphasis added.

[18]
 493 Phil. 570, 606 (2005).

[19]
 Rule II, Section 7. General Jurisdiction. The Regional Director shall
exercise primary jurisdiction over all agrarian law implementation cases
except when a separate special rule vests primary jurisdiction in a different
DAR office.

[20]
 Rule II, Section 10. Appellate Jurisdiction. The Secretary shall exercise
appellate jurisdiction over all ALI cases and may delegate the resolution of
appeals to any Undersecretary.

[21]
 Vda. de Tangub v. Court of Appeals, 270 Phil. 88, 97 (1990).

[22]
 Id.

[23]
 Heirs of Candida Del Rosario v. Del Rosario, G.R. No. 181548, June 20,
2012, 674 SCRA 180, 191-192.

[24]
 CA rollo, pp. 39-41. (Emphasis added.)

[25]
 Adopted: January 3, 1989; Effective: January 26, 1989.

[26]
 (d) Agrarian Dispute refers to any controversy relating to tenurial
arrangements, whether leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes concerning farmworkers'
associations or representation of persons in negotiating, fixing, maintaining,
changing, or seeking to arrange terms or conditions of such tenurial
arrangements.

It includes any controversy relating to compensation of lands acquired under

this Act and other terms and conditions of transfer of ownership from
landowners to farmworkers, tenants and other agrarian reform beneficiaries,
whether the disputants stand in the proximate relation of farm operator and
beneficiary, landowner and tenant, or lessor and lessee

[27]
 Adopted: January 9, 2001; Effective: January 23, 2001.

[28]
 Emphasis added.
[29]
 Dandoy v. Tongson, 514 Phil. 384, 391 (2005).

[30]
 1.9 Those cases involving the annulment or rescission of lease contracts
and deeds of sale, and the cancellation or amendment of titles pertaining to
agricultural lands under the administration and disposition of the DAR and
LBP; as well as Eps issued under PD 266, Homestead Patents, Free Patents,
and miscellaneous sales patents to settlers in settlements and resettlement
areas under the administration and disposition of the DAR.

[31]
 431 Phil. 675 (2002).

[32]
 e) Those involving the sale, alienation, mortgage, foreclosure,
preemption and redemption of agricultural lands under the coverage of the
CARP or other agrarian laws;

[33]
 c) The annulment or cancellation of lease contracts or deeds of sale or
their amendments involving lands under the administration and disposition
of the DAR or LBP;

[34]
 Sarne v. Hon. Maquiling, supra note 31.

[35]
 Id at 689. (Emphasis added.)

[36]
 1.5 Those involving the sale, alienation, pre-emption and redemption of
agricultural lands under the coverage of the CARL or other agrarian laws;

[37]
 Revised Rules and Regulations on the Compulsory Acquisition of
Agricultural Lands under R.A. No. 6657.

[38]
 378 Phil. 727, 762 (1999).

[39]
 Roxas & Co., Inc. v. Court of Appeals, supra, at 762-763.

[40]
 CA rollo, pp. 84-95.

[41]
 Id. at 82-83.

[42]
 Supra, note 16.

[43]
 Section 1. Primary and Exclusive Original Jurisdiction. - The Adjudicator
shall have primary and exclusive original jurisdiction to determine and
adjudicate the following cases:
x x x

1.13 Such other agrarian cases, disputes, matters or concerns referred to it

by the Secretary of DAR.

x x x x

[44]
 The Rules and Procedures Governing Land Transaction.

[45]
 Guidelines on Annulment of Deeds of Conveyance of Lands Covered by
the Comprehensive Agrarian Reform Program (CARP) Executed in Violation
of Section 6, Paragraph 4 of Republic Act (RA) No. 6657. Section 4 (b) of
DAR M.C. No. 02-01 pertinently provides:

SEC. 4 Operating Procedures - The procedures for annulment of deeds of

conveyance executed in violation of RA 6657 are as follows:

x x x

b) The Chief, Legal Division, of the Provincial Agrarian Reform Office, shall
have the following responsibilities:

1. Upon receipt of the MARO report, determine whether or not there was
illegal transfer of agricultural lands pursuant to Sec. 6, par. 4 of RA 6657;

2. If there was illegal transfer, file a petition for annulment of the
deed of conveyance in behalf of the PARO before the Provincial
Agrarian Reform Adjudicator (PARAD). The petition shall state the
material facts constituting the violation and pray for the issuance of an order
from the PARAD directing the ROD to cancel the deed of conveyance and the
TCT generated as a result thereof. As legal basis therefor, the petition shall
cite Section 50 of RA 6657 and Rule 11, Section 1(c) and (e) of the [1994]
DARAB New Rules of Procedure. x x x

[46]
 4.1 The late Eduardo Reyes was the original registered owner of
TCT 85055 and TCT 116506, an agricultural land situated at Brgy.
Ambiling, Magdalena, Laguna, consisting of 195,366 sq. m. and 31 sq.
meters, respectively.

4.2 The land described under TCT 85055 was issued a notice of

coverage under the mpulsory Acquisition (CA) scheme pursuant to
Section 7 of R.A. 6657. x x x. Emphasis added. See CA rollo, pp. 39-40.

[47]
 SECTION 1. Primary and Exclusive Original Jurisdiction. - The Adjudicator
shall have primary and exclusive original jurisdiction to determine and
adjudicate the following cases:

x x x x

1.5. Those cases involving the sale, alienation, pre-emption, and redemption
of agricultural lands under the coverage of the CARL or other agrarian laws;

x x x

[48]
 Supra note 31, p. 689.

[49]
 Section 4. Scope. — The Comprehensive Agrarian Reform Law of 1989
shall cover, regardless of tenurial arrangement and commodity produced, all
public and private agricultural lands, as provided in Proclamation No. 131
and Executive Order No. 229, including other lands of the public domain
suitable for agriculture.

More specifically the following lands are covered by the Comprehensive

Agrarian Reform Program:

(a) All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until
Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the public
domain.

(b) All lands of the public domain in excess of the specific limits as
determined by Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for
agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the
agricultural products raised or that can be raised thereon.

[50]
 Department of Agrarian Reform v. Paramount Holdings Equities, Inc.,
supra, at 336-337.

[51]
 CA rollo, p. 53

[52]
 Emphasis added.
[53]
 Id.

[54]
 Id.

[55]
 451 Phil. 368 (2003). (Citations omitted.)

[56]
 Heirs of Clemente Ermac v. Heirs of Vicente Ermac, supra, at 376.

[57]
 661 Phil. 307, 317 (2011).

[58]
 1.5 Those cases involving the sale, alienation, pre-emption, and
redemption of agricultural lands under the coverage of the CARL or other
agrarian laws.

[59]
 1.13 Such other agrarian cases, disputes, matters or concerns referred to
it by the Secretary of the DAR.

22.
VICTORIA P. CABRAL, Petitioner, v. HEIRS OF FLORENCIO ADOLFO
AND HEIRS OF ELIAS POLICARPIO, Respondents. G.R. No. 191615,
August 02, 2017
DECISION
TIJAM, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 is the Court of
Appeals' (CA) Decision dated November 23, 2009 in CA-G.R. SP No. 108518.
The CA's Resolution dated March 15, 2010, denying petitioner's Motion for
Reconsideration in the said case is likewise impugned herein.

The Facts
Petitioner claims that she is the registered owner of several parcels of land
situated, at Barangay Purok (formerly Iba), Meycauayan, Bulacan, originally
covered by Original Certificate of Title (OCT) No. 0-1670, subsequently
renumbered as OCT No. 0-220 (M), of the Registry of Deeds of Meycauayan,
Bulacan. The property subject of the instant case are portions of Lot 4 of
Plan Psu-164390 covered by the said OCT No. 0-1670.

On October 21, 1972, the Ministry of Agrarian Reform subjected the said
land under the coverage of the Operation Land Transfer (OLT) program of
the government under Presidential Decree (P.D.) No. 27.

In July 1973, petitioner sought to convert her landholdings, which include

not only the subject property but also her lands in Marilao and Meycauayan,
to non-agricultural purposes. In his 2nd Endorsement Letter to the DAR
Secretary dated October 1, 1973, DAR District Officer Fernando Ortega,
stated that per the reports of the Agrarian Reform Team, the subject
property was not included in the OLT program under P.D. No. 27, nor has
any portion thereof been transferred to a tenant. Thus, District Officer
Ortega recommended the conversion of the same into residential,
commercial, industrial, or other purposes.

On April 25, 1988, Emancipation Patents (EPs) were issued to Gregoria

Adolfo, Gregorio Lazaro, Florencio Adolfo, and Elias Policarpio pursuant to
the OLT program covering the subject property. Corresponding Transfer
Certificates of Titles (TCTs) were then issued to herein respondents Florencio
Adolfo on October 24, 1989 and Elias Policarpio on November 8, 1989 upon
registration of their respective EPs with the Register of Deeds of
Meycauayan, Bulacan as follows:
NAMES LOT NO. EP NO. TCT NO. AREA
(sq. m.)
Florencio Adolfo 1 A-117858 EP-003(M)
29759
Florencio Adolfo 2 A-117859-H EP-004(M)
957
Gregoria Adolfo 3 A-117978-H EP-005(M) 630
Gregoria Adolfo 4 A-117979 EP-006(M) 21793
Gregorio Lazaro 5 A-117980-H EP-007(M) 839
Gregorio Lazaro 10 A-117981 EP-008(M)
16906
Elias Policarpio 11 A-117983 EP-010(M)
995
Elias Policarpio 12 A-117982-H EP-009(M) 18019

On January 16, 1990, petitioner filed a petition before the Barangay Agrarian
Reform Council (BARC) for the cancellation of the EPs issued in favor of
Florencio Adolfo, Gregorio Lazaro, Gregoria Adolfo, and Elias Policarpio. On
January 19, 1990, petitioner filed another petition for cancellation of the said
EPs and TCTs before the DAR. The said petition was, however, forwarded to
the DAR Regional Director, who dismissed the case. In a case decided by
this Court in 2001 entitled Victoria P. Cabral v. CA, however, this Court held
that the Regional Director had no jurisdiction over the case as it is the
PARAD who has jurisdiction over cases involving cancellation of EPs.

Meanwhile, in 1994, petitioner filed an OLT Letter Protest before the DAR
Regional Director, questioning the coverage of her landholdings under P.D.
No. 27, on the ground that the same had already been classified as either
residential, commercial, or industrial.

In its November 16, 1994 Order, the DAR Regional Director denied the said
OLT protest, finding that despite the reclassification of the subject parcels of
land, the same will not be a bar in placing the said lands under the OLT
program, considering that petitioner's landholdings exceeded 24 hectares.

On appeal, the then DAR Secretary Ernesto D. Garilao, in his Order dated
July 12, 1996, affirmed the DAR Regional Director's Order, declaring that the
subject landholdings are covered by the OLT program under P.D. No. 27 as it
was only after the landholdings were placed under the OLT program on
October 21, 1972 when it was classified as within the residential zone. The
Order cited Administrative Order (A.O.) No. 06, series of 1994, which
provides that reclassification of lands to non-agricultural uses shall not
operate to divest tenant-farmers of their rights over lands covered by P.D.
No. 27, which were vested prior to June 15, 1988, and also Executive Order
(E.O.) No. 22818 which provides that tenant-farmers are deemed full owners
of the land they acquired by virtue of P.D. No. 27 as of October 21, 1972. In
fine, Secretary Garilao concluded that the petitioner's landholdings are
covered by P.D. No. 27.

On August 16, 2003, petitioner filed a Petition for Cancellation of

Emancipation Patents and Torrens Title before the Office of the Provincial
Agrarian Reform Adjudicator (PARAD) of Malolos City, Bulacan against the
said respondents and the Department of Agrarian Reform (DAR), Region III.
In the main, petitioner contended that the issuance of the said EPs and TCTs
were violative of applicable agrarian laws considering that the subject
property was already classified as residential, hence, not covered by P.D.
No. 27. Petitioner invoked a Certification dated February 24, 1983 issued by
the Zoning Administrator of the Office of the HSRC Deputized Zoning
Administration of Meycauayan, Bulacan, and Certification dated August 28,
1989 issued by the Zoning Administrator of Meycauayan, Bulacan, both
attesting to the classification of the subject property as within the residential
zone. Petitioner also averred that the said EPs were issued without due
process and without payment of just compensation.

On June 18, 2004, the Provincial Reform Adjudicator (PARAD) rendered a

Decision in favor of the petitioner, thus:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:

1. Ordering the Register of Deeds of Bulacan to cancel the Emancipation

Patent Titles issued to the private respondents, as follows: FLOPRENCIO [sic]
ADOLFO - TCT No. EP-003, FLORECNCIO [sic] ADOLFO TCT No. RP-004,
GREGORIA ADOLFO TCT No. EP-005, GREGORIA ADOLFO - TCT No. EP-006,
GREGORIO LAZARO - TCT No. EP-008, ELIAS POLICARPIO - TCT No. 010,
ELIAS POLICARPIO - TCT No. 009.

2. Ordering the private respondents and all persons claiming rights under
them to vacate the landholdings under their respective possessions and
surrender the same to petition.
3. Ordering the Register of Deeds of Bulacan to revived (sic) OCT No. 0-220-
(M) (formerly OCT No. 0-1670 registered under the name of petitioner
Victoria Cabral), insofar as Lot 4 thereof is concerned.

SO ORDERED.
Aggrieved, Gregoria Adolfo, Gregorio Lazaro, Heirs of Florencio Adolfo, and
Heirs of Elias Policarpio appealed the said decision to the Department of
Agrarian Reform Adjudication Board (DARAB).

In its July 29, 2008 Decision, the DARAB affirmed PARAD's Decision, thus:
WHEREFORE, premises considered, the Appeal is DENIED for lack of merit
and the assailed Decision is hereby affirmed.

SO ORDERED.
Undaunted, herein respondents elevated the case to the CA for review.

In its assailed Decision, the CA reversed and set aside the DARAB Decision.
The CA found that the subject land was never converted into a residential
land and, therefore, not exempt from the coverage of the government's OLT
program under P.D. No. 27, relying heavily upon Secretary Garilao's Order
above-cited. Hence, the CA concluded that when the predecessors-in-
interest of the herein respondents were identified as farmer-beneficiaries
and were given EPs/TCTs, they were deemed owners thereof. The CA
disposed, thus:
WHEREFORE, the July 29, 2008 Decision of the [DARAB] is hereby
REVERSED and SET ASIDE. The Petition for Cancellation of Emancipation
Patents and Torrens Titles (Case No. 2-03-02-0242'03) is hereby ordered
DISMISSED.

SO ORDERED.
Respondents' Motion for Reconsideration was denied in the DARAB's
Resolution dated March 11, 2009.
Hence, this petition.

G.R. No. 198160

Before We proceed to discuss the instant petition, it is noteworthy that the

issue on the coverage of Lot 4 under the OLT program pursuant to P.D. No.
27 had already been settled by this Court in its Decision dated August 31,
2016 in the case of Victoria P. Cabral v. Gregoria Adolfo, Gregorio Lazaro,
and Heirs of Elias Policarpio.

The said case involves the same issues, same assailed decisions of the
PARAD and DARAB, same subject property, and same parties (except
Gregoria Adolfo and Gregorio Lazaro who were parties in G.R. No. 198160
but not in this case, and Florencio Adolfo who is a party herein but not in
G.R. No. 198160).

Essentially, this Court upheld the findings of the PARAD and DARAB,
recognizing the zoning reclassification made on the subject property as
evidenced by the Certifications dated February 24, 1983 and August 28,
1989 issued by the zoning administrator of Meycauayan, Bulacan above-
cited. We also considered therein the 2nd Endorsement Letter of then DAR
District Officer Ortega, declaring that petitioner's landholdings were not
covered by the OLT program. The Court also found that no CLTs were issued
in favor of the respondents therein, which bolstered the fact that the subject
property was not covered by P.D. No. 27.

Hence, as it was established that Lot 4 was not covered by the OLT program,
this Court declared that the EPs covering the subject lands therein were
erroneously issued to the respondents.

With this judicial precedent in mind, We now proceed to resolve the instant
petition.

Issue
Did the CA err in reversing the PARAD and DARAB's order of cancelling the
subject EPs/TCTs?

The Court's Ruling

We answer in the affirmative.

DAR Administrative Order No. 02-9432 provides that a registered EP or

Certificate of Land Ownership Award (CLOA) may be cancelled on the
following grounds, to wit:
Grounds for the cancellation of registered EPs or CLOAs may include but not
limited to the following:

1. Misuse or diversion of financial and support services extended to the ARB

(Agrarian Reform Beneficiaries); (Section 37 of R.A. No. 6657)

2. Misuse of the land; (Section 22 of R.A. No. 6657)

3. Material misrepresentation of the ARB's basic qualifications as provided

under Section 22 of R.A. No. 6657, P.D. No. 27, and other agrarian laws;

4. Illegal conversion by the ARB; (Cf. Section 73, Paragraphs C and E of R.A.
No. 6657)

5. Sale, transfer, lease or other forms of conveyance by a beneficiary of the

right to use or any other usufructuary right over the land acquired by virtue
of being a beneficiary, in order to circumvent the provisions of Section 73 of
R.A. No. 6657, P.D. No. 27, and other agrarian laws. However, if the land
has been acquired under P.D. No. 27/E.O. No. 228, ownership may be
transferred after full payment of amortization by the beneficiary; (Sec. 6 of
E.O. No. 228)
6. Default in the obligation to pay an aggregate of three (3) consecutive
amortizations in case of voluntary land transfer/direct payment scheme,
except in cases of fortuitous events and force majeure;

7. Failure of the ARBs to pay for at least three (3) annual amortizations to
the LBP, except in cases of fortuitous events and force majeure; (Section 26
of R.A. No. 6657)

8. Neglect or abandonment of the awarded land continuously for a period of

two (2) calendar years as determined by the Secretary or his authorized
representative; (Section 22 of R.A. No. 6657)

9. The land is found to be exempt/excluded from P.D. No. 27/E.O. No. 228
or CARP coverage or to be part of the landowners' retained area as
determined by the Secretary or his authorized representative; and

10. Other grounds that will circumvent laws related to the implementation of
agrarian reform program. (emphasis supplied)
In this case, petitioner maintains that the subject property is excluded from
the coverage of P.D. No. 27 as it has already been classified as residential
land, invoking the Certifications dated February 24, 1983 and August 28,
1989 issued by the zoning administrator. Petitioner also avers that as early
as October 1, 1973, the DAR already made a declaration that her
landholdings are not included under the OLT program, and thus made a
recommendation for the conversion of the same to residential, commercial,
industrial, or other purposes. In fine, petitioner argues that there was never
any showing that the lands subject of the controversy were primarily
devoted to rice and com as to be covered by P.D. No. 27. Also, petitioner
argues that the subject EPs were issued without compliance with the
requirements for its issuance under P.D. No. 27, such as the prior issuance
of corresponding Certificates of Land Transfer (CLTs). Further, petitioner
alleges that her constitutional right to due process was violated as the
issuance of the subject EPs was done without any notice or consultation with
her and without the payment of just compensation.
The subject property (Lot 4) is not covered by the OLT program under P.D.
No. 27.

The resolution of the instant controversy is primarily anchored upon the

determination of whether the subject lands are covered by the OLT program
under P.D. No. 27.

As We have determined in G.R. No. 198160, Lot 4 had already been

reclassified to non-agricultural uses and was, therefore, already outside the
coverage of the OLT program under P.D. No. 27.

The CA in this case, however, ruled otherwise, relying heavily upon the July
12, 1996 Order of then DAR Secretary Garilao. In the said Order, Sec.
Garilao cited AO 6-94, which states that "reclassification of lands to non-
agricultural uses shall not operate to divest tenant-farmers of their rights
over lands covered by P.D. No. 27, which have vested prior to June 15,
1988," and EO 228, which provides that "tenant-farmers are deemed full
owners of the land they acquired by virtue of P.D. No. 27 as of October 21,
1972." Notably, respondents' arguments are also grounded on these
provisions.

We differ.

As this Court has often stressed, factual findings of administrative bodies

charged with their specific field of expertise, such as the PARAD and the
DARAB, are afforded great weight, nay, finality by the courts, and in the
absence of substantial showing that such findings were made from an
erroneous estimation of the evidence presented, they are conclusive, and in
the interest of stability of the governmental structure, should not be
disturbed. Contrary to the CA's conclusion, We find no cogent reason to
disturb the said quasi-judicial agency's findings. Consider:
(1) The July 12, 1996 Order of DAR Secretary Garilao involves parcels of
land different from the subject property in the case at bar.

As can be gleaned from the said Order, the certifications of reclassification

considered in the said case are as follows, to wit:
1. Certification for TCT No. T-149964 (M) with an area of of [sic] 42,109
square meters that it is classified as RESIDENTIAL ZONE as per Municipal
Ordinance No. 43, Series of 1988 dated December 21, 1988.

2. Certification for TCT No. T-149928 (M) with an area of 20,954 square
meters classified as INDUSTRIAL ZONE as per Municipal Ordinance No. 43,
Series 1988 dated December 21, 1988.

3. Certification for TCT No. T-0611 (M) with an area of 30,881 square meters
classified as RESIDENTIAL ZONE per Municipal Ordinance No. 43, Series of
1988 dated December 21, 1988.

4. Certification for TCT No. T-73.736 (M) (Lot 1-A) with an area of 3,020
square meters classified as RESIDENTIAL ZONE as per Comprehensive
Zoning Code dated October 14, 1987.

5. Certification for TCT No. T-73.737 (M) (Lot 1-A) with an area of 3,020
square meters classified as RESIDENTIAL ZONE as per Comprehensive
Zoning Code dated October 14, 1987.

6. Certification for OCT No. 0-1670 with an area of 12,299 square meters
(Lot 2) classified as RESIDENTIAL ZONE as per Comprehensive Zoning Code
approved on November 7, 1990. (emphasis supplied)
Contrariwise, the subject property in the case at bar constitutes parcels of
land covering certain portions of Lot 4 of Plan Psu-164390 of OCT No. 0-
1670. Clearly, thus, the CA erred in relying heavily on the said Order in
reversing the PARAD and DARAB decisions.
(2) The records are bereft of proof that the subject lands are tenanted and
devoted primarily to rice or corn production.

It bears stressing that P.D. No. 27, which implemented the OLT program,
covers only tenanted rice or corn lands. The requisites for coverage under
the OLT program are the following: (1) the land must be devoted to rice or
com crops; and (2) there must be a system of share-crop or lease tenancy
obtaining therein.

Neither of these requisites is present in this case.

(a) The subject property is not covered by the OLT because of its residential
nature.

Again, as found by both the PARAD and the DARAB as early as October 1,
1973, the DAR, through District Officer Ortega, already declared that the
subject landholding is not included in the OLT program by virtue of the
Agrarian Reform Team's report that the subject property is suited for
residential, commercial, industrial, or other urban purposes considering its
potential for national development. District Officer Ortega, thus,
recommended for its conversion into residential, commercial, industrial, or
other urban purposes.

This Court, in G.R. No. 198160, sustained such findings, as well as the
Certifications issued by the zoning administrator, attesting to the
classification of the property as being within the residential zone. Evidentiary
weight is accorded to the said documents as the same were issued by such
officer having jurisdiction over the area where the land in question is
situated and is, therefore, more familiar with the property in issue. These
certifications carried the presumption of regularity in its issuance and
respondents have the burden of overcoming this presumption, which they
failed to do.

(b) As to whether a tenancy relationship exists, petitioner insists that

respondents are not her tenants. On the other hand, the respondents,
anchoring their rights upon P.D. No. 27, necessarily claim that there is a
system of share-crop between them and the petitioner.

This Court has, time and again, held that occupancy and cultivation of an
agricultural land will not ipso facto make one a de jure tenant. Independent
and concrete evidence is necessary to prove personal cultivation, sharing of
harvest, or consent of the landowner. Tenancy relationship cannot be
presumed; the elements for its existence are explicit in law and cannot be
done away by conjectures. Thus, as petitioner denies such tenancy
relationship and it is respondents who assert the same, the latter has the
burden to prove their affirmative allegation of tenancy. Again, the
respondents failed to discharge such burden as there is nothing on record
that will provide this Court factual basis to determine that indeed a crop-
sharing agreement exists between the parties.

(c) Farmer-beneficiaries cannot be deemed full owners when there is no

compliance with the procedure for the issuance of an EP under P.D. No. 27
and related rules.

Thus, neither do We subscribe to Sec. Garilao's reasoning and respondents'

argument that since the reclassication of the property was made after the
effectivity of P.D. No. 27, tenant-farmers enjoy a vested right and should be
deemed as "full owners" of the property.

Indeed, under P.D. No. 27, tenant-farmers of rice and corn lands were
deemed owners of the land they till as of October 21, 1972 or the effectivity
of the said law. This policy was intended to emancipate the tenant-farmers
from the bondage of the soil. However, the provision declaring tenant-
farmers as owners as of October 21, 1972 should not be construed as
automatically vesting upon them absolute ownership over the land they are
tilling.

Certain requirements must also be complied with before full ownership is

vested upon the tenant-farmers. Thus, in G.R. No. 198160, We laid down
the steps to be undertaken before an EP can be issued to effectively transfer
the land to the tenant-farmers, to wit: first, the identification of tenants, and
the land covered by OLT; second, land survey and sketching of the actual
cultivation of the tenant to determine parcel size, boundaries, and possible
land use; third, the issuance of the CLT. To ensure accuracy and safeguard
against falsification, these certificates are processed at the National
Computer Center (NCC) at Camp Aguinaldo; fourth, valuation of the land
covered for amortization computation; fifth, amortization payments of
tenant-tillers over a fifteen (15) year period; and sixth, the issuance of the
EP.

Furthermore, there are several supporting documents which a tenantfarmer

must submit before he can receive the EP such as: (a) Application for
issuance of EP; (b) Applicant's (owner's) copy of the CLT; (c) Certification of
the landowner and the Land Bank of the Philippines that the applicant has
tendered full payment of the parcel of land as described in the application
and as actually tilled by him; (d) Certification by the President of the
Samahang Nayon or by the head of a farmers' cooperative duly confirmed by
the municipal district officer (MDO) of the Ministry of Local Government and
Community Development (MLGCD) that the applicant is a full-fledged
member of a duly registered farmers' cooperative or a certification to these
effect; (e) Copy of the technical (graphical) description of the land parcel
applied for prepared by the Bureau of Land Sketching Team (BLST) and
approved by the regional director of the Bureau of Lands; (f) Clearance from
the MAR field team (MARFT) or the MAR District Office (MARDO) legal officer
or trial attorney; or in their absence, a clearance by the MARFT leader to the
effect that the land parcel applied for is not subject of adverse claim, duly
confirmed by the legal officer or trial attorney of the MAR Regional Office or,
in their absence, by the regional director; (g) Xerox copy of Official Receipts
or certification by the municipal treasurer showing that the applicant has
fully paid or has effected up-to-date payment of the realty taxes due on the
land parcel applied for; and (h) Certification by the MARFT leader whether
applicant has acquired farm machineries from the MAR and/or from other
government agencies.

As We have held in the case of Association of Small Landowners in the

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

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 P.D. 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 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 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.
Clearly, thus, prior to the compliance with the prescribed requirements,
tenant-farmers have, at most, an inchoate right over the land they were
tilling.

In this case, the records are bereft of evidence to show that the procedure
above-enumerated was complied with by the respondents to prove that the
said provisional title was perfected, from the time that the entitlement to
such right started pursuant to P.D. No. 27 or specifically on October 21,
1972 and before the claimed land was reclassified.

Foremost, there was no CLT issued prior to the issuance of the subject EPs.
In recognition of the said inchoate right, a CLT is issued to a tenantfarmer 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. The CLT proves inchoate ownership of
an agricultural land primarily devoted to rice or com production.

In Del Castillo v. Orciga, We explained that land transfer under P.D. No. 27
is effected in two stages: first, the issuance of a CLT; and second, the
issuance of an EP. The first stage serves as the government's recognition of
the tenant-farmer's inchoate right as "deemed owners" of the land they till.
The second stage perfects the title of the tenant-farmers and vests in them
absolute ownership upon full compliance with the prescribed requirements.
As a preliminary step then, the CLT immediately serves as the tangible
evidence of the government's recognition of the the tenant-farmers' inchoate
right and of the subjection of the land to the OLT program.

To bolster the finding that the subject landholding was not covered by the
OLT program, We echo the PARAD and DARAB pronouncement that the fact
that no CLTs were previously issued to the respondents signifies the non-
inclusion of the subject lands under the coverage of the OLT. Indeed, there
is nothing in the records that will show that CLTs were issued in favor of the
respondents before the issuance of the subject EPs considering that, to
reiterate, the issuance of a CLT is a proof that the property was previously
covered by the OLT program and proof of the government's recognition of
the farmer-beneficiary's inchoate right over the same.

In G.R. No. 198160, this Court found that Elias Policarpio's TCTs, along with
therein respondent Gregoria Adolfo's TCTs, were not derived from a CLT. In
this case, the CA cited a Certification from the DAR dated April 27, 2009 to
conclude that CLTs were issued to the respondents. A perusal of the said
Certification, however, shows that only one of the lands being claimed by
Florencio Adolfo was issued a CLT (CLT No. 0-056491). The other person
stated therein who was purportedly issued a CLT was Gregorio Lazaro, who
is not a party in this case. Hence, We are perplexed on why the CA
sweepingly concluded that CLTs were issued to the respondents and applied
the same to this case.
At any rate, assuming that such Certification is valid, it could readily be seen
that CLT No. 0-056491 was only issued on September 11, 1981 or nine
years after the lot had supposedly been brought under the OLT program.
The fact that as of October 1973 a determination had already been made by
the DAR Regional Director that the subject property was not covered by the
OLT program is also telling. Thus, We agree with the findings of the PARAD
and DARAB that no CLTs were issued in this case, in violation of the
procedure for the issuance of an EP above-enumerated.

Likewise, there is no showing that petitioner was notified of the placement of

her landholdings under the OLT program and, more importantly, there was
no proof that petitioner was paid just compensation therefor.

Land acquisition by virtue of P.D. No. 27 and Republic Act (R.A.) No. 665765
partakes of the nature of expropriation. In fact, jurisprudence states that it
is an extraordinary method of expropriating private property. As such, the
law on the matter must be strictly construed. Faithful compliance with legal
provisions, especially those which relate to procedure for acquisition of
expropriated lands should therefore be observed. In expropriation
proceedings, as in judicial proceedings, notice is part of the constitutional
right to due process of law. It informs the landowner of the State's intention
to acquire 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.

In this case, the respondents and the DAR failed to adduce evidence to
prove actual notice to the petitioner and payment of just compensation for
the taking of the latter's property.

Indeed as We have settled in G.R. No. 198160, there is nothing on record

that will show that the landholding was brought under the OLT program,
CLTs were issued prior to the issuance of the subject EPs, respondents are
full-fledged members of a duly recognized farmer's cooperative, they
finished payment of amortizations, and that petitioner, as the landowner,
was notified and paid just compensation for the taking of her lands before
the issuance of the subject EPs.
In this issue of compliance with the procedure, it must be remembered that
the burden of proof lies with the party who asserts a right and the quantum
of evidence required by law in civil cases is preponderance of evidence.
Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the
term "greater weight of evidence" or "greater weight of credible evidence".
Moreover, parties must rely on the strength of their own evidence, not upon
the weakness of that of their opponent's. Significantly, as We have observed
by in G.R. No. 198160, this Court is in the dark as to what actually
transpired prior to the issuance of the subject EPs, which only raises more
questions than answers.

To Our mind, it would have been easy for the respondents to prove their
claims had they presented the documents above-enumerated. Thus, this
Court is baffled by the fact that the respondents did not adduce such
evidence before the PARAD and/or the DARAB, instead, they resorted to
defenses such as an attack to the complaint for suffering from procedural
defect and prescription of the action. Also, respondents merely relied on the
provision in P.D. No. 27 declaring that farmer-beneficiaries are deemed
owners of the land that they are tilling as of October 21, 1972, which, as
amply discussed above, is not sufficient to vest absolute ownership to
farmer-beneficiaries. Notably, respondent presented documents such as
certifications to prove payment of the value of land allotted to Florencio
Adolfo, TCTs reflecting CLT numbers, among others, for the first time on
appeal before the CA and also before this Court as attached to their
Comment to the Petition. However, these documents are merely photocopies
and were not presented before the PARAD and DARAB, hence, cannot be
given evidentiary value by this Court.

The issue on the validity of EPs is not barred by prescription.

Respondents argue that the EPs and subsequent TCTs issued to them,
registered with the Register of Deeds, have already become indefeasible
upon the expiration of one year from the date of the issuance thereof and
can no longer be cancelled. Respondents point out that their EPs were issued
in 1988 and the instant case was filed only in 2003 or 15 years after such
issuance.

This Court has already ruled that the mere issuance of EPs and TCTs does
not put the ownership of the agrarian reform beneficiary beyond attack and
scrutiny. EPs issued to agrarian reform beneficiaries may be corrected and
cancelled for violations of agrarian laws, rules, and regulations.

Besides, registration is nothing more than a mere species of notice of an

acquired vested right of ownership of a landholding. Registration of a piece
of land under the Torrens System does not create or vest title, because it is
not a mode of acquiring ownership. A certificate of title is merely an
evidence of ownership or title over the particular property described therein.
It cannot protect a usurper from the true owner. Thus, the jurisdiction of the
PARAD/DARAB cannot be deemed to disappear the moment a certificate of
title is issued as 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 EPs, on which such TCTs are grounded, be void.

At any rate, contrary to the respondents' contention, records reveal that as

early as January 1990, or less than three and two months after Florencio
Adolfo and Elias Policarpio registered their titles with the Register of Deeds,
respectively, petitioner had already pursued actions to protect her right over
the subject landholding.

WHEREFORE, premises considered, the instant petition is GRANTED.

Accordingly, the assailed Court of Appeals Decision dated November 23,
2009 and Resolution dated March 15, 2010 in CA-G.R. SP No. 108518 are
hereby REVERSED and SET ASIDE. The Decision dated July 29, 2008 and
Resolution dated March 11, 2009 of the Department of Agrarian Reform
Adjudication Board in DARAB Case No. 13552, ordering the cancellation of
Transfer Certificate of Title Nos. EP-003 and EP-004 in the name of Florencio
Adolfo, and EP-010 and EP-009 in the name of Elias Policarpio, are
REINSTATED.

SO ORDERED.
23.

G.R. No. 169913               June 8, 2011

HEIRS OF DR. JOSE DELESTE, namely: JOSEFA DELESTE, JOSE RAY

DELESTE, RAUL HECTOR DELESTE, and RUBEN ALEX DELESTE, Petitioners,
vs.
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.

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 Resolution1 of the Court of
Appeals (CA) and its September 13, 2005 Resolution2 denying petitioners’
motion for reconsideration.
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 Gregorio’s 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 Decision10 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
one-half (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
co-owners 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 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
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 Decision22 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 Decision25 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 latter’s authorized representative. Petitioners’
motion for reconsideration was likewise denied by the DARAB in its
Resolution26 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 Resolution27 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.28 On April
11, 2008, they also filed a Supplement to the Motion for Reconsideration.29
In Our Resolution30 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
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.
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.)1avvphi1
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.
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
Significantly, accompanying the Certification48 dated October 8, 1999 issued
by Gil R. Balondo, Deputy Zoning Administrator of the City Planning and
Development Office, Iligan City, and the letter49 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.
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 non-agricultural
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 the Sangguniang Bayan of Dasmariñas, Cavite, and
approved by the HSRC, specifying them as residential.
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:
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."
x x x           x x x          x x x
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 non-agricultural 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. 110-54 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
tenant-farmers 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 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. 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, tenant-farmers
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
farmer-beneficiary as soon as the DAR transfers the landholding to the
farmer-beneficiary 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.
CA61 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 & Dev’t. 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 State’s 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 ½
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,67 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.
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 DAR’s own order be cancelled administratively, with more reason
can the courts, especially the Supreme Court, do so when the matter is
clearly in issue."
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
LBP’s contention that this Court’s 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, Gregorio’s brother, and who
collectively assert their right to a share in Gregorio’s 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 landowner’s 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. In Heirs 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
CA-G.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
DARAB’s 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 CA’s 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 hereby declared 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.
24.
LAND BANK OF THE PHILIPPINES, petitioner, 
vs.
JOSEFINA R. DUMLAO, A. FLORENTINO R. DUMLAO, JR., STELLA
DUMLAO-ATIENZA, and NESTOR R. DUMLAO, represented by
Attorney-In-Fact, A. Florentino R. Dumlao, Jr., respondents.
G.R. No. 167809             November 27, 2008
DECISION
REYES, R.T., J.:
IN determining just compensation for lands covered by the government’s
Operation Land Transfer, which law applies – Presidential Decree (PD) No.
271 or Republic Act (RA) No. 66572 known as the Comprehensive Agrarian
Reform (CARP) Law?
This and other related questions are brought to the Court via this petition for
review on certiorari3 of the Decision4 of the Court of Appeals (CA) granting
each of respondents a five-hectare retention area and ordering petitioner to
pay them One Hundred Nine Thousand Pesos (P109,000.00) per hectare for
the excess of the retained area.

The Facts
Respondents Josefina R. Dumlao, A. Florentino R. Dumlao, Jr., Stella
Dumlao-Atienza, and Nestor R. Dumlao, heirs of the deceased Florentino G.
Dumlao, were the co-owners of several parcels of agricultural land with an
aggregate area of 32.2379 hectares situated at Villaverde, Nueva Vizcaya.
The properties are covered by: (1) Transfer Certificate of Title (TCT) No. T-
1180 with an area of 11.33 hectares; 5 (2) TCT No. 41508 consisting of
6.2201 hectares;6 (3) TCT No. 41507 with an area of 4.0001 hectares; 7 (4)
TCT No. 41506 consisting of 3.9878 hectares;8 (5) TCT No. 41504 consisting
of 5.0639 hectares; and (6) TCT No. 41505 with an area of 1.6360 hectares.
The properties were placed under Operation Land Transfer by the
Department of Agrarian Reform (DAR).9 However, the definite time of actual
taking was not stated.10
Pursuant to PD No. 27 and Executive Order (EO) No. 228, 11 a preliminary
valuation was made by the DAR on the landholdings covered by TCT Nos.
41504 and T-1180 with a total area of 16.3939 hectares. Finding the
valuation to be correct, petitioner bank informed respondents of the said
valuation.12 Payments were then deposited in the name of the
landowners.13 Meanwhile, processing of the properties covered by the other
four (4) titles, namely, TCT Nos. 41505, 41506, 41507 and 41508, remains
pending with the DAR.14
On July 9, 1995, respondents filed a Complaint15 before the Regional Trial
Court (RTC) in Nueva Vizcaya, Branch 28, 16 for determination of just
compensation for their properties. It was claimed, inter alia, that they were
not paid their just compensation for the properties despite issuance of
certificates of land transfer to farmer-beneficiaries by the DAR. 17 They
prayed for the appointment of three (3) competent and disinterested
commissioners who would determine and report to the court the just
compensation of their landholdings based on their current fair market value,
without prejudice to their retention rights. They also asked for payment of
actual and moral damages, attorney’s fees, and costs of suit. 18
In its Answer, the DAR, represented by the Municipal Agrarian Reform Office
(MARO) and Provincial Agrarian Reform Office (PARO), posited that the
complaint lacked a cause of action and that the RTC did not have
jurisdiction. Under Section 50 of RA No. 6657, it is the Department of
Agrarian Reform Adjudication Board (DARAB) which is vested with primary
and original jurisdiction over land valuation, while the RTC as a Special
Agrarian Court may review the DARAB’s decision.19
Petitioner, which was impleaded as defendant in the valuation case before
the trial court, likewise filed its Answer, raising a similar line of
defense.20 Petitioner added that while payment for the properties covered by
TCT Nos. T-1180 and T-41504 were already deposited in trust for
respondents, the claimfolders for the remaining four properties is still with
the DAR. Thus, the filing of the complaint against petitioner was premature.
After the termination of pre-trial conference, respondent Atty. A. Florentino
Dumlao, Jr. submitted his affidavit on which he was cross-examined.
Following the submission of their testimonial and documentary evidence,
respondents rested their case.
Upon motion of respondents, the RTC, on April 15, 1998, appointed Atty.
John D. Balasya, Clerk of Court, as commissioner. He was mandated to
"receive, examine, and ascertain valuation of the properties." 21 Believing
that the valuation of the properties is not commensurate to their true value
and, hence, not a "just" compensation, Atty. Balasya stated in his
Commissioner’s Report dated July 21, 1998, 22 that:
The evidences submitted by the parties as well as those gathered by
the undersigned show that only two (2) parcels of land were valued
under Presidential Decree No. 27. The parcels of land are located in
Nagbitin, Villaverde, Nueva Vizcaya and per Exhibit "O," the
unirrigated riceland in Nagbitin are considered first class agricultural
lands. Under Tax Ordinance No. 96-45 adopting and authorizing the
1996 Schedule of Fair Market Values for the Different Classes of Real
Property in Nueva Vizcaya (Exhibit "G" and Exhibit "G-1") the market
value of first class unirrigated Riceland in the Municipality of Villaverde
is P109,000.00 Per Department Order No. 56-97 dated May 27, 1997
issued by the Department of Finance, Re: Implementation of the
Revised Zonal Values of Real Properties in all Municipalities under the
jurisdiction of Revenue District Office No. 14 (Bayombong, Nueva
Vizcaya), Revenue Region No. 3, Tuguegarao, Cagayan for Internal
Revenue Tax purposes, the zonal value of land in other Barangays in
Villaverde is P60.00/square meter.
In summary, the undersigned believes that the valuation of
respondents Land Bank of the Philippines and the Department of
Agrarian Reform is not commensurate to the definition of just
compensation x x x.23
RTC Ruling
On October 14, 1998, the RTC issued a decision,24 the fallo of which reads:
WHEREFORE, the Court hereby orders the remand of the case with
respect to TCT Nos. 1180 and T-41504 to the proper DAR agency for
further proceedings and orders the dismissal of the case with respect
to TCT Nos. T-41508, T-41507, T-41506, and T-41505 for having been
prematurely filed, there being no preliminary valuation made yet on
the said parcels of land. No pronouncement as to costs.
SO ORDERED.25
Respondents moved for reconsideration. Consequently, on December 21,
1998, the trial court modified26 its decision in the following manner:
WHEREFORE, premises considered, in the higher interest of justice,
the Court MODIFIES its October 14, 1998 decision by ordering
plaintiffs to adduce additional evidence to support their contentions
under PD 27/EO 228 within 30 days from receipt of this Order
furnishing a copy thereof to the defendants who are given 15 days
from receipt to comment thereon. Thereafter, the matter shall be
deemed submitted for resolution.
SO ORDERED.27
Instead of adducing additional evidence, respondents filed a motion for
reconsideration of the trial court’s December 21, 1998 order. Positing that
the additional evidence required by the court pertains to the formula under
PD No. 27, respondents insisted on P109,000.00 per hectare, the market
value of the properties, as just compensation. 28 Accordingly, the trial court,
on March 18, 1999, issued another order, 29 the dispositive portion of which
states:
WHEREFORE, premises considered, the Court hereby sets the just
compensation in the amount of P6,912.50 per hectare for lot covered
by TCT No. T-1180 and the amount provided for in the Land Valuation
Summary and Farmers Undertaking for lot covered by TCT No. T-
41504 to be paid to the plaintiffs with interest from the time of the
taking until fully paid.
SO ORDERED.30
CA Disposition
Dissatisfied with the March 18, 1999 RTC Order, respondents appealed to
the CA. On February 16, 2005, the CA rendered a decision 31 modifying the
trial court’s ruling, viz.:
WHEREFORE, in view of the foregoing, the trial court’s decision is
hereby MODIFIED. The plaintiffs-appellants’ right of retention is
 recognized. Plaintiffs-appellants Josefina, A. Florentino, Jr. and Stella,
all surnamed Dumlao are each entitled to retain five (5) hectares
pursuant to the provisions of R.A. 6657.
The excess in area after application of the right of retention is valued
at One Hundred Nine Thousand (P109,000.00) Pesos per hectare with
interest at the prevailing rate from the time of taking until fully paid.
No costs.
SO ORDERED.32
The CA declared that the definite time of the actual taking of the subject
properties is not certain.33 Further, there is no doubt that the transfer of the
subject landholdings is governed by PD No. 27. 34 However, after the passage
of RA No. 6657, the formula relative to valuation under PD No. 27 no longer
applies.35 The appellate court held:
The trial court, therefore, in the determination of just compensation is
not confined within the valuation provisions of P.D. 27. It can depart
from it so long as the valuation assigned on the land transferred is
within the meaning of the phrase "just compensation" provided for
in J.M. Tuazon Co. vs. Land Tenure Administration (31 SCRA 413).36
Relying on the Commissioner’s Report, the CA assigned the lower value
of P109,000.00 per hectare as just compensation for the subject
properties.37
Issues
Petitioner bank has resorted to the present recourse, imputing to the CA the
following errors:
A.
WHEN THE CHALLENGED DECISION ADHERED TO THE
COMMISSIONER’S REPORT AND FIXED THE VALUEOF THE
LANDHOLDINGS AT P109,000.00 PER HECTARE WITH INTEREST AT
THE PREVAILING RATE FROM THE TIME OF TAKING UNTIL FULLY
PAID, WORKING A MODIFICATION OF THE LEGALLY PRESCRIBED
BASIC FORMULA FOR DETERMINING THE JUST COMPENSATION OF
LANDS ACQUIRED THROUGH OPERATION LAND TRANSFER (OLT),
CONTRARY TO THE CLEAR MANDATE OF PD 27/EO 228.
B.
WHEN THE CHALLENGED DECISION DECLARED THAT OCTOBER 21,
1972 CANNOT BE DEEMED AS THE DATE OF TAKING OF THE SUBJECT
PROPERTIES.
 C.
WHEN THE CHALLENGED DECISION DECLARED THAT RESPONDENTS’
ENTIRE LANDHOLDINGS ARE COVERED BY PD 27 AND THAT
RESPONDENTS JOSEFINA, A. FLORENTINO, JR., AND STELLA ARE
ENTITLED TO RETAIN FIVE (5) HECTARES EACH. 38 (Underscoring
supplied)
Our Ruling
The just compensation due to respondents should be determined
under the provisions of RA No. 6657.
Petitioner asserts that since the properties were acquired pursuant to PD No.
27, the formula for computing just compensation provided by said decree
and EO No. 228 should apply. Respondents, on the other hand, insist on the
application of RA No. 6657 with respect to the computation.
Petitioner is mistaken. The 1987 Constitution, specifically Article XIII on
Social Justice and Human Rights, mandates the State’s adoption of an
agrarian reform program for the benefit of the common people. 39 The
recognition of the need for genuine land reform, however, started earlier. PD
No. 27, issued on October 21, 1972, more than a decade before the
enactment of the 1987 Constitution, provided for the compulsory acquisition
of private lands for distribution among tenant-farmers and specified the
maximum retention limits for landowners.40
The agrarian reform thrust was further energized with the enactment of EO
No. 228 on July 17, 1987, when full land ownership was declared in favor of
the beneficiaries of PD No. 27. The executive issuance also provided for the
valuation of still unvalued covered lands, as well as the manner of their
payment. On July 22, 1987, Presidential Proclamation No. 131, instituting a
comprehensive agrarian reform program, as well as EO No. 229 41 providing
the mechanics for its implementation, were likewise enacted. 42
When the Philippine Congress was formally reorganized, RA No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law of 1988, was
immediately enacted. It was signed by President Corazon Aquino on June
10, 1988. This law, while considerably changing the earlier presidential
issuances, including PD No. 27 and EO No. 228, nevertheless gave them
suppletory effect insofar as they are not inconsistent with its provisions. 43
On one hand, PD No. 27 provides the formula to be used in arriving at the
exact total cost of the acquired lands:44
For the purpose of determining the cost of the land to be transferred
to the tenant-farmer pursuant to this Decree, the value of the land
shall be equivalent to two and one half (2-1/2) times the
 average harvest of three normal crop years immediately
preceding the promulgation of this Decree.
The total cost of the land, including interest at the rate of six (6) per
centum per annum, shall be paid by the tenant in fifteen (15) years of
fifteen (15) equal annual amortizations. (Emphasis supplied)
Implementing the formula under PD No. 27, EO No. 228 states:
SECTION 2. Henceforth, the valuation of rice and corn lands covered
by P.D. No. 27 shall be based on the average gross production
determined by the Barangay Committee on Land Production in
accordance with Department Memorandum Circular No. 26, series of
1973 and related issuances and regulation of the Department of
Agrarian Reform. The average gross production per hectare shall
be multiplied by two and a half (2.5), the product of which shall
be multiplied by Thirty-Five Pesos (P35.00), the government
support price for one cavan of 50 kilos of palay on October 21,
1972, or Thirty-One Pesos (P31.00), the government support price for
one cavan of 50 kilos of corn on October 21, 1972, and the amount
arrived at shall be the value of the rice and corn land, as the
case may be, for the purpose of determining its cost to the
farmer and compensation to the landowner. (Emphasis supplied)
Thus, under PD No. 27 and EO No. 228, the formula for computing the Land
Value (LV) or Price Per Hectare (PPH) of rice and corn lands is:
2.5 x AGP45 x GSP46 = LV or PPH
The parameters of PD No. 27 and EO No. 228 are manifestly different from
the guidelines provided by RA No. 6657 for determining just compensation.
Section 17 of RA No. 6657 is explicit:
Sec. 17. Determination of Just Compensation. – In determining just
compensation, the cost of acquisition of the land, the current value of
the like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declarations, and the assessment
made by government assessors shall be considered. The social and
economic benefits contributed by the farmers and the farmworkers
and by the Government to the property as well as the non-payment of
taxes or loans secured from any government financing institution on
the said land shall be considered as additional factors to determine its
valuation.
Due to the divergent formulae or guidelines presented by these laws, a
number of cases have already been brought to the Court regarding which
law applies in computing just compensation for landholdings acquired under
PD No. 27. On this score, the Court has repeatedly held that if just
compensation was not settled prior to the passage of RA No. 6657, it should
be computed in accordance with said law, although the property was
acquired under PD No. 27.
In the recent Land Bank of the Philippines v. Heirs of Angel T.
Domingo,47 We rejected the DAR’s valuation of just compensation based on
the formula provided by PD No. 27 and EO No. 228. We held then that
Section 17 of RA No. 6657 is applicable. The latter law, being the latest law
in agrarian reform, should control.
When RA 6657 was enacted into law in 1988, the agrarian reform
process in the present case was still incomplete as the amount of just
compensation to be paid to Domingo had yet to be settled. Just
compensation should therefore be determined and the expropriation
process concluded under RA 6657.
Guided by this precept, just compensation for purposes of
agrarian reform under PD 27 should adhere to Section 17 of RA
6657 x x x.
In Land Bank of the Philippines v. Estanislao,48 the Court ruled that taking
into account the passage of RA No. 6657 in 1988 pending the settlement of
just compensation, it is that law which applies to landholdings seized under
PD No. 27, with said decree and EO No. 288 having only suppletory effect.
Prior to that declaration, the Court already decreed in Land Bank of the
Philippines v. Natividad,49 citing Paris v. Alfeche,50 that:
Under the factual circumstances of this case, the agrarian reform
process is still incomplete as the just compensation to be paid private
respondents has yet to be settled. Considering the passage of Republic
Act No. 6657 (6657) before the completion of the process, the just
compensation should be determined and the process concluded under
the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO
228 having only suppletory effect, conformably with our ruling in Paris
v. Alfeche.51
Agrarian reform is a revolutionary kind of expropriation. 52 The recognized
rule in expropriation is that title to the expropriated property shall pass from
the owner to the expropriator only upon full payment of the just
compensation.53 Thus, payment of just compensation to the landowner is
indispensable.
In fact, Section 4, Article XIII of the 1987 Constitution mandates that the
redistribution of agricultural lands shall be subject to the payment of just
compensation. The deliberations of the 1986 Constitutional Commission on
this subject reveal that just compensation should not do violence to the Bill
of Rights but should also not make an insurmountable obstacle to a
successful agrarian reform program. Hence, the landowner’s right to just
compensation should be balanced with agrarian reform. 54
In the case under review, the agrarian reform process was not completed.
The just compensation to be paid respondents was not settled prior to the
enactment of RA No. 6657, the law subsequent to PD No. 27 and EO No.
228. In fact, the non-payment of just compensation is precisely the reason
why respondents filed a petition for the determination of just compensation
before the RTC on July 13, 1995.
The records do not show when respondents or their father, Florentino
Dumlao, was formally notified of the expropriation. The records, however,
bear out that the bank sent Florentino Dumlao a letter stating that it had
approved the land transfer claim involving that property covered by TCT No.
T-1180 on November 5, 1990. Moreover, the various Land Valuation
Summary and Farmers Undertakings showing the valuation of the land
transferred to the farmers-beneficiaries were approved on May 17,
198955 and July 21, 1989.56 It is thus crystal clear that even after the
passage of RA No. 6657 in 1988, neither petitioner nor the DAR had settled
the matter of just compensation with respondents as landowners.
Besides, RA No. 6657 applies to rice and corn lands covered by PD No. 27.
In Paris v. Alfeche,57 the Court explained:
Considering the passage of RA 6657 before the completion of the
application of the agrarian reform process to the subject lands, the
same should now be completed under the said law, with PD 27 and EO
228 having only suppletory effect. This ruling finds support in Land
Bank of the Philippines v. CA, wherein the Court stated:
"We cannot see why Sec. 18 of RA 6657 should not apply
to rice and corn lands under PD 27. Section 75 of RA 6657
clearly states that the provisions of PD 27 and EO 228 shall only
have a suppletory effect. Section 7 of the Act also provides –
Sec. 7. Priorities. – The DAR, in coordination with the PARC
shall plan and program the acquisition and distribution of
all agricultural lands through a period of ten (10) years
from the effectivity of this Act. Lands shall be acquired and
distributed as follows:
Phase One: Rice and Corn lands under P.D. 27; all idle or
abandoned lands; all private lands voluntarily offered by
the owners for agrarian reform; x x x and all other lands
owned by the government devoted to or suitable for
agriculture, which shall be acquired and distributed
immediately upon the effectivity of this Act, with the
 implementation to be completed within a period of not
more than four (4) years.
This eloquently demonstrates that RA 6657 includes PD
27 lands among the properties which the DAR shall
acquire and distribute to the landless. And to facilitate the
acquisition and distribution thereof, Secs. 16, 17, and 18
of the Act should be adhered to. In Association of Small
Landowners of the Philippines v. Secretary of Agrarian Reform,
this Court applied the provisions (of) RA 6657 to rice and corn
lands when it upheld the constitutionality of the payment of just
compensation for PD 27 lands through the different modes
stated in Sec. 18." (Emphasis supplied)
Verily, there is nothing to prevent Section 17 of RA No. 6657 from being
applied to determine the just compensation for lands acquired under PD No.
27.
In Natividad,58 the Court ruled that the DAR’s failure to determine the just
compensation for a considerable length of time made it inequitable to follow
the guidelines provided by PD No. 27 and EO No. 228. Hence, RA No. 6657
should apply. The same rationale was followed in Meneses v. Secretary of
Agrarian Reform.59 There, the Court noted that despite the lapse of more
than thirty (30) years since the expropriation of the property in 1972,
petitioners had yet to benefit from it, while the farmer-beneficiaries were
already harvesting the property’s produce. Thus, RA No. 6657 was applied
instead of PD No. 27 in determining just compensation.
In Meneses, the Court compared the conflicting rulings in Gabatin v. Land
Bank of the Philippines,60 cited by petitioner, and Land Bank of the
Philippines v. Natividad.61 This Court affirmed Natividad, stating that it would
be more equitable to apply the same due to the circumstances obtaining, i.e.
the more than 30-year delay in the payment of just compensation.
The application of RA No. 6657 due to the inequity faced by landowners
continued in Lubrica v. Land Bank of the Philippines.62 The landowners were
also deprived of their properties in 1972 but had yet to receive their just
compensation even after the passage of RA No. 6657. Since the landholdings
were already subdivided and distributed to the farmer-beneficiaries, the
Court, speaking through Justice Consuelo Ynares-Santiago, deemed it
unreasonable to compute just compensation using the values at the time of
taking in 1972 as dictated by PD No. 27, and not at the time of payment
pursuant to RA No. 6657.
We find no cogent reason not to apply the same ratiocination here. In the
case at bar, emancipation patents, and eventually, transfer certificates of
title, were issued to the farmer-beneficiaries 63 at least twenty-eight (28)
years ago. On March 16, 1990, the DAR acknowledged that the property
covered by TCT No. T-1180 had already been distributed to farmer-
beneficiaries through emancipation patents. As early as June 10, 1975, a
portion of the same property was conveyed to a certain Rosalina Abon,
although this was not annotated on the owner’s title.64
Needless to say, respondents have already been deprived of the use and
dominion over their landholdings for a substantial period of time. In the
interim, petitioner bank has abjectly failed to pay, much less to determine,
the just compensation due to respondents. The law clearly recognizes that
the exact value of lands taken under PD No. 27, or the just compensation to
be given to the landowner must be determined with certainty before the land
titles are transferred.65 Petitioner’s gross failure to compensate respondents
for loss of their land, while transferring the same to the farmer-beneficiaries,
make it unjust to determine just compensation based on the guidelines
provided by PD No. 27 and EO No. 228.
Accordingly, just compensation should be computed in accordance with RA
No. 6657 in order to give full effect to the principle that the recompense due
to the landowner should be the full and fair equivalent of the property taken
from the owner by the expropriator. The measure is not the taker’s gain but
the owner’s loss. 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, and ample.66
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.67 However, the determination made by the trial court, which
relied solely on the formula prescribed by PD No. 27 and EO No. 228, is
grossly erroneous. The amount of P6,912.50 per hectare, which is based on
the DAR valuation of the properties "at the time of their taking in the
1970s,"68 does not come close to a full and fair equivalent of the property
taken from respondents.
Meanwhile, the CA’s act of setting just compensation in the amount
of P109,000.00 would have been a valid exercise of this judicial function,
had it followed the mandatory formula prescribed by RA No. 6657. However,
the appellate court merely chose the lower of two (2) values specified by the
commissioner as basis for determining just compensation, namely:
(a) P109,000.00 per hectare as the market value of first class unirrigated
rice land in the Municipality of Villaverde; and (b) P60.00 per square meter
as the zonal value of the land in other barangays in Villaverde. This is
likewise erroneous because it does not adhere to the formula provided by RA
No. 6657.
It cannot be overemphasized that the just compensation to be given to the
owner cannot be assumed and must be determined with certainty. 69 Its
determination involves the examination of the following factors specified in
Section 17 of RA No. 6657, as amended, namely: (1) the cost of acquisition
of the land; (2) the current value of the properties; (3) its nature, actual
use, and income; (4) the sworn valuation by the owner; (5) the tax
declarations; (6) the assessment made by government assessors; (7) the
social and economic benefits contributed by the farmers and the
farmworkers and by the government to the property; and (8) the non-
payment of taxes or loans secured from any government financing institution
on the said land, if any.70
Section 17 was converted into a formula by the DAR through Administrative
Order (AO) No. 6, Series of 1992, 71 as amended by AO No. 11, Series of
1994,72 the pertinent portions of which provide:
A. There shall be one basic formula for the valuation of lands covered
by [Voluntary Offer to Sell] or [Compulsory Acquisition] regardless of
the date of offer or coverage of the claim:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors are present,
relevant and applicable.
A.1 When the CS factor is not present and CNI and MV are applicable,
the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
A.2 When the CNI factor is not present, and CS and MV are applicable,
the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A.3 When both the CS and CNI are not present and only MV is
applicable, the formula shall be:
LV = MV x 2
In no case shall the value of the land using the formula MV x 2 exceed
the lowest value of land within the same estate under consideration or
within the same barangay or municipality (in that order) approved by
LBP within one (1) year from receipt of claimfolder.
xxxx
A.6 The basic formula in the grossing-up of valuation inputs such as
LO’s Offer, Sales Transaction (ST), Acquisition Cost (AC), Market Value
Based on Mortgage (MVM) and Market Value per Tax Declaration (MV)
shall be:

Grossed- Valuation Input x

up Regional Consumer Price
=
Valuation Index (RCPI) Adjustment
input Factor

The RCPI Adjustment Factor shall refer to the ratio of RCPI for the
month issued by the National Statistics Office as of the date when the
claimfolder (CF) was received by LBP from DAR for processing or, in its
absence, the most recent available RCPI for the month issued prior to
the date of receipt of CF from DAR and the RCPI for the month as of
the date/effectivity/registration of the valuation input. Expressed in
equation form:

RCPI for the Month as of

the Date of Receipt of
Claimfolder by LBP from
DAR or the Most recent
RCPI RCPI for the Month Issued
Adjustmen Prior to the Date of RCPI
=
t Receipt of CF
Factor ___________
RCPI for the Month Issued
as of the
Date/Effectivity/Registrati
on of the Valuation Input

B. Capitalized Net Income (CNI) – This shall refer to the difference

between the gross sales (AGP x SP) and total cost of operations (CO)
capitalized at 12%.
Expressed in equation form:

CNI = (AGP x SP) – CO

___________
.12
Where: CNI = Capitalized Net Income

AGP = Latest available 12-month's

gross production immediately
preceding the date of offer in
case of VOS or date of notice
of coverage in case of CA.

SP = The average of the latest

available 12 month’s selling
prices prior to the date of
receipt of the claimfolder by
LBP for processing, such prices
to be secured from the
Department of Agriculture
(DA) and other appropriate
regulatory bodies or, in their
absence, from the Bureau of
Agricultural Statistics. If
possible, SP data shall be
gathered from the barangay or
municipality where the
property is located. In the
absence thereof, SP may be
secured within the province or
region.

CO = Cost of Operations
Whenever the cost of
operations could not be
obtained or verified, an
assumed net income rate
(NIR) of 20% shall be used.
Landholdings planted to
coconut which are productive
at the time of offer/coverage
shall continue to use the 70%
NIR. DAR and LBP shall
continue to conduct joint
industry studies to establish
the applicable NIR for each
crop covered under CARP.
 .12 = Capitalization Rate

xxxx
C. CS shall refer to any one or the average of all the applicable sub-
factors, namely, ST, AC and MVM:

Where ST = Sales Transactions as defined

: under Item C.2

AC = Acquisition Cost as defined

under Item C.3

MVM = Market Value Based on

Mortgage as defined under
Item C.4

xxxx
D. In the computation of Market Value per Tax Declaration (MV), the
most recent Tax Declaration (TD) and Schedule of Unit Market Value
(SMV) issued prior to receipt of claimfolder by LBP shall be considered.
The Unit Market Value (UMV) shall be grossed up from the date of its
effectivity up to the date of receipt of claimfolder by LBP from DAR for
processing, in accordance with item II.A.A.6. (Emphasis and
underscoring supplied)
While the determination of just compensation involves the exercise of
judicial discretion, such discretion must be discharged within the bounds of
the law.73 The DAR, as the government agency principally tasked to
implement the agrarian reform program, has the duty to issue rules and
regulations to carry out the object of the law. The DAR administrative orders
precisely filled in the details of Section 17 of RA No. 6657 by providing a
basic formula by which the factors mentioned in the provision may be taken
into account.74 Special agrarian courts are not at liberty to disregard the
formula devised to implement the said provision because unless an
administrative order is declared invalid, courts have no option but to apply
it.75
In his Report, the Commissioner merely specified the market value of first
class unirrigated ricelands in the municipality where the properties are
located, as well as the zonal value of lands in other barangays in the same
municipality. For their part, respondents attempted to prove the following:
market value of unirrigated ricelands for the Municipality of Villaverde, set
at P109,000.00 per hectare, pursuant to Sangguniang Bayan Tax Ordinance
No. 96-45;76 annual production of unirrigated ricefields in Villaverde, at 80
cavans during "palagad" cropping, and 101 cavans under regular
cropping;77 government support price for palay for the period October 1,
1990 to October 1995 at P6.00 per kilo, and from November 1, 1995 to the
time of the filing of the petition at P8.00 per kilo.78
However, the records do not bear out if these factors are the only
ones relevant, present and applicable in this case, so that just
compensation can now be computed by the Court based on the formula
provided by the DAR administrative orders. Based on the evidence adduced,
it appears that market value and comparable net income (CNI) are being
proved. However, CNI cannot be computed in the absence of information
regarding cost of operations.79
We are thus compelled to remand the case to the court a quo to determine
the final valuation of respondents’ properties. The trial court is mandated to
consider the factors provided under Section 17 of RA No. 6657, as translated
into the formula prescribed by DAR AO No. 6-92, as amended by DAR AO
No. 11-94.
Furthermore, upon its own initiative, or at the instance of any of the parties,
the RTC may again appoint one or more commissioners to examine,
investigate and ascertain facts relevant to the dispute including the valuation
of properties and to file a written report with the RTC.80
We next address the second issue – date of taking.
The "taking" of the properties for the purpose of computing just
compensation should be reckoned from the date of issuance of
emancipation patents, and not on October 21, 1972, as petitioner
insists. The nature of the land at that time determines the just
compensation to be paid.81
We cannot sustain petitioner’s position that respondents’ properties were
statutorily taken on October 21, 1972, the date of effectivity of PD No. 27;
that on that date, respondents were effectively deprived of possession and
dominion over the land; and that when EO No. 228 fixed the basis in
determining land valuation using the government support price of P35.00 for
one cavan of 50 kilos of palay on October 21, 1972, it was consistent with
the settled rule that just compensation is the value of the property at the
time of the taking.82
In Association of Small Landowners v. Secretary of Agrarian Reform,83 the
Court held that title to the property expropriated shall pass from the owner
to the expropriator only upon full payment of just compensation. The Court
further held that:
It is true that P.D. No. 27 expressly ordered the emancipation of
tenant-farmer as [of] October 21, 1972 and declared that he shall be
 deemed the owner of a portion of land consisting of a family-sized
farm except that no title to the land owned by him was to be actually
issued to him unless and until he had become a full-fledged member of
a duly recognized farmer’s cooperative. It was understood,
however, that full payment of just compensation also had to be
made first, conformably to the constitutional
requirement.84 (Emphasis supplied)
In Land Bank of the Philippines v. Estanislao,85 the Court declared that
seizure of landholdings or properties covered by PD No. 27 did not take
place on October 21, 1972, but upon the payment of just compensation.
Land Bank’s contention that the property was acquired for purposes of
agrarian reform on October 21, 1972, the time of the effectivity of PD
27, ergo just compensation should be based on the value of the
property as of that time and not at the time of possession in 1993, is
likewise erroneous. In Office of the President, Malacañang, Manila v.
Court of Appeals, we ruled that the seizure of the landholding did not
take place on the date of effectivity of PD 27 but would take effect
on the payment of just compensation.86 (Emphasis in the original)
However, for purposes of computing just compensation, this Court recently
declared in Land Bank of the Philippines v. Heirs of Angel T. Domingo 87 that
the time of taking should be reckoned from the issue dates of emancipation
patents.
The date of taking of the subject land for purposes of
computing just compensation should be reckoned from the
issuance dates of the emancipation patents. An emancipation
patent constitutes the conclusive authority for the issuance of a
Transfer Certificate of Title in the name of the grantee. It is from the
issuance of an emancipation patent that the grantee can acquire the
vested right of ownership in the landholding, subject to the payment of
just compensation to the landowner.88 (Emphasis supplied)
It is undisputed that emancipation patents were issued to the farmer-
beneficiaries. However, their issuance dates are not shown. As such, the trial
court should determine the date of issuance of these emancipation patents
in order to ascertain the date of taking and proceed to compute the just
compensation due to respondents, in accordance with RA No. 6657.
Now, to the third and final issue.
Respondents are entitled to payment of just compensation even on
those properties which have not been processed by the DAR.
Petitioner admits that of respondents’ landholdings, only those covered by
TCT Nos. T-1180 and T-41504, totaling 16.3939 hectares, were processed
and initially valued by the DAR. Pending initial processing by the DAR of the
remaining landholdings, petitioner posits that it cannot be made to pay the
amount of P109,000.00 per hectare for those covered by TCT Nos. 41508,
41507, 41506, and 41505, with an aggregate area of 17.2379 hectares.
The argument is specious for three reasons.
First, the determination of just compensation is judicial in nature. The DAR’s
land valuation is only preliminary and is not, by any means, final and
conclusive upon the landowner or any other interested party. In the exercise
of its functions, the courts still have the final say on what the amount of just
compensation will be.89
In Natividad, the Court held that:
[T]here is nothing contradictory between the DAR’s primary
jurisdiction to determine and adjudicate agrarian reform matters and
exclusive original jurisdiction over all matters involving the
implementation of agrarian reform, which includes the determination
of questions of just compensation, and the original and exclusive
jurisdiction of regional trial courts over all petitions for the
determination of just compensation. The first refers to
administrative proceedings, while the second refers to judicial
proceedings.
In accordance with settled principles of administrative law, primary
jurisdiction is vested in the DAR to determine in a preliminary
manner the just compensation for the lands taken under the
agrarian reform program, but such determination is subject to
challenge before the courts. The resolution of just compensation cases
for the taking of lands under agrarian reform is, after all, essentially a
judicial function.
Thus, the trial court did not err in taking cognizance of the case as the
determination of just compensation is a function addressed to the
courts of justice.90 (Emphasis supplied)
In fact, the law does not make the DAR valuation absolutely binding as the
amount payable by petitioner. A reading of Section 18 91 of RA No. 6657
shows that it is the courts, not the DAR, which make the final determination
of just compensation.
Accordingly, RA No. 6657 directs petitioner to pay the DAR’s land valuation
only if the landowner, the DAR and petitioner agree on the amount of just
compensation. Otherwise, the amount determined by the special agrarian
court as just compensation shall be paid by petitioner. Corollarily, there is no
reason for petitioner to wait for the DAR valuation of the properties, if the
court has already determined the just compensation due to respondents.
Second, to wait for the DAR valuation despite its unreasonable neglect and
delay in processing the four properties’ claimfolders is to violate the
elementary rule that payment of just compensation must be within a
reasonable period from the taking of property. Cosculluela v. Court of
Appeals92 could not have been clearer:
Just compensation means not only the correct determination of
the amount to be paid to the owner of the land but also the
payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered "just"
for the property owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait for a
decade or more before actually receiving the amount necessary to
cope with his loss. x x x.93 (Emphasis supplied)
In the case at bar, the properties have long been expropriated by the
government and their fruits enjoyed by the farmer-beneficiaries. Respondent
have been made to wait for decades for payment of their recompense. They
were not even allowed to withdraw the amount claimed to have been
deposited with petitioner bank on their behalf. It would certainly be
iniquitous to wait for the DAR to process the properties covered by the four
other titles before the special agrarian court can finally determine the
amount of their just compensation.94
Third, while the DAR is vested with primary jurisdiction to determine in
a preliminary manner the amount of just compensation, the circumstances
of this case militate against the application of the doctrine of primary
jurisdiction.
The principle of exhaustion of administrative remedies is a relative one and
is flexible depending on the peculiarity and uniqueness of the factual and
circumstantial settings of a case. It is disregarded: (1) when there is a
violation of due process; (2) when the issue involved is purely a legal
question; (3) when the administrative action is patently illegal and amounts
to lack or excess of jurisdiction; (4) when there is estoppel on the part of the
administrative agency concerned; (5) when there is irreparable injury; (6)
when respondent is a department secretary whose acts, as an alter ego of
the President, bears the implied and assumed approval of the latter;
(7) when to require exhaustion of administrative remedies would be
unreasonable; (8) when it would amount to a nullification of a claim; (9)
when the subject matter is a private land in land case proceedings; (10)
when the rule does not provide a plain, speedy and adequate remedy;
(11) when there are circumstances indicating the urgency of judicial
intervention, and unreasonable delay would greatly prejudice the
complainant; (12) when no administrative review is provided by law; (13)
where the rule of qualified political agency applies; and (14) when the issue
of non-exhaustion of administrative remedies has been rendered moot. 95
Here, to require exhaustion of administrative remedies would be
unreasonable. What is more, judicial intervention is necessary so as not to
unduly prejudice the landowners. Respondents have long been deprived of
their landholdings, yet compensation has been withheld from them.
Accordingly, to make respondents wait for the DAR to process the
claimfolders of the remaining four properties would be unreasonable, unjust
and manifestly prejudicial to them.
Respondents are entitled to the right of retention over their lands.
The right of retention is constitutionally guaranteed, subject to qualification
by the legislature. It serves to mitigate the effects of compulsory land
acquisition by balancing the rights of the landowner and the tenant and by
implementing the doctrine that social justice was not meant to perpetrate an
injustice against the landowner. A retained area, as its name denotes, is
land which is not supposed to anymore leave the landowner’s dominion, thus
sparing the government from the inconvenience of taking land only to return
it to the landowner afterwards, which would be a pointless process. 96
The opinion of the MARO97 that respondents are not entitled to retain areas
out of their landholdings because they applied for the same after the grace
period set by the government98 fails to persuade. A landowner whose land
was taken pursuant to PD No. 27 has a right to retain seven hectares of
land, provided that the landowner is cultivating the area or will now cultivate
it.99 Those who did not avail of their rights of retention under PD No. 27 are
entitled to exercise the same under Section 6 100 of RA No.
6657.101 Landowners may still avail of their retention rights notwithstanding
the August 27, 1985 deadline imposed by DAR AO No. 1, Series of 1985.
In Daez v. Court of Appeals,102 the Court, citing Association of Small
Landowners, Inc. v. Secretary of Agrarian Reform,103 disregarded said
deadline and sustained the landowner’s retention rights. Notably, under RA
No. 6657, landowners who do not personally cultivate their lands are no
longer required to do so in order to qualify for the retention of an area not
exceeding five hectares. Instead, they are now required to maintain the
actual tiller of the area retained, should the latter choose to remain in those
lands.104 Verily, there is no impediment to the exercise by respondents of
their retention rights under RA No. 6657.
In sum, We rule that:
1. The provisions of RA No. 6657 apply in determining the just compensation
due to respondents for the taking of their property. However, the value
of P109,000.00, based on the property’s market value and assigned by the
CA as just compensation, is erroneous. The trial court is thus directed to
receive evidence pertaining to the factors to be considered in determining
just compensation, in accordance with DAR AO No. 6, Series of 1992, as
amended by AO No. 11, Series of 1994.
2. For purposes of computing just compensation, the date of issuance of
emancipations is deemed the date of taking, not October 21, 1972.
3. Respondents are entitled to payment of just compensation on their entire
landholdings covered by Operation Land Transfer, except for the five
hectares of retention area each of them are entitled to.
WHEREFORE, the petition is DENIED. The case is REMANDED to the
court a quo for final determination of just compensation due to respondents.
SO ORDERED.

25.
LAND BANK OF THE PHILIPPINES, Petitioner,
v.
 SPOUSES ANTONIO AND CARMEN AVANCENA, Respondents.

DECISION

PERALTA, J.:
Before us is a petition for review on certiorari filed by petitioner Land Bank
of the Philippines seeking to annul and set aside the Decision 1 dated August
11, 2008 of the Court of Appeals (CA) issued in CA-G.R. CV No. 00067
directing it to pay twelve percent (12%) interest per annum for the delay in
the payment of just compensation. Also assailed is the CA Resolution 2 dated
December 1, 2009 denying reconsideration thereof.

Respondents-spouses Antonio and Carmen Avanceña were the registered

owners of a parcel of agricultural land situated at Sanghan, Cabadbaran,
Agusan del Norte covered by Transfer Certificate of Title No. RT-2937
containing an area of 205.0074 hectares. In 1988, respondent spouses
voluntarily offered to sell their land to the government under the
Comprehensive Agrarian Reform Program (CARP), which consisted of
160.2532 hectares of the land. In 1991, petitioner Land Bank of the
Philippines initially valued the subject lot at P1,877,516.09 based on the
guidelines prescribed in DAR Administrative Order No. 17, Series of 1989.
Upon recomputation in 1994 and based on DAR AO No. 6, Series of 1992, as
amended, by DAR AO No. 11, Series of 1994, the land was revalued at
P3,337,672.78 but respondents rejected the valuation. Petitioner deposited
the difference in the cash portion between the revalued amount and the
initial valuation of P1,877,516.09 in trust for the respondents on July 24,
1996. The parties brought the matter of valuation to the Department of
Agrarian Reform Adjudication Board (DARAB), Caraga Regional Office, which
affirmed petitioner's second valuation.

Respondents-spouses filed with the Regional Trial Court, acting as a Special

Agrarian Court (SAC), a complaint for determination of just compensation,
docketed as Civil Case No. 4507. They prayed for a valuation of no less than
P200,000.00 per hectare for the subject lot or in the alternative, to appoint
Commissioners to determine the just compensation; and that they be
allowed to withdraw the valuation amount that petitioner had deposited for
them including the earned interest, pending the court's final valuation.
Petitioner filed its Answer alleging that the valuation was computed based on
the factors enumerated in Section 17 of Republic Act No. (R.A.) 6657, the
Comprehensive Agrarian Reform Law.

While the complaint was pending, petitioner made a reevaluation of the

property using the valuation prescribed by DAR AO 5, series of 1998 which
yielded the amount of P9,057,180.32.

On March 29, 2000, the SAC issued its Decision, 3 the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered directing
the defendants Land Bank of the Philippines (LBP) and the Department of
Agrarian Reform (DAK) to pay plaintiffs the following:

1. The sum of Twenty Million Four Hundred Seventy-Five Thousand, Seven

Hundred Seventy-Five (P20?475,775) Pesos for the 160.253 hectares |of|
land with its improvements with six (6%) percent legal interest thereon, less
the provisional deposits from April 1991 until actually paid;

2. The sum of One Hundred Thousand (P100,000) Pesos, as Attorneys' fees;

3. The sum of One Hundred Thousand (P100,000) Pesos, litigation expenses;

4. All other claims and counterclaims are dismissed for lack of merit.

SO ORDERED.4ChanRoblesVirtualawlibrary

Petitioner's motion for reconsideration was denied, hence it appealed the

decision with the CA. In the meantime, respondents spouses moved for the
execution of the RTC decision pending appeal 5 which was granted in a
Resolution6 dated October 2, 2000; thus, the writ of execution was issued
and implemented.

On August 11, 2008, the CA issued the assailed decision, the decretal
portion of which reads:

WHEREFORE, in view of all the foregoing, the instant appeal is hereby

GRANTED and the assailed March 29, 2006 decision of the Regional Trial
Court (RTC), 10th Judicial Region, Branch 5, Butuan City, in Civil Case No.
4507, is hereby SET ASIDE. Consequently, this case is remanded to the
court a quo for the recomputation of just compensation. In determining the
valuation of the subject property, the factors provided under Section 17 of
R.A. 6657 shall be considered in accord with the formula prescribed in DAR
Administrative Order No. 5, Series of 1998. Moreover, the just compensation
due the [S]pouses Avancena should bear 12% interest per annum from the
time title to the property was transferred in the name of the government up
to the time that LBP deposited the amount of its valuation for the subject
land under the account of the appellees. The basis of the 12% interest would
be the just compensation that would be determined by the court a quo after
remand of the instant case.

SO ORDERED.7ChanRoblesVirtualawlibrary
Petitioner filed a motion for partial reconsideration arguing that the CA erred
in awarding interest at the rate of 12% p.a. reckoned from the time title to
property was transferred in the name of the government to the time
petitioner deposited the valuation in July 1996. It argued that upon receipt
of the DAR order of deposit, it immediately deposited the cash portion of the
initial valuation of P1,877,516.09 on October 17, 1991, thus it never
incurred delay as the title to the subject lot was transferred in the name of
the government only in December 1991.

On December 1, 2009, the CA issued its resolution denying the motion for
reconsideration. It found that nowhere in the records showed that petitioner
made a deposit of P1,877,516.09 on October 17,1991.

Dissatisfied, petitioner is now before us alleging that:

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF

LAW IN AWARDING INTEREST AT THE RATE OF 12% PER ANNUM FROM THE
TIME TITLE TO THE PROPERTY WAS TRANSFERRED IN THE NAME OF THE
GOVERNMENT IN 1991 UP TO THE TIME LBP ALLEGEDLY DEPOSITED THE
VALUATION IN 1996.8

Petitioner claims that it deposited cash and bonds for the initial valuation of
P1,877, 516.09 on October 17, 1991. It attached in this petition a
Certification9 dated October 22, 1991 which stated that the cash and bonds
due the respondents-spouses have been earmarked by petitioner for
respondents spouses on October 17, 1991. It argues that such deposit was
the basis for the DAR to take possession of the property and caused the
issuance of the title in the name of the government in December 1991,
pursuant to Section 16 (e) of RA 6657, thus, it did not incur any delay in
depositing the amounts due the respondents-spouses which can validly
justify the payment of interest.

Petitioner cites the case of Apo Fruits Corporation et al, v. CA 10 saying that
we have categorically declared therein that payment of interest for delay
cannot be applied where there is prompt and valid payment of just
compensation as initially determined, as subsequently determined after
revaluation, and even if the amount was later on increased pursuant to the
court's judgment.

Petitioner further contends that despite the pendency of the case with the
CA, the RTC issued a Writ of Execution dated March 9, 2000 directing
petitioner to pay the RTC's valuation of P20,475,775.00 plus legal interest
thereon at the rate of 6% per annum from April 1991 until fully paid; that
since such valuation was, however, set aside by the CA in its assailed
decision, there is now a huge possibility that the recomputed value will be
much lower than P20,475,775.00; that the advance payment it made
amounting to P23,416,772.55 may have exceeded the value of the subject
land so that there is a need for respondents spouses to return the difference
between its valuation of P9,057,182.30 and the advance payment.

We are not persuaded.

The CA found that the title to respondents spouses' land was canceled and a
new title was issued in the name of the Republic of the Philippines in
December 1991, but there was no showing that petitioner had made
payments prior to the taking of the land.

Thus, there was delay in the payment of just compensation which entitles
the respondents spouses to the payment of interest from the time the
property was transferred in the name of the government in December 1991
up to the time petitioner deposited the valuation in the account of the
respondents-spouses in July 1996. We agree with the CA that petitioner
should pay interest for the delay in the payment of just compensation.
However, such payment of interest should be computed up to the full
payment of just compensation.

Petitioner argues that it had made a deposit on October 17, 1991, i.e., prior
to the cancellation of the title of the respondents-spouses, and submitted
with us a Certification dated October 22, 1991 issued by the petitioner's
Bonds Servicing Department stating that it had earmarked the sum of
PI,877,516.09 in cash and in LBP bonds as compensation for the parcel of
lands covered by RT-2937 in the name of respondents spouses on October
17, 1991 pursuant to RA 6657 through voluntary offer. However, such
certification was not among those that the petitioner offered as evidence
during the trial.11 More importantly, We had rejected the practice of
earmarking funds and opening trust accounts for purposes of effecting
payment, hence, the law12 requires payment of just compesation in cash or
Land Bank of the Philippines (LBP) bonds, not by trust account. 13

The certificate of title to respondents-spouses' land was canceled and a new

certificate was issued in the government's name in December 1991 without
giving the former just compensation for such taking. We have allowed the
grant of interest in expropriation cases where there is delay in the payment
of just compensation.14 We recognize that the owner's loss is not only his
property but also its income-generating potential. 15 Thus, when property is
taken, full compensation of its value must immediately be paid to achieve a
fair exchange for the property and the potential income lost. 16 The rationale
for imposing the interest is to compensate the landowners for the income
they would have made had they been properly compensated for their
properties at the time of the taking. 17

In Republic v. CA,18 we held:

The constitutional limitation of "just compensation" is considered to be the

sum equivalent to the market value of the property, broadly described to be
the price fixed by the seller in open market in the usual and ordinary course
of legal action and competition or the fair value of the property as between
one who receives, and one who desires to sell it, fixed at the time of the
actual taking by the government. Thus, if property is taken for public use
before compensation is deposited with the court having jurisdiction over the
case, the final compensation must include interests on its just value to be
computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, between
the taking of the property and the actual payment, legal interests accrue in
order to place the owner in a position as good as (but not better than) the
position he was in before the taking occurred.

The Bulacan trial court, in its 1979 decision, was correct in imposing
interests on the zonal value of the property to be computed from the time
petitioner instituted condemnation proceedings and "took'" the property in
September 1969. This allowance of interest on the amount found to be the
value of the property as of the time of the taking computed, being an
effective forbearance, at 12% per annum should help eliminate the issue of
the constant fluctuation and inflation of the value of the currency over time.
Article 1250 of the Civil Code, providing that, in case of extraordinary
inflation or deflation, the value of the currency at the time of the
establishment of the obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict application only to
contractual obligations. In other words, a contractual agreement is needed
for the effects of extraordinary inflation to be taken into account to alter the
value of the currency.19ChanRoblesVirtualawlibrary

Thus, the CA did not err in imposing interest on the just compensation which
will be determined after the remand of the case to the SAC. The interest
should be computed from December 1991 up to the full payment of just
compensation and not only up to the time petitioner deposited the valuation
in 1996 as the CA ruled. The concept of just compensation embraces not
only the correct determination of the amount to be paid to the owners of the
land, but also payment within a reasonable time from its taking. 20 Without
prompt payment, compensation cannot be considered "just" inasmuch as the
property owner is made to suffer the consequences of being immediately
deprived of his land while being made to wait for a decade or more before
actually receiving the amount necessary to cope with his loss. 21

The award of interest is imposed in the nature of damages for delay in

payment which, in effect, makes the obligation on the part of the
government one of forbearance to ensure prompt payment of the value of
the land and limit the opportunity loss of the owner. 22 The just compensation
due respondents-spouses shall earn legal interest at the rate of 12% per
annum computed from the time of taking in December 1991 until June 30,
2013.23 And from July 1, 2013 until full payment, the interest will be at the
new legal rate of 6% per annum, in accordance with the revisions governing
the rate of interest established by Bangko Sentral ng Pilipinas Monetary
Board Circular No. 799,24 Series of 2013.25 The amount which petitioner had
already paid respondents-spouses by virtue of the RTC's Order granting the
issuance of the Writ of Execution dated October 2, 2000 shall be deducted
from the amount of the just compensation which will be awarded after the
remand of this case.

Petitioner's reliance on our Third Division's December 19, 2007 Resolution in

the case of Apo Fruits Corporation v. CA 26 wherein we declared that the
payment of interest for the delay of payment cannot be applied where there
is prompt and valid payment of just compensation as initially determined,
even if the amount of just compensation was later on increased pursuant to
the Court's judgment, is misplaced. We found then that as Land Bank had
deposited pertinent amounts in favor of the landowners within fourteen
months after the latter filed their complaint for determination of just
compensation with the SAC, there was no unreasonable delay in the
payment of just compensation which entitled the landowners to the payment
of 12% interest per annum on the unpaid just compensation.

However, such resolution was subsequenlty reversed and set aside in our En
Bane Resolution dated October 12, 2010 where we granted the landowners'
motion for reconsideration. We ordered the Land Bank to pay the
landowners an interest at the rate of 12% per annum on the unpaid balance
of the just compensation, computed from the date the Government took the
properties on December 9, 1996, until the respondent Land Bank fully paid
the balance of the principal amount on May 9, 2008. We ruled that
notwithstanding that the Land Bank had immediately paid the remaining
unpaid balance of the just compensation as finally determined by the court,
however, 12 long years had passed before the landowners were fully paid.
Thus, the landowners were entitled to legal interest from the time of the
taking of the property until the actual payment in order to place the owner in
a position as good as, but not better than, the position he was in before the
taking occurred.27 The imposition of such interest was to compensate the
landowners for the income they would have made had they been properly
compensated for their properties at the time of the taking.28 Thus, we held:

Let it be remembered that shorn of its eminent domain and social justice
aspects, what the agrarian land reform program involves is the purchase by
the government, through the LBP, of agricultural lands for sale and
distribution to farmers. As a purchase, it involves an exchange of values the
landholdings in exchange for the LBPs payment. In determining the just
compensation for this exchange, however, the measure to be borne in mind
is not the taker's gain but the owner's loss since what is involved is the
takeover of private property under the States coercive power. As mentioned
above, in the value-for-value exchange in an eminent domain situation, the
State must ensure that the individual whose property is taken is not
shortchanged and must hence carry the burden of showing that the just
compensation requirement of the Bill of Rights is satisfied.

The owner's loss, of course, is not only his property but also its income-
generating potential. Thus, when property is taken, lull compensation of its
value must immediately be paid to achieve a fair exchange for the property
and the potential income lost. The just compensation is made available to
the property owner so that he may derive income from this compensation, in
the same manner that he would have derived income from his expropriated
property. If full compensation is not paid for property taken, then the State
must make up for the shortfall in the earning potential immediately lost due
to the taking, and the absence of replacement property from which income
can be derived; interest on the unpaid compensation becomes due as
compliance with the constitutional mandate on eminent domain and as a
basic measure of fairness.29

As in the Apo case, respondents-spouses voluntarily offered to sell their land

pursuant to the government's land reform program, however, the valuation
made by the LBP on the land was rejected by the former for being
undervalued. Respondents-spouses had to resort to the filing of the case
with the RTC, sitting as SAC, for the determination of just compensation of
their land. It has already been 25 years but respondents-spouses have not
received the full amount of the just compensation due them, and further
delay can be expected with the remand of the case to the SAC for the
recomputation of the just compensation. Thus, the long delay entitles them
to the payment of interest to compensate for the loss of income due to the
taking.30

Petitioner's claim for reimbursement of the amount it had already paid to

respondents-spouses by virtue of the writ of execution pending appeal then
issued by the SAC is not meritorious. The recomputed amount of just
compensation due the respondents-spouses shall only be determined after
the remand of the case to the SAC. It would only be that time which would
establish whether the payment made to them was more than the just
compensation that they are entitled to.

There is also no basis for petitioner to claim that respondents-spouses are

merely entitled to provisionally receive its valuation of P9,057,182.30
pending the final determination of the just compensation. Notably, the CA's
decision rejected petitioner's valuation as well, thus:

It has been stated in a number of cases that in computing the just

compensation for expropriation proceedings, it is the value of the land at the
time of the taking which should be taken into consideration. This being so,
then in determining the value of the land for the payment of just
compensation, the time of taking should be the basis.

In the case at bar, the court a quo failed to consider the value and the
character of the land at the time it was taken by the government in 1991.
Instead, the former assessed the market value of the idle portion of the
subject lot as a riceland. Yet, per LBP's Field Investigation Report (FIR)
prepared in 1990, the subject lot was not yet devoted to rice or corn at that
time, although its idle portion was classified as suitable for said crops. Also,
in computing the value of the land, the court a quo considered the land's
appreciation value from the time of taking in 1991 up to the filing of the
case in 1997 and of appellee's potential profit from the land's suitability to
rice and corn, which We find to be contrary to the settled criterion in
determining just compensation. Hence erroneous.

The foregoing pronouncements do not, however, mean that We favor LBP's

valuation of P9,057,10.32 for the subject lot. The same is found to be non-
reflective of just compensation because the Tax Declaration used by LBP in
fixing the market value of the land in its initial valuation for the year 1986,
as indicated in the FIR. Additionally, no evidence was adduced to show that
LBP used the correct tax declaration (TD), which should be the 1991 TD, in
fixing the market value in its latest computation of the land's valuation.

Notably, LBP's initial valuation of the land in 1991 was P1,877,516.09 and
became P3,337,672.78 after recomputation in 1994, pursuant to DAR AO
No. 11, Series of 1994. During the pendency of the case in court, DAR AO
No. 5 series of 1998 was issued; hence, LBP accordingly recomputed its
valuation and came up with the amount of P9,057,180.32 (the amount of
P8,955,269.16 constitutes the value of the land while PI 01,913.14 was the
value of the legal easement).
Albeit LBP claims to have faithfully observed and applied the prescribed
formula in DAR AO No. 5, series of 1998, in its recomputation of the land's
valuation, it adduced no evidence, like the official computation sheets, to
show that the latest valuation of the land was indeed arrived at using the
prescribed formula and that the correct documents indicating the factors
enumerated in Section 17 of RA 6657 were actually considered. Hence, We
cannot accept LBP's latest valuation as well.

Consequently, We deem it proper to remand this case to the court a quo for
a recomputation of the just compensation, x x x31

Therefore, until the SAC had finally determined the just compensation due
the respondents-spouses upon remand of the case, it could not be said that
the payment made by virtue of the writ of execution pending appeal had
exceeded the value of the subject property.

Moreover, assuming arguendo that the amount paid by virtue of the

execution pending appeal would be more than the recomputed amount of
the just compensation, any excess amount should be returned to petitioner
as provided under Section 5, Rule 39 of the Rules of Court, to wit:

Section 5. Effect of reversal of executed judgment. - Where the executed

judgment is reversed totally or partially, or annulled, on appeal or otherwise,
the trial court may, on motion, issue such orders of restitution or reparation
of damages as equity and justice may warrant under the circumstances.

WHEREFORE, the dispositive portion of the Decision dated August 11, 2008
of the Court of Appeals in CA-G.R. CV No. 00067 is hereby modified and
shall now read as follows:

WHEREFORE, in view of all the foregoing, the instant appeal is hereby

GRANTED and the assailed March 29, 2006 decision of the Regional Trial
Court (RTC), 10lh Judicial Region, Branch 5, Butuan City, in Civil Case No.
4507, is hereby SET ASIDE. Consequently, this case is remanded to the
court a quo for the recomputation of just compensation. The interest on the
recomputed just compensation should be computed from December 1991 up
to the payment of the lull amount of just compensation less whatever
amounts received by the respondents-spouses.

27.

[G.R. NO. 149621 : May 5, 2006]

 HEIRS OF FRANCISCO R. TANTOCO, SR., MARIA R. TANTOCO,
ZOSIMO TANTOCO, MARGARITA R. TANTOCO, AND PACITA R.
TANTOCO, Petitioners, v. HON. COURT OF APPEALS, HON.
DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD
(DARAB), AGRARIAN REFORM BENEFICIARIES ASSOCIATION OF
SAN FRANCISCO, GEN. TRIAS, CAVITE, REGISTER OF DEEDS FOR THE
PROVINCE OF CAVITE AND THE DAR REGION IV
DIRECTOR, Respondents.

DECISION

AZCUNA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court seeking the annulment of the Decision, dated December 15,
2000, and Resolution, dated May 25, 2001, of the Court of Appeals in CA-
G.R. SP No. 54970 entitled "Heirs of Francisco R. Tantoco, Sr. et al., v. Hon.
Department of Agrarian Reform Adjudication Board (DARAB), Agrarian
Reform Beneficiaries Association of San Francisco, Gen. Trias, Cavite, et al."

Petitioners seek the cancellation of the collective Certificate of Land

Ownership Award (CLOA) or TCT No. CLOA-1424 issued by the Department
of Agrarian Reform (DAR) to the Agrarian Reform Beneficiaries Association
(ARBA) of San Francisco, Gen. Trias, Cavite, on the ground that TCT No.
CLOA-1424 is null and void for having been issued illegally and unlawfully.
Consequently, petitioners pray for the reinstatement of TCT No. T-402203 in
their favor over the property involved in this case.

The facts1 of the case are as follows:

Francisco R. Tantoco, Sr., Marta R. Tantoco, Zosimo Tantoco, Margarita R.

Tantoco and Pacita R. Tantoco owned a vast tract of land with a total land
area of 106.5128 hectares in San Francisco, General Trias, Cavite. This land
was registered in their names under Transfer Certificate of Title (TCT) No. T-
33404 of the Register of Deeds for the Province of Cavite.

A portion of said property consisting of 9.6455 hectares was declared

exempt from the coverage of Presidential Decree (PD) No. 27, hence the
Certificates Land Transfer (CLTs) that had been previously issued to several
people were cancelled in an Order issued by then Minister of Agrarian
Reform Heherson T. Alvarez.

On April 21, 1989, petitioners donated 6.5218 hectares to Caritas de Manila,

Inc., thereby leaving an estimated area of 100 hectares to their landholding
under TCT No. T-402203, which is now the subject matter of the
controversy.

Meanwhile, the Department of Agrarian Reform (DAR) had been considering

the land in question for compulsory acquisition pursuant to Republic Act
(R.A.) No. 6657, as amended, otherwise known as the Comprehensive
Agrarian Reform Law (CARL) of 1988.

On May 8, 1989, Francisco R. Tantoco, Sr., as owner and for and in behalf of
the other co-owners, wrote to DAR declaring the productive nature and
agricultural suitability of the land in dispute, and offering the same for
acquisition under the Voluntary Offer to Sell (VOS) scheme of the
government's Comprehensive Agrarian Reform Program (CARP). The land
was offered for sale at P500,000 per hectare or for a sum
of P53,256,400.2 According to petitioners, they never heard anything from
DAR thereafter.

It was only on June 25, 1993 that petitioners received a Notice of Land
Valuation from DAR valuing the land in question, which had now been
accurately measured to have a total land area of 99.3 hectares, in the
amount of P4,826,742.35.

On July 8, 1993, petitioners rejected the amount offered by DAR as

compensation for the subject property for being unreasonably below the fair
market value of said lot. Petitioners likewise withdrew their voluntary offer
to sell adding that the land is not suitable for agriculture anymore and that it
had been classified in 1981 for use by the Human Settlements Regulatory
Commission (now HLURB) as land for residential, commercial or industrial
purposes. Nevertheless, petitioners expressed that in the event that the DAR
would still insist on acquiring the land, petitioners will be exercising their
right of retention over an area aggregating to 79 hectares, divided among
the co-owners at five (5) hectares each, and three (3) hectares each to their
thirteen (13) children qualified to be beneficiaries under the CARP. 3

In a letter dated July 16, 1993, after rejecting the aforestated land
valuation, petitioners requested that the offer of P4,826,742.35 for the
subject property be applied instead to their other irrigated landholding
consisting of 9.25 hectares in Brgy. Pasong Camachile, General Trias, Cavite
which is covered by TCT No. 33407.4

In view of petitioners' rejection of the offer, the DAR, through its Regional
Director Percival C. Dalugdug, requested the Land Bank of the Philippines
(LBP) on July 22, 1993 to open a Trust Account in favor of petitioners for the
amount of FOUR MILLION EIGHT HUNDRED TWENTY-SIX AND SEVEN
HUNDRED FORTY-TWO AND THIRTY-TWO CENTAVOS (P4,826,742.32)
representing the assessed value of the subject property. 5

A Certification was subsequently issued by the LBP Bonds Servicing

Department on July 27, 1993 stating that the sum of P4,826,742.35 in cash
(P1,834,162.10) and in bonds (P2,992,580.25) had been "reserved or
earmarked" as compensation for petitioners' 99.3 hectares of land under the
CARP's VOS scheme.6 The cash portion of P1,834, 162.10 was placed with
the Trust Department but no release of payment in cash or in bonds had
been effected.7

Thereafter, or on August 30, 1993, the DAR issued a collective Certificate of

Land Ownership Award (CLOA) over the subject property to

private respondent Agrarian Reform Beneficiaries Association (ARBA) of San

Francisco, General Trias, Cavite.8 Public respondent Register of Deeds
consequently issued TCT No. CLOA-1424 in favor of ARBA and its 53
members, and accordingly cancelled petitioners' TCT No. T-402203.

Upon learning of the cancellation of their TCT on the above property,

petitioners filed an action for Cancellation of TCT No. CLOA-1424, and the
reinstatement of their TCT No. T-402203 before the Adjudication Board for
Region IV of the Department of Agrarian Reform on November 11, 1994. 9

Docketed as DARAB Case No. IV-Ca-003-94, the petition alleged, inter alia,

that the land in question was covered by an ongoing industrial estate
development site per land use plan of the Municipality of General Trias,
Cavite; that the land had been planted with sugar and declared as such for
taxation purposes under Tax Declaration No. 12502-A; that in an Order
dated September 1, 1986, of then Minister of Agrarian Reform Heherson
Alvarez, the same land was declared outside the ambit of PD No. 27; and
that the property is within the portion of Cavite that had been declared as an
industrial zone in the CALABARZON area, hence, the value of real properties
included therein had greatly appreciated.10

Petitioners alleged that as a result of the implementation of the CARL in June

of 1988, and coupled with the knowledge that the area had been declared
part of the industrial zone of Cavite, persons unknown to petitioners began
to claim to be tenants or farmholders on said land, when in truth and in fact,
petitioners never had any tenant or farmworker at any time on their land,
and neither did petitioners give their consent for anyone to farm the same
"which is suitable for sugarcane, residential or industrial purposes and not
for rice or corn or other industrial products.11
Petitioners added that due to the annoying persistence of DAR officials and
employees who kept on coming back to the residence of Francisco R.
Tantoco, Sr., in Quezon City, the latter was constrained to offer to sell the
subject land under the VOS scheme for P5 million originally per hectare;
that, thereafter, petitioners did not receive any reply from DAR, hence, they
paid the real property tax due on the land for 1994 on March 28, 1994; that,
afterwards, their title to the land under TCT No. T-402203 dated April 19,
1994 was cancelled without prior notice and in lieu thereof, TCT No. CLOA-
1424 dated August 30, 1993 was issued by the Register of Deeds in favor of
ARBA whose 53 members are not tenants and are unknown to them and are
likewise not qualified or are disqualified to be beneficiaries under Republic
Act (R.A.) No. 6657.12

Finally, petitioners claimed that some officials and employees of DAR Region
IV, the MARO of General Trias, Cavite, the Land Bank of the Philippines, and
the Register of Deeds of Cavite, with intent to gain, conspired with other
private persons and several members of ARBA to deprive petitioners of said
land or its fair market value or proceeds thereof, and committed the crime of
falsification of public documents by making it appear that the offer to sell
was at P500,000 per hectare instead of P5,000,000 per hectare; that the
value of adjacent lands to petitioners' property were disregarded in
determining just compensation; that no notices were received and the
alleged receipts of notice were falsified; that no trust account was ever
opened in favor petitioners and neither payment in cash or bond was ever
made by DAR; that ARBA and its members are not actually tilling the land
for productive farming and have not paid LBP the assigned valuation of the
land; and, that the former are negotiating to sell the land to land developers
and industrial companies, among others, in the hope of making a windfall
profit.

Thus, petitioners prayed for the cancellation of the TCT No. CLOA-1424, and
that TCT No-402203 in the name of petitioners should be reinstated. They
likewise prayed for the issuance of a preliminary injunction to restrain ARBA
from negotiating to sell the property in question to any interested parties.

ARBA, in its Answer, denied the allegations contained in the petition,

maintaining that the farmer beneficiaries listed in TCT No. CLOA-1424 are
qualified beneficiaries as provided for in Section 22 of RA No. 6657; that due
process was observed in the documentation and processing of the CARP
coverage of subject parcel of land in accordance with DAR Administrative
Orders and that the issuance of TCT No. CLOA-1424 was in accordance with
the provisions of R.A. No. 6657; and, that the subject property is classified
as agricultural land, hence, regardless of tenurial arrangement and
commodity produced, the land is considered to be within the coverage of the
CARL or R.A. No. 6657.

In its Supplemental Answer of December 29, 1994, ARBA further stated that
after the land had been voluntarily offered for sale to DAR the only matter to
be determined is the just compensation to be given to the landowners.
Therefore, the only issue to be resolved is the valuation of the property and
not the cancellation of the CLOA.

In addition, ARBA posited that the injunctive relief prayed for in the petition
is unnecessary because the property is automatically subject to the
prohibition against transfer under R.A. No. 6657 which prohibition is
indicated in TCT No. CLOA-1424.

Incidentally, petitioner Francisco R. Tantoco, Sr., died during the course of

the proceedings on September 2, 1995, and was duly substituted by his
surviving heirs.13

On June 17, 1997, the DAR Regional Adjudicator for Region IV, Fe Arche-
Manalang, rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Declaring the subject property more particularly described in Paragraph 5

of the Petition as properly covered under the VOS (Voluntary Offer to Sell)
scheme of the government's Comprehensive Agrarian Reform Program
(CARP) pursuant to the provisions of RA 6657, as amended, without
prejudice to the exercise by the Petitioners/co-owners of their respective
right of retention upon proper application therefor;

2) Voiding and annulling TCT No. CLOA-1424 derived from CLOA (Certificate
of Land Ownership Award) No. 00193535 issued and registered on August
27, 1995 and August 30, 1993, respectively, in the name of the Respondent
ARBA (Agrarian Reform Beneficiaries Association) and its 53 Farmers-
members;

3) Directing the Respondent Register of Deeds of Cavite to:

a) effect the immediate cancellation of TCT No. CLOA-1424 mentioned in the

preceding paragraph;

b) revalidate and reinstate TCT No. T-402203 in the joint names of

Petitioners/co-owners, subject to its eventual coverage under CARP after the
Landowners' retention areas have been properly determined/segregated
and/or expressly waived;

c) annotate at the back of Petitioners' title, their lawyer's lien thereon

equivalent to five percent (5%) of the market value of the subject property
as and by way of an adverse claim.

4) Directing the local MARO (Municipal Agrarian Reform Officer) of General

Trias, Cavite and PARO (Provincial Agrarian Reform Officer) of Cavite to:

a) undertake another identification and screening process and reallocate the

remaining CARPable areas to patented qualified ARBs (Agrarian Reform
Beneficiaries) in the area;

b) generate individual CLOAS (Certificate of Land Ownership Awards) in

favor of such identified ARBs.

5) Denying all other claims for lack of basis;

6) Without pronouncement as to cost.

SO ORDERED.14

From the aforestated decision, petitioners and respondent ARBA separately

appealed to the DAR Adjudication Board (DARAB) in Quezon City. Said
appeals were consolidated and docketed as DARAB Case No. 6385.

The issues were summarized by DARAB as follows:

"1. Whether or not the property co-owned by Petitioners under Title No. T-
33404 located at San Francisco, General Trias, Cavite with an original area
of 106.5128 hectares was properly subjected to CARP coverage pursuant to
the provisions of RA 6657, as amended, otherwise known as the
Comprehensive Agrarian Reform Law of 1988 (CARL);

2. In the affirmative, whether or not fatal infirmities or irregularities were

committed in the valuation of the subject property and its subsequent titling
and award in favor of Respondent ARBA;

3. Whether or not the Petitioners are entitled to the ancillary remedy of

injunction and other specific reliefs sought viz: cancellation of TCT No.
CLOA-1424 registered in the name of Respondent ARBA on August 30, 1993
and reinstatement of TCT No. 402203 in favor of Petitioners; [and,]
4. Whether or not the Petitioners and private Respondent ARBA are entitled
to their separate claims for damages and attorney's fees." 15

In resolving the controversy, DARAB condensed the issues posed by the

respective parties by addressing the question: Can a Collective Certificate of
Land Ownership Award validly issued pursuant to a Voluntary Offer to Sell
scheme acquisition of the Comprehensive Agrarian Reform Program (CARP)
be cancelled on the petition of the former owner on the mere suspicion that
some of the names listed therein are not really qualified farmer-
beneficiaries?16

On July 1, 1998, the DARAB rendered its ruling modifying the appealed
decision of the Regional Adjudicator, to wit:

"WHEREFORE, premises considered, judgment is hereby rendered:

1) Affirming paragraphs 1, 5, and 6 (Nos. 1, 5 and 6) of the dispositive

portion of the decision dated June 17, 1997 of the Honorable Adjudicator a
quo but;

2) Reversing paragraph Nos. 2, 3 and 4 thereof;

3) Affirming the validity, legality and efficacy of TCT - CLOA No. 1424 issued
to Respondent Agrarian Reform Beneficiaries Association of San Francisco,
Gen. Trias, Cavite.

SO ORDERED."17

Petitioners filed a Motion for Reconsideration and a Supplemental Motion for

Reconsideration which was denied by DARAB for lack of merit in a
Resolution, dated September 6, 1999, as no new matters were "adduced by
the movants which will warrant a reversal of the Board's decision." 18

Claiming that respondent DARAB acted with grave abuse of discretion in

rendering the aforementioned decision and resolution, petitioners appealed
the same to the Court of Appeals.

On December 15, 2000, the court a quo rendered its assailed decision, the
dispositive portion of which reads:

"WHEREFORE, the instant petition is hereby DENIED and is

accordingly DISMISSED for lack of merit.

SO ORDERED."19
Petitioners' Motion for Reconsideration was likewise denied by the Court of
Appeals in a resolution dated May 25, 2001. 20

Hence, this petition assigning the following errors:

RESPONDENT COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION AND WITH GRAVE ABUSE OF DISCRETION WHEN IT
RENDERED THE QUESTIONED DECISION DATED DECEMBER 15, 2000, IN
COMPLETE DISREGARD OF LAW AND UNDISPUTED FINDINGS OF FACTS BY
THE REGIONAL ADJUDICATOR IN HER DECISION DATED JUNE 17, 1997.

II

RESPONDENT COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION AND WITH GRAVE ABUSE OF DISCRETION WHEN IT
REVERSED THE DECISION OF THE REGIONAL ADJUDICATOR A QUO
DECLARING ALL PROCEEDINGS BY DAR VOID FOR FAILURE TO OBSERVE
DUE PROCESS CONSIDERING THAT RESPONDENTS BLATANTLY
DISREGARDED THE PROCEDURE FOR THE ACQUISITION OF PRIVATE LANDS
UNDER R.A. 6657, MORE PARTICULARLY, IN GIVING DUE NOTICE TO THE
PETITONERS AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS FOR EACH
LISTED FARMERS-BENEFICIARIES OF RESPONDENT ARBA.

III

RESPONDENT COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION AND WITH GRAVE ABUSE OF DISCRETION WHEN IT FAILED
TO RECOGNIZE THAT PETITIONERS WERE BRAZENLY AND ILLEGALLY
DEPRIVED OF THEIR PROPERTY WITHOUT JUST COMPENSATION,
CONSIDERING THAT PETITIONERS WERE NOT PAID JUST COMPENSATION
BEFORE THEY WERE UNCEREMONIOUSLY STRIPPED OF THEIR
LANDHOLDING THROUGH THE DIRECT ISSUANCE OF TCT NO. CLOA -1424
TO RESPONDENT ARBA IN GROSS VIOLATION OF R.A. 6657.

IV

RESPONDENT COURT OF APPEALS ACTED WITHOUT OR IN EXCESS OF ITS

JURISDICTION AND WITH GRAVE ABUSE OF DISCRETION WHEN IT
RENDERED ITS QUESTIONED RESOLUTION DATED MAY 25, 2001, DENYING
THE MOTION FOR RECONSIDERATION DESPITE THE UNDISPUTED FACTUAL
FINDINGS OF FACTS ON RECORD AND OF JURISPRUDENCE LAID DOWN BY
THIS HONORABLE SUPREME COURT IN G.R. NO. 127876 ENTITLED "ROXAS
& CO., INC. v. HON. COURT OF APPEALS, ET AL." PROMULGATED ON
DECEMBER 17, 1999.21

In sum, the principal issue to be resolved is whether or not the CLOA that
had been issued by the DAR to ARBA may be cancelled based on the
following grounds:

1. The land in question is exempt from the coverage of CARP by reason of its
inclusion in the industrial zone of CALABARZON;

2. The DAR failed to conform strictly to the procedure for the acquisition of
private agricultural lands laid down in RA 6657, hence, violating due process
and consequently denying petitioners just compensation;

3. ARBA and all its members have not paid the amortizations for the
landholdings awarded to them as required under RA 6657 and DAR
Administrative Order No. 6, Series of 1993;ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

4. All 53 members of ARBA manifested their intent to negotiate for payment

of disturbance compensation in exchange for the voluntary surrender of their
rights over the awarded property which is a prohibited transaction under
Section 73 of R.A. No. 6657, as amended, and in gross violation of DAR
Administrative Order No. 2, Series of 1994; and,

5. The ARBs did not cultivate the awarded property to make it productive in
violation of Section 2222 of the Act.

At the outset, petitioners claim that the subject property had been classified
to be within the industrial zone of General Trias, Cavite even before the
effectivity of R.A. No. 6657 in 1988, therefore, it should be outside the
coverage of CARP.23

On this, the Court accords respect to the findings of the Regional Adjudicator
who has the primary jurisdiction and competence to establish the
agricultural character of the land in question which is properly within the
coverage of CARP, thus:

"Even the petitioners' own evidence serves to buttress and affirm the
inherent nature and character of the subject property as an agricultural
land'. The same ha[d] been previously devoted to sugarcane production but
at the time it was considered for acquisition by the DAR under the VOS
scheme, it was found to be planted to various crops such as rice, corn and
camote'. Petitioner Francisco R. Tantoco, Sr. himself in his letter of intent
dated May 8, 1989 declared that the land offered for acquisition under [the]
VOS was productive and suitable [for] agricultural production'. It seems
rather peculiar that after all these years when the subject property had
already been awarded and distributed to its intended beneficiaries, it is only
now that petitioners are belatedly heard to sing a different tune by claiming
that the same had always been industrial. Petitioners apparently relied on
the flip-flopping certifications of one Engr. Alfredo M. Tan II of the HLURB -
Region IV who could not seem to make up his mind as to the exact zoning
location of the subject property. On July 10, 1990, he certified that the
subject property is "within the Agricultural Zone based on the Municipality's
approved Zoning Ordinance under HSRC Resolution No. 42-A-3 dated 09
February 1981'. After the lapse of several years or on January 10, 1995 to
be precise, in a dramatic turn-around, he suddenly became vague and
tentative. He then proceeded to certify that the same property "appears to
be within the Industrial Area based on HSRC (now HLURB) Approved Land
Use Map of General Trias per HSRC Resolution No. R-42-A-3 dated February
11, 1981."(Vide, Exhibit "R"). A more classic display of bureaucratic
ineptitude and incompetence is hard to find and simply boggles the mind.
Thus, no weight of credence at all can be attributed to either certification
due to the vacillating tenor used which is not even worth the paper it is
written on. Petitioners' heavy reliance on such an irresolute document is
rather pathetic and certainly misplaced. Resolution Nos. 105 and 125
enacted by the local Sangguniang Panlalawigan on March 25, 1988 and
September 8, 1988, respectively' are similarly rejected since there is no
showing that the same were duly approved by the HLURB (Housing and
Land Use Regulatory Board) or its preceding competent authorities prior to
June 15, 1988 which is the date of effectivity of the CARL and cut-off period
for automatic reclassifications or rezoning of agricultural lands that no longer
require any DAR conversion clearance or authority. (Emphasis
supplied) Still, owners of such agricultural lands which have been previously
reclassified or rezoned to non-agricultural uses by LGUs (Local Government
Units) and approved by the HLURB before June 15, 1988 are nonetheless
required to secure exemption clearances from the DAR based on Section 3
(c) of RA 6657, as amended, and DOJ (Department of Justice) Opinion No.
44, series of 1990 (Vide, Dar Administrative Order No. 12, series of 1994 in
relation to Administrative Order No. 6, series of 1994). As stated in the
aforecited DOJ Opinion, "the legal requirement for the DAR clearance in
cases of land use conversion from agricultural to non-agricultural uses
applies only to conversions made on or after June 15, 1988, the date of the
agrarian reform law's effectivity. Prior thereto, the powers of the HLURB and
the Department of Finance to [re-categorize] lands for land use and taxation
purposes, respectively, were exclusive. It is noted that the definition of
"agricultural land" in RA 6657 excludes lands which have previously been
classified as mineral, forest, residential, commercial and industrial areas.
Viewed against this context, the subject property cannot be considered [as]
falling within the category of reclassified lands as envisioned in Section 3(c)
of RA 6657, as amended, and so specified in the aforementioned DOJ
Opinion. (Emphasis supplied) Neither can petitioners hope [to] find any
relief from the Order of then Minister Heherson T. Alvarez dated September
1, 1986 since it merely exempts the subject property from OLT (Operation
land Transfer) coverage pursuant to PD 27 which
embraces tenanted rice and corn lands only. If at all, the said Order even
serves to bolster the agricultural nature of the subject property because of
its long history as sugar land. Sugarcane production is certainly an
agricultural activity by any norm or standard. The law defines the term as
referring to 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'. The scope
and coverage of the CARL is so broad and all-embracing as to include all
lands devoted to or suitable for agriculture regardless of tenurial
arrangement and commodity produced.24

xxx

"' The inarguable [sic] fact remains that independent of such choice by the
petitioners to voluntarily offer the subject property, the same would still be
under the CARL which allows landowners a retention limit of only five (5)
hectares and an additional three (3) hectares for each qualified child who at
the time of the effectivity of the law is: 1) at least 15 years of age; and, 2)
actually tilling the land or directly managing the farm."25

As pointed out, the property in question can be properly subjected to CARP.

It was not re-classified nor converted from agricultural to non-agricultural
use with the approval of the HLURB prior to the effectivity of the
Comprehensive Agrarian Reform Law (CARL) on June 15, 1988.

Having established that the land in question can be properly subjected to

CARP, the next question is whether the DAR officials, in acquiring said
property, performed their functions properly and strictly in accordance with
the law.

A perusal of the records reveal that the DAR officials or its employees failed
to comply strictly with the guidelines and operating procedures provided by
law in acquiring the property subject to CARP.

Firstly, there were certain inconsistencies in the manner of selection by the

DAR of the CARP beneficiaries who are members of ARBA. As found by the
Regional Adjudicator:
"As to the screening and identification of qualified potential CARP
[b]eneficiaries, DAR field personnel are presumed to be properly guided by
existing law and implementing rules and regulations (Vide, Section 22 of
R.A. 6657, as amended; DAR Administrative Order No. 10, series of 1990).
Redistribution of CARPable lands to the intended [b]eneficiaries may be done
collectively or individually, whatever is economically feasible. In the instant
case, however, all the 42 ARBs (Agrarian Reform Beneficiaries)/Applicants
opted for individual ownership and the corresponding VOCF (Voluntary Offer
Claim Folder) apparently processed as such (Vide, Exhibits "26 UU" to "26
DDD"). But surprisingly, in some inexplicable manner, the assailed CLOA
(Certificate of Land Ownership Award) that was finally generated turned out
to be collective in favor of the [r]espondent ARBA which failed to show
notwithstanding the assurances of its counsel (Vide, TSN, Hearing of
February 23, 1995, pp. 18-19) that it is duly registered with the appropriate
government and non-government agencies. Moreover, the collective title
suddenly sprouted 53 names when only 43 duly applied as [p]otential CARP
[b]eneficiaries (Vide, CARP Form No. 3; Exhibits 26 EEE" to "26 UUU";
Exhibits "V-57" to "V-99." What is even more mysterious is that among
the 53 ARBs listed in the aforementioned CLOA, only 29 accomplished the
required application forms and 30 signed the corresponding APFUS. There is
thus no basis for the MARO Certification of August 19, 1993 declaring all the
53 named FBs therein as having met all the qualifications for Potential
Beneficiaries under Section 22 of RA 6657 (Vide, Exhibits "27" to "27-F").
Such unfounded action by the said official can only be described as
whimsical and capricious. A re-screening is therefore imperative in order to
prevent a grave miscarriage of justice especially on the part of those who
applied and were excluded in the final award for no apparent reason at all.
Upon the other hand, the MARO Claim Folder Transmittal Memo to the PARO
dated May 15, 1991 carried a total of 42 signatories in the corresponding
Application to Purchase and Farmers Undertaking (Vide, CARP Form No. 4,
Exhibits "26-UU" to "26-DD", Exhibits "V-47" to "V-56" inclusive). When
called to the witness stand, the local MARO and PARO could not adequately
explain or justify the existence of such discrepancies (Vide, TSN Hearing of
February 23, 1995 pp. 62-64; 89-92) which can only give rise to the
speculation that verification and validation was done arbitrarily or in a
haphazard manner. In thus committing a substantial deviation from the
procedural mandate of the law Respondent DAR official in effect tolerated
the insidious actuations of his subordinates who acted with grave abuse of
discretion amounting to lack of jurisdiction. The resultant CLOA therefore
and its derivative TCT is fatally flawed for having been issued without
jurisdiction. The same does not even reflect the fractional share of each ARB
as required in DAR Administrative Order No. 3, series of 1993. 26
Secondly, the TCT No. CLOA-1424 was directly issued by the DAR in the
name of ARBA without: (a) payment of just compensation; and, (b) initial
transfer of title to the land in the name of the Republic of the Philippines, in
contravention to Section 16(e) of R.A. No. 6657 which states:

"(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 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. (Emphasis supplied) The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries."

As already mentioned, the DAR immediately issued the CLOA to ARBA

without first registering the property with the Registry of Deeds in favor of
the Philippine Government. This administrative irregularity was made even
worse by the fact that petitioners were not given just compensation which,
under the law, is a prerequisite before the property can be taken away from
its owners.

The case of Roxas & Co., Inc. v. Court of Appeals,27 illustrates that a transfer
of ownership over a property within the coverage of CARP can only be
effected when just compensation has been given to the owners, thus:

"Respondent DAR issued Certificates of Land Ownership Award (CLOA) to

farmer beneficiaries over portions of petitioners' land without just
compensation to petitioner. A Certificate of Land Ownership Award (CLOA) is
evidence of ownership of land by a beneficiary under R.A. 6657, the
Comprehensive Agrarian Law of 1988. Before this may be awarded to a
farmer beneficiary, the land must first be acquired by the State from the
landowner and ownership transferred to the former. The transfer of
possession and ownership of the land to the government are conditioned
upon the receipt by the landowner of the corresponding payment or deposit
by DAR of the compensation with an accessible bank. Until then, title
remains with the landowner. There was no receipt by petitioner of any
compensation for any of the lands acquired by the government."

In the instant case, the Notice of Land Valuation that was sent by the DAR to
petitioners on June 14, 1993, offered to compensate petitioners for their
property in the total amount of P4,826,742.35 based on the valuation made
by the LBP. Said amount was rejected by petitioners, prompting the DAR to
open a Trust Account in the aforestated amount with the LBP in favor of
petitioners. Pursuant to this, the LBP certified that the amount
of P4,826,742.35 had been "reserved/earmarked" to cover the value of the
subject property. This, however, did not operate to effect payment for
petitioners' property in question as the law requires payment of just
compensation in cash or Land Bank of the Philippines (LBP) bonds, not by
trust account.28

This is in line with the pronouncement made by this Court in the case
of Land Bank of the Philippines v. Court of Appeals,29 wherein it upheld the
decision of the Court of Appeals in "ordering the LBP to immediately deposit
- not merely 'earmark,' 'reserve' or 'deposit in trust' - with an accessible
bank designated by respondent DAR in the names of the following
petitioners the following amounts in cash and in government financial
instruments'."30

A similar ruling was articulated by the Court in the aforementioned case

of Roxas v. Court of Appeals,31 to wit:

The kind of compensation to be paid the landowner is also specific. The law
provides that the deposit must be made only in "cash" or "LBP" bonds.
Respondent DAR's opening of trust account deposits in petitioner's name
with the Land Bank of the Philippines does not constitute payment under the
law. Trust account deposits are not cash or LBP bonds. The replacement of
the trust account with cash or LBP bonds did not ipso facto cure the lack of
compensation; for essentially, the determination of this compensation was
marred by lack of due process. In fact, in the entire acquisition proceedings,
respondent DAR disregarded the basic requirement of administrative due
process. Under these circumstances, the issuance of the CLOA's to farmer
beneficiaries necessitated immediate judicial action on the part of the
petitioner.

In the implementation of the CARP, the Special Agrarian Courts which are
the 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. 6657.32 What agrarian adjudicators are empowered
to do is only to determine in a preliminary manner the reasonable
compensation to be paid to the landowners, leaving to the courts the
ultimate power to decide the question.33

The New Rules of Procedure of the DARAB, which was adopted on May 30,
1994, provides that in the event a landowner is not satisfied with the
decision of an agrarian adjudicator, the landowner can bring the matter
directly to the Regional Trial Court sitting as a Special Agrarian Court. Thus,
Rule XIII, Section 11 of the aforementioned Rules states:
Section 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.

The procedure for the determination of the compensation for the landowners
under the land reform program was likewise outlined by this Court
in Republic v. Court of Appeals:34

"Thus, under the law, the Land Bank of the Philippines is charged with the
initial responsibility of determining the value of the lands placed under land
reform and the compensation to be paid for their taking. 35 Through notice
sent to the landowner pursuant to [Section] 16(a) of R.A. No. 6657, the DAR
makes an offer. In case the landowner rejects the offer, a summary
administrative proceeding is held36 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 [a] Special Agrarian Court. This in essence is the
procedure for the determination of compensation cases under R.A. No.
6657."

Also, Section 17 of R.A. No. 6657 provides guidance on land valuation, to

wit:

"Section 17. Determination of Just Compensation - In determining just

compensation, the cost of acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the
owner, the tax declarations, and assessments made by the government
assessors shall be considered. The social and economic benefits contributed
by the farmers and the farmworkers and by the Government to the property
as well as the non-payment of taxes or loans secured from any government
financing institution on the said land shall be considered as additional factors
to determine its valuation."

Simply put, just compensation is the fair market value or the price which a
buyer will pay without coercion and a seller will accept without
compulsion.37 Evidently, the law recognizes that the land's exact value, or
the just compensation to be given the landowner, cannot just be assumed; it
must be determined with certainty before the land titles are
transferred.38 Expropriation of landholdings covered by R.A. No. 6657 take
place, not on the effectivity of the Act on June 15, 1988, but on the payment
of just compensation.

The determination of just compensation under Section 16(d) 39 of R.A. 6657
or the CARP Law, is not final or conclusive - - unless both the landowner and
the tenant-farmer accept the valuation of the property by the DAR, and the
parties may bring the dispute to court in order to determine the appropriate
amount of compensation, a task unmistakably within the prerogative of the
court.40

Hence, petitioners' recourse in this case is to bring the matter to the

Regional Trial Court acting as a Special Agrarian Court for the adjudication of
just compensation. The price or value of the land and its character at the
time it was taken by the Government will be the criteria for determining just
compensation.41

As to the other grounds posited by petitioners for the cancellation of the

CLOA issued to ARBA, Section IV-B of DAR Administrative Order No. 2,
Series of 1994 enumerates some of the grounds for the cancellation of
registered CLOAs, namely:

1) Misuse or diversion of financial support services extended to the ARBs

(Section 37 of R.A. No. 6657);

2) Misuse of the land (Section 22 of R.A. No. 6657);

3) Material misrepresentation of the ARBs basic qualification as provided

under Section 22 of R.A. No. 6657, P.D. No. 27, and other agrarian laws;

4) Illegal conversion by the ARB (Section 73, Paragraph C and E of R.A. No.
6657);

5) Sale, transfer, lease or other form of conveyance by a beneficiary of the

right to use or any other usufructuary right over the land acquired by virtue
of being a beneficiary in order to circumvent the provisions of Section 73 of
R.A. No. 6657, P.D. No. 27, and other agrarian laws. However, if the land
has been acquired under P.D. No.27/E.O. No. 228, ownership may be
transferred after full payment of amortization by the beneficiary (Section 6
of E.O. No. 228);

6) Default in the obligation to pay an aggregate of three (3) consecutive

amortization in case of voluntary land transfer/direct payment scheme,
except in cases of fortuitous events and force majeure (Section 26 of R.A.
No. 6657);
7) Failure of the ARBs to pay at least three (3) annual amortization to the
LBP, except in cases of fortuitous events and force majeure; (Section 26 of
R.A. No. 6657);

8) Neglect or abandonment of the awarded land continuously for a period of

two (2) calendar years as determined by the Secretary or his authorized
representatives (Section 22 of R.A. No. 6657);

9) The land is found to be exempt/excluded from P.D. No. 27/E.O. No. 228
or CARP coverage or to be part of the landowner's retained area as
determined by the Secretary or his authorized representative; and,

10) Other grounds that will circumvent laws related to the implementation of
agrarian reform program."

Petitioners ascribe the specific prohibited acts stated in Nos. 5, 7 and 8 of

the above Administrative Order to ARBA and its member-beneficiaries which
the Regional Adjudicator confirmed, thus:

"What is worse is that except for certain sporadic plantings, the land has
been generally left to lie fallow and uncultivated even with the award of the
CLOA in Respondent ARBA's favor as revealed by the ocular inspection
conducted on March 23, 1993 (Vide, TSN of same date). Such neglect can
only toll the death knell for erring ARBs who also have been remiss in the
payment of the annual amortization due which should have commenced
within one year from the date of CLOA registration on August 30, 1993
(Vide, DAR Administrative Order NO. 6, series of 1993). In an undated
instrument captioned as "Authorization" entered into sometime in 1993
(Vide, Annex "A", Petitioners' Ex-Parte Manifestation, etc. dated June 13,
1997, all the 53 FB-awardees manifested their intent to negotiate for
payment of disturbance compensation in exchange for the voluntary
surrender of their rights42 which is a prohibited transaction under Section 73
of RA 6657, as amended, and DAR Administrative Order No. 02, series of
1994. Not only that. Strangely enough, in the protracted hearings that were
conducted in this case, not one CLOA Beneficiary/ARBA member was
presented to at least defend himself orally or by means of countervailing
documentary evidence."43

Based on the above, it is clear that the ARBA and its members have
committed acts to justify the revocation of the collective CLOA that had been
issued by the DAR to the latter. The doctrine of primary jurisdiction,
however, does not warrant a court to arrogate unto itself authority to
resolve a controversy the jurisdiction over which is initially lodged with an
administrative body of special competence. 44
The failure of the DAR to comply with the requisites prescribed by law in the
acquisition proceedings does not give this Court the power to nullify the
CLOA that had been issued to ARBA. To assume the power is to short-circuit
the administrative process, which has yet to run its regular course. DAR
must be given a chance to correct its administrative and procedural lapses in
the acquisition proceedings.45

It is also worth noting at this juncture that the resolution of this case by the
Department of Agrarian Reform is to the best advantage of petitioners since
it is in a better position to resolve agrarian disputes, being the
administrative agency possessing the necessary expertise on the matter and
vested with primary jurisdiction to determine and adjudicate agrarian reform
controversies. Further, the proceedings therein are summary and the
department is not bound by technical rules of procedure and evidence, to
the end that agrarian reform disputes and other issues will be adjudicated in
a just, expeditious and inexpensive action or proceeding. 46

WHEREFORE, in view of the foregoing, the petition is GRANTED and the

Decision dated December 15, 2000 and the Resolution dated May 25, 2001
of the Court of Appeals in CA-G.R. SP No. 54970 are SET ASIDE. The case
is hereby REMANDED to respondent Department of Agrarian Reform
Adjudication Board (DARAB) for proper acquisition proceedings in
accordance with the applicable administrative procedure.

No pronouncement as to costs.

SO ORDERED.

28. Landbank of the Philippines vs. Marcos Sr. G.R. No. 175726
March 22, 2017

For this Court's resolution is a petition for review on certiorari, dated January
24, 2007, of petitioner Land Bank of the Philippines (LBP), seeking to
reverse and set aside the Decision1 dated May 26, 2006 and
Resolution2 dated December 6, 2006 of the Court of Appeals (CA), affirming
the Decision3 and Order,4 dated January 23, 2004 and March 30, 2004,
respectively, of the Regional Trial Court (RTC), Sorsogon City, Branch 52.

The antecedents are as follows:

The deceased Antonio Marcos, Sr. (Antonio) was the owner of two parcels of
agricultural land or landholdings located at Malbog, Pilar, Sorsogon,
consisting of 14.9274 hectares covered by Transfer Certificate of Title (TCT)
No. 2552 and 9.4653 hectares covered by TCT No. 2562. 5

On April 3, 1995, pursuant to Republic Act No. 6657, 6Ramiro Marcos

(Ramiro), authorized representative of the heirs of Antonio, namely: Anita
Rubio, Lolita M. Pelino, Antonio Marcos, Jr. and Ramiro, offered to sell the
landholdings to the Republic of the Philippines through its implementing arm,
the Department of Agrarian Reform (DAR).7

On July 10, 1996, petitioner LBP valued the lands covered by TCT Nos. 2552
and 2562 at P195,603.70 and P79,096.26, respectively. 8

On August 11, 1997, Ramiro filed with the DAR two (2) Landowner's Reply
to Notice of Land Valuation and Acquisition forms pertaining to the
landholdings. In the said forms, Ramiro indicated that the respondents were
accepting LBP's valuation of the landholdings. On the same date, the DAR
Regional Director sent a memorandum to the LBP requesting the preparation
of a deed of transfer over the landholdings and payment of the purchase
price to respondents based on petitioner's valuation. 9

While the payment of the purchase price is pending, the DAR brought the
matter of valuation to the Department of Agrarian Reform Adjudication
Board (DARAB), Office of the Provincial Adjudicator, Sorsogon, Sorsogon, on
June 15, 2000 requesting that summary administrative proceedings be
conducted to determine the just compensation for the landholdings. 10

After proper proceedings, the Provincial Adjudicator rendered Decisions LV

Cases Nos. 084'0011 and 085'00,12 both dated November 29, 2000, the
dispositive portions of which read:

LV Case No. 084'00.-

Wherefore, in view of the foregoing, the prior valuation of the LBP is hereby
set aside and a new valuation is fixed at FOUR HUNDRED FORTY-SIX
THOUSAND SEVEN HUNDRED EIGHTY-SIX PESOS and .03 Centavos
(P446,786.03) for the acquired area of 14.9274 hectares at Twenty-Nine
Thousand, Nine Hundred Thirty Pesos and .60 Centavos (P29,930.60) per
hectare is adopted. The Land Bank of the Philippines is hereby ordered to
pay the same to the landowners in the manner provided for by law.

SO ORDERED.

LV Case No. 085'00.-

Wherefore, in view of the foregoing, the prior valuation of the LBP is hereby
set aside and a new valuation is fixed at TWO HUNDRED EIGHTY-THREE
THOUSAND THREE HUNDRED TWO PESOS and .10 Centavos (P283,302.10)
for the acquired area of 9.4653 hectares at Twenty-Nine Thousand, Nine
Hundred Thirty Pesos and .60 Centavos (P29,930.60) per hectare is
adopted. The Land Bank of the Philippines is hereby ordered to pay the same
to the landowners in the manner provided for by law.

SO ORDERED.
Disagreeing with the decision of the Provincial Adjudicator, the LBP filed a
petition for judicial determination of just compensation for the landholdings
with the RTC sitting as a Special Agrarian Court (SAC).13

After the joinder of issues, trial on the merits ensued.

LBP presented witnesses Mr. Jessie L. Basco and Mrs. Evelyn Vega and
documentary exhibits such as the Field Investigation Reports for the
landholdings of the respondents, the Field Investigation Report for Hacienda
de Ares, Landowner's Reply to Notice of Land Valuation and Acquisition over
the Property, Memo to the vice-president of the petitioner from the DAR
Regional Director with a request to prepare Deed of Transfer and pay the
landowner dated August 11, 1997 over the property covered, Payment
Release Form, Disbursements Orders and Appearance with Motion for
Reconsideration in DARAB cases.14

On January 23, 2004, the RTC rendered a Decision in favor of the

respondents, the dispositive portion of which
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is hereby rendered:

1. Fixing the amount of FOUR HUNDRED FORTY-SIX THOUSAND SEVEN

HUNDRED EIGHTY-SIX PESOS and .03 Centavos (P446,786.03) for the
acquired area of 14.9274 hectares at P30,507.68 per hectare and the
amount of TWO HUNDRED EIGHTY-THREE THOUSAND THREE HUNDRED
TWO PESOS and .10 Centavos (P283,302.10) for the acquired area of
9.4653 hectares at P29,930.60 per hectare for the just compensation of that
two (2) parcels of land situated at Malbog, Pilar, Sorsogon covered by TCT
No. T-2552 and TCT No. T-2562 owned by the Heirs of Antonio Marcos, Sr.
which property was taken by the government pursuant to R.A. No. 6657.

2. Ordering the Petitioner Land Bank of the Philippines to pay the Private
Respondents the amount of Four Hundred Forty-Six Thousand, Seven
Hundred Eighty-Six & .03 centavos (P446,786.03) Pesos and, Two Hundred
Eighty-Three Thousand Three Hundred Two and .10 centavos (P283,302.10),
or the total amount of Seven Hundred Thirty Thousand Eighty-Eight and .13
centavos (P730,088.13) Pesos, in the manner provided by R.A. No. 6657 by
way of full payment of the just compensation after deducting whatever
amount previously received by the private respondents from the Petitioner
Land Bank as part of just compensation.

3. Without pronouncement as to costs.

SO ORDERED.15
LBP filed a motion for reconsideration of the decision, but was denied per
Order16 dated March 30, 2004.

LBP appealed to the CA. It argued that the RTC failed to consider the
documentary evidence showing that a contract of sale over the landholdings
was perfected17 and that the RTC erred in adopting the valuation of the
Hacienda de Ares properties for the purpose of fixing the value of the
landholdings.18

The CA ruled in favor of the respondents. The dispositive portion of the

decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, for lack of merit, the instant petition is DISMISSED, with the
result that the appealed decision of the Regional Trial Court of Sorsogon City
(Branch 52) is AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.19
The CA denied the motion for reconsideration of the petitioner in a
Resolution dated December 6, 2006.

Undaunted, petitioner elevated the matters before this Court and raised the
following questions of law:chanRoblesvirtualLawlibrary

1. CAN THE COURT OF APPEALS OR THE SAC DISREGARD THE

VALUATION FACTORS UNDER SECTION 17 OF R.A. 6657 WHICH
 ARE TRANSLATED INTO A BASIC FORMULA IN DAR
ADMINISTRATIVE ORDER AND AFFIRMED BY THE SUPREME
COURT IN THE CASES OF SPS. BANAL AND CELADA, IN FIXING
THE JUST COMPENSATION FOR SUBJECT PROPERTIES?

2. CAN THE PROVINCIAL AGRARIAN REFORM ADJUDICATOR

(PARAD) ABROGATE, VARY OR ALTER A CONSUMMATED
CONTRACT BETWEEN THE GOVERNMENT AND RESPONDENTS IN
REGARD TO SUBJECT PROPERTIES?20

This Court finds this petition partly meritorious.

The LBP averred that the subject property was acquired by the government
pursuant to Republic Act No. (R.A. No.) 6657, thus, in determining the just
compensation, Section 17 of the said law is applicable. 21

In Land Bank of the Philippines v. Honeycomb Farms Corporation,22 this

Court essentially pointed out that the "just compensation" guaranteed to a
landowner under Section 4, Article XIII of the Constitution is precisely the
same as the "just compensation" embodied in Section 9, Article III of the
Constitution. The just compensation due to an owner should be the "fair and
full price of the taken property," whether for land taken pursuant to the
State's agrarian reform program or for property taken for purposes other
than agrarian reform.23

It was further stressed in Honeycomb that just compensation paid for lands

taken pursuant to the State's agrarian reform program refers to the "full and
fair equivalent of the property taken from its owner by the expropriator x x x
[the measure of which] is not the taker's gain but the owner's loss. 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 and ample."24

The determination of just compensation is fundamentally a function of the

courts. Section 57 of R.A. No. 6657 explicitly vests in the RTC-SAC the
original and exclusive jurisdiction to determine just compensation for lands
taken pursuant to the State's agrarian reform program. 25 However, this
Court, in Land Bank of the Philippines v. Yatco Agricultural
Enterprise,26 underscored that, in the exercise of the essentially judicial
function of determining just compensation, the RTC-SAC is not granted
unlimited discretion. The factors under Section 17 27 of R.A. No. 6657 were
already translated into a basic formula by the DAR pursuant to its rule-
making power under Section 49 of R.A. No. 6657. 28 The said factors and the
DAR formula provide the uniform framework or structure by which just
compensation for property subject to agrarian reform should be
determined.29 Hence, aside from considering the factors provided by law, the
courts should apply the formula outlined in DAR AO No. 5, series of 1998, in
the computation of just compensation. Thus:chanRoblesvirtualLawlibrary

A. There shall be one basic formula for the valuation of lands covered by
VOS or CA:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration

The above formula shall be used if all three factors are present, relevant and
applicable.

A1. When the CS factor is not present and CNI and MV are applicable, the
formula shall be:

LV = (CNI x 0.9) + (MV x 0.1)

A2. When the CNI factor is not present, and CS and MV are applicable, the
formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A3. When both the CS and CNI are not present and only MV is applicable,
the formula shall be:
LV = MV x 2
In the recent case of Alfonso v. Land Bank of the Philippines,30 this Court
reiterated:chanRoblesvirtualLawlibrary

For the guidance of the bench, the bar, and the public, we reiterate the rule:
Out of regard for the DAR's expertise as the concerned implementing
agency, courts should henceforth consider the factors stated in Section 17 of
RA 6657, as amended, as translated into the applicable DAR formulas in
their determination of just compensation for the properties covered by the
said law. If, in the exercise of their judicial discretion, courts find that a strict
application of said formulas is not warranted under the specific
circumstances of the case before them, they may deviate or depart
therefrom, provided that this departure or deviation is supported by a
reasoned explanation grounded on the evidence on record. In other words,
courts of law possess the power to make a final determination of just
compensation.
The fixing of just compensation that is based on the landowner's prayer falls
within the exercise of the RTC-SAC's discretion and, therefore, should be
upheld as a valid exercise of its jurisdiction. 31 Similarly, the fixing of just
compensation based on the decision of the Provincial Adjudicator in this case
is within the context of this judicial prerogative. However, a reading of the
decisions of the PARAD would reveal that he did not apply or consider the
formula in DAR AO No. 5, series of 1998. He based his decision with the rule
on admissibility of evidence of bona fide sales transaction of nearby places in
determining the market value of like properties and applied the valuation of
LBP with the property of Norma Marcos Clemente and Placienda de Ares
after ruling that the properties of respondents are comparable with the said
properties.32 His decisions did not mention the consideration of the formula
laid down by the DAR in the valuation of the properties of respondents.

Likewise, the RTC-SAC ruled that the sales transaction concluded by LBP and
Norma Marcos Clemente and Hacienda de Ares can be used and be
admissible in evidence in determining the market value of the properties of
the respondents since the productivity of the coconut in the land of the
respondents is comparable to that of the properties of Norma Marcos
Clemente and Hacienda de Ares.33 It did not conduct an independent
assessment and computation using the considerations required by the law
and the rules and merely relied upon the Provincial Adjudicator's decision.
Although it took into consideration and mentioned some of the factors, it did
not point to any particular consideration that impelled it to set the just
compensation at P283,302.10 and P446,786.03.

To reiterate, when acting within the parameters set by the law itself, the
RTC-SACs are not strictly bound to apply the DAR formula to its minute
detail, particularly when faced with situations that do not warrant the
formula's strict application; they may, in the exercise of their discretion,
relax the formula's application to fit the factual situations before them. They
must, however, clearly explain the reason for any deviation from the factors
and formula that the law and the rules have provided. 34

In the case at bar, the RTC-SAC did not clearly explain why the formula was
not applied although the factors enumerated were considered in determining
just compensation. There was no reasoned explanation grounded on
evidence on record why the court did not comply with the established rules.
Thus, this Court finds that the case does not warrant for deviation from the
factors and formula set forth by the law and rules applicable.

The LBP averred that the PARAD cannot abrogate, vary or alter a
consummated contract between the government and the respondents in
regard to subject properties. It further alleged that the PARAD committed
grave abuse of discretion when he conducted summary administrative
proceedings despite the acceptance by the landowner of the preliminary
valuation computed by the LBP and offered by the DAR. 35

The implementation of R.A. No. 6657 is an exercise of the State's police

power and power of eminent domain. 36 It was also settled that the taking of
private property by the Government in the exercise of its power of eminent
domain does not give rise to a contractual obligation. 37 Thus, acquisition of
lands under the CARP is not governed by ordinary rules on obligations and
contracts but by R.A. No. 6657 and its implementing rules.

Unlike in the ordinary sale of real property where the buyer and the seller
are free to determine, by offer and acceptance, the consideration for the
subject matter of the transaction, acquisition of lands under the CARP is
governed by administrative rules intended to ensure that the rights of the
landowners to just compensation are respected. 38

The LBP's valuation of lands covered by the CARP Law is considered only as
an initial determination, which is not conclusive, as it is the RTC-SAC that
could make the final determination of just compensation, taking into
consideration the factors provided in R.A. No. 6657 and the applicable DAR
regulations. The LBP's valuation has to be substantiated during an
appropriate hearing before it could be considered sufficient in accordance
with Section 17 of R.A. No. 6657 and the DAR regulations. 39

Since it is the RTC-SAC that could make the final determination of just
compensation, the supposed acceptance of the LBP's valuation cannot be
considered as consummated contract.

R.A. No. 6657 provided that the landowner, his administrator or

representative shall inform the DAR of his acceptance or rejection of the
offer within thirty (30) days from the date of receipt of written notice by
personal delivery or registered mail. 40 It also further provided that the DAR
shall conduct summary administrative proceedings to determine the
compensation for the land in case of rejection or failure to reply. 41

It is noted that on August 11, 1997, or more than a year since the valuation
of the LBP, the respondents, through Ramiro, filed their acceptance of
valuation of their landholdings. The lapse of more than a year before
informing the DAR of their acceptance can be considered as failure to reply
as contemplated by the law. Furthermore, it is noted that it is the DAR that
brought the matter of valuation to the DARAB and requested that summary
administrative proceedings be conducted to determine the just
compensation for the landholdings.

This Court deems it premature to determine with finality the matter in

controversy, considering the lack of sufficient data to guide this Court in the
proper determination of just compensation following the guidelines that was
discussed at length. This Court is not a trier of facts and cannot receive any
new evidence from the parties to aid the prompt resolution of this case.

Therefore, we are compelled to remand the case to the court of origin for the
reception of evidence and the determination of just compensation with the
cautionary reminder for the proper observance of the factors enumerated
under Section 17 of R.A. No. 6657 and of the formula prescribed under the
pertinent DAR administrative orders.

WHEREFORE, premises considered, the petition is hereby GRANTED. The

assailed Decision and Resolution, dated May 26, 2006 and December 6,
2006, respectively, of the Court of Appeals in CA-G.R. SP No. 83711,
are REVERSED. The Civil Case is REMANDED to the RTC, Sorsogon City,
Branch 52, for trial on the merits with dispatch. The trial judge
is DIRECTED to OBSERVE strictly the procedures in determining the proper
valuation of the subject property.

SO ORDERED.

29. LANDBANK OF THE PHILIPPINES Vs. OBIAS G.R. No. 184406

March 14, 2012

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari 1 of the Decision2 dated
31 January 2008 and Resolution 3 dated 8 September 2008 of the Ninth
Division of the Court of Appeals (CA) in CA-G.R. CV No. 69644, vacating the
Decision of the Regional Trial Court (RTC) of Naga City. The dispositive
portion of the assailed decision reads:

WHEREFORE, the appealed decision of the Regional Trial Court of Naga City
(Branch 21) is VACATED and SET ASIDE and a new one rendered fixing the
just compensation for the subject land at P371,015.20 and ordering the
defendant-appellant Land Bank of the Philippines to pay said amount to
plaintiffs-appellants plus interest thereon at the rate of 6% per annum,
compounded annually, from October 21, 1972 until fully paid. 4

The facts as gathered by this Court follow:

Pursuant to the Operation Land Transfer (OLT) Program of Presidential

Decree (P.D.) No. 27, an aggregate area of 34.6958 hectares composing
three parcels of agricultural land located at Himaao, Pili, Camarines Sur
owned by Perfecto, Nellie, O’Fe, Gil, Edmundo and Nelly, all surnamed Obias,
(landowners) were distributed to the farmers-beneficiaries (farmers)
namely: Victor Bagasina, Sr., Elena Benosa, Sergio Nagrampa, Claudio
Galon, Prudencio Benosa, Santos Parro, Guillermo Breboneria, Flora
Villamer, Felipe de Jesus, Mariano Esta, Benjamin Bagasina, Andres Tagum,
Pedro Galon, Clara Padua, Rodolfo Competente, Roberto Parro, Melchor
Brandes, Antonio Buizon, Rogelio Montero, Maria Villamer, Claudio Resari,
Victor Bagasina, Jr., Francisco Montero and Pedro Montero.

As a result, the owners had to be paid just compensation for the property
taken. The Department of Agrarian Reform (DAR), using the formula under
P.D. 27 and Executive Order (E.O.) 228, came up with a computation of the
value of the acquired property at ₱1,397,578.72. However, the amount was
contested by the landowners as an inadequate compensation for the land.
Thus did they filed a complaint for determination of just compensation
before the RTC of Naga City, the assigned Special Agrarian Court (SAC)
which has jurisdiction over the complaint.

To ascertain the amount of just compensation, a committee was formed by

the trial court. The Provincial Assessor of Camarines Sur was appointed as
the Chairman and the representatives from the Land Bank of the Philippines
(LBP), DAR, the landowners and farmers, were appointed as the Members.

The Provincial Assessor recommended the "above average value of

₱40,065.31 per hectare" as just compensation; LBP Representative Edgardo
Malazarte recommended the amount of ₱38,533.577 per hectare; and the
representative of the landowners, Atty. Fe Rosario P. Bueva 5 submitted a
₱180,000.00 per hectare valuation of the land.6

None of these recommendations was adopted in the 3 October 2000

judgment7 of the trial court. The dispositive portion reads:

Wherefore, judgment is rendered ordering the following:

 (1) Fixing the Just Compensation of the 34.6958 [hectares] has to be
at Ninety One Thousand Six Hundred Fifty Seven and 50/100
(P91,657.50) per hectare or in the total amount of Three Million One
Hundred Eighty Thousand One Hundred Thirty and 29/100
(P3,180,130.29);

(2) Directing the Respondent Land Bank to pay the Plaintiffs the
amount of Three Million One Hundred Eighty Thousand One Hundred
Thirty and 29/100 (P3,180,130.29) in the manner provided for under
R.A. 6657.

No pronouncement as to costs.8

Both the landowners and LBP appealed the trial court’s decision before the
CA.

On 31 January 2008, the appellate court vacated the decision of the trial
court. It relied heavily on Gabatin v. Land Bank of the Philippines 9 ruling
wherein this Court fixed the rate of the government support price (GSP) for
one cavan of palay at ₱35.00, the price of the palay at the time of the taking
of the land. Following the formula, "Land Value= 2.5 multiplied by the
Average Gross Production (AGP) multiplied by the Government Support Price
(GSP)," provided by P.D. No. 27 and E.O. 228, the value of the total area
taken will be ₱371,015.20 plus interest thereon at the rate of 6% interest
per annum, compounded annually, starting 21 October 1972, until fully
paid. 10

The Court’s Ruling

In their petition, LBP does not contest the valuation of the property and the
amount to be paid as just compensation. It raised only the issue of "Whether
or not the provisions of DAR Administrative Order (A.O.) No. 13, 11 series of
1994, as amended by DAR A.O. No. 2, series of 2004, as further amended
by DAR A.O. No. 6, series of 2008, are mandatory insofar as the
computation of interest for P.D. 27-acquired properties is concerned." 12

To put it simply, LBP is alleging error on the part of the appellate court when
it ruled that the payment of interest shall be made until full payment
thereof. The bank contends that it should have been until the time of actual
payment as defined by the DAR A.O. No. 13, as amended.

LBP’s main contention rests upon the strict application of Item III, No. 3 of
DAR A.O. No. 13, series of 1994, as amended, by A.O. No. 2, series of 2004
as further amended by A.O. No. 6, series of 2008, with regard to the extent
of the period of application of the incremental interest. We quote the
relevant portion of the Administrative Order, as amended:

3. The grant of six percent (6%) yearly interest compounded annually shall
be reckoned as follows:

3.1 Tenanted as of 21 October 1972 and covered under OLT

- From 21 October 1972 up to the time of actual payment but not later than
December 2009.

3.2 Tenanted after 21 October 1972 and covered under OLT

-From the date when the land was actually tenanted (by virtue of Regional
Order of Placement issued prior to August 18, 1987) up to the time of actual
payment but not later than December 2009.

Time of actual payment – is the date when the Land Bank of the Philippines
(LBP) approves payment of the land transfer claim and deposits the
compensation proceeds in the name of the landowner (LO) in cash and in
bonds. The release of payment can be claimed by the landowner upon
compliance with the documentary requirements for release of payment.

This case does not present a novel issue.

It is correct that rules and regulations issued by administrative bodies to

interpret the law which they are entrusted to enforce, have the force of law,
and are entitled to great respect. Administrative issuances partake of the
nature of a statute and have in their favor a presumption of legality. 13 And a
literal reading of A.O. No. 13, as amended, will be in favor of the LBP.

However, these administrative issuances or orders, though they enjoy the

presumption of legalities, are still subject to the interpretation by the
Supreme Court pursuant to its power to interpret the law. While rules and
regulation issued by the administrative bodies have the force and effect of
law and are entitled to great respect, courts interpret administrative
regulations in harmony with the law that authorized them and avoid as much
as possible any construction that would annul them as invalid exercise of
legislative power.14

The rationale for the interpretation that the payment of interest shall be up
to the time of full payment and not up to actual payment as defined by the
Administrative Order is well pronounced in the case of Land Bank of the
Philippines v. Soriano,15 we quote:
The concept of just compensation embraces not only the correct
determination of the amount to be paid to the owners of the land, but also
payment within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just" inasmuch as the property owner
is made to suffer the consequences of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving
the amount necessary to cope with his loss.16

To condition the payment upon LBP’s approval and its release upon
compliance with some documentary requirements would render nugatory the
very essence of "prompt payment." Therefore, to expedite the payment of
just compensation, it is logical to conclude that the 6% interest rate be
imposed from the time of taking up to the time of full payment of just
compensation. (Emphasis supplied)17

The LBP sought support in the 19 December 2007 Resolution of the Court in
the case of APO Fruits Corporation v. Court of Appeals 18 wherein the Court
declared that the payment of interest for delay of payment cannot be applied
where there is prompt and valid payment of just compensation even if the
amount of just compensation was later on increased pursuant to the Court’s
judgment.19 A review of this Resolution will reveal that this Court, through
the Third Division, deleted the 12% interest on the balance of the awarded
just compensation due to the finding that the LBP did not delay the payment
of just compensation as it had deposited the pertinent amounts due to AFC
and HPI within fourteen months after they filed their complaints for just
compensation with the RTC.

However, this Resolution has already been overturned by an En Banc ruling

of the Court in its 12 October 2010 Resolution. 20 The dispositive portion
states:

WHEREFORE, premises considered, we GRANT the petitioners’ motion for

reconsideration. The Court En Banc’s Resolution dated December 4, 2009, as
well as the Third Division’s Resolutions dated April 30, 2008 and December
19, 2007, are hereby REVERSED and SET ASIDE. (Emphasis supplied)

The respondent Land Bank of the Philippines is hereby ORDERED to pay

petitioners Apo Fruits Corporation and Hijo Plantation, Inc. interest at the
rate of 12% per annum on the unpaid balance of the just compensation,
computed from the date the Government took the properties on December
9, 1996, until the respondent Land Bank of the Philippines paid on May 9,
2008 the balance on the principal amount.21
To answer the contention of LBP that there should be no payment of interest
when there is already a prompt payment of just compensation, the High
Court discussed that even though the LBP immediately paid the remaining
balance on the just compensation due to the petitioners after this Court had
fixed the value of the expropriated properties, it overlooks one essential fact
– from the time that the State took the petitioners’ properties until the time
that the petitioners were fully paid, almost 12 long years passed. This is the
rationale for imposing the 12% interest – in order to compensate the
petitioners for the income they would have made had they been properly
compensated for their properties at the time of the taking.

This Court is not oblivious of the purpose of our agrarian laws particularly
P.D. No. 27,22 that is, to emancipate the tiller of the soil from his bondage; to
be lord and owner of the land he tills.1âwphi1

Section 4, Article XIII of the 1987 Constitution mandates that the State
shall, by law, undertake an agrarian reform program founded on the right of
farmers and regular farm workers who are landless, to own directly or
collectively the lands they till or, in the case of other farm workers, to
receive a just share of the fruits thereof. It also provides that the State shall
encourage and undertake the just distribution of all agricultural lands subject
to the payment of just compensation.

Further, the deliberations of the 1986 Constitutional Commission on this

subject reveal that just compensation should not do violence to the Bill of
Rights, but should also not make an insurmountable obstacle to a successful
agrarian reform program. Hence, the landowner's right to just compensation
should be balanced with agrarian reform. 23

The mandate of determination of just compensation is a judicial

function,24 hence, we exert all efforts to consider and interpret all the
applicable laws and issuances in order to balance the right of the farmers to
own a land subject to the award the proper and just compensation due to
the landowners.

WHEREFORE, the appeal is DENIED. The 31 January 2008 Decision of the

Court of Appeals in CA-G.R. CV No. 69644, vacating the Decision of the
Regional Trial Court of Naga City acting as Special Agrarian Court is hereby
AFFIRMEDM

30.
Land Bank of the Philippines v. Honeycomb Farms Corporation (G.R.
No. 169903; February 29, 2012)

DECISION

BRION, J.:

The petition for review before us assails the decision 1 dated March 31, 2005
of the Court of Appeals (CA) in CA-G.R. CV No. 66023, which affirmed with
modification the judgment dated July 6, 1999 rendered by the Regional Trial
Court (RTC) of Masbate, Masbate, Branch 48, acting as a Special Agrarian
Court (SAC) in Special Civil Case No. 4323 for Determination and Payment of
Just Compensation. The petition also prays for the reversal of the resolution
of the CA,2 dated October 4, 2005, denying reconsideration.

FACTUAL ANTECEDENTS

Honeycomb Farms Corporation (Honeycomb Farms) was the registered

owner of two parcels of agricultural land in Cataingan, Masbate. The first
parcel of land was covered by Transfer Certificate of Title (TCT) No. T-2872
and has an area of 240.8874 hectares. The second parcel of land was
covered by TCT No. T-2549 and has an area of 254.25 hectares. 3 On
February 5, 1988, Honeycomb Farms voluntarily offered these parcels of
land, with a total area of 495.1374 hectares, to the Department of Agrarian
Reform (DAR) for coverage under Republic Act No. (RA) 6657, the
Comprehensive Agrarian Reform Law (CARL), for ₱10,480,000.00, 4 or
₱21,165.00 per hectare.5 From the entire area offered, the government
chose to acquire only 486.0907 hectares.

The Land Bank of the Philippines (LBP), as the agency vested with the
responsibility of determining the land valuation and compensation for parcels
of land acquired pursuant to the CARL, 6 and using the guidelines set forth in
DAR Administrative Order (AO) No. 17, series of 1989, as amended by DAR
AO No. 3, series of 1991, fixed the value of these parcels of land, as follows:

Acquired property Area in hectares Value

TCT No. T-2872 231.8406 ₱ 910,262.627
TCT No. T-2549 254.25 ₱1,023,520.568

When Honeycomb Farms rejected this valuation for being too low, the
Voluntary Offer to Sell was referred to the DAR Adjudication Board, Region
V, Legaspi City, for a summary determination of the market value of the
properties.9 After these administrative proceedings, the Regional Adjudicator
fixed the value of the landholdings at ₱5,324,549.00, broken down as
follows:

I. TCT No. T-2872

Land use Value per hectare Area Total (Pesos)

Cornland P12,000.00 69.158 829,896.00
Upland (cassava) 12,000.00 1.3888 16,665.60
Cocoland 15,000.00 13.65 204,750.00
Grass land 10,000.00 147.6438 1,476,438.00
TOTAL 231.8408 2,527,749.60

II. TCT No. T-2549

Land use Value per hectare Area Total (Pesos)

Coconut land P15,000.00 4.6 69,000.00
Cornland 12,000.00 101 212,000.00
Riceland (upland) 14,000.00 5 70,000.00
Cassava 12,000.00 4.65 55,800.00
Cogon 10,000.00 139 1,390,000.00
TOTAL   254.25 2,796,800.0010

Still, Honeycomb Farms rejected this valuation.

On July 4, 1994, Honeycomb Farms filed a case with the RTC, acting as a
SAC, against the DAR Secretary and the LBP, praying that it be compensated
for its landholdings in the amount of ₱12,440,000.00, with damages and
attorney’s fees.

The RTC constituted a Board of Commissioners to aid the court in

determining the just compensation for the subject properties. The Board of
Commissioners, however, failed to agree on a common valuation for the
properties.

Honeycomb Farms, thereafter, filed an amended complaint, where it

increased the valuation of the properties to ₱20,000,000.00. 11 The LBP, on
the other hand, filed an amended answer where it admitted the preliminary
valuation it made on the properties, but alleged that it had revalued the land
registered under TCT No. T-2872 at ₱1,373,244.78, while the land registered
under TCT No. T-2549 was revalued at ₱1,513,097.57. 12

THE RTC DECISION

On July 6, 1999, the RTC issued a judgment whose dispositive portion reads:

WHEREFORE, judgment is hereby rendered by:

1.) Fixing the just compensation of the two parcels of land owned by
the Honeycomb Farm[s] Corp. under TCT No. T-2872 and TCT No. T-
2549 with a total area of 486.0907 hectares which is considered a[s]
Carpable in the sum of ₱25,232,000 subject to the lien for the docket
fee the amount in excess of ₱20,000,000 as pleaded for in the
amended complaint.

2.) Ordering the defendants to jointly and severally pay Attorney’s

fee[s] equivalent to 10% of the total just compensation; without
pronouncement as to cost.

SO ORDERED.13

Since the Board of Commissioners could not reach a common valuation for
the properties, the RTC made its own valuation. First, the RTC took judicial
notice of the fact that a portion of the land, measuring approximately 10
hectares, is commercial land, since it is located a few kilometers away from
Sitio Curvada, Pitago, Cataingan, Masbate, which is a commercial district.
The lower court thus priced the 10 hectares at ₱100,000.00 per hectare and
the remaining 476 hectares at ₱32,000.00 per hectare.

Both parties appealed to the CA.

Honeycomb Farms alleged that the government failed to pay just

compensation for its land when the LBP opened a trust account in its behalf,
in violation of the Court’s ruling in Landbank of the Phils. v. CA. 14 Since it
was never paid just compensation, the taking of its land is illegal.
Consequently, the just compensation should thus be determined based on
factors existing at the time of the fixing of just compensation, and not at the
time the properties were actually taken.

The LBP, on the other hand, argued that the RTC committed a serious error
when it disregarded the formula for fixing just compensation embodied in
DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of
1994. The LBP also argued that the RTC erred in taking judicial notice that
10 hectares of the land in question is commercial land. Lastly, the LBP
assailed the award of attorney’s fees for having no legal or factual basis. 15

THE CA DECISION

The CA, in its March 31, 2005 decision, affirmed with modification the
assailed RTC judgment. The dispositive portion of the decision reads:

WHEREFORE, the foregoing considered, the assailed decision is MODIFIED

only with respect to the computation of the amount fixed by the trial court
which is hereby corrected and fixed in the total amount of ₱16,232,000.00,
and the award of attorney’s fees is deleted. The rest of the decision is
AFFIRMED.16

The CA held that the lower courts are not bound by the factors enumerated
in Section 17 of RA 6657 which are mere statutory guideposts in
determining just compensation. Moreover, while the LBP valued the land
based on the formula provided for in DAR AO No. 11, series of 1994, this
valuation was too low and, therefore, confiscatory.

The CA thus affirmed the RTC’s valuation of the 10 hectares of commercial

land at ₱100,000.00 per hectare, and the remaining 476 hectares at
₱32,000.00 per hectare.

THE PETITION

The LBP argues that the CA committed a serious error of law when it failed
to apply the mandatory formula for determining just compensation fixed in
DAR AO No. 11, series of 1994. In fixing the just compensation for the
subject landholdings at ₱16,232,000.00, the CA adopted the values fixed by
the SAC, despite the fact that the valuation was not based on law. According
to the LBP, land taken pursuant to the State’s agrarian reform program
involves both the exercise of the State’s power of eminent domain and the
police power of the State. Consequently, the just compensation for land
taken for agrarian reform should be less than the just compensation given in
the ordinary exercise of eminent domain.

In contrast, Honeycomb Farms maintains that the DAR AOs were issued
merely to serve as guidelines for the DAR and the LBP in administratively
fixing the valuation to be offered by the DAR to the landowner for
acceptance or rejection. However, it is not mandatory for courts to use the
DAR AOs to fix just compensation as this would amount to an administrative
imposition on an otherwise purely judicial function and prerogative of
determination of just compensation for expropriated lands specifically
reserved by the Constitution to the courts.

THE COURT’S RULING

We GRANT the LBP’s petition.

Agrarian reform and the guarantee of just compensatio

We begin by debunking the premise on which the LBP’s main argument rests
– since the taking done by the government for purposes of agrarian reform
is not a traditional exercise of the power of eminent domain but one which is
done in pursuance of social justice and which involves the State’s police
power, the just compensation to be paid to the landowners for these parcels
of agricultural land should be less than the market value of the property.

When the State exercises its inherent power of eminent domain, the
Constitution imposes the corresponding obligation to compensate the
landowner for the expropriated property. This principle is embodied in
Section 9, Article III of the Constitution, which provides: "Private property
shall not be taken for public use without just compensation."

When the State exercises the power of eminent domain in the

implementation of its agrarian reform program, the constitutional provision
which governs is Section 4, Article XIII of the Constitution, which provides:

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. [emphasis ours]

Notably, this provision also imposes upon the State the obligation of paying
the landowner compensation for the land taken, even if it is for the
government’s agrarian reform purposes. Specifically, the provision makes
use of the phrase "just compensation," the same phrase used in Section 9,
Article III of the Constitution. That the compensation mentioned here
pertains to the fair and full price of the taken property is evident from the
following exchange between the members of the Constitutional Commission
during the discussion on the government’s agrarian reform program:
Fr. Bernas. We discussed earlier the idea of a progressive system of
compensation and I must admit, that it was before I discussed it with
Commissioner Monsod. I think what is confusing the matter is the fact that
when we speak of progressive taxation, the bigger the tax base, the higher
the rate of tax. Here, what we are saying is that the bigger the land is, the
lower the value per square meter. So, it is really regressive, not progressive.

Mr. Monsod. Yes, Madam President, it is true. It is progressive with respect

to the beneficiary and regressive with respect to the landowner.

Fr. Bernas. But is it the intention of the Committee that the owner

should receive less than the market value?

Mr. Monsod. It is not the intention of the Committee that the owner
should receive less than the just compensation. 17 (emphases ours)

Even more to the point is the following statement made by Commissioner

Jose F.S. Bengzon Jr., taken from the same discussion quoted above:

Mr. Bengzon. Madam President, as we stated earlier, the term "just

compensation" is as it is defined by the Supreme Court in so many cases
and which we have accepted. So, there is no difference between "just
compensation" as stated here in Section 5 and "just compensation" as stated
elsewhere. There are no two different interpretations. 18

Consistent with these discussions, the Court, in the definitive case of Ass’n
of Small Landowners in the Phils., Inc. v. Hon. Secretary of Agrarian
Reform,19 defined "just compensation" for parcels of land taken pursuant to
the agrarian reform program as:

Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. It has been repeatedly stressed by
this Court that the measure is not the taker’s gain but the owner’s loss. 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.

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.
More recently, we brushed aside the LBP’s attempt to differentiate just
compensation paid in what it terms as "traditional" exercise of eminent
domain and eminent domain in the context of agrarian reform in Apo Fruits
Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, 20 thus:

To our mind, nothing is inherently contradictory in the public purpose of land

reform and the right of landowners to receive just compensation for the
expropriation by the State of their properties. That the petitioners are
corporations that used to own large tracts of land should not be taken
against them. As Mr. Justice Isagani Cruz eloquently put it:

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

Mandatory application of the DAR formula

The CA, in affirming the RTC’s valuation and disregarding that of the LBP,
explained its position, as follows:

A careful perusal of the assailed decision shows that after the trial court
dismissed the valuation made by [Honeycomb Farms] as exorbitant and that
fixed by [the LBP and the DAR] as confiscatory and therefore
unconstitutional, it fixed the value of the properties at ₱100,000.00 per
hectare for the portion near the Curvada market and ₱32,000.00 per hectare
for the rest, taking judicial notice of the fact that the so-called Sitio Curvada,
Pitago, Cataingan, just a few kilometers away from Poblacion, Cataingan,
Masbate, is a commercial district. In this respect, while it is true that the
trial court should have announced its intention to take judicial notice of the
commercial nature of the area near the Curvada Market with an area of ten
(10) hectares, under Section 3 of Rule 129 of the Rules of Court, We find,
however, that the parties were afforded ample opportunity to present
evidence on the nature of the subject property and were actually heard
thereon. Thus, We see no error on the part of the trial court in fixing the
value of the land near the Curvada Market with an area of 10 hectares at
₱1,000,000.00 after evaluating the evidence adduced by the parties. The
board of commissioners constituted by the trial court to aid it in determining
the just compensation for the subject properties conducted an ocular
inspection of the property and thereafter made its observation that 95% of
the property covered by TCT No. T-2549 and 65% of the land covered by
TCT No. T-28872 are developed. [Honeycomb Farms’] witness, Engr.
Calauag, taking into consideration the location of the subject property, made
a comparative valuation of similar properties located in other geographical
areas of the country, based on listings obtained from newspapers,
advertisements, and real estate brokers. In countering the said valuation,
[the LBP] and the DAR merely insisted on their own computation of the
value of the lands under the guidelines set by the DAR in its administrative
orders, disregarding factors such as the location of the subject property in
relation to adjacent properties, as well as its nature and the actual use for
which this property is devoted. The determination of just compensation
logically should take into consideration as essential factor the nature of the
land based on its location.

While we agree with [the LBP and the DAR] that they merely followed the
guidelines set forth in the administrative orders issued by the DAR in
arriving at the amount of ₱2,890,787.89, as the basis for compensation, the
courts of justice are not bound by such valuation as the final determination
of just compensation is a function addressed to the latter guided by factors
set forth in RA 6657.21

The LBP disputes this ruling, maintaining that while the determination of just
compensation is a judicial function, courts should take into serious
consideration the facts and data gathered by the DAR, through the LBP, as
the administrative agency mandated by law to make an initial determination
of the valuation of the parcels of agricultural land acquired for land reform.

We agree.

That it is the RTC, sitting as a SAC, which has the power to determine just
compensation for parcels of land acquired by the State, pursuant to the
agrarian reform program, is made clear in Section 57 of RA 6657, which
reads:

Section 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.
To guide the RTC in this function, Section 17 of RA 6657 enumerates the
factors that have to be taken into consideration to accurately determine just
compensation. This provision states:

Section 17. Determination of Just Compensation. – In determining just

compensation, the cost of acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the
owner, the tax declarations, and the assessment made by government
assessors, shall be considered. The social and economic benefits contributed
by the farmers and the farmworkers and by the Government to the property,
as well as the non-payment of taxes or loans secured from any government
financing institution on the said land, shall be considered as additional
factors to determine its valuation.

In Land Bank of the Philippines v. Sps. Banal, 22 we recognized that the DAR,
as the administrative agency tasked with the implementation of the agrarian
reform program, already came up with a formula to determine just
compensation which incorporated the factors enumerated in Section 17 of
RA 6657. We said:

These factors [enumerated in Section 17] have been translated into a basic
formula in DAR Administrative Order No. 6, Series of 1992, as amended by
DAR Administrative Order No. 11, Series of 1994, issued pursuant to the
DAR's rule-making power to carry out the object and purposes of R.A. 6657,
as amended. [emphases ours]

In Landbank of the Philippines v. Celada, 23 we emphasized the duty of the

RTC to apply the formula provided in the applicable DAR AO to determine
just compensation, stating that:

While [the RTC] is required to consider the acquisition cost of the land, the
current value of like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declaration and the assessments made by
the government assessors to determine just compensation, it is equally true
that these factors have been translated into a basic formula by the DAR
pursuant to its rule-making power under Section 49 of R.A. No. 6657. As the
government agency principally tasked to implement the agrarian reform
program, it is the DAR's duty to issue rules and regulations to carry out the
object of the law. [The] DAR [Administrative Order] precisely "filled in the
details" of Section 17, R.A. No. 6657 by providing a basic formula by which
the factors mentioned therein may be taken into account. The [RTC] was at
no liberty to disregard the formula which was devised to implement the said
provision.
It is elementary that rules and regulations issued by administrative bodies to
interpret the law which they are entrusted to enforce, have the force of law,
and are entitled to great respect. Administrative issuances partake of the
nature of a statute and have in their favor a presumption of legality. As
such, courts cannot ignore administrative issuances especially when, as in
this case, its validity was not put in issue. Unless an administrative order is
declared invalid, courts have no option but to apply the same. [emphases
ours]

We reiterated the mandatory application of the formula in the applicable

DAR administrative regulations in Land Bank of the Philippines v. Lim, 24 Land
Bank of the Philippines v. Heirs of Eleuterio Cruz, 25 and Land Bank of the
Philippines v. Barrido.26 In Barrido, we were explicit in stating that:

While the determination of just compensation is essentially a judicial

function vested in the RTC acting as a Special Agrarian Court, the judge
cannot abuse his discretion by not taking into full consideration the factors
specifically identified by law and implementing rules. Special Agrarian
Courts are not at liberty to disregard the formula laid down in DAR
A.O. No. 5, series of 1998, because unless an administrative order is
declared invalid, courts have no option but to apply it. The courts
cannot ignore, without violating the agrarian law, the formula provided by
the DAR for the determination of just compensation.27 (emphases ours)

These rulings plainly impose on the RTC the duty to apply the formula laid
down in the pertinent DAR administrative regulations to determine just
compensation. Clearly, the CA and the RTC acted with grievous error when
they disregarded the formula laid down by the DAR, and chose instead to
come up with their own basis for the valuation of the subject land.

Hearing necessary before RTC takes judicial notice of nature of land

Apart from disregarding the formula found in the applicable DAR AO, the
RTC, and, correspondingly, the CA, when it affirmed the trial court,
committed further error in concluding that the 10 hectares of the subject
property is commercial land after taking judicial notice of the fact that this
portion of land is near Sitio Curvada, Pitago, Cataingan, a commercial
district.

While the lower court is not precluded from taking judicial notice of certain
facts, it must exercise this right within the clear boundary provided by
Section 3, Rule 129 of the Rules of Court, which provides:
Section 3. Judicial notice, when hearing necessary. – During the trial, the
court, on its own initiative, or on request of a party, may announce its
intention to take judicial notice of any matter and allow the parties to be
heard thereon.

After the trial, and before judgment or on appeal, the proper court, on its
own initiative, or on request of a party, may take judicial notice of any
matter and allow the parties to be heard thereon if such matter is decisive of
a material issue in the case. [emphasis ours]

The classification of the land is obviously essential to the valuation of the

subject property, which is the very issue in the present case. The parties
should thus have been given the opportunity to present evidence on the
nature of the property before the lower court took judicial notice of the
commercial nature of a portion of the subject landholdings. As we said in
Land Bank of the Phils. v. Wycoco:28

The power to take judicial notice is to be exercised by courts with caution

especially where the case involves a vast tract of land. Care must be taken
that the requisite notoriety exists; and every reasonable doubt on the
subject should be promptly resolved in the negative. To say that a court will
take judicial notice of a fact is merely another way of saying that the usual
form of evidence will be dispensed with if knowledge of the fact can be
otherwise acquired. This is because the court assumes that the matter is so
notorious that it will not be disputed. But judicial notice is not judicial
knowledge. The mere personal knowledge of the judge is not the judicial
knowledge of the court, and he is not authorized to make his individual
knowledge of a fact, not generally or professionally known, the basis of his
action.

In these lights, we find that a remand of this case to the court of origin is
necessary for the determination of just compensation, in accordance with
the formula stated in DAR AO No. 6, series of 1992, as amended by DAR AO
No. 11, series of 1994, which are the applicable issuances on fixing just
compensation.

Payment through trust account

As a final point, we have not failed to notice that the LBP in this case made
use of trust accounts to pay Honeycomb Farms.1âwphi1 In Land Bank of the
Phil. v. CA,29 this Court struck down as void DAR Administrative Circular No.
9, Series of 1990, providing for the opening of trust accounts in lieu of the
deposit in cash or in bonds contemplated in Section 16(e) of RA 6657. We
said:
It is very explicit x x x [from Section 16(e)] that the deposit must be made
only in "cash" or in "LBP bonds." Nowhere does it appear nor can it be
inferred that the deposit can be made in any other form. If it were the
intention to include a "trust account" among the valid modes of deposit, that
should have been made express, or at least, qualifying words ought to have
appeared from which it can be fairly deduced that a "trust account" is
allowed. In sum, there is no ambiguity in Section 16(e) of RA 6657 to
warrant an expanded construction of the term "deposit."

xxxx

In the present suit, the DAR clearly overstepped the limits of its power to
enact rules and regulations when it issued Administrative Circular No. 9.
There is no basis in allowing the opening of a trust account in behalf of the
landowner as compensation for his property because, as heretofore
discussed, Section 16(e) of RA 6657 is very specific that the deposit must be
made only in "cash" or in "LBP bonds." In the same vein, petitioners cannot
invoke LRA Circular Nos. 29, 29-A and 54 because these implementing
regulations cannot outweigh the clear provision of the law. Respondent court
therefore did not commit any error in striking down Administrative Circular
No. 9 for being null and void.30

As a result, the DAR issued AO No. 2, Series of 1996, converting trust

accounts into deposit accounts. The pertinent portion of the AO provides:

VI. TRANSITORY PROVISIONS

xxxx

All previously established Trust Deposits which served as the basis for the
transfer of the landowner’s title to the Republic of the Philippines shall
likewise be converted to deposits in cash and in bonds. The Bureau of Land
Acquisition and Distribution shall coordinate with the LBP for this purpose.

Recognizing that the belated conversion of the trust account into a deposit
account failed to address the injustice caused to the landowner by the delay
in its receipt of the just compensation due, we held in Wycoco that:

In light of the foregoing, the trust account opened by LBP in the name of
Wycoco as the mode of payment of just compensation should be converted
to a deposit account. Such conversion should be retroactive in
application in order to rectify the error committed by the DAR in
opening a trust account and to grant the landowners the benefits
concomitant to payment in cash or LBP bonds prior to the ruling of
the Court in Land Bank of the Philippines v. Court of Appeals.
Otherwise, petitioner’s right to payment of just and valid compensation for
the expropriation of his property would be violated. The interest earnings
accruing on the deposit account of landowners would suffice to compensate
them pending payment of just compensation.

In some expropriation cases, the Court imposed an interest of 12% per

annum on the just compensation due the landowner. It must be stressed,
however, that in these cases, the imposition of interest was in the nature of
damages for delay in payment which in effect makes the obligation on the
part of the government one of forbearance. It follows that the interest in the
form of damages cannot be applied where there was prompt and valid
payment of just compensation. Conversely, where there was delay in
tendering a valid payment of just compensation, imposition of interest is in
order. This is because the replacement of the trust account with cash or LBP
bonds did not ipso facto cure the lack of compensation; for essentially, the
determination of this compensation was marred by lack of due process.

Accordingly, the just compensation due Wycoco should bear 12%

interest per annum from the time LBP opened a trust account in his
name up to the time said account was actually converted into cash
and LBP bonds deposit accounts. The basis of the 12% interest
would be the just compensation that would be determined by the
Special Agrarian Court upon remand of the instant case. In the same
vein, the amount determined by the Special Agrarian Court would also be
the basis of the interest income on the cash and bond deposits due Wycoco
from the time of the taking of the property up to the time of actual payment
of just compensation.31 (emphases ours)

In line with this ruling, the LBP is instructed to immediately convert the trust
account opened in the name of Honeycomb Farms to a deposit account.
Furthermore, the just compensation due Honeycomb Farms, as determined
by the RTC, should bear 12% interest per annum from the time LBP opened
the trust account in its name until the account is converted into cash and
LBP bonds deposit accounts.

WHEREFORE, premises considered, the petition is GRANTED. Special Civil

Case No. 4323 is REMANDED to the Regional Trial Court of Masbate,
Masbate, Branch 48, for the determination of just compensation, based on
the applicable administrative orders of the Department of Agrarian Reform,
subject to a 12% interest per annum from the time the Land Bank of the
Philippines opened the trust account for respondent Honeycomb Farms
Corporation up to the time this account is actually converted into cash and
LBP bonds deposit accounts.
SO ORDERED.

31.

LAND BANK OF THE PHILIPPINES [LBP], petitioner,vs. DOMINGO AND

MAMERTO SORIANO, Respondents, G.R. Nos. 180772 and 180776, May
6, 2010

DECISION

PEREZ, J.:

For consideration is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court filed by the Land Bank of the Philippines (LBP) seeking the
annulment of the Decision1 dated 9 October 2007 and the Resolution2 dated
12 December 2007 issued by the Court of Appeals in CA-G.R. SP Nos. 89005
and 89288.

The controversy is hinged on the determination of just compensation for

land covered by the Comprehensive Agrarian Reform Program (CARP).

First, the antecedents.

Domingo and Mamerto Soriano (respondents) are the registered owners of

several parcels of rice land situated in Oas, Albay. Out of the 18.9163
hectares of land3 owned by the respondents, 18.2820 hectares were placed
under the Operations Land Transfer and the CARP pursuant to Presidential
Decree No. 274 and Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law.5

The LBP6 pegged the value of 18.0491 hectares of land at

₱482,363.957 (₱133,751.65 as land value plus ₱348,612.30 incremental
interest), while the remaining 0.2329 hectare was computed at
₱8,238.94.8 Not satisfied with the valuation, respondents, on 23 November
2000, instituted a Complaint9 for judicial determination of just compensation
with the Regional Trial Court of Legazpi City,10 sitting as a Special Agrarian
Court (SAC). Respondents alleged that they are entitled to an amount of not
less than ₱4,500,000.00 as just compensation.11

On 21 February 2005, the SAC rendered a judgment, ordering LBP to pay

the respondents ₱894,584.94. The dispositive portion reads:

ACCORDINGLY, the just compensation of the 18.0491 hectares of irrigated

riceland is ₱133,751.79, plus increment of 6% per annum computed
annually beginning October 21, 1972, until the value is fully paid, and of the
0.2329 hectare of rain fed riceland is ₱8,238.94 plus 12% interest per
annum, beginning August 17, 1998, until the value is fully paid or a total of
₱894,584.94 as of this date. Land Bank is ordered to pay the landowners
Domingo Soriano and Mamerto Soriano said amount/land value in
accordance with law.12

The SAC applied the formula prescribed under Executive Order No. 228 in
determining the valuation of the property, i.e., Land value = Average Gross
Production x 2.5 x Government Support Price. It likewise granted
compounded interest pursuant to Department of Agrarian Reform (DAR)
Administrative Order No. 13, series of 1994, as amended by DAR
Administrative Order No. 2, series of 2004.

Both parties disagreed with the trial court’s valuation, prompting them to file
their respective appeals with the Court of Appeals. The appellate court,
however, affirmed the judgment of the trial court. It also upheld the award
of compounded interest, thus:

In the case at bar, the subject lands were taken under PD 27 and were
covered by Operation Land Transfer, making the aforecited Administrative
Order applicable. Hence, the Petitioners SORIANOs are entitled to the 6%
compounded interest per annum from the date of taking on 21 October 1972
until full payment of the just compensation.13

LBP moved for reconsideration but it was denied by the Court of Appeals on
12 December 2007.

LBP filed the instant petition seeking to nullify the appellate court’s decision
and resolution, particularly the amount awarded to respondents as just
compensation.

Basic is the tenet that since respondents were deprived of their land, they
are entitled to just compensation. Under Executive Order No. 228, the
formula used to compute the land value is:

Land value = Average Gross Production (AGP) x 2.5

x Government Support Price (GSP)

With the passage of Republic Act (R.A.) No. 6657 or the CARL in 1988, new
guidelines were set for the determination of just compensation. In particular,
Section 17 provides, thus:
Determination of Just Compensation. — In determining just compensation,
the cost of acquisition of the land, the current value of like properties, its
nature, actual use and income, the sworn valuation by the owner, the tax
declarations, and the assessment made by government assessors shall be
considered. The social and economic benefits contributed by the farmers and
the farmworkers and by the Government to the property as well as the non-
payment of taxes or loans secured from any government financing institution
on the said land shall be considered as additional factors to determine its
valuation.

Consequently, two divergent formulae arose which prompted the Court to

come up with a categorical pronouncement that, if just compensation is not
settled prior to the passage of Republic Act No. 6657, it should be computed
in accordance with the said law, although the property was acquired under
Presidential Decree No. 27. The fixing of just compensation should therefore
be based on the parameters set out in Republic Act No. 6657, with
Presidential Decree No. 27 and Executive Order No. 228 having only
suppletory effect.14

In the instant case, while the subject lands were acquired under Presidential
Decree No. 27, the complaint for just compensation was only lodged before
the court on 23 November 2000 or long after the passage of Republic Act
No. 6657 in 1988. Therefore, Section 17 of Republic Act No. 6657 should be
the principal basis of the computation for just compensation. As a matter of
fact, the factors enumerated therein had already been translated into a basic
formula by the DAR pursuant to its rule-making power under Section 49 of
Republic Act No. 6657. The formula outlined in DAR Administrative Order No.
5, series of 1998 should be applied in computing just compensation, thus:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration15

As much as this Court would like to determine the proper valuation based on
the formula cited above, the records of this case are bereft of adequate
data. To write finis to this case, we uphold the amount derived from the old
formula. However, since the application of the new formula is a matter of
law and thus, should be made applicable, the parties are not precluded from
asking for any additional amount as may be warranted by the new formula.
On to the more pertinent issue. LBP assails the imposition of 6% interest
rate on the 18.0491 hectares of lot valued at ₱133,751.65. It avers that the
incremental interest due to the respondents should be computed from the
date of taking on 21 October 1972, not up to full payment of just
compensation but up to the time LBP approved the payment of their just
compensation claim and a corresponding deposit of the compensation
proceeds was made by the bank. LBP relies on the provisions of DAR
Administrative Order No. 13, series of 1994, as amended, which
substantially provides that "the grant of 6% yearly interest compounded
annually shall be reckoned from 21 October 1972 up to the time of actual
payment but not later than December 2006." LBP stresses that under said
Administrative Order, time of actual payment is defined as the date when
LBP approves the payment of the land transfer claim and deposits the
compensation proceeds in the name of the landowner in cash and in bonds.
In sum, LBP posits that the appellate court departed from the express
provision of DAR Administrative Order No. 13, as amended, by imposing an
interest to be reckoned from the time of taking up to the actual payment of
just compensation.16

Respondents counter that the award of interest until full payment of just
compensation was correctly adhered to by the lower courts in line with the
Court’s ruling in Land Bank of the Philippines v. Imperial, 17 which found it
inequitable to determine just compensation based solely on the formula
provided by DAR Administrative Order No. 13, as amended. According to
respondents, the award of interest until full payment of just compensation is
to ensure prompt payment. Moreover, respondents claim that the date LBP
approves the payment of the land transfer claim and deposits the proceeds
in the name of the landowner is not tantamount to actual payment because
on said date, the release of the amount is conditioned on certain
requirements.18

This issue has already been raised before the Court of Appeals by LBP, first,
in its petition for review and, second, in its motion for reconsideration. The
Court of Appeals, however, neglected to give a definitive ruling on the issue
of computation of interest and merely echoed the trial court’s ruling that
respondents are entitled to the 6% compounded interest per annum from
the date of taking on 21 October 1972 until full payment of just
compensation.1avvphi1

At any rate, we cannot subscribe to the arguments of LBP.

Section 4, Article XIII of the 1987 Constitution, mandates that the

redistribution of agricultural lands shall be subject to the payment of just
compensation. The deliberations of the 1986 Constitutional Commission on
this subject reveal that just compensation should not do violence to the Bill
of Rights, but should also not make an insurmountable obstacle to a
successful agrarian reform program. Hence, the landowner's right to just
compensation should be balanced with agrarian reform. 19

Administrative Order No. 13, as amended, was issued to compensate those

who were effectively deprived of their lands by expropriation. LBP relies on
said Administrative Order to justify its own computation of interest. A literal
reading of this Administrative Order seems to favor LBP’s interpretation with
respect to the period covered by the interest rate. We quote the relevant
portion of the Administrative Order:

The grant of six percent (6%) yearly interest compounded annually shall be
reckoned as follows:

3.1 Tenanted as of 21 October 1972 and covered under OLT

- From 21 October 1972 up to the time of actual payment but not later than
December 2006

3.2 Tenanted after 21 October 1972 and covered under OLT

-From the date when the land was actually tenanted (by virtue of Regional
Order of Placement issued prior to August 18, 1987) up to the time of actual
payment but not later than December 2006

Time of actual payment – is the date when the Land Bank of the Philippines
(LBP) approves payment of the land transfer claim and deposits the
compensation proceeds in the name of the landowner (LO) in cash and in
bonds. The release of payment can be claimed by the landowner upon
compliance with the documentary requirements for release of payment. 20

However, as embodied in its Prefatory Statement, the intent of the

Administrative Order was precisely to address a situation "where a number
of landholdings remain unpaid in view of the non-acceptance by the
landowners of the compensation due to low valuation. Had the landowner
been paid from the time of taking his land and the money deposited in a
bank, the money would have earned the same interest rate compounded
annually as authorized under banking laws, rules and regulations." 21 The
concept of just compensation embraces not only the correct determination of
the amount to be paid to the owners of the land, but also payment within a
reasonable time from its taking. Without prompt payment, compensation
cannot be considered "just" inasmuch as the property owner is made to
suffer the consequences of being immediately deprived of his land while
being made to wait for a decade or more before actually receiving the
amount necessary to cope with his loss.22 To condition the payment upon
LBP’s approval and its release upon compliance with some documentary
requirements would render nugatory the very essence of "prompt payment."
Therefore, to expedite the payment of just compensation, it is logical to
conclude that the 6% interest rate be imposed from the time of taking up to
the time of full payment of just compensation.

Certainly, the trend of recent rulings bolsters this interpretation. In Forform

Development Corporation v. Philippine National Railways, 23 the Philippine
National Railways was directed to file the appropriate expropriation action
over the land in question, so that just compensation due to its owner may be
determined in accordance with the Rules of Court, with interest at the legal
rate of 6% per annum from the time of taking until full payment is made.
The Court in Manila International Airport Authority v. Rodriguez 24 ordered
just compensation for the portion of respondent’s lot actually occupied by
the runway, with interest thereon at the legal rate of 6% per annum from
the time of taking until full payment is made.ten.lihpwal

LBP also proffers that just compensation pertaining to the 0.2329 hectare
valued at ₱8,238.94 with no pronouncement as to interest per the
Department of Agrarian Reform Adjudication Board (DARAB) decision has
already attained finality, hence, it cannot be modified. 25

Anent the DARAB decision relating to the 0.2329 hectare, suffice it to say
that the determination of just compensation is a judicial function. 26 The
DAR's land valuation is only preliminary and is not, by any means, final and
conclusive upon the landowner or any other interested party. In the exercise
of their functions, the courts still have the final say on what the amount of
just compensation will be.27 Hence, we sustain the computation reached by
the trial court.

WHEREFORE, the petition is DENIED. The Decision dated 9 October 2007

and the Resolution dated 12 December 2007 of the Court of Appeals in CA-
G.R. SP Nos. 89005 and 89288 are hereby AFFIRMED without prejudice to
the right of the parties for additional claims that may arise in the application
of DAR Administrative Order No. 5, series of 1998 in relation to R.A. No.
6657.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

RENATO C. CORONA* MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD
Associate Justice
32.

LAND BANK OF THE PHILIPPINES, Petitioner, vs. EDGARDO L.

SANTOS, represented by his assignee, ROMEO L.
SANTOS, Respondent, G.R. No. 213863, January 27, 2016

DECISION

PERLAS-BERNABE, J.:

Before the Court: are consolidated petitions for review

on certiorari1 assailing the Decision2 1 dated December 4, 2013 and the
Resolution3 dated August 11, 2014 of the Court of Appeals (CA) in CA-G.R.
SP Nos. 110779 and 121813, which affirmed the Orders dated July 9,
20094 and August 24, 20095 of the Regional Trial Court of Naga City (RTC),
Branch 23, acting as a Special Agrarian Court (SAC), in Civil Case Nos.
2001-0229 and 2001-0315, and the Order6 dated October 10, 2011 in Civil
Case No. 2001-0315, directing the Land Bank of the Philippines (LBP)
to: (a) release to Edgardo L. Santos (Santos) the initial valuation of Lands 1
and 2 upon submission of two (2) valid identification (ID) cards, two (2)
latest ID pictures, current community tax certificate (CTC), and execution of
a Deed of Assignment, Warranties and Undertaking in favor of the LBP; and
(b) pay I twelve percent (12%) interest on the unpaid just compensation for
Land 3, reckoned from January 1, 2010 until full payment.

The Facts

Santos owned three (3) parcels of agricultural land devoted to corn situated
in the Municipality of Sagnay, Camarines Sur, covered by Tax Declaration
(TD) Nos. 197-018-0579 (Land 1) and 97-010-076 (Land 2), 7 and Transfer
Certificate of Title (TCT) No. 57178 (Land 3; collectively, subject lands).

In 1984, the subject lands were placed under the government's Operation
Land Transfer Program9 pursuant to Presidential Decree (PD) No. 27,10 and
distributed to the farmer-beneficiaries who were issued the corresponding
Emancipation Patents.11 The Department of Agrarian Reform (DAR) fixed the
just compensation at P164,532.50 for Land 1, P39,841.93 for Land 2, 12 and
P66,2l4.03 for Land 3,13 using the formula provided under Executive Order
No. (EO) 228,14 Series of 1987.
On May 25, 2000, the LBP received the claim folder covering the subject
lands15 and allowed Santos to collect the initial valuation for Land 3. It
withheld the release of the valuation for Lands 1 and 2 until the submission
of the certificates of title thereto,16 since it was discovered that they were
covered by Decree Nos. N-8237817 and 622575,18 respectively.

Thus, on August 30, 2000 and December 17, 2003, respectively, Santos was
issued Agrarian Reform (AR) Bond No. 0079665 in the amount of
P11,674.59 representing the initial valuation of Land 3 and AR Bond No.
0079666 in the amount of P30,428.83 representing the six percent (6%)
increment pursuant to PD 27 and EO 228, and paid cash in the total amount
of P4,678.16.19

Finding the valuation unreasonable, Santos filed three (3) petitions 20 for
summary administrative proceedings for the determination of just
compensation of the subject lands before the Office of the Provincial
Adjudicator (PARAD) of Camarines Sur, docketed as DARAB Case Nos. V-RC-
051-CS-00, V-RC-074-CS-00, and V-RC-075-CS-00.

On March 27, 2001, the PARAD rendered separate decisions21 fixing the just
compensation as follows: (a) P510,034.2922 for Land
1; (b) P2,532,060.3123 for' Land 2; and (c) Pl,147,466.7324 for Land 3, using
the formula,25 LV = AGP x 2.5 x GSP. However, in arriving at such values, I
the PARAD used the recent government support price (GSP) for com of
P300.00/cavan (P6.00/kilo) as certified by the National Food Authority
Provincial Manager of Camarines Sur, instead of the P31.00/cavan provided
under Section 226 of EO 228. Hence, it no longer applied the six percent
(6%) annual incremental interest granted under DAR Administrative Order
(DAR AO) No. 13,27 Series of 1994. In a letter28 dated September 5, 2001,
Santos unconditionally 'accepted and called for the immediate payment of
the valuations for Lands 2 and 3.

Dissatisfied with the PARAD's valuation, the LBP instituted two (2) separate
complaints29 (or the determination of just compensation before the RTC,
averring that the computations were erroneous when they disregarded the
formula provided under EO 228. The cases were raffled to its Branch 21, and
docketed as Civil Case Nos. 2001-029930 for Land 1, and 2001-031531 for
Lands 2 and 3.

Santos moved to dismiss32 the complaints on the ground that the LBP has no
legal personality to institute such action, and that the complaints were
barred by the finality of the PARAD's Decision.
In a consolidated Order33 dated November 9, 2001, the RTC dismissed both
complaints. Meanwhile, Branch 23 of the same RTC was designated as the
new SAC that gave due course to the LBP's notices of appeal. 34 The appeals,
however, were set aside by the CA's Fifth and Third Divisions, which
remanded the cases to the RTC for appropriate proceedings, and
computation of just compensation, respectively. 35

On May 5, 2009, Santos filed before the RTC a motion to release the initial
valuation for Lands 1 and 2 as fixed by the DAR, which was granted on June
2, 2009, conditioned on the submission of several documentary
requirements.36 Santos moved for reconsideration, pointing out that what
was sought was the initial valuation only and not its full payment, but
nonetheless, committed (a) to submit two (2) valid ID cards, two (2) latest
ID pictures and his CTC for the current year, and (b) to execute a Deed of
Assignment, Warranties and Undertaking in favor of the LBP. 37

In opposition, the LBP insisted that Santos must: (a) first establish his

ownership over the said properties, it appearing that a Decree covering Land
1 was issued in favor of a certain Mariano Garchitorena, hence, the owner's
duplicate of the said title must be surrendered to the Registry of Deeds for
cancellation; and (b) submit a real estate tax clearance to prove that there
were no encumbrances burdening the property and that the taxes thereon
had been fully paid until 1972.38

In an Order39 dated July 9, 2009, the RTC ruled in favor of Santos, holding

that since Land 1 was processed as an untitled property and the LBP had
admitted in its petitions for just compensation that Santos was the owner of
the untitled lands covered by PD 27 as reflected in the tax declarations, the
LBP cannot maintain an inconsistent position by requiring Santos to prove
his ownership thereto. It added that the submission of the required
documents may still be directed upon full payment of the just compensation.

The LBP's motion for reconsideration40 was denied in an Order41 dated

August 24, 2009.

The LBP elevated the matter to the CA via a petition for certiorari and

Prohibition42 with prayer for the issuance of a writ of preliminary injunction
and/or temporary restraining order (TRO), docketed as CA-GR. SP No.
110779, asserting that the RTC abused its discretion considering that: (a) it
was not at liberty to disregard43 DAR AO No. 2, Series of 2005,44 which
prescribes the requirements for the release of the initial valuation to a
landowner; and (b) no 1 further proceedings were necessary to arrive at the
just compensation for Lands 2 and 3 in view of the final and executory
decision in CA-G.R. CV No. 75010 that directed the remand of the case to
the RTC for computation purposes only, hence, res judicata had set in.45

The LBP's application for the issuance of a TRO having been denied, 46 it was
constrained to deposit the initial valuation for Lands 1 and 2 as directed by
the RTC47 after Santos' assignee,48 Romeo Santos, signed the required Deed
of Assignment, Warranties and Undertaking49 in favor of the LBP.

In an Order50 dated March 17, 2010, the RTC directed the LBP to submit a
revaluation for Lands 1, 2, and 3 in accordance with the factors set forth
under Republic Act (RA) No. 6657,51 otherwise known as the
"Comprehensive Agrarian Reform Law of 1988," as implemented by DAR AO
No. 1, Series of 2010.52

In compliance therewith, the LBP recomputed the valuation of the subject

lands as follows: P514,936.4453 for Land 1, P2,506,873.4354 for Land 2, and
Pl,155,223.4155 for Land 3, which Santos accepted. Considering, however,
the pendency of CA-G.R. SP No. 110779 involving Lands 1 and 2, Santos
moved for a separate judgment relative to Land 3.56

The RTC Ruling

On June 22, 2011, the RTC issued a Judgment57 in Civil Case No. 2001-0315,
adopting and approving the LBP's uncontested revaluation for Land 3 in the
amount of Pl,155,223.41, and ordering its payment to Santos in accordance
with Section 18 of RA 6657, minus the initial valuation that had already been
paid to him.

Santos moved for reconsideration, contending that the RTC failed to order
the payment of twelve percent (12%) interest reckoned from the time the
property was taken 1from him by the government in 1972 and distributed to
the farmer beneficiaries until full payment of the just compensation. 58 In an
Order59 dated August 31, 2011, the RTC granted the motion and awarded
twelve percent (12%) interest computed from June 26, 2000 when the LBP
approved the payment of the initial valuation for the property up to the date
the decision was rendered, or a total amount of Pl,437,669.75.

Both parties moved for reconsideration.60

In an Order61 dated October 10, 2011, the RTC modified its August 31,

2011 Order, holding that the twelve percent (12%) interest should be
reckoned from January 1, 2010 until full payment since the revaluation of
Land 3 already included the required six percent (6%) annual incremental
interest under DAR AO No. 13, Series of 1994,62 DAR AO No. 2, Series of
2004,63 and DAR AO No. 6, Series of 2008,64 from the time of taking until
December 31, 2009.

Dissatisfied, Santos filed a petition for review65 before the CA, docketed

as CA-G.R. SP No. 121813, which was subsequently consolidated with the
LBP's petition in CA-GR. SP No. 110779.66

On October 12, 2011, the LBP fully paid Santos the amount of Pl,155,223.41
representing the just compensation for Land 3.67

The CA Ruling

In a Decision68 dated December 4, 2013, the CA dismissed the petitions, and

affirmed the RTC's Orders dated July 9, 2009 and August 24, 2009 subject
of CA-G.R. SP No. 110779, and the Order dated October 11, 2011 subject of
CA-G.R. SP No. 121813.

In CA-G.R. SP No. 110779, the CA ruled that no grave abuse of discretion

was committed by the RTC when it proceeded with the determination of just
compensation, thereby rejecting the LBP's contention that the RTC was
barred by res judicata from conducting further proceedings to determine just
compensation with the finality69 of its earlier decisions in CA-G.R. CV Nos.
7491970 and 75010.71 It pointed out that the said decisions merely resolved
the LBP's personality to institute an action for determination of just
compensation, and reinstated the LBP's complaints for just compensation
which were well within the RTC's original and exclusive jurisdiction under RA
6657. It likewise sustained the release of the initial valuation for Lands 1 and
2 conditioned on the submission of only the documents mentioned in the
RTC's July 9, 2009 Order, finding that the failure to produce the titles
thereto were beyond Santos' control and that his claim of ownership had
been sufficiently established. It added that the RTC's June 22, 2011
Judgment conditioned the release of the final just compensation upon
compliance with the requirements of the law.72

In CA-G.R. SP No. 121813, the CA upheld the RTC's ruling that Santos was
entitled to a twelve percent (12%) interest reckoned from January 1, 2010
until its full payment since the revaluation by the LBP of Land 3 already
included six percent (6%) annual incremental interest until December 31,
2009.73

Aggrieved, both parties moved for reconsideration which were denied in a

Resolution74 dated August 11, 2014; hence, these consolidated petitions.

The Issues Before the Court

In its petition in G.R. No. 213863, the LBP contended that the CA
committed reversible error in: (a) not finding the RTC to have acted with
grave abuse of discretion in allowing the release of the initial valuation of
Lands 1 and 2 without submitting the documents listed under DAR AO No. 2,
Series of 2005; (b) ignoring the final decision in CA-G.R. CV No. 75010 that
effectively barred the RTC from further proceeding with the determination of
just compensation relative to Lands 2 and 3; and (c) holding it liable for
twelve percent (12%) interest on the unpaid just compensation for Land 3.

On the other hand, Santos raised in his petition in G.R. No. 214021 the
sole question of whether or not the CA erred in reckoning the award of
twelve percent (12%) interest from January 1, 2010 until full payment of the
just compensation.

The Court's Ruling

The Court has repeatedly held that the seizure of landholdings or

properties covered by PD 27 did not take place on October 21, 1972,
but upon the payment of just compensation. 75 Thus, if the agrarian
reform process is still incomplete, as in this case where the just
compensation due the landowner has yet to be settled, just compensation
should be determined and the process concluded under RA 6657. 76

As summarized in LBP v. Sps. Banal,77 the procedure for the determination

of just compensation under RA 6657 commences with the LBP determining
the initial valuation of the lands under the land reform program. 78 Using the
LBP's valuation, the DAR makes an offer to the landowner. 79 In case the
landowner rejects the offer, the DAR adjudicator conducts a summary
administrative proceeding to determine the compensation for the land by
requiring the landowner, the LBP, and other interested parties to submit
evidence on the just compensation of the land. A party who disagrees with
the decision of the DAR adjudicator may bring the matter to the RTC,
designated as a Special Agrarian Court for final determination of just
compensation.80

Note that in case of rejection, RA 6657 entitles the landowner to withdraw

the initial valuation of the landholding pending the determination of just
compensation.81 In this case, however, the LBP, citing DAR AO No. 2, Series
of 2005, posited that the release of such amount is conditioned on the
submission of all the documentary requirements listed therein, and that the
RTC's failure to require Santos to comply therewith constitutes grave abuse
of discretion.82

The Court is not persuaded.

Grave abuse of discretion connotes an 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 must be patent and gross. 83

Contrary to the LBP's assertion in G.R. No. 213863, nowhere from the said
administrative guideline can it be inferred that the submission of the
complete documents is a pre-condition for the release of the initial valuation
to a landowner. To hold otherwise would effectively protract payment of the
amount which RA 6657 guarantees to be immediately due the landowner
even pending the determination of just compensation. As elucidated in LBP
v. CA:84

As an exercise of police power, the expropriation of private property under

the CARP puts the landowner, and not the government, in a situation where
the odds are already stacked against his favor. He has no recourse but to
allow it. His only consolation is that he can negotiate for the amount of
compensation to be paid for the expropriated property. As expected, the
landowner will exercise this right to the hilt, but subject however to the
limitation that he can only be entitled to a "just compensation." Clearly
therefore, by rejecting and disputing the valuation of the DAR, the
landowner is merely exercising his right to seek just compensation. If we
are to x x x [withhold] the release of the offered compensation
despite depriving the landowner of the possession and use of his
property, we are in effect penalizing the latter for simply exercising
a right afforded to him by law.

Obviously, this would render the right to seek a fair and just compensation
illusory as it would discourage owners of private lands from contesting the
offered valuation of the DAR even if they find it unacceptable, for fear of the
hardships that could result from long delays in the resolution of their cases.
This is contrary to the rules of fair play because the concept of just
compensation embraces not only the correct determination of the amount to
be paid to the owners of the land, but also the payment of the land within a
reasonable time from its taking. Without prompt payment, compensation
cannot be considered "just" for the property owner is made to suffer the
consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to
cope with his loss.85 (Emphasis supplied)

Thus, the leniency accorded by the RTC cannot be construed as a capricious

exercise of power as it merely expedited the procedure for payment which is
inherently fairer under the circumstances considering that: (a) Santos has
been "deprived of his right to enjoy his properties as early as 1983, and has
not yet received any compensation therefor since then;" 86 (b) the existence
of the certificates of title over Lands 1 and 2 which the LBP insists to be
submitted had not been sufficiently established;87 (c) the LBP had judicially
admitted, that Santos is the owner of Lands 1 and 2 which were identified as
covered by tax declarations;88 and (d) compliance with the required
documents may still be directed before the full payment of the correct just
compensation89 which, up to this time, has not yet been finally determined.
Moreover, as aptly pointed out by the CA, Santos' failure to produce the
titles to Lands 1 and 2 was not motivated by any obstinate refusal to abide
by the requirements but due to impediments beyond his control. 90

Perforce, no reversible error or grave abuse of discretion can be imputed on

the CA in sustaining the RTC Orders dated July 9, 2009 and August 24, 2009
which allowed the withdrawal of the initial valuation upon
Santos' (a) submission of two (2) valid ID cards, two (2) latest ID pictures, I
and his current CTC, and (b) execution of a Deed of Assignment, Warranties
and Undertaking in favor of the LBP.

Neither can the Court subscribe to the LBP's contention that the RTC was
barred by res judicata from conducting further proceedings to determine just
compensation for Lands 2 and 3 since the final and executory Decision in
CA-G.R. CV No. 75010 merely called for a remand of the case for
computation purposes only.1âwphi1

Res judicata means a matter adjudged, a thing judicially acted upon or

decided; a thing or matter settled by judgment.1âwphi1 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. 91

As correctly observed by the CA, the decision in CA-G.R. CV No. 75010 did
not preclude the RTC from proceeding with the determination of just
compensation of the subject lands since the issue raised in the said case
merely pertained to the LBP's legal standing to institute the complaints for
just compensation and not the valuation of the subject lands. 92 The
pronouncement in the said decision on the matter of computation of just
compensation was a mere obiter dictum, an opinion expressed upon some
question of law that was not necessary in the determination of the case
before it.93 As succinctly pointed out in the case of LBP v. Suntay,94 "it is a
remark made, or opinion expressed, by a judge, in his decision upon a
cause by the way, that is, incidentally or collaterally, and not directly upon
the question before him, or upon a point not necessarily involved in the
determination of the cause, or introduced by way of illustration, or analogy
or argument. It does not embody the resolution or determination of the
court, and is made without argument, or full consideration of the point.
It lacks the force of an adjudication, being a mere expression of an
opinion with no binding force for purposes of res judicata."95

Besides, it bears stressing that the original and exclusive jurisdiction over all
petitions for the determination of just compensation is vested in the
RTC,96 hence, it cannot be unduly restricted in the exercise of its judicial
function.

With respect to the award of twelve percent (12%) interest on the unpaid
just compensation for Land 3 subject of GR. No. 214021, the Court finds
untenable the LBP's contention that the same was bereft of factual and legal
bases, grounded on its having promptly paid Santos the initial valuation
therefor barely two months after it approved the DAR's valuation on June
26, 2000.97

Notably, while the LBP released the initial valuation in the amount of
P46,781.58 in favor of Santos in the year 2000, the said amount is way
below, or only four (4% )98 of the just compensation finally adjudged by the
RTC. To be considered as just, the compensation must be fair and equitable,
and the landowners must have received it without any delay.

It is doctrinal that the concept of just compensation contemplates of just and

timely payment. It embraces not only the correct determination of the
amount to be paid to the landowner, but also the payment of the land within
a reasonable time from its taking, as otherwise, compensation cannot be
considered "just," for the owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait for years before
actually receiving the amount necessary to cope with his loss. 99

In LBP v. Orilla,100 the Court elucidated that "prompt payment" of just

compensation is not satisfied by the mere deposit with any accessible bank
of the provisional compensation determined by it or by the DAR, and its
subsequent release to the landowner after compliance with the legal
requirements set by RA 6657, to wit:
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. It has been repeatedly stressed by
this Court that the true measure is not the taker's gain but the owner's loss.
The word 'just" is used to modify the meaning of the word "compensation"
to convey the idea that the equivalent to be given for the property to
be taken shall be real, substantial, full, and ample.

The concept of just compensation embraces not only the correct

determination of the amount to be paid to the owners of the land, but also
payment within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just" inasmuch as the property owner
is made to suffer the consequences of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving
the amount necessary to cope with his loss.

Put differently, while prompt payment of just compensation requires

the immediate deposit and release to the landowner of the
provisional compensation as determined by the DAR, it does not end
there. Verily, it also encompasses the payment in full of the just
compensation to the landholders as finally determined by the courts.
Thus, it cannot be said that there is already prompt payment of just
compensation when there is only a partial payment thereof, as in
this case.101 (Emphasis supplied)

Thus, in expropriation cases, interest is imposed if there is delay in the

payment of just compensation to the landowner since the obligation
is deemed to be an effective forbearance on the part of the State.
Such interest shall be pegged at the rate of twelve percent (12%) per
annum on the unpaid balance of the just compensation, reckoned from the
time of taking,102 or the time when the landowner was deprived of the use
and benefit of his property103 such as when title is transferred to the
Republic,104 or emancipation patents are issued by the government,  until full
payment.105 To clarify, unlike the six percent (6%) annual incremental
interest allowed under DAR AO No. 13, Series of 1994, DAR AO No. 2, Series
of 2004 and DAR AO No. 6, Series of 2008, this twelve percent (12%)
annual interest is not granted on the computed just compensation; rather, it
is a penalty imposed for damages incurred by the landowner due to the
delay in its payment.106

Accordingly, the award of twelve percent (12%) annual interest on the

unpaid balance of the just compensation for Land 3 should be
computed from the time of taking and not from January 1, 2010 as ruled by
the RTC and the CA, until full payment on October 12, 2011.107 However,
copies of the emancipation patents issued to the farmer-beneficiaries have
not been attached to the records of the case. Hence, the Court is
constrained to remand the case to the RTC of Naga City for receipt of
evidence as to the date of the grant of the emancipation patents, which shall
serve as the reckoning point for the computation of the interests due Santos.

WHEREFORE, the petitions are DENIED. The Decision dated December 4,

2013 and the Resolution dated August 11, 2014 of the Court of Appeals in
CA-G.R. SP Nos. 110779 and 121813 are hereby AFFIRMED with
the MODIFICATION that the awarded twelve percent (12%) interest shall
be computed from the date of taking until full payment of the just
compensation on October 12, 2011 for the property covered by TCT No.
5717 (Land 3). The records of the case are REMANDED to the Regional Trial
Court of Naga City, Branch 23 for further reception of evidence as to the
date of the grant of the emancipation patents in favor of the farmer-
beneficiaries of Land 3, which shall serve as the reckoning point for the
computation of the said award.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE
LUCAS P. BERSAMIN
CASTRO
Associate Justice
Associate Justice

FRANCIS H. JARDELEZA
Associate Justice
33.
G.R. No. 194168               February 13, 2013
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
SPOUSES PLACIDO and CLARA DY ORILLA, Respondents.
DECISION
PERALTA, J.:
This is a petition for revievv on certiorari assailing the Decision1 dated April
17, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 70071, and the
Resolution2 dated Septernber 30, 2010 denying petitioner's Motion for
Partial Reconsideration.3
The factual and procedural antecedents are undisputed:
Respondents spouses Placido and Clara Orilla (respondents) were the owners
of a parcel of land situated in Bohol, identified as Lot No. 1, 11-12706,
containing an area of 23.3416 hectares and covered by Transfer Certificate
of Title No. 18401. In the latter part of November 1996, the Department of
Agrarian Reform Provincial Agrarian Reform Office (DARPARO) of Bohol sent
respondents a Notice of Land Valuation and Acquisition dated November 15,
1996 informing them of the compulsory acquisition of 21.1289 hectares of
their landholdings pursuant to the Comprehensive Agrarian Reform Law
(Republic Act [RA] 6657) for ₱371,154.99 as compensation based on the
valuation made by petitioner Land Bank of the Philippines (LBP).4
However, respondents rejected the said valuation. Consequently, a summary
hearing was conducted by the Provincial Department of Agrarian Reform
Adjudication Board (Provincial DARAB) to determine the amount of just
compensation. After the proceedings, the Provincial DARAB affirmed the
valuation made by the petitioner.5
Not content with the decision, respondents filed an action for the
determination of just compensation before the Regional Trial Court of
Tagbilaran City sitting as a Special Agrarian Court (SAC). The case was
docketed as Civil Case No. 6085 and was raffled to Branch 3.
After trial on the merits, the SAC rendered a Decision dated November 20,
2000, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered fixing the just compensation of
the land of petitioner subject matter of the instant action at ₱7.00 per
square meter, as only prayed for, which shall earn legal interest from the
filing of the complaint until the same shall have been fully paid.
Furthermore, respondents are hereby ordered to jointly and solidarily
indemnify the petitioners their expenses for attorney’s fee and contract fee
in the conduct of the appraisal of the land by a duly licensed real estate
appraiser Angelo G. Fajardo of which petitioner shall submit a bill of costs
therefor for the approval of the Court.
SO ORDERED.6
On December 11, 2000, petitioner filed a Notice of Appeal. Subsequently, on
December 15, 2000, respondents filed a Motion for Execution Pending
Appeal, pursuant to Section 2, Rule 39 of the 1997 Rules of Civil Procedure
and the consolidated cases of Landbank of the Philippines v. Court of
Appeals, et al.7 and Department of Agrarian Reform v. Court of Appeals, et
al.8 Respondents argued that the total amount of ₱1,479,023.00, which is
equivalent to ₱7.00 per square meter for 21.1289 hectares, adjudged by the
SAC as just compensation, could then be withdrawn under the authority of
the aforementioned case.9
On December 21, 2000, the SAC issued an Order granting the Motion for
Execution Pending Appeal, the dispositive of which reads:
WHEREFORE, the herein motion is granted and the petitioners are hereby
ordered to post bond equivalent to one-half of the amount due them by
virtue of the decision in this case. The respondent Land Bank of the
Philippines, is therefore, ordered to immediately deposit with any accessible
bank, as may be designated by respondent DAR, in cash or in any
governmental financial instrument the total amount due the
petitionerspouses as may be computed within the parameters of Sec. 18(1)
of RA 6657. Furthermore, pursuant to the Supreme Court decisions in
"Landbank of the Philippines vs. Court of Appeals, et al." G.R. No. 118712,
promulgated on October 6, 1995 and "Department of Agrarian Reform vs.
Court of Appeals, et al.," G.R. No. 118745, promulgated on October 6, 1995,
the petitioners may withdraw the same for their use and benefit consequent
to their right of ownership thereof.10
On December 25, 2000, respondents filed a Motion for Partial
Reconsideration of the amount of the bond to be posted, but it was later
denied in an Order dated January 11, 2001.11
For its part, petitioner filed a Motion for Reconsideration, which was likewise
denied in an Order dated December 29, 2000.12
On March 13, 2001, petitioner filed with the CA a special civil action
for certiorari and prohibition under Rule 65 of the Rules of Court with prayer
for issuance of a temporary restraining order and/or preliminary injunction.
It questioned the propriety of the SAC Order granting the execution pending
appeal.13
In its Decision dated July 29, 2002, the CA dismissed the petition on the
ground that the assailed SAC Order dated December 21, 2000 granting
execution pending appeal was consistent with justice, fairness, and equity,
as respondents had been deprived of the use and possession of their
property, pursuant to RA 6657 and are entitled to be immediately
compensated with the amount as determined by the SAC under the principle
of "prompt payment" of just compensation. Petitioner filed a Motion for
Reconsideration, but it was denied.14
Petitioner then sought recourse before this Court in a petition docketed as
G.R. No. 157206.1âwphi1 After due proceedings, this Court rendered a
Decision15 dated June 27, 2008, affirming the decision of the CA. The
decretal portion reads:
WHEREFORE, the Decision of the Court of Appeals, dated July 29, 2002, is
AFFIRMED.16
Petitioner filed a Motion for Reconsideration, but was denied with finality by
the Court.
Meanwhile, in CA-G.R. CV No. 70071, the CA rendered a Decision17 dated
April 17, 2009, granting the appeal filed by the petitioner. The dispositive
portion reads:
WHEREFORE, premises considered, the instant appeal is GRANTED. The
assailed decision of the Regional Trial Court sitting as Special Agrarian Court
is hereby SET ASIDE.
This case is REMANDED to the trial court for the proper determination of just
compensation for the land taken.
SO ORDERED.18
The CA held that there was no valid and sufficient legal basis for the SAC in
fixing the just compensation for the subject property at ₱1,479,023.00.
Thus, the CA remanded the case to the SAC for the proper determination of
just compensation.
In disposing the case, the CA also took into consideration the Motion for
Execution Pending Appeal that was granted earlier by the SAC and affirmed
by the CA and this Court, to wit:
Finally, the petitioners-appellees filed a Manifestation for Early Resolution
before this Court revealing that the petitioners-appellees filed before the
SAC a motion for execution pending appeal which was granted. This Court
affirmed the decision of the SAC. Ultimately, the Supreme Court affirmed the
decision of the Court of Appeals. Therefore, should the SAC find upon
recomputation that the just compensation previously rendered is bigger than
the recomputed value, the petitioners-appellees are ordered to return the
excess considering that payment may already have been given by LBP in
pursuant to the finality of the motion for execution pending appeal.19
Unsatisfied, petitioner filed a Motion for Partial Reconsideration.20 Petitioner
argued that when the CA set aside the valuation of the SAC amounting to
₱1,479,023.00, it necessarily follows that said amount can no longer be the
subject of an execution pending appeal. Petitioner theorized that by
annulling the SAC decision and, consequently, remanding the case to the
trial court, the latter’s decision was voided and, therefore, it could no longer
be executed.
On September 30, 2010, the CA issued a Resolution21 denying the motion.
The CA held that the issue of the validity of the writ of execution was already
resolved by the Supreme Court with finality in G.R. No. 157206. That was
precisely the reason why it stated in the decision that "should the SAC find
upon recomputation that the just compensation previously rendered is
bigger than the recomputed value, the petitioners-appellees are ordered to
return the excess, considering that payment may already have been given
by the LBP in pursuant to the finality of the motion for execution pending
appeal."22
Hence, the petition assigning the lone error:
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF
LAW IN HOLDING THAT THE TRIAL COURT’S DECISION, WHICH WAS
ANNULLED AND SET ASIDE, CAN STILL BE THE SUBJECT OF EXECUTION.23
Petitioner argues that when the CA set aside the valuation of the SAC, it
necessarily means that such valuation can no longer be the subject of an
execution pending appeal. It adds that the writ of execution ordering the LBP
to pay respondents the amount of ₱1,479,023.00 remains unimplemented as
of the time the CA rendered the decision annulling the aforesaid valuation.
Petitioner posits that once a decision is annulled or set aside, it is rendered
without legal effect for being a void judgment. Petitioner maintains that
while the issue of the validity of the writ of execution issued by the SAC had
been upheld by this Court in G.R. No. 157206, the enforcement of the writ
had been rendered moot and academic after the decision of the SAC was
reversed and set aside by the CA.
On their part, respondents contend that having attained finality, the decision
of this Court in G.R. No. 157206 could no longer be disturbed. Moreover, the
reason advanced by the CA in denying the motion for partial reconsideration
was merely an affirmation of the decision of this Court in the said case.
The petition is without merit.
At the onset, it should be noted that although this Court, in Land Bank of the
Philippines v. Orilla,24 held that the SAC validly issued the Order granting
execution pending appeal in the exercise of its sound discretion in issuing
the same according to the Rules, still what this Court deemed was justified
in that particular case was the propriety of the issuance of the said Order
and not the amount of monetary award that respondents were entitled
which, in turn, corresponds to the valuation of the subject property as
determined by the SAC in its Decision. Thus, this Court stated in the said
case that "while this decision does not finally resolve the propriety of the
determination of just compensation by the SAC in view of the separate
appeal on the matter, we find no grave abuse of discretion on the part of the
SAC Judge in allowing execution pending appeal."25
Anent the present controversy, in its Decision annulling the SAC valuation,
the CA opined:
x x x In granting the award, the SAC merely granted the amount prayed for
by the spouses and did not provide any computation or explanation on how
it arrived at the amount. There was therefore no valid and sufficient legal
basis for the award.26
The CA, therefore, concluded that there was no sufficient legal basis for the
valuation arrived at by the SAC in the amount of ₱1,479,023.00. In fine, the
CA effectively set aside and voided the Decision of the RTC fixing the amount
of just compensation for the subject property. As correctly argued by
petitioner, being the fruit of a void judgment such amount cannot be the
proper subject of the Order granting the motion for execution pending
appeal issued by the SAC.
A void judgment or order has no legal and binding effect, force or efficacy
for any purpose. In contemplation of law, it is non-existent. Such judgment
or order may be resisted in any action or proceeding whenever it is involved.
It is not even necessary to take any steps to vacate or avoid a void
judgment or final order; it may simply be ignored.27
In Metropolitan Waterworks & Sewerage System v. Sison,28 this Court held
that:
x x x "A void judgment is not entitled to the respect accorded to a valid
judgment, but may be entirely disregarded or declared inoperative by any
tribunal in which effect is sought to be given to it. It is attended by none of
the consequences of a valid adjudication. It has no legal or binding effect or
efficacy for any purpose or at any place. It cannot affect, impair or create
rights. It is not entitled to enforcement and is, ordinarily, no protection to
those who seek to enforce. All proceedings founded on the void judgment
are themselves regarded as invalid. In other words, a void judgment is
regarded as a nullity, and the situation is the same as it would be if there
were no judgments. It, accordingly, leaves the parties litigants in the same
position they were in before the trial."29
Accordingly, a void judgment is no judgment at all. It cannot be the source
of any right nor of any obligation. All acts performed pursuant to it and all
claims emanating from it have no legal effect. Hence, it can never become
final, and any writ of execution based on it is void: "x x x it may be said to
be a lawless thing which can be treated as an outlaw and slain at sight, or
ignored wherever and whenever it exhibits its head."30
As correctly maintained by petitioner, since the valuation made by the SAC
in its Decision dated November 20, 2000 having been annulled by the CA for
its lack of sufficient and legal basis, the void judgment can never be validly
executed.
Nevertheless, it must be pointed out that the situation contemplated by the
CA in the assailed Decision was one wherein payment has already been
made by petitioner to the respondents during the pendency of the appeal.
Nowhere in the disquisition of the CA can it be inferred that it is enjoining
the LBP to enforce the writ of execution in accordance with the valuation
made by the SAC. On the contrary, the CA respected the finality of the
motion for execution pending appeal should the same have already been
enforced. As pronounced by the CA:
x x x Therefore, should the SAC find upon computation that the just
compensation previously rendered is bigger than the recomputed value, the
petitioners-appellees are ordered to return the excess considering that
payment may already have been given by LBP in pursuant to the finality of
the motion for execution pending appeal.31
Verily, it appears that the writ of execution pending appeal remains
unimplemented as of the time the CA rendered its decision annulling the
valuation made by the SAC. The monetary award having emanated from a
void valuation, it follows that the writ of execution pending appeal cannot be
properly implemented. As contemplated by the CA, the situation would have
been different if the writ was already enforced during the pendency of the
appeal, for at that time the writ could still be validly enforced since the
valuation made by the SAC still stands. Necessarily, as directed by the CA,
any excess amount paid to respondents should be returned to petitioner.
Nonetheless, the amount of ₱371,154.99 representing the compensation
offered by the petitioner for the land taken, can still be properly awarded to
respondents in accordance with Land Bank of the Philippines v. Court of
Appeals.32 In the said case, the Court allowed the release of the offered
compensation to the landowner pending the determination of the final
valuation of their properties. The Court opined that:
We are not persuaded. As an exercise of police power, the expropriation of
private property under the CARP puts the landowner, and not the
government, in a situation where the odds are already stacked against his
favor. He has no recourse but to allow it. His only consolation is that he can
negotiate for the amount of compensation to be paid for the expropriated
property. As expected, the landowner will exercise this right to the hilt, but
subject however to the limitation that he can only be entitled to a "just
compensation." Clearly therefore, by rejecting and disputing the valuation of
the DAR, the landowner is merely exercising his right to seek just
compensation. If we are to affirm the withholding of the release of the
offered compensation despite depriving the landowner of the possession and
use of his property, we are in effect penalizing the latter for simply
exercising a right afforded to him by law.33
Of course, this is without prejudice to the outcome of the case which was
remanded to the SAC for recomputation of just compensation. Should the
SAC find the said valuation too low and determine a higher valuation for the
subject property, petitioner should pay respondents the difference.
Conversely, should the SAC determine that the valuation was too high,
respondents should return the excess. To be sure, the concept of just
compensation embraces not only the correct determination of the amount to
be paid to the owners of the land, but also payment within a reasonable time
from its taking. Without prompt payment, compensation cannot be
considered "just" inasmuch as the property owner is made to suffer the
consequences of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to
cope with his loss.34
WHEREFORE, subject to the foregoing disquisitions, the Decision and
Resolution of the Court of Appeals, dated April 17, 2009 and September 30,
2010, respectively, in CA-G.R. CV No. 70071, are AFFIRMED. Petitioner Land
Bank of the Philippines is ORDERED to release the amount of ₱3 71,154.99
to respondents spouses Placido and Clara Orilla, without prejudice to the
recomputation of the just compensation for the subject land by the Regional
Trial Court.
SO ORDERED.
34.

RAMON M. ALFONSO vs.LAND BANK OF THE PHILIPPINES and

DEPARTMENT OF AGRARIAN REFORM, G.R. Nos. 181912 & 18334,
November 29, 2016

DECISION

JARDELEZA, J.:

The main issue presented in this case concerns the legal duty of the courts,
in the determination of just compensation under Republic Act No. 6657, 1 (RA
6657), in relation to Section 17 of RA 6657 and the implementing formulas
of the Department of Agrarian Reform (DAR).

The Court En Banc reaffirms the established jurisprudential rule, that is:

until and unless declared invalid in a proper case, courts have the positive
legal duty to consider the use and application of Section 17 and the DAR
basic formulas in determining just compensation for properties covered by
RA 6657. When courts, in the exercise of its discretion, find that deviation
from the law and implementing formulas is warranted, it must clearly
provide its reasons therefor.

The Case

This is a petition for review on certiorari of the Decision2 and

Resolution,3 dated July 19, 2007 and March 4, 2008, respectively, of the
Court of Appeals in CA-G.R. SP No. 90615 and CA-G.R. SP No. 90643. The
Court of Appeals granted the individual petitions filed by the DAR and the
Land Bank of the Philippines (LBP) and set aside the Decision 4 dated May 13,
2005 of the Regional Trial Court fixing the total amount of ₱6,090,000.00 as
just compensation.5

The Facts

Cynthia Palomar (Palomar) was the registered owner of two (2) parcels of
land. One is located in San Juan, Sorsogon City, with an area of 1.6530
hectares covered by Transfer Certificate of Title (TCT) No. T-21136, 6 and the
other in Bibincahan, Sorsogon City, with an area of 26.2284 hectares
covered by TCT No. T-23180.7

Upon the effectivity of RA 6657, the DAR sought to acquire Palomar's San
Juan and Bibincahan properties at a valuation of ₱36,066.27 and
₱792,869.06,8 respectively. Palomar, however, rejected the valuations.
Land Valuation Case Nos. 68-01 and 70-01 were consequently filed before
the DAR Provincial Adjudication Board (Board) for summary determination of
just compensation. In the meantime, or on April 16, 2001, Palomar sold her
rights over the two properties to petitioner Ramon M. Alfonso (Alfonso ). 9

Upon orders from the Board, the parties submitted their position papers and
evidence to support their respective proposed valuations. On June 20, 2002,
Provincial Adjudicator Manuel M. Capellan issued Decisions 10 in Land
Valuation Case Nos. 68-01 and 70-01.

Applying DAR Administrative Order No. 5, Series of 1998, (DAR AO No. 5

[1998]), Provincial Adjudicator Capellan valued the properties as follows:

San Juan Property:

Land Value = CNI x 0.9 + MV x 0.1

Thus:
666.67 kls AGP / FIR
16.70 ASP / PCA data
CNI = 666.67 x 16.70 x .70 - .12 x 0.9
= 58,450.29
MV = 30,600 x 1.2 x .90 + 70 x 150.00
x 1.2 x .90 x 0.1
= 4,438.80
Land Value = 58,450.29 + 4,438.80
= 62,889.09 x 1.6530hectares
= 103,955.6611

Bibincahan Property:

Land Value = CNI x 0.9 + MV x 0.1

Thus:
= 3>952 kls AGP /FIR
16.70 ASP /PCA data
CNI = 952 x 16.70 x .70 - .12 x 0.9
= 83,466.59
MV = 30,600 x 1.2 x .90 + 90 x 150.00
x 1.2 x .90 x 0.1
 = 4,762.80
Land Value = 83,466.59 + 4,762.80
= 88,229.39 x 26.2284 hectares
= 2,314,115.7312

Respondent LBP, as the CARP financial intermediary pursuant to Section 64

of RA 6657,13 filed a motion seeking for a reconsideration of the Provincial
Adjudicator's valuations. This was denied in an Order 14 dated September 13,
2002.

Both the LBP15 and Alfonso16 filed separate actions for the judicial

determination of just compensation of the subject properties before Branch
52 of the Regional Trial Court, sitting as Special Agrarian Court (SAC), of
Sorsogon City. These actions were docketed as Civil Case No. 2002-7073
and Civil Case No. 2002-7090, respectively. Upon Alfonso's motion, the
cases were consolidated on December 10, 200217 and Amado Chua (Chua) of
Cuervo Appraisers, Inc. was appointed Commissioner who was ordered to
submit his report (Cuervo Report) within thirty (30) days. 18

Trial on the merits ensued, with each party presenting witnesses and
documentary evidence to support their respective case. Aside from
presenting witnesses, the LBP submitted as evidence the following
documents: Field Investigation Report, Land Use Map and Market Value per
Ocular Inspection for each of the affected properties.19 Alfonso, for his part,
submitted as evidence the Cuervo Report and the testimony of
Commissioner Chua.20

In his appraisal of the properties, Commissioner Chua utilized two

approaches in valuing the subject properties, the Market Data Approach
(MDA) and the Capitalized Income Approach (CIA), due to their "different
actual land use."21 He opined that "the average of the two indications
reasonably represented the just compensation (fair market value) of the
land with productive coconut trees": 22

Site Unit Land Value (Php/Sq.M.)23

  Market Data Capitalized Average
Approach (MDA) Income (rounded to the
Approach (CIA) nearest tens)
1 Php 25 Php 18.1125 22
2 Php 22 Php 17.1275 20
He thereafter computed the final land value as follows:24

  Area Unit Land Just Compensation

(Sq.m.) Value (Fair Market Value)
(Php)
Site 1      
Coconut Land 15,765 22 Php 346,830
Residential Land 600 160 96,000
Irrigation Canal 165 * *
Total for Site 1 - 16,530 sq.m   Php 442,830
       
Site 2      
Coconut Land 258,534 20 Php 5,170,680
Residential Land 3,000 160 480,000
Irrigation Canal 750 * *
Total for Site 2 - 262,284  
Php 5,650,680
sq.m
Grand Total      
(Sites 1 & 2) - 278,814  
Php 6,093,510
sq.m.
    Say - Php 6,094,000

Ruling of the SAC

On May 13, 2005, the SAC rendered its Decision. Finding the valuations of
both the LBP and the Provincial Adjudicator to be "unrealistically low," 25 the
SAC adopted Commissioner Chua's valuation as set out in the Cuervo
Report. It also held that the 'provisions of Section 2, Executive Order No.
228 (EO 228) were mere "guiding principles" which cannot substitute the
court's judgment "as to what amount [of just compensation] should be
awarded and how to arrive at such amount."26 The dispositive portion of the
SAC's Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Fixing the amount of FOUR HUNDRED FORTY-TWO THOUSAND EIGHT

HUNDRED THIRTY PESOS ([₱]442,830.00)[ ], Philippine currency for Site 1
with an area of 16,530 sq. m. covered by TCT No. T-21136 situated at San
Juan, Sorsogon City and the amount of FIVE MILLION SIX HUNDRED FIFTY
THOUSAND SIX HUNDRED EIGHTY [PESOS] ([₱]5,650,680.00) Philippine
currency for Site 2 with an area of 262,284 sq. m. covered by TCT No. T-
23180 situated at Bibincahan, Sorsogon City or a total amount of SIX
MILLION NINETY THOUSAND PESOS ([₱]6,090,000.00) for the total area of
278,814 sq.m. in the name of Cynthia Palomar/Ramon M. Alfonso which
property was taken by the government pursuant to the Agrarian Reform
Program of the government as provided by R.A. 6657.

2) Ordering the Petitioner Land Bank of the Philippines to pay the

Plaintiff/Private Respondent the amount of FOUR HUNDRED FORTY-TWO
THOUSAND EIGHT HUNDRED THIRTY PESOS ([₱]442,830.00) and the
amount of FIVE MILLION SIX HUNDRED FIFTY THOUSAND AND SIX
HUNDRED EIGHTY PESOS ([₱]5,650,680.00) or the total amount of SIX
MILLION NINETY THOUSAND PESOS ([₱]6,090,000.00) Philippine currency
for Lots 1604 and 2161 respectively, in the manner provided by R.A. 6657
by way of full payment of the said just compensation after deducting
whatever amount previously received by the private respondents from the
Petitioner Land Bank of the Philippines as part of the just compensation.

3) Without pronouncement as to costs.

SO ORDERED.27

In an Order28 dated July 5, 2005, the SAC denied the motions filed by the
LBP and the DAR seeking reconsideration of the Decision. These government
agencies filed separate petitions for review before the Court of Appeals.

In its petition, docketed as CA-G.R. SP No. 90615, the LBP faulted the SAC
for giving considerable weight to the Cuervo Report and argued that the
latter's valuation was arrived at in clear violation of the provisions of RA
6657, DAR AO No. 5 (1998), and the applicable jurisprudence. 29

According to the LBP, there is nothing in Section 17 of RA 6657 which

provides that capitalized income of a property can be used as a basis in
determining just compensation. Thus, when the SAC used the capitalized
income of the properties as basis for valuation, "it actually modified the
valuation factors set forth by RA 6657."30

The DAR, for its part, imputed error on the part of the SAC for adopting "the
average between the Market Data Approach and Capitalized Income
Approach as the just compensation of subject landholdings." 31

Ruling of the Court of Appeals

In its challenged Decision dated July 19, 2007, the Court of Appeals found
that the SAC failed to observe the procedure and guidelines provided under
DAR AO No. 5 (1998). It consequently granted the petitions filed by the LBP
and the DAR and ordered the remand of the case to the SAC for the
determination of just compensation in accordance with the DAR basic
formula.32

Alfonso filed a motion seeking reconsideration of the Court of Appeals'

Decision.33 Finding no cogent reason to reverse its earlier Decision, the Court
of Appeals denied Alfonso's motion.34

Hence, this petition.

Issue

As stated in the outset, the issue sought to be resolved in this case involves
the legal duty of the courts in relation to Section 17 and the implementing
DAR formulas. Otherwise stated, are courts obliged to apply the DAR formula
in cases where they are asked to determine just compensation for property
covered by RA 6657?

The resolution of the issue presented is fairly straightforward given the

established jurisprudence on the binding character of the DAR formulas.
During the course of the deliberations of this case, however, concerns were
strongly raised (by way of dissents and separate concurring opinion) on the
propriety of maintaining the present rule.

This case presents an opportunity for the Court en banc not only to reaffirm
the prevailing doctrine, but also expound, more explicitly and unequivocally,
on our understanding of the exercise of our "judicial function" in relation to
legislatively-defined factors and standards and legislatively-provided
regulatory schemes.

Ruling of the Court

We GRANT the petition in part.

The ruling of the Court will thus be divided into four (4) component parts.

To provide context for proper understanding, Part I will discuss the history of
Philippine land reform, with emphasis on the development, over the years,
of the manner of fixing just compensation, as well as the development of
jurisprudence on the same.
In Part II, the Court will evaluate the challenged CA ruling based on the law
and prevailing jurisprudence.

Part III will address all issues raised by way of dissents and separate
concurring opinion against the mandatory application of the DAR formulas. It
will also discuss (1) primary jurisdiction and the judicial function to
determine just compensation; (2) how the entire regulatory scheme
provided under RA 6657 represents reasonable policy choices on the part of
Congress and the concerned administrative agency, given the historical and
legal context of the government's land reform program; and (3) how
matters raised in the dissents are better raised in a case directly challenging
Section 17 and the resulting DAR formulas. We shall also show how the
current valuation scheme adopted by the DAR is at par with internationally-
accepted valuation standards.

Part IV will conclude by affirming the law, the DAR regulations and prevailing
jurisprudence which, save for a successful direct challenge, must be applied
to secure certainty and stability of judicial decisions.

I. Contextual Background

A. History of Philippine land reform laws

Section 4, Article XIII of the Constitution provides:

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.

Congress first attempted to provide for land reform in 1955, when it enacted
Republic Act No. 1400, or the Land Reform Act of 1955 (RA 1400). Its scope
was limited to the expropriation of private agricultural lands in excess of 300
hectares of contiguous area, if held by a natural person, and those in excess
of 600 hectares if owned by corporations.35 With respect to determining just
compensation, it provided that the courts take into consideration the
following:
(a) Prevailing prices of similar lands in the immediate area;

(b) Condition of the soil, topography, and climate hazards;

(c) Actual production;

(d) Accessibility; and

(e) Improvements.36

Afterwards, Congress enacted Republic Act No. 3844, otherwise known as

the Agricultural Land Reform Code of 1963 (RA 3844). Its scope, though
expanded, was limited by an order of priority based on utilization and
area.37 Just compensation under this law was based on the annual lease
rental income, without prejudice to the other factors that may be
considered.38

On October 21, 1972, then President Ferdinand Marcos issued Presidential

Decree No. 2739 (PD 27). It provided for a national land reform program
covering all rice and com lands.40 This was a radical shift in that, for the first
time in the history of land reform, its coverage was national, compulsorily
covering all rice and com lands. Even more radical, however, is its system of
land valuation. Instead of providing factors to be considered in the
determination of just compensation, similar to the system under RA 1400
and RA 3844, PD 27 introduced a valuation process whereby just
compensation is determined using a fzxed mathematical formula provided
within the law itself. The formula was also exclusively production based, that
is, based only on the income of the land.

Under PD 27, landowner's compensation was capped to 2.5 times the annual
yield, as follows:

Land Value = Average harvest of 3 normal crop years x (2.5)

Notably, this valuation scheme under PD 27 closely resembled those applied

in agrarian reform programs earlier implemented in other Asian countries. In
Taiwan, for example, compensation was capped at 2.5 times the annual
yield of the main crop, when the land values at the time averaged four to six
times the annual yield.41 South Korea, which commenced its land reform
program sometime in the 1940s, on the , other hand, capped compensation
at 1.25 times the value of the annual yield, when the land values at the time
averaged five times the annual yield.42 In Japan, the price for the acquisition
of agricultural land under its land reform program, at one point, "could not
be greater than forty times the 'official rental value' (chintai-kakaku) of rice
fields or forty-eight times the 'official rental value' of dry fields x x x." 43

While the constitutionality of PD 27 was upheld in the cases of De Chavez v.

Zobel44 and Gonzales v. Estrella,45 these cases did not rule on the validity of
the mathematical valuation formula employed.

Under President Corazon C. Aquino's Executive Order No. 228 (EO 228)
issued on July 17, 1987, the system under PD 27 was more or less retained
for purposes of valuing the remaining unvalued rice and com lands. Land
value under EO 228 was computed based on the average gross production
(AGP) multiplied by 2.5, the product of which shall be multiplied by either
₱35.00 or ₱31.00, the Government Support Price (GSP) for one cavan of
palay or corn, respectively. Thus:

Land Value= (AGP x 2.5) x GSP46

On June 10, 1988, RA 6657 was enacted implementing a comprehensive

agrarian reform program (CARP). Unlike PD 27 which covered only rice and
com lands, CARP sought to cover all public and private agricultural lands. It
was (and remains to be) an ambitious endeavor, targeting an estimated 7 .8
million hectares of land for acquisition and redistribution to landless farmer
and farmworker beneficiaries.47

B. Regulatory scheme to determine just compensation under RA 665 7

With an undertaking of such magnitude, the Congress set up a regulatory

scheme for the determination of just compensation founded on four major
features.

First, under Section 17 of RA 6657, Congress identified factors to be

considered in the determination of just compensation in the expropriation of
agricultural lands. This Section reads:

Sec. 17. Determination of Just Compensation. – In determining just

compensation, the cost of acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the
owner, the tax declarations, and the assessment made by government
assessors shall be considered. The social and economic benefits contributed
by the farmers and the farmworkers and by the Government to the property
as well as the non-payment of taxes or loans secured from any government
financing institution on the said land shall be considered as additional factors
to determine its valuation.
Second, under Section 49, Congress vested the DAR and the Presidential
Agrarian Reform Council (PARC)48 with the power to issue rules and
regulations, both substantive and procedural, to carry out the objects and
purposes of the law:

Sec. 49. Rules and Regulations. -The PARC and the DAR shall have the
power to issue rules and regulations, whether substantive or procedural, to
carry out the objects and purposes of this Act. Said rules shall take effect
ten (10) days after publication in two (2) national newspapers of general
circulation.

It is on the basis of this section that the DAR would issue its basic formulas.

Third, under Section 16(d) and (f), Congress gave the DAR primary
jurisdiction to conduct summary administrative proceedings to determine
and decide the compensation for the land, in case of disagreement between
the DAR/LBP and the landowners:

Sec. 16. Procedure for Acquisition of Private Lands. - For purposes of

acquisition of private lands, the following procedures shall be followed:

xxx

(d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land
requiring the landowner, the LBP and other interested parties to submit
evidence as to the just compensation for the land, within fifteen (15) days
from 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.

xxx

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

Fourth, to implement Section 16(f), Congress provided for the judicial review
of the DAR preliminary determination of just compensation. Under Sections
56 and 57, it vested upon designated Special Agrarian Courts the special
original and exclusive jurisdiction over all petitions for the determination of
just compensation to landowners:

Sec. 56. Special Agrarian Court. - The Supreme Court shall designate at

least one (1) branch of the Regional Trial Court (RTC) within each province
to act as a Special Agrarian Court. The Supreme Court may designate more
branches to constitute such additional . Special Agrarian Courts as may be
necessary to cope with the number of agrarian cases in each province. In
the designation, the Supreme Court shall give preference to the Regional
Trial Courts which have been assigned to handle agrarian cases or whose
presiding judges were former judges of the defunct Court of Agrarian
Relations. The Regional Trial Court (RTC) judges assigned to said courts shall
exercise said special jurisdiction in addition to the regular jurisdiction of their
respective courts. The Special Agrarian Courts shall have the powers and
prerogatives inherent in or belonging to the Regional Trial Courts.

Sec. 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 1 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.

We shall later on show how this regulatory scheme provided by Congress

(and implemented by the DAR) is a reasonable policy choice given the grand
scale of the government's agrarian reform program.

C. Development of the DAR basic formula

On March 8, 1989, the DAR issued Administrative Order No. 649 (DAR AO No.
6 [1989]), its first attempt to translate the factors laid down by Congress in
Section 17 into a formula.

Making use of "the multi-variable approach which subsumes the

ten factors mentioned under Section 17," the DAR set out a formula to
estimate "a composite value based on land market price, assessor's market
value and landowner's declared value."50 Reduced to equation form, the
formulation is as follows:

Total Land Value = MV + AMV + DV

where:

Market Value (MV) = Refers to the latest and comparable

transactions within the
municipality/province/region, depending
 on availability of data. Mortgages which
take into account bank exposures shall
also be considered in computing for this
value.
Assessor’s Market = Refers to the assessment made by
Value (AMV) government assessors.
Declared Value (DV) = Refers to the landowner’s declaration
under EO 229 or RA 6657.51

Between June 1988 to December 1989, the University of the Philippines

Institute of Agrarian Studies (UP-IAS) conducted an agrarian reform study,
which analyzed, among others, the land valuation scheme of the
government under DAR AO No. 6 (1989). 52

The UP-IAS study, which Justice Leonen cites in his dissenting opinion,
criticized DAR AO No. 6 (1989) for averaging the values based on the land
market price, assessor's market value and landowner's declared value. The
UP-IAS study said:

If agricultural lands are to be distributed to landless farmers and

farmworkers for agricultural purposes, then landowners should be
compensated for their lands based on its agricultural potential. The
appropriate formula, therefore, is to value land based only on
production/productivity. The land valuation on PD 27, which stipulates that
the value is equivalent to 2.5 x average production of tl:1ree preceding
normal croppings is a classic illustration of simplicity and productivity-based
land valuation.53 (Emphasis supplied.)

According to the study, the AMV component had no cut-off date, while the
MV factor had no guidelines for determining comparable sales, which makes
the DAR formula prone to manipulation.54 It thus suggested control
measures to prevent manipulation of the existing formula, including the
setting of cut-off dates for AMV and guidelines for comparable sales. 55 It
went on to suggest that "x x x major components could be assigned
weights with more emphasis attached to the production-based value. Should
the declared value be unavailable, then the value should be based only on
the components that are available, rather than employ the maximum limit,
that is, assuming DV to be equivalent to the sum of the other components. x
x x"56

It was also around this time that the infamous Garchitorena estate deal was
exposed. Under this deal, land acquired privately for only ₱3.1 Million in
1988 was proposed to be purchased by the DAR a year later at "an
extremely inflated price" of ₱62.5 Million.57 In his book A Captive Land: The
Politics of Agrarian Reform in the Philippines, Dr. James Putzel wrote:

Under the compensation formula finally included in the law and the early
[guidelines] of DAR, landowners could secure even more than [market
value] compensation for their lands. x x x With the passage of [RA 6657] in
June 1988, DAR decided that the value of land would be determined by
averaging three estimates of market value: the 'assessed market value'
(AMV) reported in a landowner's most recent tax declaration, the 'market
value' (MV) as an average of three sales of comparable land in the vicinity of
a landholding inflated by the consumer price index, and the owner's own
'declaration of fair market value' (DMV) made during the government's land
registration programme, Listasaka I and 11, between 1987 and 1988. While
the compensation formula included a safeguard against extreme
[overvaluation] in the owner's own declaration, it still permitted
compensation at up to 33 per cent more than the market value x x x.

Such a compensation formula might have guaranteed against excessive

compensation, in terms of the [market value] criteria enunciated in the law,
if state institutions like DAR or the tax bureau[ ] were immune to landowner
influence. However, DAR officials were urged to demonstrate results by
closing as many deals as possible with landowners. There were several ways
in which the formula was abused. First, DAR officials often chose to establish
market value (MV) as an average of three sales of highly-valued land,
labelling the sales as 'comparable.' The arbitrary character of their choice
along with the tendency for land speculation demonstrated the unsoundness
of using 'comparable sales' as an element in the compensation formula.
Secondly, landowners were able to pay just one tax instalment on the basis
of an inflated land value and thus raise the level of 'assessed market value'
(AMV). The nearer that assessed value was to the market value, the higher
could be their own declared value and the resulting compensation. There
was no obligation for landowners to pay unpaid tax arrears at the inflated
level, but beneficiaries who received the land would be required to pay taxes
at this level. Thirdly, because DAR officials discussed with landowners the
level of comparable sales being chosen, landowners could both influence that
choice and plan the most advantageous level for their 'declared market
value' (DMV). The formula was therefore extremely susceptible to abuse by
the landowners and opened the door to corrupt practices by DAR officials. 58

Within the same year, DAR Administrative Order No. 1759 (DAR AO No. 17
[1989]) was issued revising the land valuation formula under DAR AO No. 6
(1989). This revision appears to be a reaction to the recent developments,
with the new formula reflecting lessons learned from the Garchitorena estate
scandal and the UP-IAS study's comments and suggested improvements.
Under DAR AO No. 17 (1989), the DAR laid down guidelines for the
determination of the Comparable Sales (CS) component, 60 provided a cut-off
date for Market Value per Tax Declaration (MV),61 and placed greater weight
to productivity through the Capitalized Net Income (CNI) factor, among
others. Thus:

Land Value= (CS x 0.3) + (CNI x 0.4) + (MV x 0.3)

Where:

CS = Comparable Sales
CNI = Capitalized Net Income
MV = Market Value per Tax Declaration62

In case of unavailability of figures for the three main factors, the DAR, in
keeping with the UP-IAS study, also came up with alternate formulas using
the available components, always with more weight given to CNI, the
production-based value.

On April 25, 1991, the capitalization rate (relevant for the CNI factor) was
lowered from 20% to 16%.63 This decrease was presumably made for the
benefit of the landowners, considering a lower capitalization rate results to a
higher CNI valuation.

The next major change in the basic formula came with the issuance of DAR
Administrative Order No. 664 (DAR AO No. 6 [1992]) on October 30, 1992,
which, among others, gave even more weight to the CNI factor, and further
lowering the capitalization rate to 12%.65

This basic formula66 was retained under DAR AO No. 5 (1998), issued on

April 15, 1998. Parenthetically, DAR AO No. 5 (1998) gave landowners the
opportunity to take part in the valuation process, including participation in
the DAR's field investigations67 and submission of statements as to the
income claimed to , be derived from the property (whether from the crop
harvest/lease of the property).68 It is only when the landowner fails to
submit the statement, or the claimed value cannot be validated from the
actual inspection of the property, that the DAR and the LBP are allowed to
"adopt any applicable industry data or, in the absence thereof, conduct an
industry study on the specific crop which will be used in determining the
production, cost and net income of the subject landholding." 69

Recognizing that not all agricultural properties are always similarly

circumstanced, the DAR also introduced alternative CNI formulas which can
be applied depending on a property’s peculiar situation. There were CNI
formulas for when a land is devoted to intercropping, or the practice of
planting seasonal or other permanent crop/s between or under existing
permanent or seasonal crops70 and to account for lease contracts.71 There
are existing valuation guidelines which also take into account the types of
crops found in the property sought to be covered, i.e., Cavendish
bananas,72 sugarcane,73 rubber,74 and standing commercial trees,75 among
others.

D. First extension of life of CARP

Ten (10) years after RA 6657, the CARP’s Land Acquisition and Distribution
component was still far from finished. Thus, in 1998, Congress enacted
Republic Act No. 853276 (RA 8532), extending the CARP implementation for
another ten (10) years and providing funds augmentation of ₱50
billion.77 This additional allocation of funds expired in June 2008. In Joint
Resolution No. 1 approved by both Houses of Congress in January 2009,
Congress temporarily extended CARP to until June 2009. 78

E. Republic Act No. 9700 and the amendment

of Section 17 of RA 6657

By the end of June 2009, there was still a substantial balance (about 1.6
million hectares for distribution) from the projected target. 79 So, on August
7, 2009, Congress passed Republic Act No. 970080 (RA 9700), extending the
program to June 30, 2014. It also amended Section 17 to read:

Sec. 17. Determination of Just Compensation. – In determining just

compensation, the cost of acquisition of the land, the value of the standing
crop, the current value of like properties, its nature, actual use and income,
the sworn valuation by the owner, the tax declarations, the assessment
made by government assessors, and seventy percent (70%) of the zonal
valuation of the Bureau of Internal Revenue (BIR),   translated into a basic
formula by the DAR shall be considered, subject to the final decision of the
proper court. The social and economic benefits contributed by the farmers
and the farmworkers and by the Government to the property as well as the
non-payment of taxes or loans secured from any government financing
institution on the said land shall be considered as additional factors to
determine its valuation. (Italics, emphasis and underscoring supplied.)

To implement the amendments to Section 17, the DAR issued, among

others, DAR Administrative Order No. 181 (DAR AO No. 1 [2010]) and
Administrative Order No. 782 (DAR AO No. 7 [2011]). Despite retaining the
basic formula for valuation, these administrative orders introduced a change
in the reckoning date of average gross product (AGP) and selling price (SP),
both of which are relevant to the CNI factor, to June 30, 2009. 83 The MV
factor was also amended and adjusted to the fair market value equivalent to
seventy percent (70%) of the Bureau of Internal Revenue (BIR) zonal
valuation.84 The basic formula under DAR AO No. 7 (2011) appears to be the
prevailing land formula to date.

F. Constitutional challenge to RA 665 7

Shortly after the enactment of RA 6657, its constitutionality was challenged

in a series of cases filed with the Court. Among other objections, landowners
argued that entrusting to the DAR the manner of fixing just compensation
violated judicial prerogatives. This claim was unanimously rejected in our
landmark holding in Association of Small Landowners in the Philippines, Inc.
v. Secretary of Agrarian Reform (Association):85

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 –

x x x [T]he DAR shall conduct summary administrative proceedings to

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

To be sure, the determination of just compensation is a function addressed

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

The method of ascertaining just compensation under the aforecited decrees

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

xxx

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

This time, we answer in the affirmative.

xxx

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

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

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

The determination made by the DAR is only preliminary unless accepted by

all parties concerned. Otherwise, the courts of justice will still have the right
to review with finality the said determination in the exercise of what is
admittedly a judicial function.86 (Emphasis and underscoring supplied.
Citations omitted.)

G.Controlling doctrines after Association

Since this landmark ruling in Association, the Court has, over the years, set
forth a finely wrought body of jurisprudence governing the determination of
just compensation under RA 6657. This body of precedents is built upon
three strands of related doctrines.

First, in determining just compensation, courts are obligated to apply both

the compensation valuation factors enumerated by the Congress under
Section 17 of RA 6657,87 and the basic formula laid down by the DAR. 88 This
was the holding of the Court on July 20, 2004 when it decided the case
of Landbank of the Philippines v. Banal 89 (Banal) which involved the
application of the DAR-issued formulas. There, we declared:

While the determination of just compensation involves the exercise of

judicial discretion, however, such discretion must be discharged within the
bounds of the law. Here, the RTC wantonly disregarded R.A. 6657, as
amended, and its implementing rules and regulations (DAR Administrative
Order No. 6, as amended by DAR Administrative Order No. 11).

x x x In determining the valuation of the subject property, the trial

court shall consider the factors provided under Section 17 of R.A. 6657, as
amended, mentioned earlier. The formula prescribed by the DAR in
Administrative Order No. 6, Series of 1992, as amended by DAR
Administrative Order No. 11, Series of 1994, shall be used in the valuation of
the land. Furthermore, upon its own initiative, or at the instance of any of
the parties, the trial court may, appoint one or more commissioners to
examine, investigate and ascertain facts relevant to the dispute. 90 (Emphasis
and underscoring supplied.)
Banal would thereafter be considered the landmark case on binding
character of the DAR formulas. It would be cited in the greatest number of
subsequent cases involving the issue of application of the DAR-issued
formulas in the determination of just compensation.91

Second,the formula, being an administrative regulation issued by the DAR

pursuant to its rule-making and subordinate legislation power under RA
6657, has the force and effect of law. Unless declared invalid in a case
where its validity is directly put in issue, courts must consider their use and
application.92 In Land Bank of the Philippines v. Celada93 (Celada), we held:

As can be gleaned from above ruling, the SAC based its valuation solely on
the observation that there was a "patent disparity" between the price given
to respondent and the other landowners. We note that it did not apply the
DAR valuation formula since according to the SAC, it is Section 17 of RA No.
6657 that "should be the principal basis of computation as it is the law
governing the matter." The SAC further held that said Section 17 "cannot be
superseded by any administrative order of a government agency," thereby
implying that the valuation formula under DAR Administrative Order No. 5,
Series of 1998 (DAR AO No. 5,s. of 1998), is invalid and of no effect.

While SAC is required to consider the acquisition cost of the land, the current
value of like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declaration and the assessments made by
the government assessors to determine just compensation, it is equally true
that these factors have been translated into a basic formula by the DAR
pursuant to its rule-making power under Section 49 of RA No. 6657. As the
government agency principally tasked to implement the agrarian reform
program, it is the DAR’s duty to issue rules and regulations to carry out the
object of the law. DAR AO No. 5, s. of 1998 precisely "filled in the details" of
Section 17, RA No. 6657 by providing a basic formula by which the factors
mentioned therein may be taken into account. The SAC was at no liberty to
disregard the formula which was devised to implement the said provision.

It is elementary that rules and regulations issued by administrative bodies to

interpret the law which they are entrusted to enforce, have the force of law,
and are entitled to great respect. Administrative issuances partake of the
nature of a statute and have in their favor a presumption of legality. As
such, court cannot ignore administrative issuances especially when, as in
this case, its validity was not put in issue. Unless an administrative order is
declared invalid, court have no option but to apply the same.94 (Emphasis
and underscoring supplied.)
Third, courts, in the exercise of their judicial discretion, may relax the
application of the formula to fit the peculiar circumstances of a case. They
must, however, clearly explain the reason for any deviation; otherwise, they
will be considered in grave abuse of discretion.95 This rule, set forth in Land
Bank of the Philippines v. Yatco Agricultural Enterprises 96 (Yatco), was a
qualification of the application of Celada, to wit:

That the RTC-SAC must consider the factors mentioned by the law (and

consequently the DAR's implementing formula) is not a novel
concept. In Land Bank of the Philippines v. Sps. Banal, we said that the RTC-
SAC must consider the factors enumerated under Section 17 of R.A. No.
6657, as translated into a basic formula by the DAR, in determining just
compensation.

We stressed the RTC-SAC's duty to apply the DAR formula in determining

just compensation in Landbank of the Philippines v. Celada and reiterated
this same ruling in Land Bank of the Philippines v. Lim, Land Bank of the
Philippines v. Luciano, and Land Bank of the Philippines v. Colarina, to name
a few.

In the recent case of Land Bank of the Philippines v. Honeycomb Farms

Corporation, we again affirmed the need to apply Section 17 of R.A. No.
6657 and DAR AO 5-98 in just compensation cases. There, we considered
the CA and the R TC in grave error when they opted to come up with their
own basis for valuation and completely disregarded the DAR formula. The
need to apply the parameters required by the law cannot be doubted; the
DAR's administrative issuances, on the other hand, partake of the nature of
statutes and have in their favor a presumption of legality. Unless
administrative orders are declared invalid or unless the cases before them
involve situations these administrative issuances do not cover,
the courts must apply them.

In other words, in the exercise of the Court's essentially judicial function of

determining just compensation, the RTC-SACs are not granted unlimited
discretion and must consider and apply the R.A. No. 6657 - enumerated
factors and the DAR formula that reflect these factors. These factors and
formula provide the uniform framework or structure for the computation of
the just compensation for a property subject to agrarian reform. This
uniform system will ensure that they do not arbitrarily fix an amount that is
absurd, baseless and even contradictory to the objectives of our agrarian
reform laws as just compensation. This system will likewise ensure that the
just compensation fixed represents, at the very least, a close approximation
of the full and real value of the property taken that is fair and equitable for
both the farmer-beneficiaries and the landowner.
When acting within the parameters set by the law itself, the RTC-SACs,
however, are not strictly bound to apply the DAR formula to its minute
detail, particularly when faced with situations that do not warrant the
formula's strict application; they may, in the exercise of their discretion,
relax the formula's application to fit the factual situations before them. They
must, however, clearly explain the reason for any deviation from the factors
and formula that the law and the rules have provided.

The situation where a deviation is made in the exercise of judicial discretion

should at all times be distinguished from a situation where there is utter and
blatant disregard of the factors spelled out by law and by the implementing
rules. For in such a case, the RTC-SAC's action already amounts to grave
abuse of discretion for having been taken outside of the contemplation of the
law.97 (Emphasis and underscoring supplied.)

Prescinding from Association, the cases of Banal,

Celada and Yatco combined provide the three strands of controlling and
unifying doctrines governing the determination of just compensation in
agrarian reform expropriation.

For clarity, we restate the body of rules as follows: The factors listed under
Section 17 of RA 6657 and its resulting formulas provide a uniform
framework or structure for the computation of just compensation which
ensures that the amounts to be paid to affected landowners are not
arbitrary, absurd or even contradictory to the objectives of agrarian reform.
Until and unless declared invalid in a proper case, the DAR formulas partake
of the nature of statutes, which under the 2009 amendment became law
itself, and thus have in their favor the presumption of legality, such that
courts shall consider, and not disregard, these formulas in the determination
of just compensation for properties covered by the CARP. When faced with
situations which do not warrant the formula's strict application, courts may,
in the exercise of their judicial discretion, relax the formula's application to
fit the factual situations before them, subject only to the condition that they
clearly explain in their Decision their reasons (as borne by the evidence on
record) for the deviation undertaken. It is thus entirely allowable for a court
to allow a landowner's claim for an amount higher than what would
otherwise have been offered (based on an application of the formula) for as
long as there is evidence on record sufficient to support the award.

In Part II, we shall evaluate the challenged rulings of the Court of Appeals
based on the foregoing guidelines.

II. The SAC deviated, without reason or explanation, from Sect. 17 and
the DAR-issued formula when it adopted the Cuervo Report

Petitioner Alfonso challenges the Decision of the Court of Appeals which

reversed the SAC's findings for failing to observe the procedure and
guidelines provided under the relevant DAR rule.98

Applying DAR AO No. 5 (1998), the LBP and the DAR considered the
following in its valuation of Alfonso’s properties: (1) data from the Field
Investigation Reports conducted on the properties; 99 (2) data from the
Philippine Coconut Authority (PCA) as to municipal selling price for coconut
in the Sorsogon Province;100 and (3) the Schedule of Unit Market Value
(SUMV).101

Due to the absence of relevant comparable sales transactions in the

area,102 the DAR and the LBP used the following formula:

LV = (CNI x 0.9) + (MV x 0.1)

It valued the San Juan and Bibincahan properties at ₱39,974.22 103 and

₱792,869.06,104 respectively.

The SAC, in its Decision dated May 13, 2005, rejected this valuation for
being "unrealistically low"105 and instead adopted Commissioner Chua's
Cuervo Report, which valued the San Juan and Bibincahan properties at the
"more realistic" amounts of ₱442,830.00 and ₱5,650,680.00, respectively. 106

That the SAC's adoption of the Cuervo Report valuation constitutes deviation
from Section 17 and the prescribed formula is fairly evident.

Commissioner Chua employed a different formula, other than that set forth
in DAR AO No. 5 (1998), to compute the valuation. While the DAR-issued
formula generally uses the three (3) traditional approaches to value, each
with assigned weights, Commissioner Chua chose to apply only two
approaches, namely, the Market Data Approach (MDA) and the Capitalized
Income Approach (CIA)107 and averaged the indications resulting from the
two approaches. He thereafter concluded that the result "reasonably
represented the just compensation (fair market value) of the land with
productive coconut trees."108

In addition, in his computation of the CNI factor, Commissioner Chua used,

without any explanation, a capitalization rate of eight percent
(8% ),109 instead of the twelve percent (12%) rate provided under DAR AO
No. 5 (1998).
As earlier explained, deviation from the strict application of the DAR formula
is not absolutely proscribed. For this reason, we find that the Court of
Appeals erred in setting aside the SAC's Decision on the mere fact of
deviation from the prescribed legislative standards and basic
formula. Yatco teaches us that courts may, in the exercise of its judicial
discretion, relax the application of the DAR formula, subject only to the
condition that the reasons for said deviation be clearly explained.

In this case, the SAC, in adopting the Cuervo Report valuation, merely said:

Considering all these factors, the valuation made by the Commissioner and
the potentials of the property, the Court considers that the valuation of the
Commissioner as the more realistic appraisal which could be the basis for
the full and fair equivalent of the property taken from the owner while the
Court finds that the valuation of the [LBP] as well as the Provincial
Adjudicator of Sorsogon in this (sic) particular parcels of land for acquisition
are unrealistically low.110 (Emphasis and underscoring supplied.)

The statement that the government's valuation is "unrealistically

low," without more, is insufficient to justify its deviation from Section 17 and
the implementing DAR formula.111 There is nothing in the SAC's Decision to
show why it found Commissioner Chua's method more appropriate for
purposes of appraising the subject properties, apart from the fact that his
method yields a much higher (thus, in its view, "more realistic") result.

The Cuervo Report itself does not serve to enlighten this Court as to the
reasons behind the non-application of the legislative factors and the DAR-
prescribed formula.

For example, the Cuervo Report cited a number of "comparable sales" for
purposes of its market data analysis.112 Aside from lack of proof of fact of
said sales, the Report likewise failed to explain how these purported
"comparable" sales met the guidelines provided under DAR AO No. 5 (1998).
The relevant portion of DAR AO No. 5 (1998) reads:

II. C.2 The criteria in the selection of the comparable sales transaction (ST)
shall be as follows:

a. When the required number of STs is not available at the barangay level,
additional STs may be secured from the municipality where the land being
offered/covered is situated to complete the required three comparable STs.
In case there are more STs available than what is required at the municipal
level, the most recent transactions shall be considered. The same rule shall
apply at the provincial level when no STs are available at the municipal level.
In all cases, the combination of STs sourced from the barangay, municipality
and province shall not exceed three transactions.

b. The land subject of acquisition as well as those subject of comparable

sales transactions should be similar in topography, land use, i.e., planted to
the same crop. Furthermore, in case of permanent crops, the subject
properties should be more or less comparable in terms of their stages of
productivity and plant density.

c. The comparable sales transactions should have been executed within the
period January 1, 1985 to June 15, 1988, and registered within the period
January l, 1985, to September 13, 1988.

d. STs shall be grossed up from the date of registration up to the date of

receipt of CF by LBP from DAR for processing, in accordance with Item
II.A.9. (Emphasis and underscoring supplied.)

To this Court's mind, a reasoned explanation from the SAC to justify its
deviation from the foregoing guidelines is especially important considering
that both the DAR and the LBP were unable to find sales of comparable
nature.

Worse, further examination of the cited sales would show that the same far
from complies with the guidelines as to the cut-off dates provided under the
DAR AO No. 5 (1998). The purported sales were dated between November
28, 1989 (at the earliest) to March 12, 2002 (at the latest), 113 whereas DAR
AO No. 5 (1998) had already and previously set the cut-off between June to
September of 1988. We also note that these purported sales involve much
smaller parcels of land (the smallest involving only 100 square meters). We
can hardly see how these sales can be considered "comparable" for purposes
of determining just compensation for the subject land.

Neither was there any explanation as to the glaring discrepancies between

the government and Commissioner Chua's factual findings. Where, for
example, the DAR and the LBP claim an average yield of 666.67kg/ha. 114 and
952kgs./ha.,115 the Cuervo Report asserts 1,656 kgs./ha. and 1,566
kgs./ha.,116 for the San Juan and Bibincahan properties, respectively. Where
the government alleges an average selling price of ₱5.58 for coconuts, 117 the
Cuervo Report claims ₱l2.50.118 The Cuervo Report, however, is completely
bereft of evidentiary support by which the SAC could have confirmed or
validated the statements made therein. In contrast, the valuations submitted
by the DAR and the LBP were amply supported by the relevant PCA data,
SFMV and Field Investigation Reports.
Considering the foregoing, we cannot but conclude that the SAC committed
the very thing cautioned about in Yatco, that is, "utter and blatant disregard
of the factors spelled out by the law and by the implementing rules." 119 In
this sense, we AFFIRM the Court of Appeals' finding of grave abuse of
discretion and order the REMAND of the case to the SAC for computation of
just compensation in accordance with this Court's ruling in Yatco.

Part III shall now address the concerns raised in the dissents.

III. The Dissents/Separate Concurring Opinion

A. Summary of issues raised Dissents/Separate Concurring Opinion

Justice Leonen proposes that this Court abandon the doctrines

in Banal and Celada, arguing that Section 17 of RA 6657 and DAR AO No. 5
(1998) are unconstitutional to the extent they suggest that the basic formula
is mandatory on courts.120 His principal argument is grounded on the
premise that determination of just compensation is a judicial function. Along
the same lines, Justice Carpio cites Apo Fruits Corporation v. Court of
Appeals (Apo Fruits)121 to support his view that the basic formula "does not
and cannot strictly bind the courts."122 Justice Velasco, for his part, calls for a
revisit of the decided cases because a rule mandating strict application of the
DAR formula could only straitjacket the judicial function. Justice Carpio also
raises an issue of statutory construction.123 He argues that Section 17 and
DAR AO No. 5 (1998) apply only when the landowner and the tenant agree
on the proffered value, but not otherwise.

B. Dissents as indirect constitutional attacks

At this juncture, we emphasize that petitioner Alfonso never himself

questioned the constitutionality of Section 17 of RA No. 6657 and the DAR
Administrative Order implementing the same. The main thrust of Alfonso's
petition concerns itself only with the non-binding nature of Section 17 of RA
6657 and the resulting DAR formula in relation to the judicial determination
of the just compensation for his properties.

Petitioner is a direct-injury party who could have initiated a direct attack on

Section 17 and DAR AO No. 5 (1998). His failure to do so prevents this case
from meeting the "case and controversy" requirement of Angara.124 It also
deprives the Court of the benefit of the "concrete adverseness which
sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional questions." 125
The dissents are, at their core, indirect attacks on the constitutionality of a
provision of law and of an administrative rule or regulation. This is not
allowed under our regime of judicial review. As we held in Angara v.
Electoral Commission,126 our power of judicial review is limited:

x x x [T]o actual cases and controversies to be exercised after full

opportunity of argument by the parties, and limited further to the
constitutional question raised or the very lis mota presented. Any attempt at
abstraction could only lead to dialectics and barren legal questions and to
sterile conclusions unrelated to actualities. Narrowed as its function is in this
manner, the judiciary does not pass upon questions of wisdom, justice or
expediency of legislation. More than that, courts accord the presumption of
constitutionality to legislative enactments, not only because the legislature is
presumed to abide by the Constitution but also because the judiciary in the
determination of actual cases and controversies must reflect the wisdom and
justice of the people as expressed through their representatives in the
executive and legislative departments of the government. 127 (Emphasis
supplied.)

Our views as individual justices cannot make up for the deficiency created by
the petitioner's failure to question the validity and constitutionality of Section
17 and the DAR formulas. To insist otherwise will be to deprive the
government (through respondents DAR and LBP) of their due process right
to a judicial review made only "after full opportunity of argument by the
parties."128

Most important, since petitioner did not initiate a direct attack on

constitutionality, there is no factual foundation of record to prove the
invalidity or unreasonableness of Sectionl 7 and DAR AO No. 5 (1998). This
complete paucity of evidence cannot be cured by the arguments raised by,
and debated among, members of the Court. As we held in Ermita-Malate
Hotel and Motel Operators Association, Inc. v. City Mayor of Manila: 129

It admits of no doubt therefore that there being a presumption of

validity, the necessity for evidence to rebut it is unavoidable, unless the
statute or ordinance is void on its face, which is not the case here. The
principle has been nowhere better expressed than in the leading case of
O'Gorman& Young v. Hartford Fire Insurance Co., where the American
Supreme Court through Justice Brandeis tersely and succinctly summed up
the matter thus: "[t]he statute here questioned deals with a subject clearly
within the scope of the police power. We are asked to declare it void on the
ground that the specific method of regulation prescribed is unreasonable and
hence deprives the plaintiff of due process of law. As underlying questions of
fact may condition the constitutionality of legislation of this character, the
presumption of constitutionality must prevail in the absence of some factual
foundation of record for overthrowing the statute." No such factual
foundation being laid in the present case, the lower court deciding the
matter on the pleadings and the stipulation of facts, the presumption of
validity must prevail and the judgment against the ordinance set
aside.130 (Emphasis and underscoring supplied.)

Issues on the constitutionality or validity of Section 17 of RA 6657 and DAR

AO No. 5 (1998) not having been raised by the petitioner, much less
properly pleaded and ventilated, it behooves the Court to apply, not
abandon, Banal, Celada and Yatco, and postpone consideration of the
dissents' arguments in a case directly attacking Section 17 of RA 6657 and
DAR AO No. 5 (1998).

If, however, left unanswered, the objections now casting Section 17 and the
DAR formulas in negative light might be used as bases for the abandonment
of the rule established in Banal and clarified in Yatco. The net practical
effect, whether intended or not, of such a course of action would be to strip
the implementing DAR regulations of all presumption of validity. We would
then place upon the government the burden of proving the formula's
appropriateness in every case, as against the valuation method chosen by
the landowner, whatever it may be. It would allow the landowner to cherry-
pick, so to speak, a factor or set of factors to support a proposed valuation
method. As the case below has shown, such a process has allowed the SAC
to conclude, without explanation, that Commissioner Chua's higher valuation
was "more realistic" than the government's "ridiculously low" valuation and,
therefore, in its opinion, more just.

Allowing the SAC to arrive at a determination of just compensation based on

open-ended standards like "more realistic" and "ridiculously low" bodes ill for
the future of land reform implementation. One can only imagine the havoc
such a ruling, made in the name of ensuring absolute freedom of judicial
discretion, would have on the government's agrarian reform program and
the social justice ends it seeks to further. It could open the floodgates to the
mischief of the Garchitorena estate scandal where, to borrow terms used by
the SAC in this case, a property acquired at a "ridiculously low" cost of ₱3.1
million was proposed to be purchased by the DAR for the "more realistic"
amount of ₱6.09 million.

We thus feel compelled to address these issues, if only to assure those

directly affected, that the law and the implementing DAR regulations are
reasonable policy choices made by the Legislative and Executive
departments on how best to implement the law, hence, the heavy premium
given their application.
C. Primary jurisdiction and the judicial power/function to determine just
compensation

Section 1, Article VIII of the 1987 Constitution131 provides that "judicial

power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable."

The right of a landowner to just compensation for the taking of his or her
private property is a legally demandable and enforceable right guaranteed
by no less than the Bill of Rights, under Section 9, Article III of the
Constitution.132 The determination of just compensation in cases of eminent
domain is thus an actual controversy that calls for the exercise of judicial
power by the courts. This is what the Court means when it said that "[t]he
determination of 'just compensation' in eminent domain cases is a judicial
function."133

Before RA 6657, the courts exercised the power to determine just

compensation under the Rules of Court. This was true under RAs 1400 and
3844 and during the time when President Marcos in Presidential Decree No.
1533 attempted to impermissibly restrict the discretion of the courts, as
would be declared void in EPZA v. Dulay (E-PZA). RA 6657 changed this
process by providing for preliminary determination by the DAR of just
compensation.

Does this grant to the DAR of primary jurisdiction to determine just

compensation limit, or worse, deprive, courts of their judicial power? We
hold that it does not. There is no constitutional provision, policy, principle,
value or jurisprudence that places the determination of a justiciable
controversy beyond the reach of Congress' constitutional power to require,
through a grant of primary jurisdiction, that a particular controversy be first
referred to an expert administrative agency for adjudication, subject to
subsequent judicial review.

In fact, the authority of Congress to create administrative agencies and

grant them preliminary jurisdiction flows not only from the exercise of its
plenary legislative power,134 but also from its constitutional power to
apportion and diminish the jurisdiction of courts inferior to the Supreme
Court.135

Tropical Homes, Inc. v. National Housing Authority, 136 has settled that

"[t]here is no question that a statute may vest exclusive original jurisdiction
in an administrative agency over certain disputes and controversies falling
within the agency's special expertise."137
In San Miguel Properties, Inc. v. Perez,138 we explained the reasons why
Congress, in its judgment, may choose to grant primary jurisdiction over
matters within the erstwhile jurisdiction of the courts, to an agency:

The doctrine of primary jurisdiction  bas been increasingly called into play on
matters demanding the special competence of administrative agencies even
if such matters are at the same time within the jurisdiction of the courts. A
case that requires for its determination the expertise, specialized skills, and
knowledge of some administrative board or commission because it involves
technical matters or intricate questions of fact, relief must first be obtained
in an appropriate administrative proceeding before a remedy will be supplied
by the courts although the matter comes within the jurisdiction of the courts.
The application of the doctrine does not call for the dismissal of the case in
the court but only for its suspension until after the matters within the
competence of the administrative body are threshed out and determined.

To accord with the doctrine of primary jurisdiction, the courts cannot and will
not determine a controversy involving a question within the competence of
an administrative tribunal, the controversy having been so placed within the
special competence of the administrative tribunal under a regulatory
scheme. In that instance, the judicial process is suspended pending referral
to the administrative body for its view on the matter in dispute.
Consequently, if the courts cannot resolve a question that is within the legal
competence of an administrative body prior to the resolution of that question
by the latter, especially where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience, and
services of the administrative agency to ascertain technical and intricate
matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered, suspension or dismissal of
the action is proper. 139 (Emphasis and underscoring supplied.)

Rule 43 of the Revised Rules of Court, which provides for a uniform

procedure for appeals from a long list of quasi-judicial agencies to the Court
of Appeals, is a loud testament to the power of Congress to vest myriad
agencies with the preliminary jurisdiction to resolve controversies within
their particular areas of expertise and experience.

In fact, our landmark ruling in Association has already validated the grant by

Congress to the DAR of the primary jurisdiction to determine just
compensation. There, it was held that RA 6657 does not suffer from the vice
of the decree voided in EPZA,140 where the valuation scheme was voided by
the Court for being an "impermissible encroachment on judicial
prerogatives."141 In EPZA, we held:
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 the Constitution is reserved
to it for final determination.

x x x [T]he 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. 142

Unlike EPZA, and in answer to the question raised in one of the

dissents,143 the scheme provided by Congress under RA 6657 does not take
discretion away from the courts in determining just compensation in agrarian
cases. Far from it. In fact, the DAR valuation formula is set up in such a way
that its application is dependent on the existence of a certain set of facts,
the ascertainment of which falls within the discretion of the court.

Applied to the facts of this case, and confronted with the LBP/DAR valuation
and the court-appointed commissioner's valuation, it was entirely within the
SAC's discretion to ascertain the factual bases for the differing amounts and
decide, for itself, which valuation would provide just compensation. If, in its
study of the case, the SAC, for example, found that the circumstances
warranted the application of a method of valuation different from that of the
DAR's, it was free to adopt any other method it deemed appropriate
(including the Cuervo method), subject only to the Yatco requirement that it
provide a reasoned explanation therefor.

As pointed out earlier in this Opinion, however, the SAC in this case simply
adopted the Cuervo valuation as the "more realistic" amount and rejected
the DAR/LBP valuation for being "unrealistically low." In fact, there is
nothing in its Decision to indicate that the SAC actually looked into the
evidentiary bases for the opposing valuations to satisfy itself of the factual
bases of each. This, in tum, explains the utter dearth of explanation for the
stark inconsistencies between Commissioner Chua and the
DAR/LBP's factual findings. Thus, and with all due respect, it is quite
incorrect to say that the present rule requiring strict application of the DAR
formula completely strips courts of any discretion in determining what
compensation is just for properties covered by the CARP.

More importantly, in amending Section 1 7 of RA 665 7, Congress provided

that the factors and the resulting basic formula shall be "subject to the final
decision of the proper court." Congress thus clearly conceded that
courts have the power to look into the "justness" of the use of a formula to
determine just compensation, and the "justness" of the factors and their
weights chosen to flow into it.

In fact, the regulatory scheme provided by Congress in fact sets the stage
for a heightened judicial review of the DAR's preliminary determination of
just compensation pursuant to Section 17 of RA 6657. In case of a proper
challenge, SACs are actually empowered to conduct a de nova review of the
DAR's decision. Under RA 6657, a full trial is held where SA Cs are
authorized to (1) appoint one or more commissioners, 144 (2) receive, hear,
and retake the testimony and evidence of the parties, and (3) make findings
of fact anew.145 In other words, in exercising its exclusive and original
jurisdiction to determine just compensation under RA 6657, the SAC is
possessed with exactly the same powers and prerogatives of a Regional Trial
Court (RTC) under Rule 67 of the Revised Rules of Court.

In such manner, the SAC thus conducts a more exacting type of review,

compared to the procedure provided either under Rule 43 of the Revised
Rules of Court, which governs appeals from decisions of administrative
agencies to the Court of Appeals, or under Book VII, Chapter 4, Section
25146 of the Administrative Code of 1987,147 which provides for a default
administrative review process. In both cases, the reviewing court decides
based on the record, and the agency's findings of fact are held to be binding
when supported by substantial evidence.148 The SAC, in contrast, retries the
whole case, receives new evidence, and holds a full evidentiary hearing.

Having established that the regulatory scheme under RA 6657 does not, in
principle, detract from (but rather effectuates) the exercise of the judicial
function, we shall now show how the DAR valuation process is at par with
internationally-accepted valuation practices and standards.

H. DAR Valuation process is at par with international standards

Valuation is not an exact science.149 In clear recognition of the inherent

difficulty such a task entails, the DAR declared:

Just compensation in regard to land cannot be an absolute amount

disregarding particularities of productivity, distance to the marketplace and
so on.1âwphi1 Hence, land valuation is not an exact science but an exercise
fraught with inexact estimates requiring integrity, conscientiousness and
prudence on the part of those responsible for it. What is important ultimately
is that the land value approximates, as closely as possible, what is broadly
considered to be just.150
Nevertheless, there are existing standards which are observed to ensure the
competence and integrity of valuation practice. At present, we have the
Philippine Valuation Standards (PVS), or the reference standards for local
government assessors and other agencies undertaking property
valuations.151 The PVS are, in turn, based on the International Valuation
Standards (IVS), also known as the Generally Accepted Valuation Principles
(GAVP). The IVS represents the internationally accepted best practices in the
valuation profession and were formulated by the International Valuations
Standards Committee (IVSC).152

Of note is the IVSC's stature in the valuation profession. Composed of

professional valuation associations from around the world, the IVSC is a
non-governmental organization (NGO) member of the United Nations which
provides advice and counsel relating to valuation and seeks to coordinate its
Standards and work programs with related professional discipline in the
public interest, and cooperates with international agencies in determining
and promulgating new standards. It was granted Roster status with the
United Nations Economic and Social Council in May 1985. 153

There also exists a process which allows for a systematic procedure 154 to be
followed in answering questions about real property value:

Part One: Definition of the Problem

Identification Intende Purpose Date Identificatio Extra- Hypo-
of d use of of n of ordinary thetical
client/intend of appraisa opinio characteristi assumptio conditio
ed users apprais l n of cs of ns ns
al (includin value property
g (including
definitio location and
n of property
value) rights to be
valued)
Part Two: Scope of Work
Part Three: Data Collection and Property Description
Market Area Data Subject Property Data Comparable Property
Data
General characteristics of Specific Sales, listings,
region, city and characteristics of land offerings, vacancies,
neighborhood and improvements, cost and depreciation,
personal property, income and expenses,
business assets, etc. capitalization rates, etc.
 Part IV. Data Analysis
Market Analysis Highest and Best Use Analysis
Demand studies Site as though vacant
Supply studies Ideal improvement
Marketability studies Property as improved
Part V. Land Value Opinion
Part VI. Application of the Approaches to Value
Cost Sales Comparison Income
Part VII. Reconciliation of Value Indications and Final Opinion of Value
Part VIII. Report of Defined Value

Based on the foregoing, the process involves, among others, utilizing one or
more valuation approaches, with each individual approach producing a
particular value indication,155 and thereafter, reconciling the different value
indications to arrive at "a supported opinion of defined value." 156

The valuation process is applied to develop a well-supported opinion of a

defined value based on an analysis of pertinent general and specific data.
Appraisers develop an opinion of property value with specific appraisal
procedures that reflect the different approaches to data analysis. 157

The PVS and the IVS, discussed earlier, list three market-based valuation
approaches: the sales comparison approach, the income capitalization
approach and the cost approach.158

The sales comparison approach considers the sales of similar or substitute

properties and related market data, and establishes a value estimate by
processes involving comparison. In general, a property being valued is
compared with sales of similar properties that have been transacted in the
market.159

In the income capitalization approach, income and expense data relating to

the property being valued are considered and value is estimated through a
capitalization process.1âwphi1 Capitalization relates income (usually a net
income figure) and a defined value type by converting an income amount
into a value estimate. This process may consider direct relationships (known
as capitalization rates), yield or discount rates (reflecting measures of return
on investment), or both.160

The cost approach considers the possibility that, as an alternative to the

purchase of a given property, one could acquire a modem equivalent asset
that would provide equal utility. In a real estate context, this would involve
the cost of acquiring equivalent land and constructing an equivalent new
structure. Unless undue time, inconvenience and risk are involved, the price
that a buyer would pay for the asset being valued would not be more than
the cost of the modem equivalent. Often the asset being valued will be less
attractive than the cost of the modem equivalent because of age or
obsolescence.161

These approaches are used in all estimations of value.162 Depending on the

circumstances attendant to each particular case, one or more of these
approaches may be used.

The final analytical step in the valuation process is the reconciliation of the
value indications derived into a single peso figure or a range into which the
value will most likely fall:

In the valuation process, more than one approach to value is usually

applied, and each approach typically results in a different indication of value.
If two or more approaches are used, the appraiser must reconcile at least
two value indications. Moreover, several value indications may be derived in
a single approach. x xx

x x x Resolving the differences among various value indications is

called reconciliation. x x x163 (Emphasis supplied.)

Reconciliation requires appraisal judgment and a careful, logical analysis of

the procedures that lead to each value indication. Appropriateness, accuracy
and quantity of evidence are the criteria with which an appraiser forms a
meaningful, defensible and credible final opinion of value. 164

The valuation process concludes with a final report/opinion of value. This

reported value is the appraiser's opinion165 and reflects the experience and
judgment that has been applied to the study of the assembled data. 166

For a well-supported opinion of a defined value, however, there must be an

analysis of pertinent general and specific data167 using an accepted and
systematic valuation process. Following the generally accepted valuation
process, there is an application of the appropriate approaches to value and,
where multiple approaches have been employed, the reconciliation of the
different value indications to arrive at a final opinion of value. Reconciliation,
in large part, relies on the proper application of appraisal techniques and
the appraiser 's judgment and experience.168
The Philippines has kept abreast with the internationally-recognized and
accepted standards for valuation practice.

As previously discussed, we already have the PVS used by local government

assessors and other agencies in conducting property valuations. 169 There is
also Republic Act No. 9646 (RA 9646), otherwise known as the Real Estate
Service Act of the Philippines, which mandates the conduct of licensure
examinations to ensure the technical competence, responsibility and
professionalism of real estate practitioners in general (including appraisers,
in particular).170

Actual valuation reforms to overcome the "multiplicity of fragmented policies

and regulations which have previously characterized both the public and
private sectors"171 have also been undertaken. In April 2010, the Department
of Finance (DOF) issued a Mass Appraisal Guidebook for the
"operationalization and practical application of the Philippine Valuation
Standards."172 The PVS also appear in the Manual on Real Property Appraisal
and Assessment Operations published by the DOF as guidelines to aid local
assessors in discharging their functions.173

A Valuation Reform Act174 is currently being proposed to harmonize valuation

in both public and private sectors by providing uniform valuation standards
which "shall conform with generally accepted international valuation
standards and principles."175

The existence of these standards and measures highlights the emerging

importance of valuation, not only in the context of land reform
implementation, but as a profession, with high standards of competence, a
distinct body of knowledge continually augmented by contributions of
practitioners, and a code of ethics and standards of practice with members
willing to be subject to peer review.176

An examination of the terms of the DAR issuances would show that the
implementing agency has indeed taken pains to ensure that its valuation
system is at par with local and international valuation standards. The
pertinent portion of DAR AO No. 7 (2011) reads:

Section 85. Formula for Valuation.1âwphi1 The basic formula for the

valuation of lands covered by VOS or CA shall be:

LV = (CNI x 0.60) +(CS x 0.30) + (MV x 0.10)

Where:
LV = Land Value
CNI = Capitalized Net Income (based on land use and
productivity)
CS = Comparable Sales (based on fair market value equivalent
to 70% of BIR Zonal Value)
MV = Market Value per Tax declaration (based on Government
assessment)

The CS factor refers to the Market Data Approach under the standard

appraisal approaches which is based primarily on the principle of substitution
where a prudent individual will pay no more for a property than it would cost
to purchase a comparable substitute property. This factor is determined by
the use of 70% of the BIR zonal valuation.

The CNI factor, on the other hand, refers to the Income Capitalization

Approach under the standard appraisal approaches which is considered the
most applicable valuation technique for income-producing properties such as
agricultural landholdings. Under this approach, the value of the land is
determined by taking the sum of the net present value of the streams of
income, in perpetuity, that will be forgone by the LO due to the coverage of
his landholding under CARP.

The MV factor is equivalent to the Market Data Approach, except that this is

intended for taxation purposes only. (Emphasis and underscoring supplied.)

The administrative order's express reference to "standard appraisal

approaches," namely the Market Data Approach and the Income
Capitalization Approach, as discussed earlier, is in line with the PVS and the
IVS/GAVP.

1. The whole regulatory scheme provided under RA 6657 (and

operationalized through the DAR formulas) are reasonable policy choices to
best implement the purposes of the law

The whole regulatory scheme provided under RA 6657 (and implemented

through the DAR formulas) are reasonable policy choices made by the
Congress and the DAR on how best to implement the purposes of the CARL.
These policy choices, in the absence of contrary evidence, deserve a high
degree of deference from the Court.

On the Section 17 enumeration. Congress, in adopting Section 17, opted for

the enumeration of multiple factors provided under RAs 1400 and 3844, to
replace the exclusively production based formula provided in PD 27. The
Court cannot now fault Congress for not enumerating all possible valuation
factors, a task even this Court cannot conceivably achieve, and use the
Congress’ limitation as a reason to void the enumeration.

On the use of a formula. In the absence of evidence of record to the

contrary, it is reasonable to assume that DAR decided that a formula is a
practical method to arrive at a determination of just compensation due the
landowner. This became necessary considering the multiple factors laid down
by the Congress in Section 17. For one, the formulas provide a concrete,
uniform and consistent equation, applicable to all agricultural land
nationwide, regardless of their location. It thus assures prompt, consistent
and even-handed implementation by limiting the exercise of discretion by
DAR officials. We have also earlier noted how formulas worked in the
agrarian reform programs of other Asian countries. Finally, we have also
noted how the absence of a formula resulted in the Garchitorena estate
scandal. The Garchitorena estate scandal underscores the wisdom of
deferring to the DAR’s choice to use a formula in its judgment, "uniformity of
ruling is essential to comply with the purposes of [RA 6657]." 177

On the choice of the formula's components and their weights. DAR

reformulated its formulas every so often as it gained experience in its
implementation. We can see from AO No. 5 (1998) that the DAR finally
settled on two approaches to value: the income capitalization approach and
the sales comparison approach, represented under the CNI and CS factors,
respectively. While the cost approach was excluded, market value of the
land as per tax declaration of the owner (MV) is nevertheless considered.
DAR also decided on the relative weights to allocate to each component.

The inclusion of the CNI as a component factor was id apparent reaction to

the suggestion of the UP-IAS study, which roundly[ criticized DAR AO No. 6
(1989) for not having considered the production income of the land. While
the same study recommended that the appropriate formula should "value
land based only on production/productivity,"178 the DAR, however, chose to
also consider comparable sales and market value as per tax declaration. This
is in keeping with the mandate of Section 17 which provided that "current
value of like properties" and "the sworn valuation by the owner, the tax
declarations," and the "assessment made by government assessors" shall
also be considered.

We note that while "cost of acquisition of the land" was also included as a
factor to be considered in determining just compensation, it was not
included as a component in the basic formula. Again, in the absence of
contrary evidence of record, it is reasonable to assume that the DAR acted,
on the knowledge that most agricultural lands are inherited. This makes
their acquisition cost nil. To include the same as a component of the formula
would only serve to reduce the resulting value, much to the prejudice of the
landowner.179

On the formula as DAR 's expert opinion. The general function of an

appraisal or valuation exercise is to develop an opinion of a certain type of
value.180 This process, though subjective, is amenable to a rigorous process
that should result in a considered opinion of value. As earlier discussed,
there is an application of the generally accepted approaches to value and,
where multiple approaches have been employed, the reconciliation of the
different value indications to arrive at a final opinion of value. 181 In this case,
the DAR, applying the law and using the accepted valuation process and
approaches to value, acted no different from a valuation appraiser and gave
an opinion as to what components make up the right formula.

Similar to the valuation profession which recognizes that the integrity and
credibility of a valuation opinion rests in large part on the appraiser's
judgment and experience,182 the DAR's choices on the formula's component
parts and their corresponding weights was based on its expertise, judgment
and actual experience in the field of agrarian reform. We have taken pains to
show how the DAR formula, and valuation process, is consistent and at par
with recognized, international relation processes. There is no contrary
evidence of record.

We shall now discuss the detailed arguments of the dissents as they relate
to the DAR formulas.

J. Responses to specific arguments in the Dissents and Separate Concurring

Opinion

Justice Leonen asserts that the Congress and the DAR failed to capture all
the factors183 (if not the "important,"184 "highly influential,"185 and
"critical"186 ones) to fully determine market value. Since the listing of factors
in Section 17 is incomplete, any formula derived therefrom would also (and
necessarily) be incomplete for purposes of arriving at just compensation.

We note that Justice Leonen cites the UP-IAS study in his dissent. This study
analyzed the DAR formula under DAR AO No. 06 (1989). Our case now
involves the DAR formula under DAR AO No. 5 (1998). Not only is the latter
formula completely different from that under DAR AO No. 6 (1989), it has,
as earlier discussed, already "improved" on the formula by incorporating the
suggestions and recommendations of the UP-IAS study cited.
Furthermore, Justice Leonen did not point to a complete or exhaustive listing
of factors upon which he based his assertion of the law's incompleteness.
Neither did he show how courts are to actually approach valuation (in the
absence of Section 17 and the implementing DAR formula) as to avoid
"underrating the effect of each property's peculiarities." 187

Even granting, for the sake of argument, that there is an infinite number of

factors that can be considered in the valuation of property, we see no
conceptual inconsistency between applying a formula to determine just
compensation and giving all attendant factors due consideration.

This is evident when one considers the indispensability of the approaches to

value in any estimation of value.188 Following the generally-accepted
valuation process, after all relevant market area data, subject property data
and comparable property data have been gathered and analyzed,189 the
approaches to value will be applied190 and the resulting value indications
reconciled191 to arrive at a final opinion of value. Thus, while there can
arguably be an infinite number of factors that can be considered for
purposes of determining a property's value, they would all ultimately be
distilled into any one of the three valuation approaches. In fact, and as part
of their discipline, appraisers are expected to "apply all the approaches that
are applicable and for which there is data."192

Justice Leonen also seems to favor the use of the discounted cash flow
(DCF)/discounted future income method (a variant of the yield capitalization
technique) where the present DAR basic formula makes use of the direct
capitalization technique.193 He thereafter equates this to a lack of
consideration for future income and ventures that, in turn, might be the
reason why landowners always feel that the DAR/LBP assessment is severely
undervalued.194

We disagree. Direct capitalization and yield capitalization are both methods

used in the income capitalization approach to value.

Direct capitalization is distinct from yield capitalization x x x in that the

former does not directly consider the individual cash flows beyond the first
year. Although yield capitalization explicitly calculates year-by-year effects
of potentially changing income patterns, changes in the original investment's
value, and other considerations, direct capitalization processes a single
year's income into an indication of value. x x x195

In fact, and applied to the same set of facts, use of either method can be

expected to produce similar results:
x x x Either direct capitalization or yield capitalization may correctly produce
a supportable indication of value when based on relevant market information
derived from comparable properties, which should have similar income-
expense ratios, land value-to-building value ratios, risk characteristics, and
future expectations of income and value changes over a typical holding
period. A choice of capitalization method does not produce a different
indication of value under this circumstance.196 (Emphasis supplied.)

Selection of the appropriate income capitalization method to use depends on

the attendant circumstances. While direct capitalization is used when
properties are already operating on a stabilized basis, it is not useful where
the property sought to be valued is going through an initial lease-up or
when income and/or expenses are expected to change in an irregular
pattern over time. In the latter case, yield capitalization techniques are
considered to be more appropriate.197

In fact, the DAR uses yield capitalization methods where, based on its
experience, such method is appropriate. In Joint Memorandum Circular No.
07, Series of 1999, for example, the DAR and the LBP revised their initial
valuation guidelines for rubber plantations, to wit:

I. PREFATORY STATEMENT

The rubber plantation income models presented under the old rubber Land
Valuation Guideline (LVG No. 6, Series of 1990) recognized the income of
rubber plantations based on processed crumb rubber. However, recent
consultations with rubber authorities (industry, research, etc.) disclosed that
the standard income approach to valuation should measure the net income
or productivity of the land based on the farm produce (in their raw forms)
and not on the entire agri-business income enhanced by the added value of
farm products due to processing. Hence, it is more appropriate to determine
the Capitalized Net Income (CNI) of rubber plantations based on the actual
yield and farm gate prices of raw products (field latex and cuplump) and the
corresponding cost of production.

There is also a growing market for old rubber trees which are estimated to
generate net incomes ranging between ₱20,000 and ₱30,000 per hectare or
an average of about ₱100 per tree, depending on the remaining stand of old
trees at the end of its economic life. This market condition for old rubber
trees was not present at the time LVG No. 6, Series of 1990, was being
prepared. (The terminal or salvage value of old rubber trees was at that time
pegged at only ₱6,000 per hectare, representing the amount then being paid
by big landowners to contractors for clearing and uprooting old trees.)
LVG No. 6, Series of 1990, was therefore revised to address the foregoing
considerations and in accordance with DAR Administrative Order (AO) No.
05, Series of 1998. (Emphasis and underscoring supplied.)

What can be fairly inferred from the DAR's adoption of the direct

capitalization method in its formula is the operational assumption 198 that the
agricultural properties to be valued are, in general, operating on a stabilized
basis, or are expected to produce on a steady basis. This choice of
capitalization method is a policy decision made by the DAR drawn, we can
presume, from its expertise and actual experience as the expert
administrative agency.

Justice Velasco, for his part, calls for a revisit of the established rule on the
ground that the same "have veritably rendered hollow and ineffective the
maxim that the determination of just compensation is a judicial
function."199 According to him, the view that application of the DAR formulas
cannot be made mandatory on courts is buttressed by: (1) Section 50 of RA
6657 which expressly provides that petitions for determination of just
compensation fall within the original and exclusive jurisdiction of the
SACs;200 (2) Land Bank of the Philippines v. Belista201 which already settled
that petitions for the determination of just compensation are excepted from
the cases falling under the DAR's special original and exclusive jurisdiction
under Section 57 of RA 6657; and (3) Heirs of Lorenzo and Carmen Vidad v.
Land Bank of the Philippines, (Heirs of Vidad)202 which held that the DAR's
process of valuation under Section 16 of RA 6657 is only preliminary, the
conclusion of which is not a precondition for purposes of invoking the SAC's
original and exclusive jurisdiction to determine just compensation.

Justice Velasco correctly pointed out this Court's statement

in Belista excepting petitions for determination of just compensation from
the list of cases falling within the DAR's original and exclusive
jurisdiction.203 Justice Velasco is also correct when he stated that the Court,
in Heirs of Vidad, summarized and affirmed rulings which "invariably upheld
the [SAC's] original and exclusive jurisdiction x x x notwithstanding the
seeming failure to exhaust administrative remedies before the DAR." 204 Later
on, he would point out, again correctly, the seemingly conflicting rulings
issued by this Court regarding the imposition upon the courts of a formula to
determine just compensation.

We acknowledge the existence of statements contained in our rulings over

the years which may have directly led to the inconsistencies in terms of the
proper interpretation of the CARL. As adverted to earlier in this Opinion, this
Court thus takes this case as a good opportunity to affirm, for the guidance
of all concerned, what it perceives to be the better jurisprudential rule.
Justice Velasco reads both Belista and Heirs of Vidad as bases to show that
SACs possess original and exclusive jurisdiction to determine just
compensation, regardless of prior exercise by the DAR of its primary
jurisdiction.

We do not disagree with the rulings in Belista and Heirs of Vidad, both of

which acknowledge the grant of primary jurisdiction to the DAR, subject to
judicial review. We are, however, of the view that the better rule would be to
read these seemingly conflicting cases without having to disturb established
doctrine.

Belista, for example, should be read in conjunction with Association, the

landmark case directly resolving the constitutionality of RA 6657.
In Association, this Court unanimously upheld the grant of jurisdiction
accorded to the DAR under Section 16 to preliminarily determine just
compensation. This grant of primary jurisdiction is specific, compared to the
general grant of quasi-judicial power to the DAR under Section
50. Belista, which speaks of exceptions to the general grant of quasi-judicial
power under Section 50, cannot be read to extend to the specific grant of
primary jurisdiction under Section 16.

Heirs of Vidad should also be read in light of our ruling in Land Bank of the
Philippines v. Martinez,205 another landmark case directly and affirmatively
resolving the issue of whether the DAR' s preliminary determination (of just
compensation) can attain finality. While the determination of just
compensation is an essentially judicial function, Martinez teaches us that the
administrative agency’s otherwise preliminary determination may become
conclusive not because judicial power was supplanted by the agency's
exercise of primary jurisdiction but because a party failed to timely invoke
the same. The Court said as much in Heirs of Vidad:

It must be emphasized that the taking of property under RA 6657 is an

exercise of the State’s power of eminent domain. The valuation of property
or determination of just compensation in eminent domain proceedings is
essentially a judicial function which is vested with the courts and not with
administrative agencies. When the parties cannot agree on the amount of
just compensation, only the exercise of judicial power can settle the dispute
with binding effect on the winning and losing parties. On the other hand, the
determination of just compensation in the RARAD/DARAB requires the
voluntary agreement of the parties. Unless the parties agree, there is no
settlement of the dispute before the RARAD/DARAB, except if the aggrieved
party fails to file a petition for just compensation on time before the
RTC.206 (Emphasis and underscoring supplied.)
Considering the validity of the grant of primary jurisdiction, our ruling
in Heirs of Vidal should also be reconciled with the rationale behind the
doctrine of primary jurisdiction. In this sense, neither landowner nor agency
can disregard the administrative process provided under the law without
offending the already established doctrine of primary jurisdiction:

x x x [I]n cases raising issues of fact not within the conventional experience
of judges or cases requiring the exercise of administrative discretion,
agencies created by Congress for regulating the subject matter should not
be passed over. This is so even though the facts after they have been
appraised by specialized competence serve as a premise for legal
consequences to be judicially defined. Uniformity and consistency in the
regulation of business entrusted to a particular agency are secured, and the
limited functions of review by the judiciary are more rationally exercised, by
preliminary resort for ascertaining and interpreting the circumstances
underlying legal issues to agencies that are better equipped than courts by
specialization, by insight gained through experience, and by more flexible
procedure.207 (Emphasis supplied.)

Arguing against the binding nature of the DAR formula, Justice Carpio, in his
Separate Concurring Opinion, cites Apo Fruits208 which held, to wit:

What is clearly implicit, thus, is that the basic formula and its alternatives-
administratively determined (as it is not found in Republic Act No. 6657, but
merely set forth in DAR AO No. 5, Series of 1998)-although referred to and
even applied by the courts in certain instances, does not and cannot strictly
bind the courts. x x x209

The argument of Apo Fruits that the DAR formula is a mere administrative

order has, however, been completely swept aside by the amendment to
Section 17 under RA 9700. To recall, Congress amended Section 17 of RA
6657 by expressly providing that the valuation factors enumerated be
"translated into a basic formula by the DAR x x x." This amendment
converted the DAR basic formula into a requirement of the law itself. In
other words, the formula ceased to be merely an administrative rule,
presumptively valid as subordinate legislation under the DAR's rule-making
power. The formula, now part of the law itself, is entitled to the presumptive
constitutional validity of a statute.210More important, Apo Fruits merely
states that the formula cannot "strictly" bind the courts. The more
reasonable reading of Apo Fruits is that the formula does not strictly apply in
certain circumstances. Apo Fruits should, in other words, be read together
with Yatco.
Justice Carpio also raises an issue of statutory construction of Section 18 of
RA 6657 in relation to Section 17. Section 18 reads:

Sec. 18. Valuation and Mode of Compensation. –The LBP shall compensate

the landowner in such amounts 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 1 7, and other pertinent provisions hereof, or as may be
finally determined by the court, as the just compensation for the land.

The Justice reads Section 18 to mean that Section 17 and the implementing
DAR formula operate only to qualify the offer to be made by the DAR and
the LBP to the landowner. Section 17 is not a qualifying imposition on the
court in its determination of just compensation. Stated differently, where
there is disagreement on the issue of just compensation, Section 17 and the
basic formula do not apply.

We disagree. Sections 16, 17 and 18 should all be read together in

context211 as to give effect to the law.212 This is the essence of the doctrines
we laid down in Banal, Celada and Yatco.

Section 16 governs the procedure for the acquisition of private lands. The
relevant provision reads:

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 setforth in Sections 17,
18, and other pertinent provisions hereof.x x x (Emphasis supplied.)

It is clear from the foregoing provision that the procedure for acquisition of
private land is commenced by the DAR's notice of acquisition and offer of
compensation to the landowner. At such point, the DAR does not know
whether the landowner will accept its offer. Section 16(a), however,
states without qualification that the DAR shall make the offer in accordance
with Sections 17 and 18. In case the landowner does not reply or rejects the
offer, then the DAR initiates summary administrative proceedings to
determine just compensation, subject to the final determination of the court.
In the summary proceedings, the DAR offer remains founded on the criteria
set forth in Section 17. Section 16(a) did not distinguish between the
situation where the landowner accepts the DAR's offer and where he/she
does not. Section 17, as amended, itself also did not distinguish between a
valuation arrived at by agreement or one adjudicated by litigation. Where
the law does not distinguish, we should not distinguish. 213

Section 18, on the other hand, merely recognizes the possibility that the
landowner will disagree with the DAR/LBP's offer. In such case, and where
the landowner elevates the issue to the court, the court needs to rule on the
offer of the DAR and the LBP. Since the government's offer is required by
law to be founded on Section 1 7, the court, in exercising judicial review, will
necessarily rule on the DAR determination based on the factors enumerated
in Section 17.

Now, whether the court accepts the determination of the DAR will depend on
its exercise of discretion. This is the essence of judicial review. That the
court can reverse, affirm or modify the DARJLBP's determination cannot,
however, be used to argue that Section 18 excuses observance from Section
17 in cases of disagreement.

Finally, there is no cogent policy or common sense reason to distinguish.

Worse, this reading flies in the face of the contemporaneous interpretation
and implementation given by the DAR and the LBP to Sections 16, 17 (as
amended) and 18. DAR AO No. 5 (1998) expressly provides that the basic
formula applies to both voluntary offers to sell and to compulsory
acquisition.214

K. The matters raised by the dissents are better resolved in a proper case
directly challenging Section 17 of RA 6657 and the resulting DAR
formulas

The following central issues of fact underlying many of the arguments raised
by the dissents are better raised in a case directly impugning the validity of
Section 17 and the DAR formulas:

(1) Whether, under the facts of a proper case, the use of a basic formula
(based on factors enumerated by Congress) to determine just compensation
is just and reasonable.

Evidence must be taken to determine whether, given the scale of the

government's agrarian reform program, the DAR and the LBP (and later,
Congress) acted justly and within reason in choosing to implement the law
with the enumeration of factors in Section 17 and the use of a basic
formula, or, whether, under the facts, it is more just and reasonable to
employ a case to case method of valuation.
A core and triable question of fact is whether the DAR and the LBP can
effectively and fairly implement a large scale land reform program without
some guide to canalize the discretion of its employees tasked to undertake
valuation. Otherwise stated, how can the DAR and the LBP commence CARP
implementation if the different DAR and LBP employees tasked with making
the offer, and spread nationwide, are each given complete discretion to
determine value from their individual reading of Section 17? This will resolve
the factual underpinnings of the argument advanced that the valuation
factors enumerated in Section 17 apply only where there is agreement on
value as between the DAR/LBP and the landowner. But not when there is
disagreement.

(2) Whether, under the facts of a proper case, the enumeration of the
factors in Section 17 and the resulting formula, are themselves just and
reasonable.

To resolve this, there must be a hearing to determine: (a) whether,

following generally-accepted valuation principles, the enumeration under
Section 17 is sufficient or under-inclusive; (2) how the DAR arrived at
selecting the components of the formula and their assigned weights; (3)
whether there are fairer or more just and reasonable alternatives, or
combinations of alternatives, respecting valuation components and their
weights; and (4) whether the DAR properly computes or recognizes net
present value under the CNI factor, and whether DAR employs a fair
capitalization rate in computing CNI.

All things considered, it is important that the DAR and the LBP be heard so
that they can present evidence on the cost and other implications of doing
away with the use of a basic formula, or using a different mix of valuation
components and weights.

IV Conclusion

The detennination of just compensation is a judicial function. The "justness"

of the enumeration of valuation factors in Section 17, the "justness" of using
a basic formula, and the "justness" of the components (and their weights)
that flow into the basic formula, are all matters for the courts to decide. As
stressed by Celada, however, until Section 17 or the basic formulas are
declared invalid in a proper case, they enjoy the presumption of
constitutionality. This is more so now, with Congress, through RA 9700,
expressly providing for the mandatory consideration of the DAR basic
formula. In the meantime, Yatco, akin to a legal safety net, has tempered
the application of the basic formula by providing for deviation, where
supported by the facts and reasoned elaboration.
While concededly far from perfect, the enumeration under Section 17 and
the use of a basic formula have been the principal mechanisms to implement
the just compensation provisions of the Constitution and the CARP for many
years. Until a direct challenge is successfully mounted against Section 17
and the basic formulas, they and the collective doctrines in Banal,
Celada and Yatco should be applied to all pending litigation involving just
compensation in agrarian reform. This rule, as expressed by the doctrine
of stare decisis, necessary for securing certainty and stability of judicial
decisions, thus:

Time and again, the Court has held that it is a very desirable and necessary
judicial practice that when a court has laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle and apply
it to all future cases in which the facts are substantially the same. Stare
decisis et non quieta movere. Stand by the decisions and disturb not what is
settled. Stare decisis simply means that for the sake of certainty, a
conclusion reached in one case should be applied to those that follow if the
facts are substantially the same, even though the parties may be different.
It proceeds from the first principle of justice that, absent any powerful
countervailing considerations, like cases ought to be decided alike. Thus,
where the same questions relating to the same event have been put forward
by the parties similarly situated as in a previous case litigated and decided
by a competent court, the rule of stare decisis is a bar to any attempt to
relitigate the same issue.215

This Court thus for now gives full constitutional presumptive weight and
credit to Section 17 of RA 6657, DAR AO No. 5 (1998) and the resulting DAR
basic formulas. To quote the lyrical words of Justice Isagani Cruz
in Association:

The CARP Law and the other enactments also involved in these cases have
been the subject of bitter attack from those who point to the shortcomings
of these measures and ask that they be scrapped entirely. To be sure, these
enactments are less than perfect; indeed, they should be continuously re-
examined and rehoned, that they may be sharper instruments for the better
protection of the farmer's rights. But we have to start somewhere. In the
pursuit of agrarian reform, we do not tread on familiar ground but grope on
terrain fraught with pitfalls and expected difficulties. This is inevitable. The
CARP Law is not a tried and tested project. On the contrary, to use Justice
Holmes's words, "it is an experiment, as all life is an experiment," and so we
learn as we venture forward, and, if necessary, by our own mistakes. We
cannot expect perfection although we should strive for it by all means.
Meantime, we struggle as best we can in freeing the farmer from the iron
shackles that have unconscionably, and for so long, fettered his soul to the
soil.216

For the guidance of the bench, the bar, and the public, we reiterate the rule:
Out of regard for the DAR's expertise as the concerned implementing
agency, courts should henceforth consider the factors stated in Section 17 of
RA 6657, as amended, as translated into the applicable DAR formulas in
their determination of just compensation for the properties covered by the
said law. If, in the exercise of their judicial discretion, courts find that a strict
application of said formulas is not warranted under the specific
circumstances of the case before them, they may deviate or depart
therefrom, provided that this departure or deviation is supported by a
reasoned explanation grounded on the evidence on record. In other words,
courts of law possess the power to make a final determination of just
compensation.217

A final note

We must be reminded that the government (through the administrative

agencies) and the courts are not adversaries working towards different ends;
our roles are, rather, complementary. As the United States Supreme Court
said in Far East Coeference v. United States:218

x x x [C]ourt and agency are not to be regarded as wholly independent and

unrelated instrumentalities of justice, each acting in the performance of its
prescribed statutory duty without regard to the appropriate function of the
other in securing the plainly indicated objects of the statute. Court and
agency are the means adopted to attain the prescribed end, and, so far as
their duties are defined by the words of the statute, those words should be
construed so as to attain that end through coordinated action. Neither body
should repeat in this day the mistake made by the courts of law when equity
was struggling for recognition as an ameliorating system of justice; neither
can rightly be regarded by the other as an alien intruder, to be tolerated if
must be, but never to be encouraged or aided by the other in the attainment
of the common aim.219 (Emphasis supplied.)

The Congress (which wrote Section 1 7 and funds the land reform land
acquisition), the DAR (author of DAR AO No. 5 [1998] and implementer of
land reform), and the LBP (tasked under EO 405 with the valuation of lands)
are partners to the courts. All are united in a common responsibility as
instruments of justice and by a common aim to enable the farmer to "banish
from his small plot of earth his insecurities and dark resentments and
"rebuild in it the music and the dream."220 Courts and government agencies
must work together if we are to achieve this shared objective.
WHEREFORE, the petition is PARTIALLY GRANTED. Civil Case Nos. 2002-
7073 and 2002-7090 are REMANDED to the Special Agrarian Court for the
determination of just compensation in accordance with this ruling.

SO ORDERED.

35.

LAND BANK OF THE PHILIPPINES v. ENRIQUE LIVIOCO, G.R. No.

170685, September 22, 2010

DECISION

DEL CASTILLO, J.:

When the evidence received by the trial court are irrelevant to the issue of
just compensation and in total disregard of the requirements provided under
Section 17 of the Comprehensive Agrarian Reform Law, the Court is left with
no evidence on record that could aid in the proper resolution of the case.
While remand is frowned upon for obviating the speedy dispensation of
justice, it becomes necessary to ensure compliance with the law and to give
everyone - the landowner, the farmers, and the State - their due.

This is a Petition for Review under Rule 45, assailing the August 30, 2005
Decision1cralaw of the Court of Appeals (CA), as well as its December 5,
2005 Resolution2cralaw in CA-GR SP No. 83138. The dispositive portion of
the assailed Decision reads as follows:chanroblesvirtuallawlibrar

WHEREFORE, premises considered, the petition is DENIED. The Decision

dated January 29, 2004 and the Order dated March 16, 2004 of the RTC,
Branch 56, Angeles City in Civil Case No. 10405 are hereby
AFFIRMED.3cralaw

Factual Antecedents

Petitioner Land Bank of the Philippines (LBP) is the government financial

institution4cralaw established to aid in the implementation of the
Comprehensive Agrarian Reform Program (CARP) as well as to act as
financial intermediary of the Agrarian Reform Fund. 5cralaw

Respondent Enrique Livioco (Livioco) was the owner of 30.6329 hectares of

sugarland6cralaw located in Dapdap, Mabalacat, Pampanga. Sometime
between 1987 and 1988,7cralaw Livioco offered his sugarland to the
Department of Agrarian Reform (DAR) for acquisition under the CARP
at P30.00 per square meter, for a total of P9,189,870.00. The voluntary-
offer-to-sell (VOS) form8cralaw he submitted to the DAR indicated that his
property is adjacent to residential subdivisions and to an international paper
mill.9cralaw

The DAR referred Livioco's offer to the LBP for valuation. 10cralaw Following
Section 17 of Republic Act (RA) No. 6657 and DAR Administrative Order No.
17, series of 1989,11cralaw as amended by Administrative Order No. 3,
series of 1991,12cralaw the LBP set the price at P3.21 per square meter or a
total of P827,943.48 for 26 hectares.13cralaw Livioco was then promptly
informed of the valuation14cralaw and that the cash portion of the claim
proceeds have been "kept in trust pending [his] submission of the
[ownership documentary] requirements."15cralaw It appears however that
Livioco did not act upon the notice given to him by both government
agencies. On September 20, 1991, LBP issued a certification to the Register
of Deeds of Pampanga that it has earmarked the amount of P827,943.48 as
compensation for Livioco's 26 hectares.16cralaw
It was only two years later17cralaw that Livioco requested for a reevaluation
of the compensation on the ground that its value had already appreciated
from the time it was first offered for sale.18cralaw The request was denied by
Regional Director Antonio Nuesa on the ground that there was already a
perfected sale.19cralaw

The DAR proceeded to take possession of Livioco's property. In 1994, the

DAR awarded Certificates of Land Ownership Award (CLOAs) covering
Livioco's property to 26 qualified farmer-beneficiaries.20cralaw

Livioco filed separate complaints to cancel the CLOAs and to recover his
property but the same proved futile. The first case he filed in 1995 was for
quieting of title, recovery of possession and damages against the DAR, LBP,
Register of Deeds, and the farmer-beneficiaries.21cralaw In its final and
executory Decision,22cralaw the CA sustained the validity of the
CLOAs.23cralaw The relevant portions of the Decision read:

What matters most is the fact that the requirements for "Compulsory
Acquisition" of private lands, especially the indispensable ones, to wit: (1)
valuation of the subject property by the proper government agency which is
the LBP; (2) DAR's "Notice of Land Valuation" to petitioner and; (3) most
importantly, the deposit of the amount of land valuation in the name of
petitioner after he rejected the said amount, were substantially complied
with in the instant case.

Considering therefore that there was material and substantial compliance

with the requirements for the "Compulsory Acquisition" of the subject land,
the acquisition of the same is indubitably in order and in accordance with
law.24cralaw

Livioco then filed in 1998 a petition for reconveyance before the DAR
Regional Office.25cralaw The case eventually reached the CA, which
dismissed the petition on the ground that the validity of the compulsory
acquisition had already been decided with finality in the earlier CA case, to
wit:chanroblesvirtuallawlibrar

As the disputed property was eventually acquired through Compulsory

Acquisition, its reconveyance to the petitioners was properly disallowed by
the DAR. The certifications by other government agencies that the land was
identified as a resettlement area [are] of no avail as the DAR is vested with
primary jurisdiction to determine and adjudicate agrarian reform matters
and has exclusive original jurisdiction over all matters involving the
implementation of agrarian reform.

xxxx

Indeed, it is to the best interest of the public that the litigation regarding the
reconveyance of the disputed property between the same parties for the
same grounds must come to an end, the matter having [been] already fully
and fairly adjudicated by the DAR, this Court and the Supreme Court which
had declined to disturb the judgment of this Court. 26cralaw

Upon the request of DAR, LBP made two amendments to the valuation. At
first, they reduced the acquired area from 30.6329 hectares to 23.9191
hectares. Later, they increased the acquired area to 24.2088 hectares. The
remaining 6.4241 hectares of the property was determined as not
compensable because this comprised a residential area, a creek, road, and a
chapel.27cralaw The total value for 24.2088 hectares was P770,904.54.
Livioco was informed on August 8, 2001 that the payment was already
deposited in cash and agrarian reform bonds and may be withdrawn upon
submission of the documentary requirements. 28cralaw

Unable to recover his property but unwilling to accept what he believes was
an outrageously low valuation of his property, Livioco finally filed a petition
for judicial determination of just compensation against DAR, LBP, and the
CLOA holders before Branch 56 of the Regional Trial Court (RTC) of Angeles
City on December 18, 2001.29cralaw He maintained that between 1990 and
2000, the area where his property is located has become predominantly
residential hence he should be paid his property's value as such. To prove
that his property is now residential, Livioco presented a Certification from
the Office of the Municipal Planning and Development Coordinator of the
Municipality of Mabalacat that, as per zoning ordinance, Livioco's land is
located in an area where the dominant land use is residential. 30cralaw He
also presented certifications from the Housing and Land Use Regulatory
Board,31cralaw the Mt. Pinatubo Commission,32cralaw and the National
Housing Authority33cralaw that his property is suitable for a resettlement
area or for socialized housing. None of these plans pushed through.

Livioco then presented evidence to prove the value of his property as of

2002. According to his sworn valuation, his property has a market value
of P700.00/square meter.34cralaw He also presented the Bureau of Internal
Revenue (BIR) zonal value for residential lands in Dapdap, as ranging
from P150.00 to P200.00/square meter.35cralaw He then presented Franklin
Olay (Olay), chief appraiser of the Rural Bank of Mabalacat, who
testified36cralaw and certified37cralaw that he valued the property at P800.00
per square meter, whether or not the property is residential. Olay explained
that he arrived at the said value by asking the buyers of adjacent residential
properties as to the prevailing selling price in the area. 38cralaw There was
also a certification from the Pinatubo Project Management Office that
Livioco's property was valued at P300.00/square meter.39cralaw Livioco
prayed that just compensation be computed at P700.00/square
meter.40cralaw

Only LBP filed its Answer41cralaw and participated in the trial. It justified

the P3.21/square meter valuation of the property on the ground that it was
made pursuant to the guidelines in RA 6657 and DAR Administrative Order
No. 3, series of 1991. LBP objected to respondent's theory that his property
should be valued as a residential land because the same was acquired for
agricultural purposes, not for its potential for conversion to other
uses.42cralaw LBP presented its agrarian affairs specialist who
testified43cralaw that, due to the increase in the acquired area, she was
assigned to amend the claim of Livioco. She computed the total value
thereof at P770,904.54, using the DAR Administrative Order No. 3, series of
1991.44cralaw The only other witness of LBP was its lawyer, who explained
the legal basis for the DAR administrative orders and the factors for land
valuation provided in Section 17 of RA 6657.45cralaw

Ruling of the Regional Trial Court

Apparently aware that neither party presented relevant evidence for the
proper computation of the just compensation, the trial court issued its April
2, 2003 Order requiring the reception of additional
evidence:chanroblesvirtuallawlibrar

A perusal of the record of this case as well as the evidence adduced by the
parties shows that the facts required for the proper computation and/or
determination of just compensation for the plaintiff's property i.e., land
value of the property in accordance with the Listasaka, capitalized net
income, comparable sales and market value pursuant to the corresponding
tax declaration, are unavailable and insufficient.

WHEREFORE, for the Court to properly determine and fix the just
compensation to be accorded to [respondent's] property, the reopening of
this case for the purpose of the presentation of additional evidence is hereby
ordered.

Let the reception of aforesaid additional evidence be set on April 22, 2003 at
8:30 am.
 x x x x46cralaw

Based on the records, the next hearing took place on July 10, 2003 where
none of the parties presented additional evidence, whether testimonial or
documentary.47cralaw Nevertheless, the trial court proceeded to rule in favor
of Livioco:chanroblesvirtuallawlibrar

WHEREFORE, premises considered, the Court hereby renders judgment in

favor of the [respondent], Enrique Livioco, and against the Department of
Agrarian Reform and the Land Bank of the Philippines with a determination
that the just compensation of Livioco's property, consisting of 24.2088
hectares located at Mabalacat, Pampanga is worth Php700.00 per square
meter.

Defendants Department of Agrarian Reform and Land Bank of the Philippines

are, therefore, ordered to pay [respondent] the amount of Php700.00 per
square meter multiplied by 24.2088 hectares representing the entire area
taken by the government from the plaintiff. 48cralaw

The trial court was of the opinion that Livioco was able to prove the higher
valuation of his property with a preponderance of evidence. In contrast,
there was a dearth of evidence to support LBP's P3.21 per square meter
valuation of the property. Not a single documentary evidence was presented
to substantiate its valuation.

LBP sought a reconsideration49cralaw of the adverse decision arguing that

the court should have considered the factors appearing in Section 17. It
stressed that in failing to consider the property's productive capacity
(capitalized net income), the court placed the farmer-beneficiaries in a very
difficult position. They would not be able to pay off the just compensation for
their lands because it is valued way beyond its productive capacity. The
same was denied by the trial court.50cralaw

Upon respondent's motion, the lower court ordered LBP on March 29, 2004
to release as initial cash down payment the amount of P827,943.48,
inclusive of legal interest accruing from the time of taking on September 20,
1991 (the date when LBP informed the Register of Deeds that it has
earmarked the said amount in favor of Livioco).nad51cralaw

LBP sought a reconsideration of the said order. It clarified that the just
compensation deposited by LBP in the account of respondent was
only P770,904.54 for the 24.2088 hectares. It likewise asked that the
release of the deposit be subject to respondent's compliance with the release
requirements of the ownership documents.52cralaw The records are silent as
to the court's action on the motion as well as to the execution of this order.

Ruling of the Court of Appeals53cralaw

Petitioner turned to the CA to no avail. The CA affirmed the trial court's

decision in toto. First it held that factual findings of the trial courts are
entitled to respect. It held that the factors for determining just
compensation, set out in Section 17 of RA 6657, were all considered by the
trial court in arriving at its decision. It stated that among the relevant
evidence considered were Livioco's sworn valuation, tax declarations, zonal
value, actual use of the property, and the socio-economic benefits
contributed by the government to the property. It likewise noted that the
taking of Livioco's property coincided with the Mt. Pinatubo eruption in 1991,
which event affected its valuation.54cralaw Pursuant to Section 18(1)(b) of
RA 6657, the CA ordered LBP to pay 30% of the purchase price in cash,
while the balance may be paid in government financial instruments
negotiable at any time.55cralaw

A motion for reconsideration56cralaw was filed on September 29, 2005,

which was denied in a Resolution57cralaw dated December 5, 2005.

Hence, this petition.

Petitioner's arguments

In this Petition before us, LBP assails the CA's assent to the valuation of
Livioco's property as a residential land. It maintains that it is not the State's
policy to purchase residential land. Since the property was acquired under
the CARP, it had to be valued as an agricultural land. 58cralaw Moreover, the
assumption that Livioco's property has a residential use is entirely
speculative and baseless because none of the government plans to use it as
a residential land was carried out.59cralaw

LBP also assails the Decision of the trial court which valued the land as of
1997 when the rule is that just compensation must be valued at the time of
taking, which in this case was in 1988. By considering events that transpired
after 1988, the court obviously relied on factors that were not in existence at
the time of taking.60cralaw

LBP further argues that the trial court should have given more weight to its
land valuation because it is the authorized agency recognized by the
legislature as having expertise on the matter. 61cralaw
LBP insists that the Claim Valuation and Processing Form that it presented
before the appellate court "clearly established the area covered, the land use
or crop planted, the average price/hectare and the total value of the subject
land." LBP describes this document as clear and convincing evidence of the
correctness of its valuation.62cralaw

LBP likewise assails the lower courts' valuation on the ground that they
disregarded the factors set out in Section 17 of RA 6657 for the
determination of just compensation. It argues that the factors stated in that
provision are exclusive and the courts cannot consider factors that are not
included therein.63cralaw

Respondent's arguments

Respondent argues that by seeking a review of the just compensation, LBP is

raising a question of fact, which entails an examination of the probative
value of the evidence presented by the parties.64cralaw He points out that
LBP is merely reiterating the arguments already presented in its motion for
reconsideration before the CA, which makes the instant petition
dilatory.65cralaw

Respondent then argues that, with respect to the determination of just

compensation, courts are not bound by the findings of administrative
agencies such as LBP. Courts are the final authority in this matter. LBP's
valuation is only preliminary and it has the duty to prove to the trial courts
the veracity of its valuation. In the instant case, the trial court decided
based on the evidence presented but found LBP's valuation
unsubstantiated.66cralaw He then prays for the dismissal of the instant
petition for review.67cralaw

Issue

Was the compensation for respondent's property

determined in accordance with law?

Our Ruling

For purposes of just compensation, the fair market value of an expropriated

property is determined by its character and its price at the time of
taking.68cralaw There are three important concepts in this definition - the
character of the property, its price, and the time of actual taking. Did the
appellate court properly consider these three concepts when it affirmed the
trial court's decision? We find that it did not.
 As to the character of the property

The trial and appellate courts valued respondent's property as a residential

land worth P700.00 per square meter. They considered the use for the
property as having changed from agricultural in 1988 (when Livioco offered
it to DAR) to residential by 2002 (allegedly due to the eruption of Mt.
Pinatubo).nad Both courts erred in treating the land as residential and
accepting the change in the character of the property, without any proof that
authorized land conversion had taken place.

In expropriation cases (including cases involving lands for agrarian reform),

the property's character refers to its actual use at the time of
taking,69cralaw not its potential uses.70cralaw Respondent himself admitted
that his property was agricultural at the time he offered it for sale to DAR in
1988. In his letter to the DAR in 1988, respondent manifested that his land
is agricultural and suitable for agricultural purposes, although it stood
adjacent to residential properties.71cralaw Moreover, it has been conclusively
decided by final judgment in the earlier cases72cralaw filed by respondent
that his property was validly acquired under RA 6657 and validly distributed
to agrarian reform beneficiaries. Since the coverage of RA 6657 only extends
to agricultural lands, respondent's property should be conclusively treated as
an agricultural land and valued as such.

The lower courts erred in ruling that the character or use of the property has
changed from agricultural to residential, because there is no allegation or
proof that the property was approved for conversion to other uses by DAR.
It is the DAR that is mandated by law to evaluate and to approve land use
conversions73cralaw so as to prevent fraudulent evasions from agrarian
reform coverage. Even reclassification74cralaw and plans for
expropriation75cralaw by local government units (LGUs) will not ipso facto
convert an agricultural property to residential, industrial or commercial.
Thus, in the absence of any DAR approval for the conversion of respondent's
property or an actual expropriation by an LGU, it cannot be said that the
character or use of said property changed from agricultural to residential.
Respondent's property remains agricultural and should be valued as such.
Hence, the CA and the trial court had no legal basis for considering the
subject property's value as residential.

Respondent's evidence of the value of his land as residential property (which

the lower courts found to be preponderant) could, at most, refer to the
potential use of the property. While the potential use of an expropriated
property is sometimes considered in cases where there is a great
improvement in the general vicinity of the expropriated property, 76cralaw it
should never control the determination of just compensation (which appears
to be what the lower courts have erroneously done).nad The potential use of
a property should not be the principal criterion for determining just
compensation for this will be contrary to the well-settled doctrine that the
fair market value of an expropriated property is determined by its character
and its price at the time of taking, not its potential uses. If at all, the
potential use of the property or its "adaptability for conversion in the future
is a factor, not the ultimate in determining just compensation." 77cralaw

The proper approach should have been to value respondent's property as an

agricultural land, which value may be adjusted in light of the improvements
in the Municipality of Mabalacat. Valuing the property as a residential land
(as the lower courts have done) is not the correct approach, for reasons
explained above. It would also be contrary to the social policy of agrarian
reform, which is to free the tillers of the land from the bondage of the soil
without delivering them to the new oppression of exorbitant land valuations.
Note that in lands acquired under RA 6657, it is the farmer-beneficiaries who
will ultimately pay the valuations paid to the former land owners (LBP
merely advances the payment).nad78cralaw If the farmer-beneficiaries are
made to pay for lands valued as residential lands (the valuation for which is
substantially higher than the valuation for agricultural lands), it is not
unlikely that such farmers, unable to keep up with payment amortizations,
will be forced to give up their landholdings in favor of the State or be driven
to sell the property to other parties. This may just bring the State right back
to the starting line where the landless remain landless and the rich acquire
more landholdings from desperate farmers.

The CA also erroneously considered the Mt. Pinatubo eruption in 1991 as

converting the use for respondent's property from agricultural to residential.
We find no basis for the appellate court's conclusion. First, as already
explained, there was no conversion order from DAR, or even an application
for conversion with DAR, to justify the CA's decision to treat the property as
residential. Second, respondent himself testified that his property was not
affected by the volcanic ashfall,79cralaw which can only mean that its nature
as an agricultural land was not drastically affected. The Mt. Pinatubo
eruption only served to make his property attractive to government agencies
as a resettlement area, but none of these government plans panned out;
hence, his property remained agricultural. Third, the circumstance that
respondent's property was surrounded by residential subdivisions was
already in existence when he offered it for sale sometime between 1987 and
1988. The VOS form that respondent accomplished described his property as
being located adjacent to residential subdivisions. It was not therefore a
drastic change caused by volcanic eruption. All together, these
circumstances negate the CA's ruling that the subject property should be
treated differently because of the natural calamity.
As to the price: Applying Section 17 of RA 6657

The trial and appellate courts also erred in disregarding Section 17 of RA

665780cralaw in their determination of just compensation. Section 17 of RA
6657 provides:chanroblesvirtuallawlibrar

Sec. 17. Determination of Just Compensation. - In determining just

compensation, the cost of acquisition of the land, the current value of the
like properties, its nature, actual use and income, the sworn valuation by the
owner, the tax declarations, and the assessments made by government
assessors shall be considered. The social and economic benefits contributed
by the farmers and the farmworkers and by the Government to the property
as well as the non-payment of taxes or loans secured from any government
financing institution on the said land shall be considered as additional factors
to determine its valuation.

Jurisprudence is replete with reminders to special agrarian courts to strictly

adhere to the factors set out in Section 17 of RA 6657. 81cralaw

By issuing its April 2, 2003 Order requiring the reception of additional

evidence, the trial court revealed its awareness of the importance of
adhering to Section 17 of RA 6657. It recognized that the evidence
presented by the parties were insufficient to arrive at the just compensation
and that the necessary evidence were unavailable for its consideration. For
some reason, however, the trial court proceeded to rule on the case without
actually receiving such relevant evidence. Instead, the trial court, as
affirmed by the CA, ruled in favor of respondent based on preponderance of
evidence, regardless of the fact that the evidence presented by respondent
were not really relevant to the factors mentioned in section 17 of RA 6657.

The CA ruled that the trial court took into account all the factors in Section
17 of RA 6657. We disagree. Going over the factors in Section 17, it is clear
that almost all were not properly considered and some positively ignored.
For instance: (a) The "cost of acquisition" was not even inquired into. It
would not have been difficult to require respondent to present evidence of
the property's price when he acquired the same. (b) As to the "nature" of
the property, it has already been explained that the lower courts erroneously
treated it as residential rather than agricultural. (c) Also, no heed was given
to the "current value of like properties." Since respondent's property is
agricultural in nature, "like properties" in this case would be agricultural
lands, preferably also sugarcane lands, within the municipality or adjacent
municipalities. But the chief appraiser of the Rural Bank of Mabalacat
testified that he considered the value of adjacent residential properties, not
"like properties" as required under the law. Comparing respondent's
agricultural property to residential properties is not what the law envisioned.
(d) The factor of "actual use and income of the property" was also ignored;
what was instead considered was the property's potential use.

Thus, we cannot accept the valuation by the lower courts, as it is not in

accordance with Section 17 of RA 6657. It was based on respondent's
evidence which were irrelevant or off-tangent to the factors laid down by
Section 17.

However, we also cannot accept the valuation proffered by LBP for lack of
proper substantiation.

LBP argues that its valuation should be given more weight because it is the
recognized agency with expertise on the matter, but this same argument
had been struck down in Landbank of the Philippines v. Luciano. 82cralaw The
Court ruled that LBP's authority is only preliminary and the landowner who
disagrees with the LBP's valuation may bring the matter to court for a
judicial determination of just compensation. The RTCs, organized as special
agrarian courts, are the final adjudicators on the issue of just
compensation.83cralaw

We have ruled in several cases that in determining just compensation, LBP

must substantiate its valuation. In Luciano, the Court
held:chanroblesvirtuallawlibrar

LAND BANK's valuation of lands covered by CARL is considered only as an

initial determination, which is not conclusive, as it is the RTC, sitting as a
SAC, that should make the final determination of just compensation, taking
into consideration the factors enumerated in Section 17 of RA 6657 and the
applicable DAR regulations. Land Bank's valuation had to be substantiated
during the hearing before it could be considered sufficient in accordance with
Section 17 of RA 6657 and DAR AO No. x x x84cralaw

It is not enough that the landowner fails to prove a higher valuation for the
property; LBP must still prove the correctness of its claims. 85cralaw In the
absence of such substantiation, the case may have to be remanded for the
reception of evidence.86cralaw

In the case at bar, we find that LBP did not sufficiently substantiate its
valuation. While LBP insists that it strictly followed the statutory provision
and its relevant implementing guidelines in arriving at its valuation, the
Court notes the lack of evidence to prove the veracity of LBP's claims. LBP
merely submitted its computation to the court without any evidence on
record, whether documentary or testimonial, that would support the
correctness of the values or data used in such computation.

LBP presented two of its officials, but their testimonies were hardly of any
use. The first witness only testified that she prepared the documents,
computed the value, and had the same approved by her superior. The other
testified that LBP follows Section 17 of RA 6657 and the relevant
administrative orders in arriving at its valuations. LBP also offered in
evidence the Claims Valuation and Processing Form "to show the total
valuation"87cralaw of the property. The effort was however futile because
LBP did not prove the correctness of the values or data contained in the said
Form. The computation in the Form may be mathematically correct, but
there is no way of knowing if the values or data used in the computation are
true. For this Court to accept such valuation would be jumping to a
conclusion without anything to support it.88cralaw

Remand of the case

Given that both parties failed to adduce evidence of the property's value as
an agricultural land at the time of taking, it is premature for the Court to
make a final decision on the matter. The barren records of this case leave us
in no position to resolve the dispute. Not being a trier of facts, the Court
cannot also receive new evidence from the parties that would aid in the
prompt resolution of this case. We are thus constrained to remand the case
to the trial court for the reception of evidence and determination of just
compensation in accordance with Section 17 of RA 6657.

Guidelines in the remand of the case

The trial court should value the property as an agricultural land.

It is reminded to adhere strictly to the doctrine that just compensation must

be valued at the time of taking. The "time of taking"89cralaw is the time
when the landowner was deprived of the use and benefit of his property,
such as when title is transferred to the Republic. In the instant case, the
records are silent as to the date when title was transferred to the Republic.
However, we can take guidance from the findings contained in the final and
executory decision in CA-GR SP No. 45486, which ruled on the validity of the
DAR acquisition and is binding on both Livioco and LBP. The said Decision
states that between 1993 and 1994, "the Republic[,] through DAR[,] took
possession of the subject portion of [Livioco's] land and awarded the same
to [agrarian reform beneficiaries] who were issued Certificates of Land
Ownership Award sometime in 1994."90cralaw
So as not to lose time in resolving this issue, the Court declares that the
evidence to be presented by the parties before the trial court for the
valuation of the property must be based on the values prevalent in 1994 for
like agricultural lands. The evidence must conform to Section 17 of RA 6657
and, as far as practicable, to DAR Administrative Order No. 6, series of
1992, as amended by DAR Administrative Order No. 11, series of
1994.91cralaw

Given the expertise of the DAR on the matter, due reliance on DAR
Administrative Orders is encouraged; but, as the Administrative Orders
themselves recognize, there are situations where their application is not
practicable or possible. If the cited factors in the DAR Administrative Order
are absent, irrelevant, or unavailable, the trial court should exercise judicial
discretion and make its own computation of the just compensation based on
the factors set in Section 17 of RA 6657.

The trial court may impose interest on the just compensation 92cralaw as may
be warranted by the circumstances of the case and based on prevailing
jurisprudence.

The trial court is reminded that the practice of earmarking funds and
opening trust accounts has been rejected by the Court for purposes of
effecting payment;93cralaw hence, it must not be considered as valid
payment.

In the event that the respondent had already withdrawn the amount
deposited in the LBP as required by the trial court's March 29, 2004
Order,94cralaw the withdrawn amount should be deducted from the final land
valuation to be paid by LBP.

In case the release required by the trial court's March 29, 2004 Order has
not yet been effected, the trial court's first order of business should be to
require LBP's immediate compliance therewith. 95cralaw

WHEREFORE, premises considered, the petition is DENIED insofar as it seeks

to have the Land Bank of the Philippines' valuation of the subject property
sustained. The assailed August 30, 2005 Decision of the Court of Appeals
and its December 5, 2005 Resolution in CA-G.R. SP No. 83138 are
REVERSED and SET ASIDE for lack of factual and legal basis. Civil Case No.
10405 is REMANDED to Branch 56 of the Regional Trial Court96cralaw of
Angeles City for reception of evidence on the issue of just compensation. The
trial court is directed to determine the just compensation in accordance with
the guidelines set in this Decision. The trial court is further directed to
conclude the proceedings and to submit to this Court a report on its findings
and recommended conclusions within sixty (60) days from notice of this
Decision.97cralaw

SO ORDERED.

36.

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
HEIRS OF JESUS ALSUA, represented by BIBIANO C.
SABINO, Respondents.
G.R. No. 211351               February 4, 2015

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated

October 31, 2013 and the Resolution3 dated February 18, 2014 of the Court
of Appeals (CA) in CA-G.R. SP No. 127483, fixing the just compensation for
respondents' 47.4535-hectare (ha.) land at ₱2,465,423.02, less the initial
valuation already paid in the amount of Pl,369,708.02, with legal interest at
the rate of 12% per annum (p.a.) from November 13, 2001 to June 30,
2013, and 6% p.a. from July 1, 2013 until full satisfaction, using the formula
stated in Department of Agrarian Reform (DAR) Administrative Order (AO)
No. 5, series of 1998.4

The Facts

Jesus Alsua (Jesus) owned a 62.1108 has. parcel of unregistered agricultural

land known as Lot No. 8882, Cad-201, situated in Malidong, Pioduran, Albay,
covered by Tax Declaration No. 99-13-001-00675 in his name.6

On March 6, 1994, respondents Heirs of Jesus Alsua and their representative

Bibiano C. Sabino (respondents) voluntarily offered to sell 7 the entire parcel
of land to the government under Republic Act No. (RA) 6657, 8 as amended,
otherwise known as the "Comprehensive Agrarian

Reform Law of 1988," but only 47.4535 has. thereof, consisting of 43.7158
has. of cocoland and 3.7377 has. of unirrigated riceland (subject lands),
were acquired.9

Upon receipt from the DAR of the Claim Folder (CF) on April 20, 2001, albeit
containing incomplete documents, petitioner Land Bank of the Philippines
(LBP) valued the subject lands at 1,369,708.0210 (LBP’s valuation) using the
formula11 stated in DAR AO No. 5, series of 1998, as follows:

Cocoland 43.7158 ha. x ₱29,018.46 ₱1,268,565.19

Unirrigated Riceland 3.7377 ha. x 27,060.18 101,142.83

12

₱1,369,708.02
The necessary documents were completed only in September 2001, 13 hence,
the CF was considered to have been received only on the latter date, 14 and
the LBP’s valuation approved on September 25, 2001. 15

The DAR then offered to respondents the LBP’s valuation as just

compensation for the lands, but the latter rejected the valuation. 16 Thus, the
LBP was prompted to deposit the said amount in cash and in Agrarian
Reform Bonds in respondents’ name.17

After summary administrative proceedings for the determination of just

compensation, docketed as DARAB Case No. 05-01-0059-A’-2001, the
Provincial Agrarian Reform Adjudicator (PARAD), in a Decision 18 dated
January 29, 2004, fixed the value of the subject lands at ₱5,479,744.15. The
LBP moved for reconsideration but was denied in a Resolution 19 dated March
11, 2004. Dissatisfied with the PARAD’s valuation, the LBP filed a
petition20 for determination of just compensation before the Regional Trial
Court of Legazpi City, Branch 3 (RTC), docketed as Agrarian Case No. 04-02,
averring that the PARAD’s valuation was excessively high and is contrary to
the legally prescribed factors in determining just compensation. 21

On the other hand, respondents maintained the correctness of the PARAD’s

valuation, insisting that it considered all the factors that may be used as
basis in order to arrive at a just and equitable valuation of the subject lands,
including their potential use and corresponding increase in value. 22

In the interim, or on November 29, 2001, the Register of Deeds of Albay

issued Original Certificates of Title (OCT) Nos. C-27721 23 and 2772224 in the
names of the agrarian reform beneficiaries.

During the pendency of the proceedings, the RTC appointed the Agrarian
Operations Center of the LBP to conduct a reinvestigation of the gross
production and selling price data within the 12-month period preceding June
30, 2009.25 On July 4, 2011, the Commissioner submitted his Report 26 dated
July 1, 2011, finding that the subject cocoland has a density of 80 trees per
hectare with more than 35 years of age.27 Considering the lack of data from
the landowners who were absent during the ocular inspection, and after
ascertaining that the coconut production for the 12-month period prior to
June 30, 2009 based on the industry data (PCA data) was unattainable in
the area since the coconut trees were still recovering from the impact of
typhoons Milenyoand Reming which hit the country in September and
November 2006, respectively,28 he merely attached the production and
selling price data from the Philippine Coconut Authority (PCA) for the
concerned period.
 The RTC Ruling

In a Decision29 dated August 17, 2012, the RTC rejected the valuation of

both the LBP and the PARAD and fixed the just compensation for the subject
lands at ₱4,245,820.5330 as follows:

LV for Cocoland = ₱3,654,285.91

LV for Riceland = 350,072.98

LV for Trees = 241, 461.64

31
₱4,245,820.53
================

The RTC used the formula under DARAO No. 5, series of 1998, as amended,
i.e., LV = (CNI x 0.9) + (MV x 0.1), utilizing production data or values within
the 12-month period preceding the presumptive date of taking on June 30,
2009 pursuant to DAR AO No. 1, series of 2010, which "currentizes" the
bases for the production data and values and does away with the payment of
interest that will compensate for the loss of purchasing power due to
inflation. It explained that to reckon the taking from November 29, 2001, or
the date the OCTs were issued in favor of the beneficiaries, pursuant to the
ruling in LBP v. Dumlao,36 will be unjust to the landowners, considering the
diminution in the purchasing power of the peso. On the other hand, while
interests may be imposed for the delay in the payment of the compensation,
such imposition will be unjust to the State which would be unduly penalized
for the "steadfastness of the implementors of the agrarian reform program
in their administrative determination of compensation that the landowners
had repudiated."

The LBP moved for reconsideration38 which was, however, denied by the RTC
in an Order dated October 25, 2012, prompting it to elevate its case to the
CA.

The CA Ruling

In a Decision dated October 31, 2013, the CA fixed the just compensation of

the subject lands at 2,465,423.02, less the initial valuation already paid in
the amount of 1,369,708.02,plus legal interest at the rate of 12% p.a. from
November 13, 2001 to June 30, 2013, and at 6% p.a. from July 1, 2013
until full satisfaction.41
The CA affirmed the applicability of the provisions of DAR AO No. 5, series of
1998 in the computation of the just compensation for the subject lands but
declared that the RTC erred infixing the date of taking on June 30, 2009
(i.e., the presumptive date of taking pursuant to DAR AO No. 1, series of
2010).42 It pointed out that the taking of lands under the agrarian reform
program partakes of the nature of an expropriation proceeding; thus, just
compensation should be pegged at the price or value of the property at the
time it was taken from the owner and not its value at the time of rendition of
judgment or the filing of the complaint if the government takes possession
of the land before the institution of expropriation proceedings. 43

Separately, however, the CA used different values from that employed by

the LBP in computing the capitalized net income (CNI) for purposes of
arriving at the land value (LV) of the 43.7158 has. cocoland as the same
purportedly "did not reflect the true income generating capacity of the
property." Instead, the CA based the selling price on the average farm gate
prices of copra for the four-year period from 2000 to 2003. On the other
hand, while it found that the RTC correctly used the one-factor formula in
computing the LV of the unirrigated riceland, i.e., MV x 2, considering the
lack of available information on Comparable Sales, it used the market value
(MV) per tax declaration and grossed it up with the location adjustment
factor and the applicable Regional Consumer Price Index in accordance with
Item II (A.9) of DAR AO No. 5, series of 1998. Accordingly, it valued the
subject lands as follows:

LV for Cocoland = ₱1,936,892.34

LV for Unirrigated Riceland = 287,069.04

LV for Trees = 241,461.64

₱2,465,423.02

Aggrieved, the LBP filed a motion for reconsideration which was, however,

denied in a Resolution dated February 18,2014, hence, the instant petition.

The Issue Before the Court

The essential issue for the Court’s resolution is whether or not the CA
committed any reversible error in fixing the just compensation for the
subject lands.

The Court’s Ruling

Settled is the rule that when the agrarian reform process is still incomplete,
such as in this case where the just compensation due the landowner has yet
to be settled, just compensation should be determined and the process be
concluded under RA 6657.

For purposes of determining just compensation, the fair market value of an

expropriated property is determined by its character and its price at the time
of taking,50 or the "time when the landowner was deprived of the use and
benefit of his property,"51 such as when title is transferred in the name of the
beneficiaries, as in this case. In addition, the factors enumerated under
Section 17 of RA 6657, i.e., (a) the acquisition cost of the land, (b) the
current value of like properties, (c) the nature and actual use of the property
and the income therefrom, (d) the owner’s sworn valuation, (e) the tax
declarations, (f) the assessment made by government assessors, (g) the
social and economic benefits contributed by the farmers and the
farmworkers, and by the government to the property, and (h) the non-
payment of taxes or loans secured from any government financing institution
on the said land, if any, must be equally considered.

In this case, both the RTC and the CA applied the provisions of DAR AO No.
5, series of 1998 in computing the just compensation for the subject lands.
Under the said AO, there shall be one basic formula for the valuation of
lands, i.e., LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), where:

LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration

The above-stated formula shall be used only if all the three factors i.e., CNI,
CS, and MV, are present, relevant, and applicable. In case one or two factors
are not present, the said AO provides for alternate formulas. 53

Records show that the comparable sales (CS) were found to be

Unavailable54 so the alternative formula, i.e., LV = (CNI x 0.9) + (MV x 0.1),
was used by the LBP, the RTC, and the CA in fixing the just compensation
for the subject cocoland. On the other hand, they used the one-factor
formula under the said AO, i.e., LV = MV x 2, in valuing the subject riceland
considering the lack of comparable sales (CS) and production data to arrive
at the capitalized net income (CNI). It appears, however, that both the RTC
and the CA made variations from the formula under the said AO.
A. RTCAND CA VALUATION OF THE SUBJECT COCOLAND.

For its part, the RTC used production data or values within the 12-month
period preceding the presumptive date of taking of the subject cocoland on
June 30, 2009, in accordance with DAR AO No. 1, series of 2010. It is
significant to point out, however, that the said AO only applies to tenanted
rice and corn lands acquired under Presidential Decree No. 27 and Executive
Order No. (EO) 228, which scenario does not obtain in this case. Besides,
the long-standing rule is that an expropriated property must be valued at
the time of taking, in this case, upon the issuance of the OCTs in the name
of the beneficiaries on November 29, 2001. Hence, the said AO cannot be
made to obtain and the RTC’s valuation cannot be sustained.

On the other hand, while the CA correctly held that just compensation shall
be the price or value of the property at the time it was taken from the owner
and appropriated by the government, or on November29, 2001, it, departed
from the parameters prescribed under DAR AO No. 5, series of 1998 in
computing the capitalized net income (CNI)in order to arrive at the land
value (LV) for the subject lands. Particularly, under the foregoing AO, the
selling price (SP) for purposes of computing the capitalized net income
(CNI)shall be "the average of the latest available 12-months' selling prices
prior to the date of receipt of the CF by LBP for processing, such prices to be
secured from the Department of Agriculture (DA) and other appropriate
regulatory bodies or, in their absence, from the Bureau of Agricultural
Statistics. x x x."

In rejecting the LBP’s proposed valuation which used the prices of copra
from July 2000 to June 2001 per certification from the PCA, the CA opined
that the data and values used therein did not reflect the true income
generating capacity of the property.62 Instead, it used the data for the four-
year period from 2000 to 2003, thus, including data or values beyond the
time of taking. Consequently, the Court similarly cannot adopt the CA’s
computation.

B. RTCAND CA VALUATION OF THE SUBJECT RICELAND.

The RTC used the one-factor formula under DAR AO No. 5, series of 1998,
utilizing unit market value (UMV) taken from the Schedule of Base Unit
Market Value63 as of 2002, pursuant to the pertinent ordinance of the
Sangguniang Panlalawigan of Albay. Having been based on data or values
beyond the time of taking on November 29, 2001, the Court cannot accept
the RTC’s valuation. To reiterate, just compensation is the fair market value
of an expropriated property at the time of taking,65 in this case, the value of
the subject lands upon the issuance of the OCTs in the name of the
beneficiaries on November 29, 2001.

For its part, the CA used the same formula but utilized the unit market value
(UMV) from the Schedule of Unit Market Value for Albay effective 2000 in
the amount of ₱34,690.00, and then grossed it up with the location
adjustment factor and the applicable Regional Consumer Price Index in
accordance with Item II (A.9) of DAR AO No. 5, series of 1998. Considering
that the taking took place on November 29, 2001, the UMV should be that
corresponding for the year 2001. However, records are bereft of showing
that the UMV for the year 2000 is the same UMV obtaining for the year
2001. Thus, on this score, the CA’s computation must equally be rejected.

C. RTCAND CA VALUATION OF THE TREES INCLUDED IN THE JUST

COMPENSATION.

It is relevant to point out that the RTC’s valuation of the standing trees in
the amount of ₱241,461.64, as affirmed by the CA, appears to have been
pegged according to the prevailing values within the 12-month period
preceding June 30, 2009. As mentioned, such date was long after the
subject lands’ taking on November 29,2001 and, hence, can neither be
countenanced.

D. THE PROPER VALUATION AND REMAND GUIDELINES.

In view of the foregoing disquisitions, the just compensation for the subject
lands should be computed based on the factors stated in Section 17 of RA
6657, as amended. However, the Court has pored over the records and
observed that the only factors considered by both courts in determining the
just compensation were (a) the nature and actual use of the property, and
the income therefrom, as well as (b) the market value of the subject
lands, without a showing that the other factors under the said section were
even taken into account or, otherwise, found to be inapplicable, contrary to
what the law requires.

Similarly, the Court has gone over the LBP’s findings and computation, as
contained in the Claims and Valuation and Processing Form, and is likewise
unable to adopt the same since it was partly based on the field investigation
report72 which admittedly did not consider (a) the economic and social
benefits of the subject lands, and (b) the current value of like properties
within the vicinity. To reiterate, the factors enumerated under Section 17 of
RA 6657 must be considered in computing just compensation. Accordingly,
the Court finds a need to remand Agrarian Case No. 04-02 to the RTC for the
determination of just compensation in accordance with these factors.
Relative thereto, the RTC is further directed to observe the following
guidelines in the remand of the case:

1. Just compensation must be valued at the time of taking, or the

"time when the landowner was deprived of the use and benefit of his
property, in this case, upon the issuance of OCT Nos. C-27721 and
27722 in the names of the agrarian reform beneficiaries on November
29, 2001. Hence, the evidence to be presented by the parties before
the trial court for the valuation of the subject lands must be based on
the values prevalent on such time of taking for like agricultural lands. 77

2. The evidence must conform to Section 17 of RA 6657, as amended,

prior to its amendment by RA 9700. It bears pointing out that while
Congress passed RA 9700 on July 1, 2009, amending certain
provisions of RA 6657, as amended, among them, Section 17, and
declaring "[t]hat all previously acquired lands wherein valuation is
subject to challenge by landowners shall be completed and finally
resolved pursuant to Section 17 of [RA 6657], as amended," the law
should not be retroactively applied to pending claims/cases. In fact,
DAR AO No. 2, series of 2009 implementing RA 9700 expressly
excepted from the application of the amended Section 17 all claim
folders received by LBP prior to July1, 2009, which shall be valued in
accordance with Section 17 of RA 6657, as amended, prior to its
further amendment by RA No. 9700.

Records show that the CF from the DAR was actually received by the
LBP on April 20, 2001, but the latter considered the same as received
only later in September 2001 with the completion of the necessary
documents. Hence, Section 17 of RA 6657, as amended, prior to its
further amendment by RA 9700, should be the basis for the valuation
of the subject lands. In the event that the respondents had already
withdrawn the amount deposited by the LBP, the withdrawn amount
should be deducted from the final land valuation to be paid by LBP.

3. The RTC may impose interest on the just compensation as may be

warranted by the circumstances of the case. In previous cases, the
Court has allowed the grant of legal interest in expropriation cases
where there is delay in the payment since the just compensation due
to the landowners was deemed to be an effective forbearance on the
part of the State.85 Legal interest shall be pegged at the rate of 12%
interest p.a. from the time of taking until June 30, 2013 only.
Thereafter, or beginning July 1, 2013, until fully paid, interest shall be
at 6% p.a. in line with the amendment introduced by BSP-MB Circular
No. 799, series of 2013.
 4. Finally, the RTC is advised that while it should be mindful of the
different formulae created by the DAR in arriving at just compensation,
it is not strictly bound to adhere thereto if the situations before it do
not warrant their application. As held in LBP v. Heirs of Maximo
Puyat:88

[T]he determination of just compensation is a judicial function; hence,

courts cannot be unduly restricted in their determination thereof. To do so
would deprive the courts of their judicial prerogatives and reduce them to
the bureaucratic function of inputting data and arriving at the valuation.
While the courts should be mindful of the different formulae created by the
DAR in arriving at just compensation, they are not strictly bound to adhere
thereto if the situations before them do not warrant it. Apo Fruits
Corporation v. Court of Appeals [(565 Phil. 418 (2007)] thoroughly discusses
this issue, to wit:

[T]he basic formula and its alternatives–administratively determined (as it is

not found in Republic Act No. 6657, but merely set forth in DARAO No. 5,
Series of 1998)– although referred to and even applied by the courts in
certain instances, does not and cannot strictly bind the courts. To insist that
the formula must be applied with utmost rigidity whereby the valuation is
drawn following a strict mathematical computation goes beyond the intent
and spirit of the law. The suggested interpretation is strained and would
render the law inutile. Statutory construction should not kill but give life to
the law. As we have established in earlier jurisprudence, the valuation of
property in eminent domain is essentially a judicial function which is vested
in the regional trial court acting as a SAC, and not in administrative
agencies. The SAC, therefore, must still be able to reasonably exercise its
judicial discretion in the evaluation of the factors for just compensation,
which cannot be arbitrarily restricted by a formula dictated by the DAR, an
administrative agency. Surely, DAR AO No. 5 did not intend to straightjacket
the hands of the court in the computation of the land valuation. While it
provides a formula, it could not have been its intention to shackle the courts
into applying the formula in every instance. The court shall apply the
formula after an evaluation of the three factors, or it may proceed to make
its own computation based on the extended list in Section 17 of Republic Act
No. 6657, which includes other factors[.] x x x.

WHEREFORE, the petition is DENIED insofar as it seeks to sustain the

valuation of the subject lands made by petitioner Land Bank of the
Philippines. The Decision dated October 31, 2013 and the Resolution dated
February 18, 2014 rendered by the Court of Appeals in CA-G.R. SP No.
127483, fixing the just compensation for respondents' 47.4535 hectares of
land at ₱2,465,423.02, less the initial valuation already paid in the amount
of Pl ,369, 708.02, plus legal interest as afore-discussed, which did not fully
consider the factors enumerated under Section 17 of Republic Act No. 6657,
as amended, are hereby SET ASIDE. Accordingly, Agrarian Case No. 04-02 is
REMANDED to the Regional Trial Court of Legazpi City, Branch 3 for the
proper determination of just compensation in accordance with the guidelines
set in this Decision. The trial court is directed to conduct the proceedings in
said case with reasonable dispatch and to submit to the Court a report on its
findings and recommended conclusions within sixty (60) days from notice of
this Decision.

SO, ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

37.

Heirs of Feliciano vs Landbank of the Philippines GR No. 215290,

January 11, 2017
PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari1 assailing the Amended

Decision2 dated October 24, 2014 of the Court of Appeals (CA) in CA-G.R. SP
No. 122761, directing respondent the Land Bank of the Philippines (LBP) to
pay petitioner, Victoria Aida Reyes Espiritu (Espiritu) the amount of
P1,892,471.01, representing the interest due on the balance of the revalued
just compensation which accrued from July 1, 2009 until December 13,
2011, with interest at the rate of 6% per annum (p.a.) from the finality of
the Decision until full payment.

The Facts

Petitioners heirs of Pablo Feliciano, Jr., namely: Lourdes Feliciano Tudla,

Gloria Feliciano Caudal, Gabriela Feliciano Bautista, Angela Feliciano Lucas,
Donna Celeste Feliciano-Gatmaitan, Cynthia Celeste Feliciano, and Hector
Reuben Feliciano (Feliciano heirs) are co-owners of a 300 hectare (ha.)
parcel of agricultural land situated at F. Simeon, Ragay, Camarines Sur,
covered by Transfer Certificate of Title (TCT) No. RT 3080 (4120). 3

In 1972, a 135.2583 ha. portion of the afore-mentioned land was classified

as unirrigated riceland (subject land), and placed under the coverage 4 of
Presidential Decree No. (PD) 27.5 The Certificates of Land Transfer were
distributed to the 84 tenant-beneficiaries in 1973 who were issued
Emancipation Patents in 1989.6 The claim folder covering the subject land
was received by the LBP from the Department of Agrarian Reform (DAR) on
December 2, 1997.7 The DAR valued the subject land at P1,301,498.09,
inclusive of interests, but the Feliciano heirs rejected the said valuation,
prompting the LBP to deposit the said amount in the latter's name on
January 26, 1998.8 On March 24, 2000, the said amount was released to
them.9

After the summary administrative proceedings for the determination of just

compensation, the Office of the Provincial Agrarian Reform Adjudicator of
Camarines Sur, Branch I rendered a Decision10 dated September 28, 2001,
fixing the value of the subject land at P4,641,080.465 or an average of
P34,302.375/ha.11

On November 22, 2001, the LBP filed a petition 12 for the determination of
just compensation before the Regional Trial Court of Naga City, Branch 23
(RTC), docketed as Civil Case No. 2001-0359, which was initially dismissed,
but eventually reinstated.13
In the interim, the Feliciano heirs assigned their rights over the just
compensation claims to Espiritu.14

The RTC Proceedings

In an Order dated May 4, 2011, the RTC directed the LBP to revalue the
subject land in accordance with DAR Administrative Order No. (AO) 1, Series
of 201015 (DAR AO 1, Series of 2010). In compliance therewith, the LBP
revalued the land at P7,725,904.05. Espiritu accepted the said amount but
insisted on petitioners' entitlement to twelve percent (12%) interest p.a. on
the revalued amount on the ground of unreasonable delay in the payment
thereof.16

In a Decision17 dated September 19, 2011, the RTC (a) fixed the just
compensation for the subject land at P7,725,904.05; and (b) directed the
LBP (i) to pay Espiritu the said amount, less amounts already paid to and
received by the Feliciano heirs, and (ii) to pay 12% interest p.a. on the
unpaid balance of the just compensation, computed from January 1, 2010
until full payment.18 It observed that the subject land, which was
expropriated pursuant to PD 27, fell under the coverage of DAR AO 13,
Series of 1994,19 DAR AO 2, Series of 2004, 20 and DAR AO 6, Series of
200821 (DAR AO 6-2008; collectively, DAR AOs) that provided for the
payment of 6% annual interest for any delay in the payment of just
compensation. Since DAR AO 06-2008 was effective only until December 31,
2009, the RTC imposed 12% interest p.a. on the unpaid just
compensation22 from January 1, 2010 until full payment. 23

Both parties moved for reconsideration, 24 which were denied in an

Order25cralawred dated November 24, 2011, modifying the reckoning of the
12% interest p.a. from the finality of the Decision until its satisfaction.

Aggrieved, the Feliciano heirs, represented by Espiritu (collectively,

petitioners), elevated the matter before the CA.26chanroblesvirtuallawlibrary

The CA Ruling

In a Decision27 dated March 17, 2014, the CA fixed the just compensation for
the subject land at P7,725,904.05, plus legal interest at the rate of twelve
percent (12%) p.a., computed from July 1, 2009 up to the finality of the
Decision, or the total amount of P8,316,876,97, and directed the LBP to pay
the said amount to Espiritu.28 It ruled that the DAR AOs are no longer
applicable to the instant case since the subject land was revalued based on
the July 1, 2009 values pursuant to DAR AO 1, Series of 2010. It further
held that interest at 12% p.a. was proper considering the delay in the
payment of just compensation. 29

Petitioners filed a motion for reconsideration 30 but the same was denied by
the CA in an Amended Decision31 dated October 24, 2014, which modified its
earlier ruling. The CA pointed out that since the LBP had already paid
petitioners the total amount of P7,725,904.05 on December 13, 2011, it is
only liable for the payment of 12% interest p.a., accruing from July 1, 2009
up to the said date, or the amount of P1,892,471.01. Accordingly, it ordered
the LBP to pay Espiritu the said amount, which shall thereafter earn interest
at the rate of six percent (6%) p.a. from the finality of the said Decision until
full payment.32 Hence, the instant petition.chanroblesvirtuallawlibrary

The Issue Before the Court

The essential issue for the Court's resolution is whether or not the CA's
determination of just compensation is correct.chanroblesvirtuallawlibrary

The Court's Ruling

Case law states that when the acquisition process under PD 27 is still
incomplete - such as in this case, where the just compensation due the
landowner has yet to be settled - just compensation should be determined
and the process be concluded under Republic Act No. (RA) 6657, 33 otherwise
known as the "Comprehensive Agrarian Reform Law of 1988." 34

For purposes of determining just compensation, the fair market

value of an expropriated property is determined by its character and
its price at the time of taking, or the time when the landowner was
deprived of the use and benefit of his property, such as when the title is
transferred in the name of the beneficiaries. In addition, the factors
enumerated under Section 17 of RA 6657, as amended, i.e., (a) the
acquisition cost of the land, (b) the current value of like properties, (c) the
nature and actual use of the property, and the income therefrom, (d) the
owner's sworn valuation, (e) the tax declarations, (f) the assessment made
by government assessors, (g) the social and economic benefits contributed
by the farmers and the farmworkers, and by the government to the
property, and (h) the non-payment of taxes or loans secured from any
government financing institution on the said land, if any, must be equally
considered.35

However, it bears pointing out that while Congress passed RA 970036 on

August 7, 2009, further amending certain provisions of RA 6657, as
amended, among them, Section 17, its implementing rules, i.e., DAR AO 2,
Series of 2009,37 clarified that the said law shall not apply to claims/cases
where the claim folders were received by the LBP prior to July 1,
2009.38 In such a situation, just compensation shall be determined in
accordance with Section 17 of RA 6657, as amended, prior to its
further amendment by RA 9700.39

In LBP v. Kho,40 the Court had succinctly explained the "cut-off rule" in the
application of RA 9700:
chanRoblesvirtualLawlibrary
It is significant to stress, however, that DAR AO 1, series of 2010 which was
issued in line with Section 31 of RA 9700 empowering the DAR to provide
the necessary rules and regulations for its implementation, became effective
only subsequent to July 1. 2009. Consequently, it cannot be applied in the
determination of just compensation for the subject land where the claim
folders were undisputedly received by the LBP prior to July 1, 2009, and, as
such, should be valued in accordance with Section 17 of RA 6657 prior to its
further amendment by RA 9700 pursuant to the cut-off date set under DAR
AO 2, series of 2009 (cut-off rule). Notably, DAR AO 1, series of 2010 did
not expressly or impliedly repeal the cut-off rule set under DAR AO 2, series
of 2009, having made no reference to any cut-off date with respect to land
valuation for previously acquired lands under PD 27 and EO 228 wherein
valuation is subject to challenge by landowners. Consequently, the
application of DAR AO 1, series of 2010 should be, thus, limited to those
where the claim folders were received on or subsequent to July 1, 2009.
(Emphases and underlining supplied)ChanRoblesVirtualawlibrary
Following the above dictum, since the claim folder covering the subject land
was received by the LBP on December 2, 1997, 41 or prior to July 1, 2009, the
RTC should have computed just compensation using pertinent DAR
regulations applying Section 17 of RA 6657 prior to its amendment by RA
9700 instead of adopting the new DAR issuance. While the RTC, acting as a
Special Agrarian Court (SAC), is not strictly bound by the different formula
created by the DAR since the valuation of property or the determination of
just compensation is essentially a judicial function which is vested with the
courts, and not with administrative agencies, 42 it must explain and justify in
clear terms the reason for any deviation from the prescribed factors and the
applicable formula.43

In this case, the Court has gone over the records and found that neither the
RTC nor the CA considered the date when the claim folder was received nor
explained their reasons for deviating from the DAR formula. Therefore, as it
stands, the RTC and the CA should have utilized the basic formula prescribed
and laid down in pertinent DAR regulations existing prior to the passage of
RA 9700, in determining the just compensation for the subject land.

Accordingly, while the parties did not raise as issue the improper application

of DAR AO 1, Series of 2010, the Court finds the need to remand the case
to the RTC for the determination of just compensation to ensure
compliance with the law, and to give everyone - the landowner, the
farmers, and the State - their due.44 To this end, the RTC is hereby
directed to observe the following guidelines in the remand of the case:

1. Just compensation must be valued at the time of taking, or the

time when the owner was deprived of the use and benefit of his property, in
this case, when emancipation patents were issued in the names of the
farmer beneficiaries in 1989. 45 Hence, the evidence to be presented by the
parties before the RTC for the valuation of the subject land must be based
on the values prevalent on such time of taking for like agricultural lands.46

2. Just compensation must be arrived at pursuant to the guidelines

set forth in Section 17 of RA 6657, as amended, prior to its
amendment by RA 9700. However, the RTC is reminded that while it
should take into account the different formula created by the DAR in arriving
at the just compensation for the subject land, it is not strictly bound thereto
if the situations before it do not warrant their application. 47 In any event,
should the RTC find the said guidelines to be inapplicable, it must clearly
explain the reasons for deviating therefrom, and for using other factors or
formula in arriving at the reasonable just compensation for the acquired
property.48

3. Interest may be awarded as may be warranted by the

circumstances of the case and based on prevailing jurisprudence. In
previous cases, the Court has allowed the grant of legal interest in
expropriation cases where there is delay in the payment since the just
compensation due to the landowners was deemed to be an effective
forbearance on the part of the State.49 Legal interest on the unpaid balance
shall be pegged at the rate of 12% p.a. from the time of taking in 1989
when Emancipation Patents were issued, until June 30, 2013 only.
Thereafter, or beginning July 1, 2013, until fully paid, the just compensation
due the landowners shall earn interest at the new legal rate of 6% p.a. 50 in
line with the amendment introduced by Bangko Sentral ng Pilipinas-
Monetary Board Circular No. 799, 51 Series of 2013.

For guidance of the bench, the bar, and the public, we reiterate the rule: Out
of regard for the DAR's expertise as the concerned implementing agency,
courts should henceforth consider the factors stated in Section 17 of RA
6657, as amended, as translated into the applicable DAR formulas in their
determination of just compensation for the properties covered by the said
law. If, in the exercise of their judicial discretion, courts find that a strict
application of said formulas is not warranted under the specific
circumstances of the case before them, they may deviate or depart
therefrom, provided that this departure or deviation is supported by a
reasoned explanation grounded on the evidence on record. In other words,
courts of law possess the power to make a final determination of just
compensation.52

WHEREFORE, the Amended Decision dated October 24, 2014 of the Court
of Appeals in CA-G.R. SP No. 122761 is REVERSED and SET ASIDE. Civil
Case No. 2001-0359 is hereby REMANDED to the Regional Trial Court of
Naga City, Branch 23 for reception of evidence on the issue of just
compensation in accordance with the guidelines set in this Decision. The trial
court is DIRECTED to conduct the proceedings in the said case with
reasonable dispatch, and to submit to the Court a report on its findings and
recommended conclusions within sixty (60) days from notice of this
Decision.

SO ORDERED., JJ., concur.chanRoblesvirtualLawlibr

Landbank of the Philippines vs Spouses Chu GR No. 192345, March 29, 2017

DEL CASTILLO, J.:

Petitioner Land Bank of the Philippines (LBP) is assailing the January 18,
2010 Decision1 of the Court of Appeals (CA) in CA G.R. SP No. 93518 over
the amount of just compensation awarded to respondents Esteban and
Cresencia Chu, as well as its May 24, 2010 Resolution 2 which denied LBP's
Motion for Reconsideration of the said Decision.

Factual Antecedents

Respondents were the registered owners of two parcels of agricultural land

located in San Antonio, Pilar, Sorsogon which were acquired by the
government pursuant to its agrarian reform program. 3 The first parcel of
land covered by Transfer Certificate of Title (TCT) Nos. T-27060 and 27062
and with an area of 14.9493 hectares (14.9493 has.) was acquired under
Presidential Decree No. 274 (PD 27-acquired land) and initially valued by the
LBP at ₱l77,657.98. 5 The second parcel of land covered by TCT No. T-27060
(pt.) was acquired under Republic Act No. 6657 6 (RA 6657-acquired
property) and has an area of 7.7118 hectares (7.7118 has.). LBP valued the
same at ₱263,928.57.7

Respondents rejected LBP's valuation; hence summary administrative

proceedings were conducted before the Provincial Agrarian Reform
Adjudication Board (PARAD) to determine the just compensation. The
administrative proceedings were docketed as Land Valuation Case No. LV-
30-'03 for the RA 6657-acquired property and Land Valuation Case No. LV-
48-'03 for the PD 27- acquired land.

Ruling of the Provincial Agrarian Reform Adjudicator

On April 11, 2003, the PARAD issued two separate Decisions 8 recomputing
the valuations arrived at by the LBP. The PARAD recomputed the value of
the RA 6657-acquired property at ₱1,542,360.00 (or ₱200,000.00/ha.)
based on the comparable sales transaction of similar nearby lots as well as
Municipal Resolution No. 79, series of2002, declaring Hacienda Chu as
industrial area. In addition, it considered the subject property's good
production, topography, and accessibility. As regards the PD 27-acquired
land, the PARAD valued the subject property at ₱983,663.94 using the
formula: Land Value= AGP x ASP x 2.5 (or Average Gross Production of 75.2
x Actual Support Price of ₱350.00 x 2.5).

LBP's Motion for Reconsideration was denied by the DARAB in its June 19,
2003 Order.9

Ruling of the Regional Trial Court (RTC) as Special Agrarian Court (SAC)

Dissatisfied, LBP filed a Petition for Determination of Just Compensation

before the RTC of Sorsogon City, Branch 52, docketed as Civil Case No.
2003- 7205.10

In its September 21, 2005 Decision,11 the RTC fixed the just compensation at
₱2,313,478.00 for the RA 6657-acquired property and ₱1,155,173.00 for the
PD 27-acquiredland.12

In arriving at these amounts, the RTC took cognizance of the factors

considered by the LBP and the PARAD. In addition, it considered the
"potentials" of the subject properties, to wit:

The Court considers the decision of the Provincial Adjudicator of Sorsogon,

the testimony of the witnesses presented by the Private Respondent namely
the Secretary of the Sangguniang Bayan and the Municipal Assessor of the
Municipality of Pilar, Sorsogon who testified on the Municipal
Ordinance/Resolution specifically declaring x x x the land of the private
respondents including the subject landholding x x x is the subject [of]
Municipal Expansion for Agri-Economic Cum Industrial Area. The Court also
consider[ed] the applicable law and jurisprudence on the matter in arriving
[at] the just compensation of the subject property. The Court further
consider[ed] the present economic condition of the country as well as the
present assessed value of the acquired property. The suqject property is
very near the industrial center that was planned by the local government
thus transforming the area adjacent to the acquired property into an
economic hub of the province of Sorsogon partly thru industrial program,
eco-tourism development and agricultural productivity into an Agri-Economic
Zone to serve as the backbone of a comprehensive and sustainable program
of community[;] thus it will provide enormom: livelihood opportunities and
tremendous economic multiplier effect not only for residents of barangay
San Antonio (Sapa) but also for the entire citizenry of Pilar, Sorsogon.

According to the answer filed by the private respondents, the property is

fully planted to coconut (TCT-T-27060) and only more or less 20 meters
away from the provincial road and is more or less half [a] kilometer away
from the barangay poblacion. These characteristics are likewise true [for]
TCT No. T- 27062. That the area covered under P.D. 27 yields an average of
73 sacks of clean palay per harvest while that covered under R.A. 6657 x x x
yields an average of 10 nuts per tree every 45 days at 110 fruit[-]bearing
trees per hectare. For all the foregoing potentials of the property, the Court
not only took into consideration the amount of just compensation fixed by
the Provincial Adjudicator of Sorsogon but further took into account such
potentials of the acquired property which can command a price of not less
than ₱l00,000.00 per hectare. The Provincial Adjudicator valued the 7.7118
hectares acquired under TCT No. T-27060 [at] ₱l,542,360.00 under R.A.
6657 while that portion acquired inside the property titled under TCT No. T-
27062 [at] ₱983,663.94 under P.D. 27 and considering the potentials of the.
land in terms of the enormous livelihood opportunities and tremendous
economic multiplier effect not only for the residents of [B]arangay San
Antonio but also the entire municipality of Pilar, Sorsogon, the Court further
valued the acquired property in the amount of ₱l00,000.00 per hectare.
Adding the value of the land in terms of the fair market value as determined
by the Provincial Adjudicator of Sorsogon, which includes the value of the
actual production of the coconut trees and the palay produced, to wit:
₱l,542,360.00 and ₱983,663.94 respectively and the potentials of the
property [at] ₱l00,000.00 per hectare or the value of ₱771,118.00 for the
7.7118 hectares and ₱l71,510.00 for the 1.7151 hectares, we get the total
of ₱2,313,478.00 as just compensation for the 7.7118 hectares and the just
compensation in the amount of ₱1,155,173.94 for the 1.7151 hectares. 13

The dispositive portion of the RTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Fixing the amount of TWO MILLION THREE HUNDRED THIRTEEN
THOUSAND FOUR HUNDRED SEVENTY EIGHT (₱2,313,478.00) 14 Pesos,
Philippine Currency for the 7.7118 15 hectares and the amount of ONE
MILLION ONE HUNDRED FIFTY FIVE THOUSAND AND ONE HUNDRED
SEVENTY THREE (₱l,155,173.00) Pesos, Philippine currency for the 1.7151
hectares,16 to be the just compensation of said acquired portions which
agricultural land are situated [in] San Antonio (Sapa) Pilar, Sorsogon,
covered by TCT No. T-27060 and TCT No. T-27062 in the name of the Sps.
Esteban and Cresencia Chu, which property was taken by the government
pursuant to the Agrarian Reform Program provided by R.A. 6657.

2) Ordering the Petitioner Land Bank of the Philippines to pay the Private
Respondents the total amount of just compensation in the sum of THREE
MILLION FOUR HUNDRED SIXTY EIGHT THOUSAND AND SIX HUNDRED
FIFTY ONE (₱3,468,651.00) Pesos, Philippine currency, in the manner
provided by R.A. No. 6657 by way of full payment of the said just
compensation after deducting whatever amount previously received by the
Private Respondents from the Petitioner Land Bank as part of the just
compensation.

3) Ordering the Private Respondents to pay whatever deficiency in the

docket fees to the Clerk of Court based on the valuation fixed by the Court.

4) Without pronouncement as to cost

SO ORDERED.17

LBP's motion for reconsideration 18 was denied by the RTC in its Order 19 dated
February 13, 2006.

Ruling of the Court of Appeals

On appeal, the CA modified the RTC's ruling. The CA noted that the formula
used by the PARAD (i.e., LV = AGP x ASP x 2.5) in computing the valuation
for the PD 27-acquired land is correct. However, the amount used for the
ASP, which is P350, is erroneous. According to the CA, the mandated ASP in
Executive Order No. 22820 (EO 228) is only P35, not P350, pursuant to our
ruling in Gabatin v. Land Bank of the Philippines. 21 Moreover, the CA opined
that this formula remains applicable to PD 27-acquired lands
notwithstanding the passage of RA 6657, citing as basis EO 229. 22 In
addition, interest at the rate of 12% per annum must be imposed to
compensate for the delay. Accordingly, it upheld LBP's valuation for the PD
27-acquired land at ₱177 ,657.98 but awarded legal interest at the rate of
12% per annum.23
On the other hand, for the property acquired under RA 6657, the CA opined
that Section 1 7 thereof, as well as Department of Agrarian Reform
Administrative Order No. 5,24 series of 1998 (DAR A.O. 05-98), must be
considered in fixing just determination. As such, the formula to be used is LV
== (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) where LV is land value; CNI is
capitalized net income; CS is comparable sales; and, MV is market value per
tax declaration. The alternative formula of LV = (CNI x 0.9) + (MV x 0.1)
may be used if the CS factor is not present. The CA found that although the
LBP used this formula, it, however, failed to consider the rising values of the
lands in Pilar, Sorsogon which resulted from the economic developments
mentioned in the municipal resolution and the current assessment of
industrial lands in the area - this, despite the fact that evidence was
presented to show that comparable sales (the CS in the formula) have gone
up to at least ₱200,000.00 per hectare. Thus, it affirmed the estimate that
the RA 6657-acquired property may be priced at ₱200,000.00 per hectare as
fixed by the PARAD.25

The CA disposed of the case, thus:

IN VIEW OF THE FOREGOING, the RTC decision dated September 21, 2005
is modified in that:

1) Just compensation for the PD 27-acquired property of 14.9493 hectares

shall be ₱l77,657.98 with interest of 12 percent per annum from November
1994 until paid, and

2) Just compensation for the RA 6657-acquired property of 7.7118 hectares

shall be computed at ₱200,000 per hectare, or ₱l,542,360.

The petitioner is ordered to pay the respondents the amounts as set forth
herein. All other aspects of the decision stand.

SO ORDERED.26

The LBP filed a Motion for Reconsideration 27 which was denied by the
appellate court in its Resolution dated May 24, 2010.

Thus, the present Petition for Review on Certiorari.

Issues

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF

LAW WHEN:
A

INSOFAR AS THE RA 6657-ACQUIRED LAND, IT DISREGARDED THE

VALUATION FACTORS UNDER SECTION 17 OF RA 6657 AND THE PERTINENT
DAR ADMINISTRATIVE ORDERS IN FIXING ITS VALUE AT ₱l,542,360.00.

B.

INSOFAR AS THE PD 27-ACQUIRED LAND, IT REFUSED TO REMAND THE

INSTANT CASE TO THE TRIAL COURT FOR A RECOMPUTATION OF ITS VALUE
PURSUANT TO SECTION 17 OF RA 6657, AS AMENDED.

C.

IT IMPOSED THE PAYMENT OF INTEREST AT 12% PER ANNUM ON THE

VALUE OF THE PD 27-ACQUIRED LAND.28

LBP's Argument

The LBP posits that the appellate court improperly relied on extraneous
factors, such as the rising value of the lands in Pilar, Sorsogon, potentials of
the subject property considering its strategic location, livelihood
opportunities and economic multiplier effect to the community, in
determining the just compensation for the subject properties. The LBP insists
on the mandatory application of RA 6657 vis-a-vis the formula provided in
DAR A.O. No. 05-98.

Likewise, the LBP avers that the computation of the just compensation
forthe PD 27-acquired land must be revised in view of the enactment of RA
9700.29

In particular, Section 5 thereof provides that all previously acquired lands,

the valuation of which is subject to challenge by the landowners, shall be
completed and finally resolved pursuant to Section 17 of RA 6657, as
amended. LBP posits that the contested valuation of the PD 27-acquired
land, should now be computed in accordance with Section 17 of RA 6657, as
amended; hence, the need to remand the case to the RTC for a re-
computation of its value.

Lastly, the LBP contends that the CA's award of 12% interest per annum is
without basis. It posits that with the enactment of RA 9700 vis-a-vis RA
6657, interest should no longer be imposed since the valuation of the PD 27-
acquired land would no longer be pegged at 1972 prices but would be
brought to current values pursuant to Section 5 of RA 9700 in relation to
Section 17 of RA 6657, as amended, vis-a-vis DAR A.O. Nos. 02-0930 and
01-10.31

Respondents did not file a comment to the Petition and were deemed to
have waived the filing thereof.32

Our Ruling

We grant the Petition in part.

Only questions of law may be raised in

a Petition for Review Under Rule 45,
exceptions thereto

Under Rule 45 of the Rules of Court, only questions of law may be raised as
this Court is not a trier of facts; it is not our function to re-examine and
weigh anew the evidence of the parties. This Court shall examine or evaluate
the evidence again only in the exercise of its discretion and for compelling
reasons,33 as when the judgment is based on a misapprehension of facts and
when the findings of fact are conflicting. 34 Here, we find that the judgment
arrived at by the PARAD and the RTC, which rulings were subsequently
affirmed in toto and with modifications, respectively, by the CA, as to the RA
6657-acquired property, was to some extent based on a misapprehension or
erroneous appreciation of facts. As regards the PARAD's and the CA's ruling,
on one hand, and the RTC's on the other, on the PD 27-acquired land, their
findings thereon are conflicting.

Additionally, the PARAD's and the CA's reliance on PD 27 and its

implementing rules, which formed the basis of their respective Decisions, are
now inapplicable thereto.

RA 6657-acquired property

The LBP correctly argued that consideration of the valuation factors under
Section 17 of RA 6657 and the formula under DAR A.O. No. 05-98 35 is
mandatory in ascertaining just compensation for purposes of agrarian reform
cases. In Land Bank of the Philippines v. Gonzalez, 36 we held that although
the determination of just compensation is fundamentally a judicial function
vested in the RTC, the judge must still exercise his discretion within the
bounds of law. He ought to take into fall consideration the factors specifically
identified in RA 6657 and its implementing rules, as contained under the
pertinent Administrative Orders of the DAR, such as DAR A.O. No. 05-98,
which contains the basic formula of the factors enumerated under said law.
He may not disregard the procedure laid down therein because unless an
administrative order is declared invalid courts have no option but to apply it.
Otherwise, the judge runs the risk of violating the agrarian reform law
should he choose not to use the formula laid down by the DAR for the
determination of just compensation. The Court reaffirmed this established
jurisprudential rule in Alfonso v. Land Bank of the Philippines 37 when it
categorically gave "full constitutional presumptive weight and credit to
Section 17 of RA6657, DARAO No. 5 (1998) and the resulting DAR basic
formulas."38

The Court then made the following pronouncement:

For clarity, we restate the body of rules as follows: The factors listed under
Section 17 of RA 6657 and its resulting formulas provide a uniform
framework or structure for the computation of just compensation which
ensures that the amounts to be paid to affected landowners are not
arbitrary, absurd or even contradictory to the objectives of agrarian reform.
Until and unless declared invalid in a proper case, the DAR formulas partake
of the nature of statutes, which under the 2009 amendment became law
itself, and thus have in their favor the presumption of legality, such that
courts shall consider, and not disregard, these formulas in the determination
of just compensation for properties covered by the CARP. When faced with
situations which do not warrant the formula's strict application, courts may,
in the exercise of their judicial discretion, relaxformula's application to fit the
factual situations before them, subject only to condition that they clearly
explain in their Decision their reasons (as borne by the evidence on record)
for the deviation undertaken. It is thus entirely allowable for a court to allow
a landowner's claim for an amount higher than what would otherwise have
been offered (based on an application of the formula) for as long as there is
evidence on record sufficient to support the award.

xxxx

For the guidance of the bench, the bar, and the public, we reiterate the rule:
Out of regard for the DAR's expertise as the concerned implementing
agency, courts should henceforth consider the factors stated in Section 17 of
RA 6657, as amended, as translated into the applicable DAR formulas in
their determination of just compensation for the properties covered by the
said law. If, in the exercise of their judicial discretion, courts find that a strict
application of said formulas is not warranted under the specific
circumstances of the case before them, they may deviate or depart
therefrom provided that this departure or deviation is supported by a
reasoned explanation grounded on the evidence on record. In other words,
courts of law possess the power to make a final determination of just
compensation.39
Be that as it may, we cannot sustain LBP's valuation of ₱263,928.57 as just
compensation for the RA 6657-acquired property for failure to substantiate
the same.

In Land Bank of the Philippines v. Livioco, 40 we held that "in determining just
compensation, LBP must substantiate its valuation." This pronouncement is a
reiteration of our ruling in Land Bank of the Philippines v. Luciano41 that:

Clearly, Land Bank's valuation of lands covered by CARL is considered only

as an initial determination, which is not conclusive, as it is the RTC, sitting
as a [SAC], that should make the final determination of just compensation,
taking into consideration the factors enumerated in Section 17 of RA 6657
and the applicable DAR regulations. Land Bank's valuation had to be
substantiated during the hearing before it could be considered sufficient in
accordance with Section 17 of RA No. 6657 and DAR AO No. x x x (Emphasis
supplied)

In this case, we hold that the LBP was not able to justify its valuation.
Although the LBP maintained that it stringently applied the pertinent law and
its relevant implementing rules in arriving at its computation, it failed to
adduce sufficient evidence to prove the truthfulness or correctness of its
assertions. Its Formal Offer of Exhibits, and the reasons therefor, consisted
only of the following:

1) Exhibit A-Field Investigation Report for the 7.7118 hectares

- To prove that an actual investigation of the area subject matter of the case
was conducted and participated by the personnel of the Department of
Agrarian Reform, Land Bank of the Philippines and the representative of the
Agrarian Reform Committee that will show the actual condition of the
property at the time of the voluntary offer of the landowner of her property
to the government;

2) Exhibit B - Market Value per Ocular Inspection for the 7.7118 hectares

- To prove where the location adjustment factor is taken which is used in the
computation of valuation

xxxx

4) Exhibit D - Claims Valuation and Processing Form for the 7.7118 hectares
- To show the detailed computation/valuation made on the properties
subject matter of this case under DAR Administrative Order No. 5, series of
1998 using the formula LV = (CNI x .90) + (MV x .10)

- To show the date of receipt of LANDBANK of the claim folder from the
Department of Agrarian Reform which is used as the basis [in] determining
the average price of the crops found in the property at the time of the field
investigation/ocular inspection

xxxx

7) Exhibit G - PCA Municipal Selling Price for Coconut (Sorsogon Province)

- T[o] show the average selling price of copra per kilo for the municipality of
Pilar[,] Sorsogon for the period October 2001 to September 2002 which is
P9.97 per kilo.42 (Emphasis supplied)

The LBP used the formula LV = (CNI x. 90) + (MV x .10). Concededly, it was
able to sufficiently establish the Capitalized Net Income (CNI) factor 43 of the
formula. However, the same is not true regarding the Market Value (MV)
component thereof While the CNI factor, as computed in the Claims
Valuation and Processing Form (Claims Form), finds support from and can be
adequately explained by a simple perusal of the documents forming part of
the records of this case,44 the MV component, on the other hand, does not
have any similar support and basis as a thorough search of the records failed
to produce the same.

The Claims Form, which the LBP insists embodies a detailed computation
using the formula earlier cited, did not reflect how the data and figures were
arrived at and if they were indeed correct. The LBP did not present any
testimonial evidence before the RTC which could explain or corroborate how
it came up with the figures and what credence ought to be accorded to
them. All that the Claims Form showed is the LBP's computation, and
nothing more. As we held in Land Bank of the Philippines v. Livioco, 45 "the
computation in the Form may be mathematically correct, but there is no way
of knowing if the values or data used in the computation are true." For this
reason we cannot uphold the LBP's valuation. Besides, LB P's Formal Offer of
Exhibits was admitted only when respondents failed to offer any objection.
In any case, even considering the absence of objection on the part of
respondents, LBP must still prove the basis and correctness of its
computation. LBP miserably failed in this regard.

We cannot agree to the valuations fixed by the PARAD and the RTC,
valuations that found their way into rulings that were affirmed in toto and
with modification by the CA, respectively. These rulings were arrived at in
clear disregard of the formula set forth under DAR A.O. No. 05-98. As borne
out by their respective Decisions, these tribunals considered only the
Comparable Sales (CS) factor to the exclusion of the other factors, namely,
the CNI and MY.

Aggravating the situation, the CS factor was not determined pursuant to the
guidelines laid down in DAR A.O. No. 05-98. Respondents merely submitted
a notarized Deed of Absolute Sale between them and Wilson Tarog reflecting
an amount of ₱200,000.0046 per hectare. A second notarized Deed of
Voluntary Land Transfer executed between Rudy Balisalisa and Abegail
Sapanza was submitted fixing the amount per hectare at
₱241,462.00.47 Additionally, respondents proffered in evidence Municipal
Resolution No. 79, Series of2002, 48 declaring the intent of Pilar, Sorsogon to
develop Hacienda Chu as an agri-economic-industrial site in accordance with
its town expansion program. All of these, however, are irrelevant as DAR
A.O. No. 05-98 itself categorically enumerates the guidelines for determining
the CS factor, thus:

C. 1. The following rules shall be observed in the computation of CS:

a. As a general rule, there shall be at least three (3) Sales Transactions.

- At least one comparable sales transaction must involve land whose area is
at least ten percent (10%) of the area being offered or acquired but in no
case less than one hectare. The other transaction/s should involve land
whose area is/are at least one hectare each.

b. If there are more than three (3) STs available in the same barangay, all of
them shall be considered.

c. If there are less than three (3) STs available, the use of STs may be
allowed only if AC and/or MVM are/is present.

xxxx

C. 2. The criteria in the selection of the comparable sales transactions (ST)

shall be as follows:

a. When the required number of STs is not available at the barangay level,
additional STs may be secured from the municipality where the land being
offered/covered is situated to complete the required three comparable STs.
In case there are more STs available than what is required at the municipal
level, the most recent transactions shall be considered. The same rule shall
apply at the provincial level when no STs are available at the municipal level.
In all cases, the combination of STs sourced from the barangay, municipality
and province shall not exceed three transactions.

b. The land subject of acquisition as well as those subject of comparable

sales transactions should be similar in topography, land use, i.e., planted to
the same crop. Furthermore, in case of permanent crops, the subject
properties should be more or less comparable in terms of their stages of
productivity and plant density.

c. The comparable sales transactions should have been executed within the
period January 1, 1985 to June 15, 1988, and registered within the period
January 1, 1985 to September 13, 1988.

d. STs shall be grossed up from the date of registration up to the date of

receipt of CF by LBP from DAR for processing, in accordance with Items
II.A.9.

Respondents presented only two comparable sales transactions. This falls

short of the requirements of DARA.O. No. 05-98.

The PARAD erroneously considered the municipal resolution as the third

comparable sales transaction when it noted and held that:

x x x And, last is a Municipal Resolution No. 79 Series of 2002 declaring the

entire Hacienda Chu [in] San Antonio Sapa, Pilar, Sorsogon as Town
Expansion and classified the same as an Industrial Area (Annex "C"). That
the subject property is very productive, with good location, very near x x x
the Poblacion, and, accessible by land and water x x x

It is a well-settled rule that in determining the valuation of the properties a

comparable sale transaction of similar nearby places is admissible in
evidence x x x. Thus from the evidence submitted by the landowner, the
Board is convinced that the valuation by the Land Bank of the Philippines is
in fact unreasonable, considering that the subject property [has] good
production, topography and [is] accessible on both land and water. The
Board however cannot grant the prayer for Three Hundred Fifty Thousand
Pesos per hectare considering that in comparable sales transactions the
Board can only grant the lowest among those presented as [evidence]. And,
therefore the Board can only grant the amount of Two Hundred Thousand
Pesos per hectare (Annex A).49 (Emphasis supplied)

The municipal resolution could not in any manner be regarded as a

comparable sales transaction precisely because no sale transaction ever took
place. At best, the said resolution merely manifested the formal intention of
the local government of Pilar to acquire certain portions of the subject
properties.

Equally glaring is the fact that none of the tribunals below took into full
consideration the factors laid down in Section 17 of RA 6657 - a necessary
requirement which no court of law is at liberty to disregard if sound judicial
discretion is to be exercised at all in determining just compensation. Instead,
this Court notes that the RTC, not to mention the CA, primarily took account
of an extraneous factor- potentials of the land- to justify the award of
₱200,000.00 per hectare. Discounting respondents' evidence on the
comparable sales transactions, the potentials of the landholding may then be
said to have become the main factor supporting the valuation thereof This
conclusion is even borne out by the Decisions of the PARAD, the RTC, and
the CA whose discussions centered thereon. However, this Court has a]ready
reiterated in Land Bank of the Philippines v. Livioco 50 that, such
factor, standing alone, has already been dismissed as improper basis for
assessing the just compensation in the expropriation of agricultural lands.
Thus:

x x x While the potential use of an expropriated property is sometimes

considered in cases where there is a great improvement in the general
vicinity of the expropriated property, it should never control the
determination of just compensation (which appears to be what the lower
courts have erroneously done). The potential use of a property should not be
the principal criterion for determining just compensation for this will be
contrary to the well-settled doctrine that the fair market value of an
expropriated property is determined by its character and its price at the time
of taking, not its potential uses. If at all, the potential use of the property or
its "adaptability for conversion in the future is a factor,
51
compensation.  (Emphasis supplied)

Despite the foregoing, the PARAD, the RTC, and the CA, proceeded to rule in
respondents' favor on the basis of their evidence and, with meager evidence
to support their pronouncements, pegged the price of the RA 6657-acquired
property at ₱200,000.00 and ₱300,000.00, respectively, per hectare. We
cannot uphold the same.

As may be gleaned from the above discussion, the respective evidence of

both parties are insufficient to enable this Court to come up with a correct
computation on the just compensation to which respondents are entitled.
However, as this Court is not a trier of facts, this Court cannot receive new
evidence from the parties that would aid or assist it in the prompt resolution
of this case. Thus, this Court is constrained to remand the case to the RTC
for the reception of evidence and the determination of just compensation in
accordance with our pronouncement in Alfonso v. Land Bank of the
Philippines.52

PD 27-acquired land

a. Remand case to the RTC for determination of just compensation

b. Award of interest

a. Remand case to the RTC for determination of just compensation

The appellate court also incorrectly ruled that the formula under EO 228
should be followed for purposes of computing just compensation in relation
to PD 27-acquired lands. Citing Land Bank of the Philippines v.
Imperial,53 the CA held that the guidelines provided under PD 27 and EO 228
remained operative despite the passage of RA 6657 given that EO 229 states
that PD 27 shall continue to operate with respect to rice and com lands.

In a number of cases, such as Land Bank of the Philippines v. Hon.

Natividad,54 Lubrica v. Land Bank of the Philippines, 55 Land Bank of the
Philippines v. Gallego, Jr.,56 Land Bank of the Philippines v. Heirs of Jvfaximo
and Gloria Puyat,57 and Land Bank of the Philippines v. Santiago, Jr.,58 we
definitively ruled that when the agrarian reform process is still incomplete as
the just compensation due the landowner has yet to be settled, just
compensation should be determined, and the process concluded, under
Section 17 of RA 6657, which contains the specific factors to be considered
in ascertaining just compensation, viz.:

SECTION 17. Determination of Just Compensation. –

In determining just compensation, the cost of acquisition of the land, the

current value of like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declarations, the assessment made by
government assessors shall be considered. The social and economic benefits
contributed by the fanners and the farmworkers and by the Government to
the property as well as the non-payment of taxes or loans secured from any
government financing institution on the said land shall be considered as
additional factors to determine its valuation.

In Land Bank of the Philippines v. Gallego, Jr.,59 we explained that:

The Court has already ruled on the applicability of agrarian laws, namely,
P.D. No. 27/E.O. No. 228 in relation to Republic Act (RA.) No. 6657, in prior
Cases concerning just compensation.

In Paris v. Alfeche, the Court held that the provisions of R.A. No. 6657 are
also applicable to the agrarian reform process of lands placed under the
coverage of P.D. No. 27/E.O. No. 228, which has not been completed upon
the effectivity of R.A. No. 6657. Citing Land Bank of the Philippines v. Court
of Appeals, the Court in Paris held that P.D. No. 27 and E.O. No. 228 have
suppletory effect to R.A. No. 6657, to wit:

We cannot see why Sec. 18 of RA [No.] 6657 should not apply to rice and
com lands under PD [No.] 27. Section 75 of RA [No.] 6657 clearly states
that the provisions of PD [No.] 27 and EO [No.] 228 shall only have a
suppletory effect. Section 7 of the Act also provides -

Sec. 7. Priorities. The DAR, in coordination with the PARC shall plan and
program the acquisition and distribution of all agricultural lands through a
period of (10) years from the effectivity of this Act. Lands shall be acquired
and distributed as follows:

Phase One: Rice and Com lands under P.D. 27; all idle or abandoned lands;
all private lands voluntarily offered by the owners of agrarian reform; x x x
and all other lands owned by the government devoted to or suitable
foragriculture, Which shall be acquired and distributed immediately upon the
effectivity of this Act, with the implementation to be completed within a
period of not more than four (4) years x x x.

This eloquently demonstrates that RA [No.] 6657 includes PD [No.] 27 lands

among the properties which the DAR shall acquire and distribute to the
landless. And to facilitate the acquisition and distribution thereof, Secs. 16,
17 and 18 of the Act should be adhered to. In Association of Small
Landowners of the Philippines v. Secretary of Agrarian Reform[,] this Court
applied the provisions (of) RA 6657 to rice and com lands when it upheld the
constitutionality of the payment of just compensation for PD [No.] 27 lands
through the different modes stated in Sec. 18.

Particularly, in Land Bank of the Philippines v. Natividad, where the agrarian

reform process in said case "is still incomplete as the just compensation to
be paid private respondents has yet to be settled," the Court held therein
that just compensation should be determined and the process concluded
under R.A. No. 6657.
The retroactive application of RA. No. 6657 is not only statutory but is also
founded on equitable considerations. In Lubrica v. Land Bank of the
Philippines, the Court declared that it would be highly inequitable on the part
of the landowners therein to compute just compensation using the values at
the time of taking in 1972, and not at the time of payment, considering that
the government and the fanner-beneficiaries have already benefited from
the land although ownership thereof has not yet been transferred in their
names. The same equitable consideration is applicable to the factual milieu
of the instant case. The records show that respondents' property had been
placed under the agrarian reform program in 1972 and had already been
distributed to the beneficiaries but respondents have yet to receive just
compensation due them. (Emphases supplied)

It bears stressing that while this case was pending, Congress enacted RA
9700 entitled "An Act Strengthening the Comprehensive Agrarian Reform
Program [CARP], Extending the Acquisition and Distribution of All
Agricultural Lands, Instituting Necessary Reforms, Amending for the Purpose
Certain Provisions of Republic Act No. 6657, Othe1wise known as The
Comprehensive Agrarian Reform Law of 1988, as amended, and
Appropriating Funds Therefor."

Significantly, just as RA 6657 had so provided, RA 9700 also provides that it

shall apply even to PD 27-acquired lands, albeit those that are yet to be
acquired and distributed by the DAR. It likewise provided for further
amendments to RA 6657, as amended, including Section 17 thereof: by
including two new factors in the determination of just compensation, namely
(a) the value of the standing crop and (b) seventy percent (70%) of the
zonal valuation of the Bureau of Internal Revenue, translated into a basic
formula by the DAR, subject to the final decision of the proper court.

Nevertheless, despite the enactment of RA 9700, we take the view that this
case still falls within the ambit of Section 17 of RA 6657, as amended. To
emphasize, RA 9700 applies to landholdings that are yet to be acquired and
distributed by the DAR. In addition, RA 9700 itself contains the qualification
that "previously acquired lands wherein valuation is subject to challenge,"
such as the landholding subject of this case, "shall be completed and
resolved pursuant to Section 17 of RA 6657, as amended,"60 thus:

Section 5. Section 7 of Republic Act No. 6657, as amended, is hereby further

amended to read as follows:

SEC. 7. Priorities. - The DAR in coordination with the Presidential Agrarian

Reform Council (PARC) shall plan and program the final acquisition and
distribution of all remaining unacquired and undistributed agricultural lands
from the effectivity of this Act until June 30, 2014. Lands shall be acquired
and distributed as follows:

Phase One: During the five (5)-year extension period hereafter all remaining
lands above fifty (50) hectares shall be covered for purposes of agrarian
reform upon the effectivity of this Act. All private agricultural lands of
landowners with aggregate landholdings in excess of fifty (50) hectares
which have already been subjected to a notice of coverage issued on or
before December 10, 2008; rice and corn lands under Presidential Decree
No. 27; all idle or abandoned lands; all private lands voluntarily offered by
the owners for agrarian reform: Provided, That with respect to voluntary
land transfer, only those submitted by June 30, 2009 shall he
allowed Provided, further, That after June 30, 2009, the modes of
acquisition shall be limited to voluntary offer to sell and compulsory
acquisition: Provided, furthermore, That all previously acquired lands
whereinvaluation is subject to challenge by landowners shall be completed
and finally resolved pursuant to Section 17 of Republic Act No. 6657, as
amended: x x x (Emphases supplied.)

Our ruling further finds support in DAR A.0. No. 02-09, the implementing
rules of RA 9700, Chapter VI (Transitory Provision) of which specifically
provides:

VI. Transito1y Provision

With respect to cases where the Master List of ARBs has been :finalized on
or before July 1, 2009 pursuant to Administrative Order No. 7, Series
of2003, the acquisition and distribution of landholdings shall continue to be
processed under the provisions of R.A. No. 6657 prior to its amendrp.ent by
R.A. No. 9700.

However, with respect to land valuation, all Claim Folders received by LBP
prior to July 1, 2009 shall be v:illued in accordance with Section 17 of RA.
No. 6657 prior to its amendment by RA. No. 9700. (Emphasis supplied)

From the foregoing, it is evident that DAR A.O. No. 02-09 requires that
landholdings, the claim folders of which had been received by LBP prior to
July 1, 2009, be valued pursuant to the old Section 17 of RA 6657, as
amended,61 or prior to its further amendment by RA 9700.

Here, the Claim Folder was received on November 27, 2002, as evidenced by
the Memorandum Request to Value the Land. 62 Hence, by express mandate
of RA 9700 vis-a-vis DAR A.O. No. 02-09, Section 17 of RA 6657, as
amended, shall apply for purposes of ascertaining just compensation.
This pronouncement finds support in the Court's ruling in Land Bank of the
Philippines v. Kho,63 viz.:

Case law dictates that when the acquisition process under PD 27 is still
incomplete, such as in this case where the just compensation due to the
landowner has yet to be settled, just compensation should be determined
and the process concluded under RA 6657, as amended.

For the purposes of determining just compensation, the fair market value of
an expropriated property is determined by its chan1cter and its price at the
time of taking, or the time when the landowner was deprived of the use and
benefit of his property, such as when the title is transferred in the name of
the beneficiaries. In addition, the factors enumerated under Section 17 of RA
6657, as amended, i.e., (a) the acquisition cost of the land, (b) the current
value of like properties, (c) the nature and actual use of the property, and
the income therefrom, (d) the owner's sworn valuation, (e) the tax
declarations, (f) the a5sessment made by government assessors, (g) the
social and economic benefits contributed by the farmers and the
farmworkers, and by the government to the property, and (h) the
nonpayment of taxes or loans secured from any government financing
institution on the said land, if any, must be equally considered.

However, it bears pointing out that while Congress passed RA 9700 cm

August 7, 2009, further amending certain provisions of RA 6657, as
amended, among them, Section 17, and declaring '[t]hat all previously
acquired lands wherein valuation is subject to challenge by landowners shall
be completed and finally resolved pursuant to Section 17 of [RA 6657], as
amended,' DAR AO 2, series of2009, which is the implementing rules of RA
9700, had clarified that the said law shall not apply to claims/cases where
the claim folders were received by the LBP prior to July 1, 2009. In such
situation, just compensation shall be determined in accordance with Section
17 of RA 6657, as amended, prior to its further amendment by RA 9700.

xxxx

It is significant to stress x x x that DAR AO 1, series of2010 which was

issued in line with Section 31 of RA 9700 empowering the DAR to provide
the necessary rules and regulations for its implementation, became effective
only subsequent to July J, 2009. Consequently, it cannot be applied in the
determination of just compensation for the subject land where the claim
folders were undisputedly received by the LBP m:Jor to July 1, 2009, and, as
such, should be valued in accordance with Section 17 of RA 665] prior to its
further amendment by RA 9700 pursuant to the cut-off date set under DAR
AO 2, series of 2009 (cut-off rule). Notably, DAR AO 1, series of 2010 did
not expressly or impliedly repeal the cut-0.ff rule set under DAR AO 2, series
of 2009, having made no reference to any cut-off date with respect to land
valuation for previously acquired lands under PA 27 and EO 228 wherein
valuation is subject to challenge by landowners. Consequently, the
application of DAR AO 1, series of 2010 should be, thus, limited to those
where the claim folders were received on or subsequent to July 1, 2009.

In this case, x x x [s]ince the claim folders were received by the LBP prior to
July 1, 2009, the RTC should have computed just compensation using
pertinent DAR regulations applying Section 17 of RA 6657 prior to its
amendment by RA 9700 instead of adopting the new DAR issuance, absent
any cogent justifications otherwise. Therefore, as it stands, the RTC and the
CA were duty-bound to utilize the basic formula prescribed and laid down in
pertinent DAR regulations existing prior to the passage of RA 9700, to
determine just compensation.

Nonetheless, the RTC, acting as a SAC, is reminded that it is not strictly

bound by the different [formulas] created by the DAR if the situations before
it do not warrant their application. To insist on a rigid application of the
formula goes beyond the intent and spirit of the law, bearing in mind that
the valuation of property or the determination of just compensation is
essentially a judicial function which is vested with the courts, and not with
administrative agencies. Therefore, the RTC must still be able to reasonably
exercise its judicial discretion in the evaluation of the factors for just
compensation, which cannot be restricted by a formula dictated by the DAR
when faced with situations that do not warrant its strict application.
However, the RTC must explain and justify in clear terms the reason for any
deviation from the prescribed factors and formula. (Emphasis in the original)

b. Award of interest

We also agree with the LBP's stance that the award of compounded interest
is not proper. In Land Bank of the Philippines v. Spouses Chico,64 we held
that "when just compensation is determined under R.A. No. 6657, no
incremental, compounded interest of six percent (6%) per annum shall be
assessed x x x as the same applies only to lands taken under P.D. No. 27
and E.0. No. 228, pursuant to DAR A.O. No. [13-94], x x x and not Sec. 26
of R.A. No. 6657 x x x."

The rationale for this is explained in Land Bank of the Philippines v. Court of

Appeals65 to wit: that DAR A.O. No. 13-94 aims to compensate the
landowners for unearned interests because had payment been made in 1972
when the GSP for rice was pegged at ₱35.00, and this amount was deposited
in a bank, it would have earned a compounded interest of 6% per annum:
x x x Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x AGP
x ₱35 x x x) could be multiplied by (l.06)n to determine the value of the land
plus the additional 6% compounded interest it would have earned from
1972. However, since the PARAD already increased the GSP from ₱35.00 to
₱300.00/cavan of palay x x x, there is no more need to add any interest
thereon, much less compound it To the extent that it granted 6%
compounded interest to private respondent Jose Pascual, the Court of
Appeals erred.66 (Emphasis supplied)

If upon remand of this case the LBP is found to be in delay in the payment of
just compensation, then it is bound to pay interest. In Land Bank of the
Philippines v. Santiago, Jr.,67 we ruled that interest may be awarded in
expropriation cases, particularly where delay attended the payment of just
compensation. There, we categorically stressed that the interest imposed in
case of delay in payments in agrarian cases is in the nature of damages for
delay in payment which, "in effect, makes the obligation on the part of the
government one of forbearance."68 Upon this point, nothing could be any
clearer than our pronouncement in Land Bank of the Philippines v. Santiago,
Jr., thus:

Quoting Republic v. Court of Appeals this Court, in Land Bank of the

Philippines v. Rivera, held:

The constitutional limitation of just compensation is considered to be the

sum equivalent to the market value of the property, broadly described to be
the price fixed by the seller in open market in the usual and ordinary course
of legal action and competition or the fair value of the property as between
one who receives, and one who desires to sell, if fixed at the time of the
actual taking by the government. Thus, if property is taken for public use
before compensation is deposited with the court having jurisdiction over the
case, the final compensation must include interest on its just value to be
computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, between
the taking of the property and actual payment, legal interests accrue in
order to place the owner in a position as good as (but not better than) the
position he was in before the taking occurred.

xxxx

The Court, in Republic, recognized that the just compensation due to the

landowners for their expropriated property amounted to an effective
forbearance on the part of the State. x x x69 (Emphases supplied)
Be that as it may, the LBP is bound to pay interest at 12% per annum "from
the time of taking until June 30, 2013. Thereafter, or beginning July 1, 2013,
until fully paid, the just compensation due the landowners shall earn interest
at the new legal rate of 6% per annum x x x.70 In Nacar v. Galley
Frames,71 citing Eastern Shipping Lines v. Court of Appeals72 which has been
modified to reflect Bangko Sentral ng Pilipinas-Monet.ary Board Circular No.
799,73 we held that:

x x x [T]he guidelines laid down in the case of Eastern Shipping Lines are
accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-

contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual

and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:

l. When the obligation is breached, and it consists in the payment of a sum

of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extra judicial demand under and
subject to the provisions of Article 1169 of the Civil Code.1âwphi1 (Emphasis
supplied)

Against the foregoing backdrop, a 12% interest per annum computed from

the date of the taking of the subject property until June 30, 2013, and 6%
interest per annum from July 1, 2013 until fully paid, on the just
compensation to be ascertained by the RTC, shall be imposed although not
specifically prayed for by respondents. In Prince Transport, Inc.
v. Garcia,74 citing BPI Family Bank v. Buenaventura,75 we recognized that
"the general prayer is broad enough to justify [the grant] of a remedy
different from or together with the specific remedy" sought. Moreover, we
stressed in Prince Transport, Inc. v. Garcia that even if a specific remedy is
not prayed for, we may confer on the party the proper relief if the facts
alleged in the complaint and the evidence presented so warrant as "[t]he
prayer in the complaint for other reliefs equitable and just in the premises
justifies the grant of a relief not otherwise specifically prayed for." 76 This is
the situation here.
Guidelines in the remand of the case

The Court notes that the date of taking of both of respondents' property
cannot be reasonably ascertained from the records of the case as neither the
pleadings filed by the parties nor the Decisions rendered by the lower
tribunals contained any allegations nor findings thereon. Thus, the Court
hereby resolves to order the RTC to determine the date of taking - it being
an indispensable component of just compensation - of the subject
landholdings. Accordingly, the LBP may submit in evidence the Certificates of
Land Ownership Award (for the RA 6657-acquired property) and
Emancipation Patents (for the PD 27-acquired land), which are conclusive
proof of actual taking of the properties, granted to the farmer-beneficiaries
of said lands. Alternatively, it may present the Notice of Coverage, Notice of
Valuation, Letter of Invitation to A Preliminary Conference and Notice of
Acquisition issued by the DAR to confirm symbolic compulsory taking of the
RA 6657-acquired property.77

It bears emphasis that despite the enactment of RA 9700, the determination

of just compensation for both landholdings shall be pursuant to Section 17 of
RA 6657, as amended, in view of the qualifications imposed by RA 9700.

It must be reiterated too that the factors laid down in Section 17 of RA

6657, as amended, and the formula as translated by the DAR in its
implementing rules, are mandatory and may not be disregarded by the RTC.
Both parties are reminded that they ought to present evidence in accordance
with the requirements set forth in the relevant DAR issuances. For this
reason, this Court restates that even if the landowner fails to prove a higher
amount as just compensation, the LBP must substantiate its valuation and
prove the correctness of its claims. Naturally, it behooves the LBP to present
clear and convincing documentary and, if necessary, testimonial, evidence to
justify its valuation and how this was arrived at.

Moreover, as regards the RA 6657-acquired property, the RTC must be

reminded that although the potential use of an expropriated property may
be factored in, especially in instances where there is a significant
improvement in the locality of the expropriated property, that factor,
however, should not be the controlling component in the determination of
just compensation. Otherwise, it will run afoul of the well-settled principle
that the fair market value of an expropriated property is determined
essentially by its character and by its price at the time of taking, not by its
potential uses.1âwphi1

Finally, the RTC may not award compounded interest on the PD 27- acquired
land, considering that RA 6657, which is now applicable even to landholdings
covered by PD 27, does not itself expressly grant it; what is allowed is the
grant of interest in the nature of delay in payment of just compensation.
Hence, the LBP is obliged to pay interest at 12% per annum from the date of
taking until June 30, 2013, and 6% per annum from July l, 2013 until fully
paid, in the event it is found to be in delay in the payment of just
compensation.

WHEREFORE, the Petition is hereby PARTLYI GRANTED. The January 18,

2010 Decision and May 24, 2010 Resolution of the Court of Appeals in CA-
G.R. SP No. 93518 are REVERSED and SET ASIDE. Land Valuation Case Nos.
LV-30-'03 and LV-48-'03 are hereby REMANDED to the Regional Trial Court
of Sorsogon City, Branch 52, for the determination of the just compensation
strictly in accordance 'With the guidelines set forth in this Decision.

SO ORDERED.

39.

Edgardo Santos vs. Land Bank of the Philippines, et al.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 137431               September 7, 2000
EDGARDO SANTOS, represented by his attorney-in-fact ROMEO L.
SANTOS, petitioner,
vs.
LAND BANK OF THE PHILIPPINES, JESUS DIAZ, ROBERTO ONG and
AUGUSTO AQUINO, respondents.
DECISION
PANGANIBAN, J.:
The Comprehensive Agrarian Reform Law (RA 6657) provides that just
compensation to landowners shall be paid in cash and bonds. Hence, a trial
court decision directing the payment of such compensation "in the manner
provided by R.A. 6657" is not illegally amended but is merely clarified by an
order, issued during the execution proceedings, that such amount shall be
paid in cash and bonds.
The Case
Before the Court is a Petition for Review on Certiorari of the December 8,
1998 Decision1 and the February 2, 1999 Resolution 2 of the Court of Appeals
(CA)3 in CA-GR SP No. 48517, which had respectively dismissed the Petition
for Certiorari and Mandamus, filed by petitioner, and denied reconsideration.
The decretal part of the assailed Decision reads:
"WHEREFORE, the petition is DISMISSED. The Order of April 24, 1998 is
AFFIRMED."4
The Facts
The antecedents of the case are adequately summarized in the assailed
Decision, as follows:
"It appears that petitioner Edgardo Santos is the plaintiff in Agrarian Case
No. RTC 94-3206 for the determination of just compensation regarding
properties which were taken by DAR under P.D. No. 27 in 1972. On August
12, 1997, the Regional Trial Court, sitting as an Agrarian Court rendered
judgment, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered (1) fixing the amount of
P49,241,876.00 to be the just compensation for the irrigated and unirrigated
ricelands with areas of 36.4152 and 40.7874 hectares, respectively, and
situated at Pinit, Ocampo, Camarines Sur which are portions of the
agricultural lands covered by Transfer Certificates of Title Nos. 2883 and
2884 in the name of the [p]laintiff, and which were taken by the
government pursuant to Land Reform Program as provided in Presidential
Decree No. 27; and (2) ordering Defendant Land Bank of the Philippines to
pay [p]laintiff the amount of FORTY-FIVE MILLION SIX HUNDRED NINE-
EIGHT THOUSAND EIGHT HUNDRED FIVE AND 34/100 (P45,698,805.34)
PESOS, Philippine [c]urrency, in the manner provided by R.A. 6657, by way
of full payment of the said just compensation. No pronouncement as to
costs."
"A preliminary valuation in the amount of P3,543,070.66 had in fact been
previously released by the Land Bank in cash and bond; thus deducting it
from the total amount adjudged, the balance unpaid amount[ed] to
P45,698,805.34 which was ordered by the Regional Trial Court to be paid in
accordance with RA 6657.
"The Land Bank elevated the matter to the Supreme Court, which eventually
dismissed the appeal in its Resolution dated December 17, 1997.
Accordingly, a writ of execution was issued by the Regional Trial Court on
December 4, 1997 and a notice of garnishment was served on the Land
Bank on December 17, 1997.
"On December 22, 1997, the Regional Trial Court issued an Order declaring
that the Land Bank had complied with the writ of execution and ordered the
same to release the amount of P44,749,947.82 to petitioner and the amount
of P948,857.52 to the Clerk of Court as commission fees for execution of
judgment.
"The Land Bank remitted the amount of P948,857.52 to the Clerk of Court
on December 24, 1997 and released the amount of P3,621,023.01 in cash
and Land Bank Bond No. AR-0002206 in the amount of P41,128,024.81 to
the petitioner.
"Petitioner filed a motion for the issuance of an alias writ of execution before
the Regional Trial Court, praying that the payment of the compensation be in
proportion of P8,629,179.36 in bonds and P32,499,745 in cash, alleging that
the cash portion should include the amounts in the Decision representing the
interest payments.
"Before the motion could be resolved by the Regional Trial Court, petitioner
moved to withdraw the same and instead filed a motion for release of the
balance of the garnished amount. He claimed that the payment of
P41,128,024.81 in Land Bank Bonds was not acceptable to him and that the
said amount should be paid in cash or certified check. The respondent Land
Bank, on the other hand, opposed the motion, contending that the judgment
amount had already been satisfied on December 24, 1997.
"The Regional Trial Court issued an Order on March 20, 1998 for the Land
Bank to release the balance of P41,128,024.81 from the garnished amount
in cash or certified check.
"The Land Bank moved for a reconsideration of the said Order, maintaining
that the payment was properly made in Land Bank Bonds.
"On March 25, 1998, petitioner filed a motion to hold the Land Bank in
contempt for its refusal to release the balance of the garnished amount in
cash or certified check.
"Respondent Regional Trial Court presided over by a new judge, resolved the
two motions on April 24, 1998. It held that the payment of just
compensation must be computed in the manner provided for in Section 18,
Republic Act No. 6657. Thus, it ruled that:
"To summarize, the very issue to be resolved in the instant case is to
determine how much should be paid in cash and how much also should be
paid in bonds, to fully satisfy the judgment herein rendered in the amount of
P49,241,876.00, the computation of which is as follows:
Total land value per judgment P49,241,876.00
Amount payable in bonds:
70% (50 has) P22,323,932.75
75% (excess) P13,012,907.41 35,336,840.16
Amount payable in cash:
30% (50 has) P9,567,399.75
35% (excess) 4,337,635.81 13,905,035.56
Less:
Preliminary valuation: P3,543,070.66
Commissioner's Fee: 948,857.52
Payment to plaintiff on
12-24-97 3,621,023.01 P 8,112,951.19
______________
P 5,792,084.37
"Consequently, not only must the Order of March 20, 1997 be reconsidered,
but by implication, the Order of this Court dated December 22, 1997 is
likewise deemed reconsidered. It goes without saying that the payment of
just compensation must be made in accordance with Sec. 18, Republic Act
No. 6657 in relation to Section 9, Rule 39 of the 1997 Rules of Civil
Procedure insofar as it does not contravene x x x the former.
"On the basis of the foregoing discussion, this Court finds no merit [i]n the
motion to cite in contempt of court the Land Bank of the Philippines.
"Be it also noted that Defendant Land Bank, through counsel, has submitted
a re-computation of the compensation in accordance with her manifestation
on oral argument [with] which this court begs to disagree.
"WHEREFORE, Defendant Land Bank of the Philippines is hereby ordered to
pay the [p]laintiff the [c]ash [b]alance of FIVE MILLION SEVEN HUNDRED
NINETY TWO THOUSAND EIGHTY-FOUR and 37/100 (P5,792,084.37),
Philippine [c]urrency and the amount of THIRTY FIVE MILLION, THREE
HUNDRED THIRTY SIX THOUSAND EIGHT HUNDRED FORTY and 16/100
(P35,336,840.16) PESOS in government instruments or bonds to fully
satisfy the Judgment herein in the amount of forty-nine million two hundred
forty one thousand eight hundred seventy six (P49,241,876.00) pesos,
Philippine [c]urrency as just compensation due the [p]laintiff.
"Thus, the Order of this Court dated March 20, 1998 is hereby reconsidered
and SET ASIDE and by implication, the Order dated December 22, 1997 is
hereby deemed reconsidered and MODIFIED accordingly.
"The Motion to Cite in Contempt of Court the Land Bank of the Philippines is
hereby DENIED.
"SO ORDERED."
"Petitioner's motion to reconsider the above-mentioned Order was denied on
June 17, 1998[;] hence, this petition."5
The CA Ruling
The CA upheld the questioned April 24, 1998 Order of the trial court. The
appellate court opined that the Order merely ascertained the mode of
compensation for petitioner's expropriated properties, as decreed in the final
judgment, and was issued pursuant to the court a quo's general supervisory
control over the process of execution. Said the CA:
"RA 6657 is clear and leaves no doubt as to its interpretation regarding the
manner of payment of just compensation. The provision allows the
landowner to choose the manner of payment from the list provided therein,
but since plaintiff had obviously wanted payment to be made in cash, then
the trial court, through the new presiding judge, Judge Villegas-Llaguno, had
only to apply Section 18 of R.A. 6657 which provides for the payment of a
percentage thereon in cash and the balance in bond, in the exercise of her
ministerial duty to execute the decision which ha[d] become final and
executory. Nevertheless, in the exercise of her supervisory powers over the
execution of a final and executory judgment, Judge Villegas-Llaguno found it
necessary to modify the order of Judge Naval dated December 22, 1997 as
regards the order of execution since it had erroneously applied Section 9,
Article 39 of the Rules of Court regarding satisfaction of money judgments in
the manner of payment even as to the portion required to be paid in bonds,
and thus, had completely disregarded the portion in the final and executory
decision of August 12, 1997 which makes direct reference to RA 6657.
"The garnishment, on the other hand, of the amount of P45,698,805.34 from
the Land Bank of the Philippines does not affect the execution of the
judgment in the case. As above-expounded, the judgment was to be fully
executed in accordance with the provisions of R.A. 6657 which allows the
landowner to have the compensation be paid in cash and in bond, but not
fully in cash, as herein petitioner would like to maintain. Technically, the
garnishment which was made in this case pursuant to the order of execution
by Judge Naval shall extend only to the cash portion of the judgment
amount. On the other hand, with respect to the amount to be issued in
bonds, the only jurisdiction of the trial court is to order the Land Bank of the
Philippines to issue the corresponding bonds and deliver the same to herein
petitioners.
Hence, this Petition.6
Issues
In his Memorandum,7 petitioner submits the following issues for resolution:
"1. Did respondent judge act without jurisdiction when she issued the Order
dated 24 April 1998 amending the final Judgment dated 12 August 1997?
"2. Is it a ministerial duty of the respondent judge to order the release and
of the Land Bank to release the garnished amount under Section 9 (c) of
Rule 39 of the Rules of Court?
"3. May respondent Land Bank question the legality of its own compliance
with the Writ of Execution?
"4. Are the respondent judge and the respondent Land Bank and its officials
liable for damages under Section 3 of Rule 65 of the Rules of Court?" 8
In short, the main issue is whether the April 24, 1998 Order of Judge
Llaguno was proper.
The Court's Ruling
We find no merit in this Petition.
Main Issue: Propriety and Efficacy of the April 24, 1998 RTC Order
Petitioner insists that the April 24, 1998 Order of Judge Llaguno was issued
without jurisdiction. That is, it allegedly amended the August 12, 1997
judgment of the Special Agrarian Court by requiring the payment of
compensation in cash and bonds.
Assailed Order Not an
Amendment, But an Iteration
of Final Judgment
The argument is not persuasive. The April 24, 1998 Order was not an illegal
amendment of the August 12, 1997 judgment which had become final and
executory. The reason is that the Order did not revise, correct, or alter the
Decision. Rather, the Order iterated and made clear the essence of the final
judgment.
The August 12, 1997 judgment mandated compensation to the petitioner "in
the manner provided by R.A. 6657."9 There is certitude with regard to this
assertion. The confusion in the present case, which required the issuance of
the assailed Order, arose from petitioner's belief that the Land Bank had
obligated itself to pay in cash the compensation due him. This fact can
allegedly be gleaned from its compliance with the December 4, 1997 Writ of
Execution and December 19, 1997 Notice of Garnishment.
Compensation Due Petitioner to Be Paid Pursuant to RA 6657
However, it is clear from the August 12, 1997 judgment that the
compensation was to be paid "in the manner provided by RA
6657."10 Pursuant to Section 18 of the same law, payment was to be in
cash and bonds, as indicated below:
"Section 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 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) Twenty-five percent (25%)

hectares, insofar as the cash, the balance to be paid
excess hectarage is in government financial
concerned. instruments negotiable at
any time

(b) For lands above twenty- Thirty-percent (30%) cash,

four (24) hectares and up to the balance to be paid in
fifty (50) hectares government financial
instruments negotiable at
anytime."

Be that as it may, petitioner contends that the bank is estopped from

questioning its alleged undertaking to pay him in cash. This contention was
purportedly manifested in its letter-compliance with the Writ of Execution
and the Notice of Garnishment. In the letter, respondent said that it was
segregating a specified amount from the Agrarian Reform Fund, in order to
pay him. He insists that such amount was garnished in accordance with
Section 1, Rule 39 of the Rules of Court, and should have been delivered to
him pursuant to Section 9 of the same Rule.
We disagree. Respondent bank was obliged to follow the mandate of the
August 12, 1997 judgment. Hence, its compliance with the Writ of Execution
and the Notice of Garnishment11 ought to have been construed as an
agreement to pay petitioner in the manner set forth in Republic Act No.
6657. Its compliance was not an undertaking to pay in cash because such
act would have been a deviation from the dictum of the final judgment, to
which execution must conform. 12 Paying in cash, as petitioner demands, is
not compatible with such judgment.
Misplaced is petitioner's reliance on Section 9, Rule 39 of the Rules of Court,
because the final judgment decrees payment in cash and bonds. Indeed, this
provision must be taken in conjunction with RA 6657. Since respondent bank
had already given petitioner the entire adjudged amount in the required
proportion of cash and bonds, it must be deemed to have complied with its
duty under Rule 39.
We understand petitioner's desire to be paid in cash; after all, his
compensation was long overdue. However, we cannot grant his Petition
because it is not sustained by the law. In this regard, we recall the Court's
explanation in Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform:13
"It cannot be denied from these cases that the traditional method 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 exercise of the power of
eminent domain. This is not an ordinary expropriation where only a specific
property of relatively limited area is sought to be taken by the State from its
owner for a specific and perhaps local purpose. What we deal with here is
a revolutionary kind of expropriation.
x x x           x x x          x x x
"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 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 specter 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 be 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
forbearance 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."
All told, we hold that the appellate court was correct in sustaining the
propriety and the efficacy of the April 24, 1998 Order of Judge Llaguno. In
the exercise of her supervisory powers over the execution of a final and
executory judgment,14 such as her August 12, 1997 Decision, special
circumstances attending its execution impelled her to issue the Order
clarifying the terms thereof.
Petitioner's claim for damages against the bank must likewise be denied
because, as already explained, it was well within its rights in resisting the
former's claim.
WHEREFORE, the Petition is hereby DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
40.

G.R. No. 137431. September 7, 2000.]

EDGARDO SANTOS, represented by his attorney-in-fact ROMEO L.

SANTOS, Petitioner, v. LAND BANK OF THE PHILIPPINES, JESUS
DIAZ, ROBERTO ONG and AUGUSTO AQUINO, Respondents.

PANGANIBAN, J.:

The Comprehensive Agrarian Reform Law (RA 6657) provides that just
compensation to landowners shall be paid in cash and bonds. Hence, a trial
court decision directing the payment of such compensation in the manner
provided by R.A. 6657" is not illegally amended but is merely clarified by an
order, issued during the execution proceedings, that such amount shall be
paid in cash and bonds.

The Case
Before the Court is a Petition for Review on Certiorari of the December 8,
1998 Decision 1 and the February 2, 1999 Resolution 2 of the Court of
Appeals (CA) 3 in CA-GR SP No. 48517, which had respectively dismissed
the Petition for Certiorari and Mandamus, filed by petitioner, and denied
reconsideration.chanrob1es virtua1 1aw 1ibrary

The decretal part of the assailed Decision reads:jgc:chanrobles.com.ph

"WHEREFORE, the petition is DISMISSED. The Order of April 24, 1998 is

AFFIRMED." 4

The Facts

The antecedents of the case are adequately summarized in the assailed

Decision, as follows:jgc:chanrobles.com.ph

"It appears that petitioner Edgardo Santos is the plaintiff in Agrarian Case
No. RTC 94-3206 for the determination of just compensation regarding
properties which were taken by DAR under P.D. No. 27 in 1972. On August
12, 1997, the Regional Trial Court, sitting as an Agrarian Court rendered
judgment, the dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, judgment is hereby rendered (1) fixing the amount of

P49,241,876.00 to be the just compensation for the irrigated and unirrigated
ricelands with areas of 36.4152 and 40.7874 hectares, respectively, and
situated at Pinit, Ocampo, Camarines Sur which are portions of the
agricultural lands covered by Transfer Certificates of Title Nos. 2883 and
2884 in the name of the [plaintiff] and which were taken by the government
pursuant to Land Reform Program as provided in Presidential Decree No. 27;
and (2) ordering Defendant Land Bank of the Philippines to pay [p]laintiff the
amount of FORTY-FIVE MILLION SIX HUNDRED NINE-EIGHT THOUSAND
EIGHT HUNDRED FIVE AND 34/100 (P45,698,805.34) PESOS, Philippine
[c]urrency, in the manner provided by R.A. 6657, by way of full payment of
the said just compensation. No pronouncement as to costs." chanrob1es
virtua1 1aw 1ibrary

"A preliminary valuation in the amount of P3,543,070.66 had in fact been

previously released by the Land Bank in cash and bond; thus deducting it
from the total amount adjudged, the balance unpaid amount[ed] to
P45,698,805.34 which was ordered by the Regional Trial Court to be paid in
accordance with RA 6657.

"The Land Bank elevated the matter to the Supreme Court, which eventually
dismissed the appeal in its Resolution dated December 17, 1997.
Accordingly, a writ of execution was issued by the Regional Trial Court on
December 4, 1997 and a notice of garnishment was served on the Land
Bank on December 17, 1997.

"On December 22, 1997, the Regional Trial Court issued an Order declaring
that the Land Bank had complied with the writ of execution and ordered the
same to release the amount of P44,749,947.82 to petitioner and the amount
of P948,857.52 to the Clerk of Court as commission fees for execution of
judgment.

"The Land Bank remitted the amount of P948,857.52 to the Clerk of Court
on December 24, 1997 and released the amount of P3,621,023.01 in cash
and Land Bank Bond No. AR-0002206 in the amount of P41,128,024.81 to
the petitioner.

"Petitioner filed a motion for the issuance of an alias writ of execution before
the Regional Trial Court, praying that the payment of the compensation be in
proportion of P8,629,179.36 in bonds and P32,499,745 in cash, alleging that
the cash portion should include the amounts in the Decision representing the
interest payments.

"Before the motion could be resolved by the Regional Trial Court, petitioner
moved to withdraw the same and instead filed a motion for release of the
balance of the garnished amount. He claimed that the payment of
P41,128,024.81 in Land Bank Bonds was not acceptable to him and that the
said amount should be paid in cash or certified check. The respondent Land
Bank, on the other hand, opposed the motion, contending that the judgment
amount had already been satisfied on December 24, 1997.chanrob1es
virtua1 1aw 1ibrary

"The Regional Trial Court issued an Order on March 20, 1998 for the Land
Bank to release the balance of P41,128,024.81 from the garnished amount
in cash or certified check.

"The Land Bank moved for a reconsideration of the said Order, maintaining
that the payment was properly made in Land Bank Bonds.

"On March 25, 1998, petitioner filed a motion to hold the Land Bank in
contempt for its refusal to release the balance of the garnished amount in
cash or certified check.

"Respondent Regional Trial Court presided over by a new judge, resolved the
two motions on April 24, 1998. It held that the payment of just
compensation must be computed in the manner provided for in Section 18,
Republic Act No. 6657. Thus, it ruled that:jgc:chanrobles.com.ph

"To summarize, the very issue to be resolved in the instant case is to

determine how much should be paid in cash and how much also should be
paid in bonds, to fully satisfy the judgment herein rendered in the amount of
P49,241,876.00, the computation of which is as follows:chanrob1es virtual
1aw library

Total land value per judgment P49,241,876.00

Amount payable in bonds:chanrob1es virtual 1aw library

70% (50 has) P22,323,932.75

75% (excess) P13,012,907.41 35,336,840.16

Amount payable In cash:chanrob1es virtual 1aw library

30% (50 has) P9,567,399.75

35% (excess) 4,337,635.81 13,905.035.56

Less:chanrob1es virtual 1aw library

Preliminary valuation: P3,543,070.66

Commissioner’s Fee: 948,857.52

Payment to plaintiff on

12-24-97 3,621,023.01 P8,112,951.19

——————

P5,792,084.

"Consequently, not only must the Order of March 20, 1997 be reconsidered,
but by implication, the Order of this Court dated December 22, 1997 is
likewise deemed reconsidered. It goes without saying that the payment of
just compensation must be made in accordance with Sec. 18, Republic Act
No. 6657 in relation to Section 9, Rule 39 of the 1997 Rules of Civil
Procedure insofar as it does not contravene . . . the former.

"On the basis of the foregoing discussion, this Court finds no merit [i]n the
motion to cite in contempt of court the Land Bank of the
Philippines.chanrob1es virtua1 1aw 1ibrary

"Be it also noted that Defendant Land Bank, through counsel, has submitted
a re-computation of the compensation in accordance with her manifestation
on oral argument [with] which this court begs to disagree.

"WHEREFORE, Defendant Land Bank of the Philippines is hereby ordered to

pay the [p]laintiff the [c]ash [b]alance of FIVE MILLION SEVEN HUNDRED
NINETY TWO THOUSAND EIGHTY-FOUR and 37/100 (95,792,084.37),
Philippine [c]urrency and the amount of THIRTY FIVE MILLION, THREE
HUNDRED THIRTY SIX THOUSAND EIGHT HUNDRED FORTY and 16/100
(935,336,840.16) PESOS in government instruments or bonds to fully satisfy
the Judgment herein in the amount of forty-nine million two hundred forty
one thousand eight hundred seventy six (P49,241,876.00) pesos, Philippine
[c]urrency as just compensation due the [p]laintiff.

"Thus, the Order of this Court dated March 20, 1998 is hereby reconsidered
and SET ASIDE and by implication, the Order dated December 22, 1997 is
hereby deemed reconsidered and MODIFIED accordingly.

"The Motion to Cite in Contempt of Court the Land Bank of the Philippines is
hereby DENIED.

"SO ORDERED."cralaw virtua1aw library

"Petitioner’s motion to reconsider the above-mentioned Order was denied on

June 17, 1998[;] hence, this petition." 5
The CA Ruling

The CA upheld the questioned April 24, 1998 Order of the trial court. The
appellate court opined that the Order merely ascertained the mode of
compensation for petitioner’s expropriated properties, as decreed in the final
judgment, and was issued pursuant to the court a quo’s general supervisory
control over the process of execution. Said the CA:jgc:chanrobles.com.ph

"RA 6657 is clear and leaves no doubt as to its interpretation regarding the
manner of payment of just compensation. The provision allows the
landowner to choose the manner of payment from the list provided therein,
but since plaintiff had obviously wanted payment to be made in cash, then
the trial court, through the new presiding judge, Judge Villegas-Llaguno, had
only to apply Section 18 of R.A. 6657 which provides for the payment of a
percentage thereon in cash and the balance in bond, in the exercise of her
ministerial duty to execute the decision which ha[d] become final and
executory. Nevertheless, in the exercise of her supervisory powers over the
execution of a final and executory judgment, Judge Villegas-Llaguno found it
necessary to modify the order of Judge Naval dated December 22, 1997 as
regards the order of execution since it had erroneously applied Section 9,
Article 39 of the Rules of Court regarding satisfaction of money judgments in
the manner of payment even as to the portion required to be paid in bonds,
and thus, had completely disregarded the portion in the final and executory
decision of August 12, 1997 which makes direct reference to RA 6657.

"The garnishment, on the other hand, of the amount of P45,698,805.34 from

the Land Bank of the Philippines does not affect the execution of the
judgment in the case. As above-expounded, the judgment was to be fully
executed in accordance with the provisions of R.A. 6657 which allows the
landowner to have the compensation be paid in cash and in bond, but not
fully in cash, as herein petitioner would like to maintain. Technically, the
garnishment which was made in this case pursuant to the order of execution
by Judge Naval shall extend only to the cash portion of the judgment
amount. On the other hand, with respect to the amount to be issued in
bonds, the only jurisdiction of the trial court is to order the Land Bank of the
Philippines to issue the corresponding bonds and deliver the same to herein
petitioners.
Hence, this Petition. 6

Issues

In his Memorandum, 7 petitioner submits the following issues for

resolution:jgc:chanrobles.com.ph

"1. Did respondent judge act without jurisdiction when she issued the Order
dated 24 April 1998 amending the final Judgment dated 12 August 1997?
chanrob1es virtua1 law library

"2. Is it a ministerial duty of the respondent judge to order the release and
of the Land Bank to release the garnished amount under Section 9 (c) of
Rule 39 of the Rules of Court?

"3. May respondent Land Bank question the legality of its own compliance
with the Writ of Execution?

"4. Are the respondent judge and the respondent Land Bank and its officials
liable for damages under Section 3 of Rule 65 of the Rules of Court?" 8

In short, the main issue is whether the April 24, 1998 Order of Judge
Llaguno was proper.

The Court’s Ruling

We find no merit in this Petition.

Main Issue

Propriety and Efficacy of the

April 24. 1998 RTC Order

Petitioner insists that the April 24, 1998 Order of Judge Llaguno was issued
without jurisdiction. That is, it allegedly amended the August 12, 1997
judgment of the Special Agrarian Court by requiring the payment of
compensation in cash and bonds.

Assailed Order Not an

Amendment, But an Iteration

of Final Judgment

The argument is not persuasive. The April 24, 1998 Order was not an illegal
amendment of the August 12, 1997 judgment which had become final and
executory. The reason is that the Order did not revise, correct, or alter the
Decision. Rather, the Order iterated and made clear the essence of the final
judgment.chanrob1es virtua1 1aw 1ibrary

The August 12, 1997 judgment mandated compensation to the petitioner in

the manner provided by R.A. 6657." 9 There is certitude with regard to this
assertion. The confusion in the present case, which required the issuance of
the assailed Order, arose from petitioner’s belief that the Land Bank had
obligated itself to pay in cash the compensation due him. This fact can
allegedly be gleaned from its compliance with the December 4, 1997 Writ of
Execution and December 19, 1997 Notice of Garnishment.
Compensation Due Petitioner

to Be Paid Pursuant to RA 6657

However, it is clear from the August 12, 1997 judgment that the
compensation was to be paid in the manner provided by RA 6657." 10
Pursuant to Section 18 of the same law, payment was to be in cash and
bonds, as indicated below:jgc:chanrobles.com.ph

"Section 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 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:chanrob1es virtual 1aw library

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

(a) For lands above fifty (50) Twenty-five percent (25%)

hectares, insofar as the cash, the balance to be paid

excess hectarage is concerned. in government financial

instruments negotiable

at any time
(b) For lands above twenty- Thirty-percent (30%) cash,
four (24) hectares and up to the balance to be paid in

fifty (50) hectares government financial

instruments negotiable at

anytime."cralaw virtua1aw library

Be that as it may, petitioner contends that the bank is estopped from

questioning its alleged undertaking to pay him in cash. This contention was
purportedly manifested in its letter-compliance with the Writ of Execution
and the Notice of Garnishment. In the letter, respondent said that it was
segregating a specified amount from the Agrarian Reform Fund, in order to
pay him. He insists that such amount was garnished in accordance with
Section 1, Rule 39 of the Rules of Court, and should have been delivered to
him pursuant to Section 9 of the same Rule.

We disagree. Respondent bank was obliged to follow the mandate of the

August 12, 1997 judgment. Hence, its compliance with the Writ of Execution
and the Notice of Garnishment 11 ought to have been construed as an
agreement to pay petitioner in the manner set forth in Republic Act No.
6657. Its compliance was not an undertaking to pay in cash because such
act would have been a deviation from the dictum of the final judgment, to
which execution must conform. 12 Paying in cash, as petitioner demands, is
not compatible with such judgment.

Misplaced is petitioner’s reliance on Section 9, Rule 39 of the Rules of Court,

because the final judgment decrees payment in cash and bonds. Indeed, this
provision must be taken in conjunction with RA 6657. Since respondent bank
had already given petitioner the entire adjudged amount in the required
proportion of cash and bonds, it must be deemed to have complied with its
duty under Rule 39.chanrob1es virtua1 1aw 1ibrary
We understand petitioner’s desire to be paid in cash; after all, his
compensation was long overdue. However, we cannot grant his Petition
because it is not sustained by the law. In this regard, we recall the Court’s
explanation in Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform: 13

"It cannot be denied from these cases that the traditional method 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 exercise of the power of
eminent domain. This is not an ordinary expropriation where only a specific
property of relatively limited area is sought to be taken by the State from its
owner for a specific and perhaps local purpose. What we deal with here is a
revolutionary kind of expropriation.

x x x

"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 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 specter 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.chanrob1es virtua1
1aw 1ibrary
"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 be 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
forbearance 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."cralaw
virtua1aw library

All told, we hold that the appellate court was correct in sustaining the
propriety and the efficacy of the April 24, 1998 Order of Judge Llaguno. In
the exercise of her supervisory powers over the execution of a final and
executory judgment, 14 such as her August 12, 1997 Decision, special
circumstances attending its execution impelled her to issue the Order
clarifying the terms thereof.

Petitioner’s claim for damages against the bank must likewise be denied
because, as already explained, it was well within its rights in resisting the
former’s claim.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the Petition is hereby DENIED and the assailed Decision

AFFIRMED. Costs against petitioner.