TOPIC: Land Acquisition and Distribution Process: OLT:

Del Castillo V. Orciga PD27

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J. Velasco Manotok
Petitioners: Respondents:
JOVENDO DEL CASTILLO ABUNDIO ORCIGA, EMELINA ORCIGA-
VOLANTE, PILAR ORCIGA CLEMENA,
ADELAIDA ORCIGA GENIO, NENITA ORCIGA
ELEDA, YOLANDA ORCIGA TAKASAN and
ALBERTO ORCIGA
DOCTRINE
A Certificate of Land Transfer (CLT) is a provisional title of ownership over the landholding while the lot
owner is awaiting full payment of the land’s value or for as long as the beneficiary is an “amortizing
owner.”

FACTS
1. Petitioner Jovendo del Castillo is the son and administrator of Menardo del Castillo, who
previously owned a 1.3300-hectare riceland located at Omabo, Polpog, Bula, Camarines Sur.
The farmland was formerly cultivated by Eugenio Orciga.
2. Pursuant to PD No. 27, Eugenio Orciga became the beneficiary of the Land Transfer Program of
the government during his lifetime. He was awarded Certificate of Land Transfer No. 0-070176
over the said landholding on April 3, 1981.
3. In 1988, Eugenio Orciga died. Prior to the final selection and determination of the successor of
the deceased tenant, the heirs agreed to rotate among themselves the cultivation of the riceland
covered by the CLT. Among the heirs was Ronald Orciga.
4. After cultivating and harvesting the Riceland from 1989 to 1991, Ronald Orciga abandoned the
said farm on May 3, 1991 and eventually left the barrio without turning over the land owner’s
share of the agricultural harvest.
5. On May 28, 1991, fully armed with guns, petitioner del Castillo – a member of the CAFGU
(Citizens Armed Forces Geographical Unit) – forcibly entered the riceland of the late Eugenio
Orciga. He started to cultivate the land over the objection of the respondents, effectively ejecting
them from their possession and cultivation of the land.

PROCEDURAL HISTORY
1. Respondents filed a complaint with the Office of Provincial Adjudicator, DARAB, Naga City for
Reinstatement with Mandatory Injunction and Damages. Provincial Adjudicator Virgil G. Alberto
ruled in favor of petitioner. He dismissed the petition for reinstatement for lack of cause of action.
Rolando Orciga was given until the next cropping season of 1994 to personally cultivate said
farmholding, subject to payment of arrearages on rentals.
2. Respondents filed a Motion for Reconsideration on August 1, 1994, claiming that the Provincial
Adjudicator’s Decision was contrary to law and not in accordance with the provisions and intent of
MAR Memorandum Circular No. 19, series of 1978, in relation to A.O. 4, series of 1988.
3. The Provincial Adjudicator rejected the plea for reconsideration.
4. Respondents filed an appeal before the DARAB. The DARAB annulled the appealed decision and
a new decision was rendered. The DARAB placed the disposition of subject landholding with the
DAR, particularly the PARO for the implementation of Ministry Memorandum Circular No. 19,
Series of 1978, as amended by DAR Administrative Order No. 14, Series 1988. It ordered Del
Castillo to vacate the subject landholding for the proper disposition of DAR.
5. Petitioner filed a Motion for Reconsideration but it was rejected by DARAB.
6. Petitioner filed a petition for review before the Court of Appeals. The CA denied the petition. The
appellate court concluded that petitioner del Castillo has no right to take possession of the
farmland being disputed even if the heirs had failed to deliver the agricultural lessor’s share. It
held that when the beneficiary abandons the tillage or refuses to gain rights accruing to the
farmer-beneficiary, under the law, it will be reverted to the government and not to the farm lot
owner. CA ordered Del Castillo to vacate the landholding and directed the Department of

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 Agrarian Reform Adjudication Board to restore possession of the farm lot to respondents.
7. Petitioner filed a Motion for Reconsideration of said Decision but the CA discarded the said
motion for lack of merit in its May 7, 2002 Resolution.
8. Petitioner filed a petition for review on certiorari before the SC.
POINT/S OF CONTENTION
Petitioner Del Castillo asserts that restoring the possession of the Riceland to respondents would be
prejudicial to the interest of Menardo del Castillo, the former landowner, due to the unjustified
abandonment of said landholding by Ronald Orciga the designated successor of the beneficiary, Eugenio
Orciga. He also argues that his father, Menardo del Castillo, is still entitled to just and full compensation of
the Riceland which, at the time the case was originally before the Office of the Provincial Agrarian Reform
Adjudicator of Camarines Sur, had not been paid by Eugenio Orciga. Furthermore, he claims that
because of respondent’s pending payment of the amortizations, eh should still be considered the owner of
the Riceland. Based on such reasons, he concludes that he is entitled to possess and cultivate the land
as administrator on behalf of his father.

ISSUES Ruling
1. Whether petitioner is entitled to the possession of the riceland? 1. NO
RATIONALE
NO.

1. A Certificate of Land Transfer (CLT) is a document issued to a tenant-farmer, which 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. This certificate prescribes the terms and conditions of
ownership over said land and likewise describes the landholding—its area and its location. A CLT is the
provisional title of ownership over the landholding while the lot owner is awaiting full payment of the land’s
value or for as long as the beneficiary is an “amortizing owner.
2. Land transfer under PD No. 27 is effected in two (2) stages: (1) issuance of a CLT to a farmer-
beneficiary as soon as DAR transfers the landholding to the farmer-beneficiary in recognition that said
person is a “deemed owner”; and (2) issuance of an Emancipation Patent as proof of full ownership of the
landholding upon full payment of the annual amortizations or lease rentals by the farmer or beneficiary.
The CLT of Eugenio Orciga was issued on April 3, 1981; thus, he has been the rightful owner of said
farmland by virtue of PD No. 27.
3. In the case at bar, the petitioner has two options: first, to bring the dispute on the non-payment of
the land to the DAR and the Barangay Committee on Land Production that will subsequently resolve said
dispute pursuant to Ministry of Agrarian Reform (MAR) Memorandum Circular No. 26, series of 1973 and
other issuances; and, second, to negotiate with the DAR and LBP for payment of the compensation claim
pursuant to Section 2 of EO No. 228. Eventually, the scheme under EO No. 228 will result to the full
payment of the compensation of the value of the land to Menardo del Castillo, petitioner’s father and
former landowner.
4. It is indubitably clear that the reconveyance of the land to the former owner is not allowed. The
policy is to hold such lands under trust for the succeeding generations of farmers. The objective is to
prevent repetition of cases where the lands distributed to the tenant-farmers reverted to the former lot
owners or even conveyed to land speculators. Thus, possession of the land cannot be restored to
petitioner del Castillo although there was failure of the heirs to pay the landowner’s share or
compensation. The transfer or conveyance of the riceland can only be made to an heir of the beneficiary
or to any other beneficiary who shall in turn cultivate the land. In the case in hand, even if Ronald Orciga
has abandoned the land, the right to possess and cultivate the land legally belongs to the other heirs of
Eugenio Orciga. Undoubtedly, petitioner del Castillo is not a beneficiary of Eugenio Orciga—the original
beneficiary; hence, petitioner has no legal right to the possession of the farmland.

DISPOSITIVE
WHEREFORE, the November 26, 2002 Decision of the Court of Appeals is hereby AFFIRMED with
MODIFICATIONS, as follows: The respondents or heirs of the late Eugenio Orciga are ordered, within

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one month from finality of this Decision, to choose the sole owner and cultivator of the landholding from
among themselves, giving first preference to his surviving spouse, or in her absence or incapacity, from
among the heirs, and to give priority according to age of the heirs in accordance with MAR Memorandum
Circular No. 19, Series of 1978. In case of respondents’ failure to comply with MAR Memorandum
Circular No. 19, Series of 1978, the DAR is ordered to determine the heir or successorin-interest of the
late Eugenio Orciga as farmerbeneficiary within one month reckoned from the lapse of the 30-day period
given to respondents to determine the sole owner-cultivator. Petitioner Jovendo del Castillo is ordered to
immediately surrender possession of the disputed landholding to respondents, and the DARAB is directed
to ensure the immediate restoration of possession of said landholding to the respondents. Costs against
the petitioner.

HOLY TRINITY REALTY V. DELA TOPIC: CARP - Compulsory Acquisition

2 CRUZ
Bersamin, J. Palenzuela
Petitioners: Respondents:
Holy Trinity Realty & Development Corp. Victorio Dela Cruz, Lorenzo Manalaysay, Ricardo
Marcelo, Jr. And Leoncio De Guzman
DOCTRINE
Before land may be placed under the coverage of Republic Act No. 6657, two requisites must be met,
namely: (1) that the land must be devoted to agricultural activity; and (2) that the land must not be
classified as mineral, forest, residential, commercial or industrial land.

For land to be covered under Presidential Decree No. 27, it must be devoted to rice or corn crops, and
there must be a system of share-crop or lease-tenancy obtaining therein. If either requisite is absent, the
land must be excluded. Hence, exemption from coverage followed when the land was not devoted to rice
or corn even if it was tenanted; or the land was untenanted even though it was devoted to rice or corn.

Land on which no agricultural activity is being conducted is not subject to the coverage of either
Presidential Decree No. 27 or Republic Act No. 6657.

FACTS
A parcel of land (Dakila property) in Bulacan was registered under the name of one Freddie Santiago. It
used to be tenanted by Susana Surio and 13 others, but the tenants freely and voluntarily relinquished
their tenancy rights in favor of Santiago through their respective sinumpaang pahayag in exchange for
some financial assistance and individual homelots titled and distributed in their names.

Holy Trinity purchased the remaining 208,050 sqm of the Dakila property from Santiago. Santiago caused
the transfer of the title to Holy Trinity and subdivided the Dakila property into 6 lots. Holy Trinity then
developed the property by dumping filing materials on the topsoil, erected a perimeter fence and steel
gate and later on established its field office on the property.

In 1998, the Sanggunian Bayan ng Malolos passed Municipal Resolution No. 16-98 reclassifying four of
the six subdivided lots belonging to Holy Trinity into residential lots. The Municipal Planning and
Development Office (MPDO) of Bulacan issued the Certificate of Eligibility for Conversion, Preliminary
Approval and Locational Clearance in favor of Holy Trinity for its residential subdivision project on the
Dakila property. In 1999, Holy Trinity purchased another from Santiago another parcel of land.

In 2006, a certain Silvino Manalad and the alleged heirs of one Felix Surio wrote to Provincial Agrarian
Reform Officer (PARO) of Bulacan to request an investigation of the sale of the Dakila property. It was
followed by the letter request of the Chairman of Sumapang Matanda Barangay Agrarian Reform Council
(BARC) to place the Dakila property within the coverage of Operation Land Transfer (OLT) pursuant to
PD 27. DAR Provincial Office of Bulacan filed a petition to annul the sale of the Dakila property with the
Provincial Agrarian Reform Adjudicator (PARAD) of Bulacan.

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PROCEDURAL HISTORY
DAR Regional Office ruled that the subject properties were within the coverage of PD 27.
 OIC-Regional Director in Pampanga issued an order granting the letter request of BARC
Chairman. He claimed that the sale of the Dakila property was a prohibited transaction under
PD 27, Sec. 6 of RA 6657 and DAR Admin. Order no. 1, Series of 1989 and that Holy Trinity
was disqualified from acquiring land under RA 6657 because it is a corporation. Petitioner
assailed the order and file Motion to Withdraw/Quash/Set Aside, while the motion was
pending the Register of Deeds issued emancipation patents (EP) pursuant to the order of
the OIC-RD.
DAR Secretary affirmed Regional Director’s ruling
 Holy Trinity’s appeal to Dar Sec. was denied, holding that forum was not committed because
the cause of action in the letter request and the action for cancellation of the deed of sale
before DARAB were distinct and separate, that EP’s were regularly issued and that the
resolution of the DARAB did not affect the validity of EP’s. DAR Sec. ruled that Dakila
property was not exempt from the coverage of PD 27 and Ra 6657 because Municipal
Resolution No. 16-98 did not change or reclassify but merely re-zoned the Dakila property
Office of the President reversed DAR Sec’s ruling
 holding that the Dakila Property ceased to be suitable for agriculture and had been
reclassified as residential land pursuant to Mun. Reso. No. 16-98. It shows that the City
Assessor of Malolos and the Provincial Assessor of Bulacan have considered these lands as
residential for taxation purposes. Dela Cruz appealed to the CA.
CA reversed OP’s ruling
 It declared that prior to the effectivity of RA6657 and even after the passage of Municipal
Resolution No. 16-98, the Dakila property was an agricultural land, and that there was no
valid reclassification because Sec. 20 of Ra 7160 and Memo Cir. 54 required an ordinance,
not a resolution and the findings of DAR should be respected.
POINT/S OF CONTENTION
Petitioner
Holy Trinity argues that CA ignored issues vital to the complete determination of the parties’ respective
rights over the Dakila property. They argue that CA should have ruled on the propriety of issuing the EPs,
that since the petition was still pending in DARAB, DAR should have withheld the issuance of the EPs.

Holy Trinity claimed that they were deprived of due process because the requirements of notice and
conduct off public hearing and a field investigation were not strictly complied with by the DAR pursuant to
RA 6657 and DAR Admin Order No. 12, Series of 1998.

Holy Trinity asserted that CA erred in placing Dakila property under the coverage of RA 6657 when the
order of OIC-RD applied the provisions of PD27 and that the two laws should be differentiated from each
other. CA, according to Holy Trinity, should have dismissed Dela Cruz petition for review due to its
defective certification, pointing to the verification having been signed by BARC Chairman.

ISSUES Ruling
Whether or not Dakila property was an agricultural land within the coverage of RA 6657 NO
or PD 27.
RATIONALE
The Court agreed that reclassification requires an ordinance, not a resolution, and such may only be
passed after conduct of public hearings.

The petitioner claims the reclassification on the basis of Municipal Resolution No. 16-98. Given the
foregoing clarifications, however, the resolution was ineffectual for that purpose. A resolution was a mere
declaration of the sentiment or opinion of the lawmaking body on a specific matter that was temporary in
nature, and differed from an ordinance in that the latter was a law by itself and possessed a general and
permanent character. It was also noted that the petitioner did not show if the requisite public hearings
were conducted at all. In the absence of any valid and complete reclassification, therefore, the Dakila
property remained under the category of an agricultural land.

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Nonetheless, the Dakila property was not an agricultural land subject to the coverage of Republic Act No.
6657 or Presidential Decree No. 27.

Verily, the basic condition for land to be placed under the coverage of Republic Act No. 6657 is that it
must either be primarily devoted to or be suitable for agriculture.50 Perforce, land that is not devoted to
agricultural activity is outside the coverage of Republic Act No. 6657.51 An agricultural land, according to
Republic Act No. 6657, is one that is devoted to agricultural activity and not classified as mineral, forest,
residential, commercial or industrial land.52Agricultural activity includes the “cultivation of the soil,
planting of crops, growing of fruit trees, raising livestock, poultry or fish, 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.”53

Consequently, before land may be placed under the coverage of Republic Act No. 6657, two requisites
must be met, namely: (1) that the land must be devoted to agricultural activity; and (2) that the land must
not be classified as mineral, forest, residential, commercial or industrial land. Considering that the Dakila
property has not been classified as mineral, forest, residential, commercial or industrial, the second
requisite is satisfied. For the first requisite to be met, however, there must be a showing that agricultural
activity is undertaken on the property.

It is not difficult to see why Republic Act No. 6657 requires agricultural activity in order to classify land as
agricultural. The spirit of agrarian reform laws is not to distribute lands per se, but to enable the landless
to own land for cultivation. This is why the basic qualification laid down for the intended beneficiary is to
show the willingness, aptitude and ability to cultivate and make the land as productive as possible.54 This
requirement conforms with the policy direction set in the 1987 Constitution to the effect that agrarian
reform laws shall be founded on the right of the landless farmers and farmworkers to own, directly or
collectively, the lands they till.55 In Luz Farms v. Secretary of the Department of Agrarian Reform,56 we
even said that the framers of the Constitution limited agricultural lands to the “arable and suitable
agricultural lands.”

Here, no evidence was submitted to show that any agricultural activity – like cultivation of the land,
planting of crops, growing of fruit trees, raising of livestock, or poultry or fish, including the harvesting of
such farm products, and other farm activities and practices – were being performed on the Dakila property
in order to subject it to the coverage of Republic Act No. 6657. We take particular note that the previous
tenants had themselves declared that they were voluntarily surrendering their tenancy rights because the
land was not conducive to farming by reason of its elevation, among others.57 Also notable is the second
Whereas Clause of Municipal Resolution No. 16-98, which mentioned that the Dakila property was not fit
for agricultural use due to lack of sufficient irrigation and that it was more suitable for residential use.

Even if we supplemented the provisions of Presidential Decree No. 27, the outcome is still the same,
because the Dakila property was still not within the scope of the law. For land to be covered under
Presidential Decree No. 27, it must be devoted to rice or corn crops, and there must be a system of
share-crop or lease-tenancy obtaining therein. If either requisite is absent, the land must be excluded.
Hence, exemption from coverage followed when the land was not devoted to rice or corn even if it was
tenanted; or the land was untenanted even though it was devoted to rice or corn. Based on these
conditions, the DAR Regional Office erred in subjecting the Dakila property under the OLT. The first
requirement, that the land be devoted to rice or corn cultivation, was not sufficiently established.

Petitioners were also deprived of due process by the failure of the OIC-Regional Director to see to the
compliance with the procedures outlined by Republic Act No. 6657 and Presidential Decree No. 27.

DISPOSITIVE
Petition for review on certiorari GRANTED. Office of the President’s assailed decision REINSTATED. Eps
issued to the respondents CANCELLED for being NULL and VOID. Respondents to pay costs of suit.

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Additional Notes/Doctrine:

In Reyes v. Barrios, we identified the procedural requirements that must be followed prior to the issuance
of an EP, viz:

The Primer on Agrarian Reform enumerates the steps in transferring the land to the
tenant-tiller, thus:
a. First step: the identification of tenants, landowners, and the land covered by OLT.
b. Second step: land survey and sketching of the actual cultivation of the tenant to
determine parcel size, boundaries, and possible land use;
c. Third step: the issuance of the Certificate of Land Transfer (CLT). To ensure accuracy
and safeguard against falsification, these certificates are processed at the National
Computer Center (NCC) at Camp Aguinaldo;
d. Fourth step: valuation of the land covered for amortization computation;
e. Fifth step: amortization payments of tenant-tillers over fifteen (15) year period; and
f. Sixth step: the issuance of the Emancipation Patent.
Thus, there are several steps to be undertaken before an Emancipation Patent can be
issued. x x x.

xxxx

Furthermore, there are several supporting documents which a tenant-farmer must submit
before he can receive the Emancipation Patent, such as:
a. Application for issuance of Emancipation Patent;
b. Applicant's (owner's) copy of Certificate of Land Transfer.
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 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.

Majority of these supporting documents are lacking in this case. Hence, it was improper
for the DARAB to order the issuance of the Emancipation Patent in favor of respondent
without the required supporting documents and without following the requisite procedure
before an Emancipation Patent may be validly issued.

For a valid implementation of the CAR Program, two notices are required: (1) the Notice of
Coverage and letter of invitation to a preliminary conference sent to the landowner, the
representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to
DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to the landowner under
Section 16 of the CARL.

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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 "[n]o 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.

TOPIC: Rights of farmers to own lands they till/ Agrarian

Hacienda Luisita v. PARC Reform Justice
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J. Velasco Jr. Lopez
Petitioners: Respondents:
HACIENDA LUISITA, INCORPORATED PRESIDENTIAL AGRARIAN REFORM
Petitioners-in-intervention: COUNCIL; SECRETARY NASSER
LUISITA INDUSTRIAL PARK CORPORATION PANGANDAMAN OF THE DEPARTMENT OF
and RIZAL COMMERCIAL BANKING AGRARIAN REFORM; ALYANSA NG MGA
CORPORATION MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI, and
JULIO SUNIGA and his SUPERVISORY GROUP
OF THE HACIENDA LUISITA, INC. and
WINDSOR ANDAYA
DOCTRINE
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock
distribution of the corporate landowner belongs to PARC. Contrary to petitioner HLI’s posture, PARC
also has the power to revoke the SDP which it previously approved. It may be, as urged, that RA 6657
or other executive issuances on agrarian reform do not explicitly vest the PARC with the power to
revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC
under the principle of necessary implication, a basic postulate that what is implied in a statute is as
much a part of it as that which is expressed.

The Supreme Court ruled that there appeared to have been no breach of the fundamental law. Section
4, Article XIII of the 1987 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.”

The law is clear – farmers and regular farmworkers have a right to OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law allows two modes of land distribution—direct
and indirect ownership. No language is found in the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being the legal entity through which collective ownership

7
can be exercised. The term “collectively” is said to allow 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.

Even in the definition of agrarian reform itself in RA 6657 allows stock distribution— “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 physical redistribution of land, such as
production or profit sharing, labour management and the distribution of shares of stock which allow
beneficiaries to receive a just share of the fruits of the land they work.”

The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with the State’s commitment to farmers
and farmworkers to advance their interests under the policy of social justice. This is believed to be the
modality of the legislature for collective ownership by which the imperatives of social justice may be
approximated, if not achieved.

FACTS
Hacienda Luisita de Tarlac (Hacienda Luisita) is a 6,443-hectare mixed agricultural-industrial-
residential expanse straddling several municipalities of Tarlac. It is 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.

To facilitate the adverted sale-and-purchase package, the Philippine government assisted the buyer to
obtain a dollar loan from a US bank. Also, the Government Service Insurance System (GSIS) extended
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, 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;

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.

On March 17, 1988, during the administration of President Corazon Cojuangco Aquino, the Office of
the Solicitor General moved to withdraw the government’s case against Tadeco, et al. The CA
dismissed the case, subject to the PARC’s approval of Tadeco’s proposed stock distribution plan (SDP)
in favor of its farmworkers. Under EO 229 (Sec 10) and later RA 6657(Sec 31), Tadeco had the option
of availing stock distribution as an alternative modality to actual land transfer to the farmworkers.

On August 23, 1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as vehicle to
facilitate stock acquisition by the farmworkers. Pedro Cojuangco, Josephine C. Reyes, Teresita C.
Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI. For this purpose,
Tadeco conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related
properties of Hacienda Luisita in exchange for HLI shares of stock.

On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda

8
Luisita signified in a referendum their acceptance of the proposed HLI’s Stock Distribution Option Plan
(SODP).

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

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. (5,117 out of 5315 =
shares; 132 = land distribution)

Prior to approval, DAR Secretary Miriam Defensor-Santiago proposed 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
November 21, 1989 - the PARC, under then Sec. Defensor-Santiago, issued Resolution No. 89-12-2,
approving the SDP of Tadeco/HLI.

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.
Two separate groups subsequently contested this claim of HLI.

ON THE CONVERSION OF LANDS

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from
agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the application on
August 14, 1996, subject to payment of three percent (3%) of the gross selling price to the FWBs and
to HLI’s continued compliance with its undertakings under the SDP, among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of
Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the latter.
Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial Park
Corporation (LIPCO), which used it in developing an industrial complex. From this area was carved out
2 parcels(180 has and 4 has), for which 2 separate titles were issued in the name of LIPCO. Later,
LIPCO transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in payment of
LIPCO’s PhP431,695,732.10 loan obligations to RCBC (dacion en pago). LIPCO’s titles were
cancelled and new ones were issued to RCBC.

9
The other 200 has was transferred to Luisita Realty Corporation (LRC) in two separate transactions in
1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each.

Apart from the 500 hectares, another 80.51 hectares were later detached from Hacienda Luisita and
acquired by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus,
4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI.

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

From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI also filed a
petition before the Supreme Court in light of what it considers as the DAR’s hasty placing of Hacienda
Luisita under CARP even before PARC could rule or even read the motion for reconsideration. PARC
would eventually deny HLI’s motion for reconsideration via Resolution No. 2006-34-01 dated May 3,
2006.
POINT/S OF CONTENTION

HLI: PARC has no authority to revoke the SDP; it has the power to disapprove, but not to recall its
previous approval of the SDP. It is the court which has jurisdiction and authority to order the revocation
or rescission of the PARC-approved SDP. 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 should be
the applicable law on the disposition of the agricultural land of HLI.

ISSUES Ruling
1. WON PARC possess jurisdiction to recall or revoke HLI’s SDP? 1. YES
2. WON Sec. 31 of RA 6657, which allows stock transfer in lieu of outright 2. NO
land transfer, unconstitutional?
3. WON the revocation of the HLI’s SDP valid? 3. YES
4. WON portions of the converted land within Hacienda Luisita that RCBC 4. YES
and LIPCO acquired by purchase be excluded from the coverage of the
assailed PARC resolution?
RATIONALE

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

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

Following the doctrine of necessary implication, it may be stated that the conferment of express power
to approve a plan for stock distribution of the agricultural land of corporate owners necessarily includes
the power to revoke or recall the approval of the plan. To deny PARC such revocatory power would
reduce it into a toothless agency of CARP, because the very same agency tasked to ensure

10
compliance by the corporate landowner with the approved SDP would be without authority to impose
sanctions for non-compliance with it.

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. 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.

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

While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of
27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 31 of RA 6657 as early
as November 21, 1989 when PARC approved the SDP of Hacienda Luisita or at least within a
reasonable time thereafter, and why its members received benefits from the SDP without so much of a
protest. It was only on December 4, 2003 or 14 years after approval of the SDP that said plan and
approving resolution were sought to be revoked, but not, to stress, by FARM or any of its members, but
by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of
Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent
implementation of the SDP. Even the public respondents, as represented by the Solicitor General, did
not question the constitutionality of the provision.

On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the
constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with the Court.
Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on
their rights and even accepted benefits from the SDP with nary a complaint on the alleged
unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded
into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time
and the occurrence of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.

The last but the most important requisite that the constitutional issue must be the very lis mota of the
case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not
being critical to the resolution of the case. If some other grounds exist by which judgment can be made
without touching the constitutionality of a law, such recourse is favored.

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

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

11
The Supreme Court also noted that Section 5 of RA 9700 superseded Section 31 of RA 6657 vis-à-vis
the stock distribution component of said provision, where Section 5 of RA 9700 provides: “That after
June 30, 2009, the mode of acquisition shall be limited to voluntary offer to sell and compulsory
acquisition.” Thus, stock distribution is no longer an available option under existing law. The issue has
become moot and academic.

The Supreme Court ruled that there appeared to have been no breach of the fundamental law.
Section 4, Article XIII of the 1987 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.”

The law is clear – farmers and regular farmworkers have a right to OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law allows two modes of land distribution—direct
and indirect ownership. No language is 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 term “collectively” is said to allow 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.

Even in the definition of agrarian reform itself in RA 6657 allows stock distribution— “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 physical redistribution of land, such
as production or profit sharing, labour management and the distribution of shares of stock which allow
beneficiaries to receive a just share of the fruits of the land they work.”

The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with the State’s commitment to
farmers and farmworkers to advance their interests under the policy of social justice. This is believed to
be the modality of the legislature for collective ownership by which the imperatives of social justice may
be approximated, if not achieved.

Also as contended by FARM that stock certificates do not equate to land ownership, still, the
Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in
the assets of the corporation, which includes the agricultural lands. A share of stock typifies an aliquot
part of the corporation’s property, or right to share in its proceeds to the 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. However, the FWBs will ultimately own the agricultural lands owned by the corporation
when the latter is eventually dissolved and liquidated.

The policy of agrarian reform is that control over the agricultural land must always be in the
hands of the farmers. The Court also reasoned that there can be no guarantee of a successful
implementation of agrarian reform, whether there is actual distribution or not. Accordingly, the principle
of “land to the tiller and the old pastoral model of ownership were non-human juridical persons were
prohibited from owning agricultural lands are no longer realistic under existing conditions.

3. YES, the revocation of the HLI’s SDP valid and the PARC did NOT gravely abuse its discretion in
revoking the subject SDP and placing the hacienda under CARP’s compulsory acquisition and

12
distribution scheme.

The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLI’s stock
distribution violate DAO 10 because the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of “man days” and the hiring of additional
farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is contrary to what Sec. 11 of
DAO 10 prescribes.

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

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

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

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

To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month
threshold. Remove this timeline and the corporate landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits the implementation of the stock distribution
scheme. the reason underpinning the 30-year accommodation does not apply to corporate landowners
in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much
shorter period of time.

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

13
4. YES, portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired by
purchase should be excluded from the coverage of the assailed PARC resolution.

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 purchasers in good faith for value entitled to the
benefits arising from such status.

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

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

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

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably,
LIPCO acquired 300 hectares of land from Centennary for the amount of PhP750 million pursuant to a
Deed of Sale dated July 30, 1998. On the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion
en pago to pay for a loan of PhP431,695,732.10.

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

14
The Court went on to apply the operative fact doctrine to determine what should be done in the
aftermath of its disposition of the above-enumerated issues:

While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-
32-01 and 2006-34-01, the Court cannot close its eyes to certain “operative facts” that had occurred in
the interim. Pertinently, the “operative fact” doctrine realizes that, in declaring a law or executive action
null and void, or, by extension, no longer without force and effect, undue harshness and resulting
unfairness must be avoided. This is as it should realistically be, since rights might have accrued in
favor of natural or juridical persons and obligations justly incurred in the meantime. The actual
existence of a statute or executive act is, prior to such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot always be erased by a new judicial
declaration.

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

Petition is DENIED. 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

15
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

Additional Notes: Palenzuela

DISSENTING OPINION
CORONA, C.J.

TL;DR: Agrarian reform’s underlying principle is the recognition of the rights of farmers and
farmworkers who are landless to own, directly or collectively, the lands they till. Actual land distribution
to qualified agrarian reform beneficiaries is mandatory. Anything that promises something other than
land must be struck down for being unconstitutional.

There is no valid substitute to actual distribution of land because the right of landless farmers and
farmworkers expressly and specifically refers to a right to own the land they till. The river cannot rise
higher than its source. An unconstitutional provision cannot be the basis of a constitutional act.
As the stock distribution plan of petitioner HLI is based on Section 31 of RA 6657 which is
unconstitutional, the stock distribution plan must perforce also be unconstitutional.

Justice Corona started his dissenting opinion by citing the conversation between Mr. Tadeo and Mr. Ople
during the ConComm Deliberations. The latter presented an inquiry on how some of the biggest land
estates would be redistributed to their tenants, or what will happen if they have no tenants at all, to which
Mr. Tadeo replied: “The principle is agrarian land for the tillers and land for the landless.”

Justice Corona emphasized the importance of agrarian reforms and how it is an essential element of
social justice. “It aims to liberate farmers and farmworkers from bondage to the soil, to ensure that they do
not remain slaves of the land but stewards thereof.” In his opinion, the case at bar is of great importance
as it is a test of the Court’s findelity to agrarian reform, social justice, and the Constitution.

He also discussed the history of agrarian reform in the Philippines: how the revolts in 1751 against the
religious of St. Dominic and of St. Augustin led the King of Spain to implement pacification measures by
Don Pedro Calderon Enriquez of the Royal Audiencia who "demanded from the aforesaid religious the
titles of ownership of the lands which they possessed; and notwithstanding the resistance that they made
to him xxx distributed to the villages the lands which the [religious] orders had usurped, and all which they
held without legitimate cause [he] declared to be crown lands." This was the first recorded attempt at
compulsory land distribution in the Philippines. This proved to be ineffectual though for the friars still
controlled various tracts of land until the end of Spanish regime.

16
Gov. Gen. William Howard Taft reported that there was about 171,991 hectares tilled by about 70,000
landless tenants. He negotiated with Rome for the purchase of the friar lands for $7 Million with sinking
funds. The "lands were to be disposed of to the tenants as rapidly as the public interest will permit" even
at a net pecuniary loss to the colonial government.

Later, the Philippines was plunged into a series of revolts by the Sakdalista (1930s) and the Hukbalahap
(1950s). Appeasement came in the form of RA 1199 (Agricultural Tenancy Act of 1954) and RA 1400
(Land Reform Act of 1955). RA 1199 allowed tenants to become leaseholders while RA 1400 mandated
compulsory land redistribution. However, RA 1400 set unreasonable retention limits at 300 hectares for
private rice lands and 600 hectares for corporate lands

As peasant unrest continued to fester, RA 3844 (Land Reform Code of 1963) was enacted instituting the
"operation land transfer" program but allowing a maximum retention area of 75 hectares. This was
followed in 1971 by RAs 6389 and 6390 (Code of Agrarian Reforms) which created the Department of
Agrarian Reform, reinforced the position of farmers and expanded the scope of agrarian reform by
reducing the retention limit to 24 hectares. In 1972, President Ferdinand E. Marcos issued PD 2
proclaiming the entire Philippines as a land reform area. However, PD 27 subsequently restricted the
scope of land reform to the compulsory redistribution of tenanted rice and corn lands exceeding seven
hectares.

Thus, more than two and a half centuries after compulsory land redistribution was first attempted in the
Philippines, there remained so much unfinished business. It is this which the social justice provisions of
the 1987 Constitution were intended to finish. Section 4, Article XIII thereof commands:

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, considering 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.

For Justice Corona, the Constitution has ordained land redistribution as the mechanism of agrarian
reform.
1. It recognizes the right of farmers and regular farmworkers who are landless to own directly or
collectively the lands they till.
2. It affirms the primacy of this right which is enshrined as the centerpiece of agrarian reform,
thereby guaranteeing its enforcement.
3. In the same breath, it directs that, to such end, the State shall undertake the just distribution of
all agricultural lands, subject only to retention limits and just compensation.

He continued by explaining that The Comprehensive Agrarian Reform Law of 1988 (RA 6657) was
supposed to be a revolutionary law by introducing innovative approaches to agrarian reform

Among its novel provisions (and relevant to this case) is Section 31 which provides:
SEC. 31. Corporate Landowners. - Corporate landowners may voluntarily transfer ownership
over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20
hereof or to qualified beneficiaries, under such terms and conditions consistent with this Act, as
they may agree upon, subject to confirmation by the DAR.

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

17
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.

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 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.

Section 31 of RA 6657 grants corporate landowners like petitioner Hacienda Luisita, Inc. (HLI) the
option to give qualified agrarian reform beneficiaries the right to purchase capital stock of the
corporation proportionate to how much 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. Such voluntary divestment of a portion of the corporate landowner’s
capital stock to qualified agrarian reform beneficiaries is considered compliance with the agrarian
reform law (RA 6657), subject to certain conditions.

This provision is the basis of the assailed stock distribution plan executed by petitioner HLI with
farmworker-beneficiaries.

Respondents herein argues that the provision is unconstitutional, insofar as it provides HLI the choice to
resort to stock distribution for compliance with the agrarian reform program. They assert that the stock
distribution arrangement is fundamentally infirm as it impairs the right of farmers and farmworkers under
Section 4, Article XIII of the Constitution to own the land they till.

The ponencia opines that the challenge on the constitutionality of Section 31 of RA 6657 and its
counterpart provision in EO 229 must fail because such issue is not the lis mota of the case. Moreover, it
has become moot and academic.

This is where Justice Corona disagrees. In this case, the question of constitutionality has been raised by
the parties-in-interest to the case. In addition, any discussion of petitioner HLI’s stock distribution plan
necessarily and inescapably involves a discussion of its legal basis, Section 31 of RA 6657. More
importantly, public interest and a grave constitutional violation render the issue of the constitutionality of
Section 31 of RA 6657 unavoidable. Agrarian reform is historically imbued with public interest and, as the
records of the Constitutional Commission show, Hacienda Luisita has always been viewed as a litmus
test of genuine agrarian reform. Furthermore, the framers emphasized the primacy of the right of
farmers and farmworkers to directly or collectively own the lands they till. The dilution of this right not
only weakens the right but also debases the constitutional intent thereby presenting a serious
assault on the Constitution.

Under the operative fact doctrine, the law is recognized as unconstitutional but the effects of the
unconstitutional law, prior to its declaration of nullity, may be left undisturbed as a matter of equity and fair

18
play. In fact, the invocation of the operative fact doctrine is an admission that the law is unconstitutional. It
is evident to Justice Corona that the ponencia evaded the issue of constitutionality and adverted to the
doctrine of operative facts in its attempt to come up with what it deems to be a just and equitable
resolution of this case.

Assuming for the sake of argument that the constitutionality of Section 31 of RA 6657 has been
superseded and rendered moot by Section 5 of RA 9700 vis-a-vis stock distribution as a form of
compliance with agrarian reform, the issue does not thereby become totally untouchable. Courts will still
decide cases, otherwise moot and academic, if:

xxx 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; and
fourth, the case is capable of repetition yet evading review... 30

In this case, all the above-mentioned requisites are present:

First, a grave violation of the Constitution exists. Section 31 of RA 6657 runs roughshod over the
language and spirit of Section 4, Article XIII of the Constitution.

The first sentence of Section 4 is plain and unmistakeable. It grounds the mandate for agrarian reform on
the right of farmers and regular farmworkers, who are landless, to own directly or collectively the land they
till. The express language of the provision is clear and unequivocal – agrarian reform means that farmers
and regular farmworkers who are landless should be given direct or collective ownership of the land they
till. That is their right. 

Unless there is land distribution, there can be no agrarian reform. Any program that gives farmers or
farmworkers anything less than ownership of land fails to conform to the mandate of the
Constitution. In other words, a program that gives qualified beneficiaries stock certificates instead of
land is not agrarian reform. Actual land distribution is the essential characteristic of a
constitutional agrarian reform program. The polar star, when we speak of land reform, is that the
farmer has a right to the land he tills.

The essential thrust of agrarian reform is land-to-the-tiller. Thus, to satisfy the mandate of the constitution,
any implementation of agrarian reform should always preserve the control over the land in the hands of its
tiller or tillers, whether individually or collectively.

Consequently, any law that goes against this constitutional mandate of the actual grant of land to farmers
and regular farmworkers must be nullified. If the Constitution, as it is now worded and as it was intended
by the framers envisaged an alternative to actual land distribution (e.g., stock distribution) such option
could have been easily and explicitly provided for in its text or even conceptualized in the intent of the
framers. Absolutely no such alternative was provided for. Section 4, Article XIII on agrarian reform, in no
uncertain terms, speaks of land to be owned directly or collectively by farmers and regular farm workers.

In the case at hand, the corporate landowner remains to be the owner of the agricultural land. Qualified
beneficiaries are given ownership only of shares of stock, not the lands they till. Landless farmers and
farmworkers become landless stockholders but still tilling the land of the corporate owner,
thereby perpetuating their status as landless farmers and farmworkers.

Second, this case is of exceptional character and involves paramount public interest.

The implementation of agrarian reform at Hacienda Luisita has always been of paramount interest.
Indeed, it was specifically and unequivocally targeted when agrarian reform was being discussed
in the Constitutional Commission. Moreover, the Court should take judicial cognizance of the violent
incidents that intermittently occur at Hacienda Luisita, solely because of the agrarian problem there.

19
Indeed, Hacienda Luisita proves that, for landless farmers and farmworkers, the land they till is
their life.

The Constitution does not only bestow the landless farmers and farmworkers the right to own the land
they till but also concedes that right to them and makes it a duty of the State to respect that right through
genuine and authentic agrarian reform. To subvert this right through a mechanism that allows stock
distribution in lieu of land distribution as mandated by the Constitution strikes at the very heart of social
justice. As a grave injustice, it must be struck down through the invalidation of the statutory provision that
permits it.

To leave this issue unresolved is to allow the further creation of laws, rules or orders that permit policies
creating, unintentionally or otherwise, means to avoid compliance with the foremost objective of agrarian
reform – to give the humble farmer and farmworker the right to own the land he tills. To leave this matter
unsettled is to encourage future subversion or frustration of agrarian reform, social justice and the
Constitution. 

Third, the constitutional issue raised requires the formulation of controlling principles to guide the bench,
the bar and the public. Fundamental principles of agrarian reform must be established in order that its aim
may be truly attained.

No law, rule or policy can subvert the ultimate goal of agrarian reform, the actual distribution of land to
farmers and farmworkers who are landless. There is no valid substitute to actual distribution of land
because the right of landless farmers and farmworkers expressly and specifically refers to a right
to own the land they till.

Fourth, this case is capable of repetition, yet evading review.

As previously mentioned, if the subject provision is not struck down today as unconstitutional, the
possibility of passing future laws providing for a similar option is ominously present. Indeed, what will stop
our legislators from providing artificial alternatives to actual land distribution if this Court, in the face of an
opportunity to do so, does not declare that such alternatives are completely against the Constitution?

The river cannot rise higher than its source. An unconstitutional provision cannot be the basis of
a constitutional act. As the stock distribution plan of petitioner HLI is based on Section 31 of RA 6657
which is unconstitutional, the stock distribution plan must perforce also be unconstitutional.

On Petitioner’s Obligation to
Distribute Hacienda Luisita to Farmers

the National Government, in 1957, aided petitioner HLI’s predecessor-in-interest [Tarlac Development
Corporation (TADECO)] in acquiring Hacienda Luisita with the condition that the acquisition of Hacienda
Luisita should be made "with a view to distributing this hacienda to small farmers in line with the
[government]’s social justice program." The distribution of land to the farmers should have been
made within ten years. That was a sine qua non condition. It could have not been done away with for
mere expediency. Petitioner HLI is bound by that condition

Agrarian reform’s underlying principle is the recognition of the rights of farmers and farmworkers who are
landless to own, directly or collectively, the lands they till. Actual land distribution to qualified agrarian
reform beneficiaries is mandatory. Anything that promises something other than land must be struck down
for being unconstitutional.

Our action here today is not simply about Hacienda Luisita or a particular stock distribution plan. Our
recognition of the right under the Constitution of those who till the land to steward it is the Court’s
marching order to dismantle the feudal tenurial relations that for centuries have shackled them to the soil
in exchange for a pitiful share in the fruits, and install them as the direct or collective masters of the

20
domain of their labor. It is not legal, nor moral, to replace their shackles with mere stock certificates
or any other superficial alternative.

Justice Corona voted that the petition be dismissed; that RA 6657, Sec. 31 should be declared null and
void for being unconstitutional, hence making the stock distribution plan of petitioner HLI unconstitutional.
“For how can we grant it when it invites us to rule against the constitutional right of landless farmworker-
beneficiaries to actually own the land they till? How can we sustain petitioner HLI’s claim that its stock
distribution plan should be upheld when we are in fact declaring that it is violative of the law and of the
Constitution? Indeed, to affirm the correctness of PARC Resolution No. 2005-32-01 dated December 22,
2005 revoking the stock distribution plan and directing the compulsory distribution of Hacienda Luisita
lands to the farmworker-beneficiaries and, at the same time, grant petitioner HLI’s prayer for the
nullification of the said PARC Resolution is an exerciise in self-contradiction.”

Islanders Carp-Farmers TOPIC: CARP – RA 6657 as amended >

Beneficiaries Multi-Purpose Agribusiness Venture Agreement (AVA)
4 Cooperative v. Lapanday
CJ. Panganiban Sabado
Petitioners: Islanders Carp-Farmers Respondents Islanders Carp-Farmers
Beneficiaries Multi-Purpose Cooperative, Inc. Beneficiaries Multi-Purpose Cooperative, Inc.
DOCTRINE: Joint economic enterprises are partnerships or arrangements entered into by CARP land
beneficiaries and investors to implement agribusiness enterprises in agrarian reform areas.

FACTS: Ramon Cajegas entered into a Joint Production Agreement (JPA) for Petitioner Islanders
Carp-Farmer Beneficiaries Multi-Purpose Cooperative, Inc. with Respondent Lapanday Agricultural and
Development Corp. A Joint Venture is one whereby the beneficiaries contribute use of the land held
individually or in common and the facilities and improvements if any. On the other hand, the investor
furnishes capital and technology for production, processing and marketing of agricultural goods, or
construction, rehabilitation, upgrading and operation of agricultural capital assets, infrastructure, and
facilities. It has a personality separate and distinct from its components.

PROCEDURAL HISTORY

RTC (FILING): Three years after the JPA, the Petitioner filed a complaint with the RTC for Declaration
of Nullity against Respondent alleging that the JPA’s provisions, terms and conditions, cause and
purposes violated of the express mandatory provision of R.A. 6657. Further, that those who executed
the contract were not authorized.

DARAB: While the case was pending with the RTC, the Respondent filed a case at the DARAB for
Breach of Contract. DARAB decided in favor of respondent declaring the JPA valid and binding. It
ordered the petitioner to account for the proceeds of the produce and to comply with the terms of the
Contract.

RTC (RULING): The RTC dismissed the case due to lack of jurisdiction.

CA: Petitioner appealed to the CA. The CA ruled that being in the nature of an agricultural leasehold
and not a shared tenancy, the JPA was valid. The agreement could not be considered contrary to
public policy simply because one of the parties was a corporation.

POINT/S OF CONTENTION
Petitioner: The JPA’s provisions, terms and condition, cause and purposes violated of the express
mandatory provision of R.A. 6657. Further, that those who executed the contract were not authorized.
Respondent: JPA is valid and binding therefore Petitioner should comply with the terms of the

21
contract.
ISSUES
1. Who has Jurisdiction? DARAB
2. Whether the JPA is valid: YES (SC: Why? Because DARAB said so.)
RATIONALE: YES. The assailed Joint Production Agreement is a type of joint economic enterprise.
Joint economic enterprises are partnerships or arrangements entered into by CARP land beneficiaries
and investors to implement agribusiness enterprises in agrarian reform areas.

Recognizing that agrarian reform extends beyond the mere acquisition and redistribution of land, the
law acknowledges other modes of tenurial arrangements to effect the implementation of CARP.

In line with its power to issue rules and regulations to carry out the objectives of RA 6657, the DAR
issued A. O. 2 (1999), which issued "Rules and Regulations Governing Joint Economic Enterprises in
Agrarian Reform Areas." These rules and regulations were to provide CARP beneficiaries with
alternatives to sustain operations of distributed farms and to increase their productivity.

Sec. 10 of the AO order states as follows: Resolution of Disputes: xxx The specific modes of resolving
disputes shall be stipulated in the contract, and should the parties fail to do so, the procedure herein
shall apply. xxx The aggrieved party shall first request the other party to submit the matter to mediation
or conciliation by trained mediators or conciliators from DAR, NGOs, or the private sector chosen by
them. xxx Should the dispute remain unresolved, it may be brought to either of the following for
resolution depending on the principal cause of action: (a) DARAB if it involves interpretation and
enforcement of an agribusiness agreement or an agrarian dispute as defined in Sec. 3(d) of RA 6657.

The present controversy involves the interpretation and enforcement of the terms of the Joint
Production Agreement. Thus, the case clearly falls within the jurisdiction of the DARAB. 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. All doubts should be resolved in favor
of the DAR, since the law has granted it special and original authority to hear and adjudicate agrarian
matters.

Validity of the Joint Production Agreement. The Department of Agrarian Reform Adjudication Board
(DARAB) has jurisdiction to determine and adjudicate all agrarian disputes involving the
implementation of the Comprehensive Agrarian Reform Law (CARL). Included in the definition of
agrarian disputes are those arising from other tenurial arrangements beyond the traditional landowner-
tenant or lessor-lessee relationship. Expressly, these arrangements are recognized by Republic Act
6657 as essential parts of agrarian reform. Thus, the DARAB has jurisdiction over disputes arising from
the instant Joint Production Agreement entered into by the present parties. Since the DARAB had
already ruled in a separate case on the validity of the Joint Venture Agreement, the proper remedy for
petitioner was to question the Board's judgment through a timely appeal with the CA. Because of the
manifest lack of jurisdiction on the part of the RTC, the Court must defer any opinion on the other
issues raised by petitioner until an appropriate review of a similar case reaches the Court.
DISPOSITIVE: WHEREFORE, the Petition is DENIED. Costs against petitioner.

DNTDC v. SPS. SALIGA TOPIC: Selection of Agrarian Reform Beneficiaries > OLT
5 J. Brion Tirol
Petitioners: Respondents:
DAVAO NEW TOWN DEVELOPMENT SPOUSES GLORIA ESPINO SALIGA AND
CORPORATION (DNTDC) CESAR SALIGA, AND SPOUSES DEMETRIO
EHARA AND ROBERTA SUGUE EHARA
DOCTRINE
While tenant farmers of rice and corn lands are "deemed owners" as of October 21, 1972 following the
provisions of P.D. No. 27, this policy should not be interpreted as automatically vesting in them

22
absolute ownership over their respective tillage. The tenant-farmers must still first comply with the
requisite preconditions, i.e., payment of just compensation and perfection of title before acquisition of
full ownership.
FACTS
At the root of the present controversy are two parcels of land 4.9964 hectares and 2.5574 hectares
(subject property) situated in Catalunan Pequeño, Davao City and originally registered in the name of
Atty. Eugenio Mendiola (deceased). On February 5, 1998, the respondents Sps. Gloria Espino Saliga
and Cesar Saliga (Sps. Saliga) and Sps. Demetrio Ehara and Roberta Sugue Ehara (Sps. Ehara), filed
before the Office of the PARAD in Davao City a complaint for injunction, cancellation of titles and
damages against DNTDC.

PARAD Proceedings

In their complaint (& amended complaint), the respondents claimed that they and their parents, from
whom they took over the cultivation of the landholding, had been tenants of the property as early as
1965. On August 12, 1981, the respondents and Eugenio executed a five-year lease contract. While
they made stipulations regarding their respective rights and obligations over the landholding, the
respondents claimed that the instrument was actually a device Eugenio used to evade the land reform
law.

The respondents also argued that pursuant to the provisions of PD No. 27, they, as tenants, were
deemed owners of the property beginning October 21, 1972 (effectivity date). Thus, the subsequent
transfer of the property to DNTDC was not valid. The respondents added that DNTDC could not have
been a buyer in good faith as it did not verify the status of the property whether tenanted or not
tenanted prior to its purchase. The respondents submitted, among others, the pertinent tax declarations
showing that the property was agricultural as of 1985.

In its answer, DNTDC alleged in defense that it purchased the property in good faith from the previous
owners (Paz M. Flores and Elizabeth M. Nepumuceno) in 1995. At that time, the alleged tenancy
relationship had already expired following the expiration of their lease contracts in 1986. DNTDC also
claimed that prior to the sale, the Davao City Office of the Zoning Administrator confirmed that the
property was not classified as agricultural. It pointed out that the affidavit of non-tenancy executed by
the vendors affirmed the absence of any recognized agricultural lessees on the property. DNTDC
added that the property had already been classified to be within an "urban/urbanizing zone" in the
"1979-2000 Comprehensive Land Use Plan for Davao City" that was duly adopted by the City Council
of Davao City and approved by the Human Settlement Regulatory Commission (HSRC) (now HLURB).

The PARAD ordered the DNTDC to pay the spouses Saliga the sum of P20,000.00 and the spouses
Ehara the sum of P15,000.00 as disturbance compensation, and to allocate to each of the respondent
spouses a 150 sqm homelot. While the PARAD conceded that the respondents were tenants of the
property, it nevertheless ruled that the property had already been reclassified from agricultural to non-
agricultural uses prior to June 15, 1988, the date when RA No. 6657 (CARL) took effect. Thus, since
RA No. 6657 covers only agricultural lands, the property fell outside its coverage.

The respondents appealed the case to the DARAB.

The ejectment case before the MTCC

Pending resolution of the appeal before the DARAB, DNTDC filed before the MTCC-Davao City a
complaint for unlawful detainer against Demetrio Ehara, Jr., Reynaldo Saliga and Liza Saliga (children
of respondent Sps. Ehara and Sps. Saliga). DNTDC claimed that it owned the 2.5574-hectare portion
of the property which the respondents' children had been occupying by its mere tolerance. Despite its
repeated demands, the respondents' children refused to vacate and continued to illegally occupy it.

The respondents' children raised the issue of lack of jurisdiction, arguing that the case involved an

23
agrarian dispute. They contended that the law considers them immediate members of the farm
household, to whom RA No. 3844 and RA No. 6657 extend tenurial security. They claimed that they, as
tenants, were entitled to continue occupying the disputed portion.

The MTCC granted DNTDC's complaint and ordering the respondents' children to vacate such portion
of the property. The MTCC ruled that the respondents' children were not tenants of the property
because they failed to prove that their stay on the premises was by virtue of a tenancy agreement and
because they had been occupying portions different from their parents' landholding. The MTCC also
ruled that this portion was no longer agricultural and was thus removed from the coverage of R.A. No.
6657.

The prohibition case before the RTC

The respondents' children filed before the RTC a petition for Prohibition against DNTDC to enjoin the
execution of the MTCC decision. They repeated the defenses and allegations in their pleading before
the MTCC. The children of the Sps. Saliga Liza and Reynaldo - however added that Cesar had already
died; hence, they were filing the prohibition case in their own right as heirs/successors-in-interest of
Cesar.

Thereafter, the respondents' children and DNTDC entered into a compromise agreement. The
respondents' children undertook to voluntarily and peacefully vacate the 2.5574-hectare portion of the
property and to remove and demolish their respective houses built on its premises, while DNTDC
agreed to give each of them the amount of P20,000.00 as financial assistance. The RTC approved the
compromise agreement in its decision.

DARAB Ruling

DARAB reversed and set aside the PARAD's ruling. The DARAB ordered DNTDC and all persons
acting in its behalf to respect and maintain the respondents in the peaceful possession and cultivation
of the property, and the Municipal Agrarian Reform Officer (MARO) to enjoin the DNTDC from
disturbing the respondents in their peaceful possession and cultivation of it.

As the PARAD did, the DARAB declared that a tenancy relationship existed between Eugenio and the
respondents, which was not extinguished by the expiration of the five-year term stated in their lease
contracts. Thus, when DNTDC purchased the property, it had been subrogated to the rights and
obligations of the previous landowner pursuant to the provisions of RA No. 3844.

Unlike the PARAD, the DARAB was not convinced that the property had already been reclassified to
non-agricultural uses so as to remove it from the coverage of RA No. 6657. With AO No. 5, series of
1994 as basis, the DARAB held that the alleged reclassification of the property did not and could not
have divested the respondents of their rights as "deemed owners" under PD No. 27. The DARAB also
pointed out that while Davao City Ordinance No. 363, series of 1982 (adopting the Comprehensive
Development Plan of Davao City), reclassified the property to be within the "urban/urbanizing zone,"
the DNTDC did not submit the required certifications from the HLURB, adopting the zoning ordinance,
and from the DAR, approving the conversion to make the reclassification valid.

When the DARAB denied the DNTDC's MR, the DNTDC elevated the case to the CA via a petition for
review.

CA Ruling

The CA affirmed in toto the decision of the DARAB. The CA similarly declared that the tenancy
relationship established between the respondents and Eugenio was not extinguished by the expiration
of the 5-year term of their lease contracts or by the subsequent transfer of the property to DNTDC.

The CA was also convinced that the property was still agricultural and was, therefore, covered by RA

24
No. 6657. While the CA conceded that the conversion of the use of lands that had been reclassified as
residential, commercial or industrial, prior to the effectivity of RA No. 6657, no longer requires the
DAR's approval, the CA pointed out that the landowner must first comply with certain pre-conditions for
exemption and/or conversion. Among other requirements, the landowner must secure an exemption
clearance from the DAR. This exemption clearance shall be issued after the landowner files the
certifications issued by the deputized zoning administrator, stating that the land had been reclassified,
and by the HLURB, stating that it had approved the pertinent zoning ordinance, with both the
reclassification and the approval carried out prior to June 15, 1988.

In this case, the CA held that DNTDC failed to secure and present any exemption clearance. DNTDC
filed the present petition after the CA denied its MR.

PROCEDURAL HISTORY
1. Respondents filed before the Office of PARAD a complaint for injunction, cancellation of titles
and damages against DNTDC.
2. PARAD ordered DNTDC to pay disturbance compensation as it agreed that they were tenants,
but nevertheless ruled that the property had already been reclassified from agricultural to non-
agricultural uses (urban zone) prior to June 15, 1988, the date when RA No. 6657 (CARL) took
effect. Thus, since RA No. 6657 covers only agricultural lands, the property fell outside its
coverage.
3. Pending resolution of the appeal before the DARAB, DNTDC filed before the MTCC-Davao
City a complaint for unlawful detainer against the children of the respondents.
4. MTCC granted DNTDC's complaint.
5. The respondents' children filed before the RTC a petition for Prohibition against DNTDC to
enjoin the execution of the MTCC decision. However, the parties entered into a compromise
agreement, which the RTC approved.
6. DARAB reveresed the PARAD Ruling. Unlike the PARAD, the DARAB was not convinced that
the property had already been reclassified to non-agricultural uses so as to remove it from the
coverage of RA No. 6657.
7. The CA affirmed in toto the decision of the DARAB. The CA was also convinced that the
property was still agricultural and was, therefore, covered by RA No. 6657. While the CA
conceded that the conversion of the use of lands that had been reclassified as residential,
commercial or industrial, prior to the effectivity of RA No. 6657, no longer requires the DAR's
approval, the CA pointed out that the landowner must first comply with certain pre-conditions
for exemption and/or conversion, which DNTDC failed to comply with.
POINT/S OF CONTENTION
DNTDC:
1. The respondents, in the compromise agreement, categorically agreed to voluntarily vacate the
property upon receipt of the stated financial assistance. Since the RTC approved the
compromise agreement and the respondents had already received the agreed financial
assistance, the CA should have considered these incidents that immediately bound the
respondents to comply with their undertaking to vacate.
2. No tenancy relationship exists between DNTDC and the respondents. DNTDC maintains that
while a tenancy relationship existed between the respondents and Eugenio, this relationship
was terminated when the MTCC ordered the respondents to vacate the property. It emphasizes
that this MTCC decision that ordered the respondents to vacate the property had already
become final and executory upon the respondents' failure to seasonably appeal. DNTDC adds
that after the respondents' lease contract with Eugenio expired and the latter simply allowed
the former to continue occupying the property, the respondents became bound by an implied
promise to vacate its premises upon demand. Thus, when, as the new owner, it demanded the
return of the property, the respondents were obligated to comply with their implied promise to
vacate.
3. The property is no longer agricultural, contrary to the findings of the DARAB and the CA.
DNTDC points out that the proceedings before the PARAD had sufficiently addressed this
issue, which the CA recognized in the assailed decision. Thus, DNTDC contends that the
findings of the PARAD should prevail over those of the DARAB.

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 4. DNTDC additionally argues that the MTCC and the RTC cases are closely intertwined with and
relevant to the present case. It points out that Reynaldo and Liza categorically stated in their
petition in the RTC case that they were suing in their own right as heirs/successors-in-interest
of Cesar. Consequently, the spouses Saliga, as represented and succeeded by Reynaldo and
Liza, are bound by the compromise agreement that the latter signed in the RTC case.

Sps. Saliga:
1. MTCC and the RTC cases do not bear any significance to the present controversy. They point
out that the parties in the MTCC and the RTC cases, aside from DNTDC, were Demetrio
Ehara, Jr., Reynaldo and Liza who are undeniably different from them.
2. A tenancy relationship exists between them and DNTDC and that the property is still
agricultural. The respondents quoted in toto the CA's discussions on these issues to support
their position.
ISSUES Ruling
1. Whether vested rights over the property accrued to the respondents under 1. NO.
PD No. 27.
2. Whether the property had been reclassified from agricultural to non- 2. YES.
agricultural uses prior to June 15, 1988 (to remove it from the coverage of
RA No. 6657)
3. Whether an agricultural leasehold or tenancy relationship exists between 3. NO.
DNTDC and the respondents
4. Whether the compromise agreement signed by the respondents' children in 4. NO.
the RTC case binds the respondents.
RATIONALE
1. Whether vested rights over the property accrued to the respondents under PD No. 27.
NO. Under PD No. 27, tenant-farmers of rice and corn agricultural lands are "deemed owners" of the
land that they till as of October 21, 1972. Under these terms, vested rights cannot simply be taken
away by the expedience of adopting zoning plans and ordinances reclassifying an agricultural land to
an "urban/urbanizing" area.

While tenant farmers of rice and corn lands are "deemed owners" as of October 21, 1972 following the
provisions of P.D. No. 27, this policy should not be interpreted as automatically vesting in them
absolute ownership over their respective tillage. The tenant-farmers must still first comply with the
requisite preconditions, i.e., payment of just compensation and perfection of title before acquisition of
full ownership.

In Del Castillo v. Orciga, the Court explained that land transfer under PD No. 27 is effected in 2 stages:
1. The issuance of a certificate of land transfer (CLT); and
2. The issuance of an emancipation patent (EP).

The first stage (issuance of the CLT) serves as the government's recognition of the tenant farmers'
inchoate right as "deemed owners" of the land that they till. The second stage (issuance of the EP)
perfects the title of the tenant farmers and vests in them absolute ownership upon full compliance with
the prescribed requirements. As a preliminary step, therefore, the CLT immediately serves as the
tangible evidence of the government's recognition of the tenant farmers' inchoate right and of the
subjection of the particular landholding to the government's OLT program.

In this case, the record does not show that the respondents had been issued CLTs. The CLT could
have been their best evidence of the government's recognition of their inchoate right as "deemed
owners" of the property. Similarly, the record does not show that the government had placed the
property under its OLT program or that the government, through the MARO, recognized the
respondents as the actual tenants of the property on the relevant date, thereby sufficiently vesting in
them such inchoate right.

Consequently, this Court can safely conclude that no CLTs had ever been issued to the respondents
and that the government never recognized any inchoate right on the part of the respondents as

26
"deemed owners" of the property. In effect, therefore, no vested rights under P.D. No. 27, in relation to
R.A. No. 6657, accrued to the respondents such that when the property was reclassified prior to June
15, 1988, it did not fall, by clear legal recognition within the coverage of R.A. No. 6657.

Interestingly, the contract of lease executed between Eugenio and the respondents shows that the
property was primarily planted with coconut and coffee trees and, secondarily with several fruit-bearing
trees. By its explicit terms, P.D. No. 27 applies only to private agricultural lands primarily devoted to
rice and corn production. Thus, the property could never have been covered by P.D. No. 27 as it was
not classified as rice and corn land.

2. Whether the property had been reclassified from agricultural to non-agricultural uses prior to
June 15, 1988 so as to remove it from the coverage of R.A. No. 6657.
YES. The City Council of Davao City has the authority to adopt zoning resolutions and ordinances.
Under Section 3 of RA No. 2264 (the then governing Local Government Code), municipal and/or city
officials are specifically empowered to "adopt zoning and subdivision ordinances or regulations in
consultation with the National Planning Commission."

In Pasong Bayabas Farmers Asso., Inc. v. CA, the Court held that this power of the local government
units to reclassify or convert lands to non-agricultural uses is not subject to the approval of the DAR.
There, the Court affirmed the authority of the Municipal Council of Carmona to issue a zoning
classification and to reclassify the property in dispute from agricultural to residential through the
Council's Kapasiyahang Bilang 30, as approved by the HSRC.

In Junio v. Secretary Garilao, this Court clarified, once and for all, that "with respect to areas classified
and identified as zonal areas not for agricultural uses, like those approved by the HSRC before the
effectivity of RA 6657 on June 15, 1988, the DAR's clearance is no longer necessary for conversion."

Citing the cases of Pasong Bayabas Farmers Asso., Inc. and Junio, this Court arrived at significantly
similar ruling in the case of Agrarian Reform Beneficiaries Association (ARBA) v. Nicolas.

Based on these considerations, we hold that the property had been validly reclassified as non-
agricultural land prior to June 15, 1988. We note the following facts established in the records that
support this conclusion: xxx (2) the HSRC approved this Comprehensive Development Plan through
Board Resolution R-39-4; xxx (4) the City Council of Davao City adopted the Comprehensive
Development Plan through its Resolution No. 894 and City Ordinance No. 363, series of 1982; (5) the
Office of the Zoning Administrator expressly certified on June 15, 1995 that per City Ordinance No.
363, series of 1982 as amended by S.P. Resolution No. 2843, Ordinance No. 561, series of 1992, the
property (located in barangay Catalunan Pequeño) is within an "urban/urbanizing" zone; xxx and (7)
the HLURB, per certification dated May 2, 1996, quoted the April 8, 1996 certification issued by the
Office of the City Planning and Development Coordinator stating that "the Mintal District which includes
barangay Catalunan Pequeño, is identified as one of the 'urbaning district centers and priority
areas and for development and investments' in Davao City."

Both the DARAB and the CA simply brushed this aside on technicality. The CA reasoned that the
certificate was belatedly presented and that it referred to a parcel of lot subject of another case, albeit,
similarly involving DNTDC, as one of the parties, and property located within the same district.

We cannot support this position of the CA for the following reasons:

1. Under Section 3, Rule I of the 1994 DARAB New Rules of Procedure (the governing DARAB
rules), the DARAB shall not be bound by technical rules of procedure and evidence
provided under the Rules of Court, which shall not apply even in a suppletory character, and
shall employ all reasonable means to ascertain facts of every case.
2. For all intents and purposes, the May 2, 1996 HLURB certification satisfied the purpose of this
requirement, which is to establish by sufficient evidence the property's reclassification as non-
agricultural land prior to June 15, 1988.

27
If only to emphasize, we reiterate - only those parcels of land specifically classified as agricultural are
covered by the CARL; any parcel of land otherwise classified is beyond its ambit.

3. Whether an agricultural leasehold or tenancy relationship exists between DNTDC and the
respondents.
NO. In Solmayor v. Arroyo, the Court outlined the essential requisites of a tenancy relationship, all of
which must concur for the relationship to exist, namely:
1. The parties are the landowner and the tenant;
2. The subject is agricultural land;
3. There is consent;
4. The purpose is agricultural production;
5. There is personal cultivation; and
6. There is sharing of harvests.

In this case, we hold that no tenancy relationship exists between DNTDC, as the owner of the property,
and the respondents, as the purported tenants; the second essential requisite as outlined above the
subject is agricultural land is lacking. To recall, the property had already been reclassified as non-
agricultural land. Accordingly, the respondents are not de jure tenants and are, therefore, not entitled to
the benefits granted to agricultural lessees under the provisions of P.D. No. 27, in relation to R.A. No.
6657.

The respondents, through their predecessors-in-interest, had been tenants of Eugenio as early as
1965. Under Section 7 of R.A. No. 3844, once the leasehold relation is established, the agricultural
lessee is entitled to security of tenure and acquires the right to continue working on the landholding.
However, whether the leasehold relationship between the respondents and Eugenio had been
established by virtue of the provisions of R.A. No. 3844 or of the five-year lease contract executed in
1981, this leasehold relationship had been terminated with the reclassification of the property as non-
agricultural land in 1982. The expiration the five-year lease contract in 1986 could not have done more
than simply finally terminate any leasehold relationship that may have prevailed under the terms of that
contract.

Consequently, when the DNTDC purchased the property in 1995, there was no longer any tenancy
relationship that could have subrogated the DNTDC to the rights and obligations of the previous owner.

4. Whether the compromise agreement signed by the respondents' children in the RTC case
binds the respondents.
NO. As the respondents have well pointed out and contrary to DNTDC's position, this similarity in their
last names or familial relationship cannot automatically bind the respondents to any undertaking that
their children in the RTC case had agreed to. This is because DNTDC has not shown that the
respondents had expressly or impliedly acquiesced to their children's undertaking; that the respondents
had authorized the latter to bind them in the compromise agreement; or that the respondents' cause of
action in the instant case arose from or depended on those of their children in the cases before the
MTCC and the RTC. Moreover, the respondents' children and DNTDC executed the compromise
agreement in the RTC case with the view of settling the controversy concerning only the issue of
physical possession over the disputed 2.5574-hectare portion subject of the ejectment case before the
MTCC.

Moreover, the issues involved in the cases before the MTCC and the RTC are different from the issues
involved in the present case. In the ejectment case before the MTCC, the sole issue was possession
de jure, while in the prohibition case before the RTC, the issue was the propriety of the execution of the
decision of the MTCC in the ejectment case. In contrast, the issues in the present controversy that
originated from the PARAD boil down to the respondents' averred rights, as tenants of the property.

DISPOSITIVE
WHEREFORE, in view of these considerations, we hereby GRANT the petition, and accordingly

28
REVERSE and SET ASIDE the decision dated March 28, 2006 and the resolution dated September 5,
2006 of the Court of Appeals in CA-G.R. SP No. 79377. We REINSTATE the decision dated July 6,
1998 and the resolution dated September 8, 1998 of the PARAD in DARAB Case No. XI-1418-DC-98.

Hermoso v. C.L. Realty TOPIC: Selection of Agrarian Reform Beneficiaries; CARP

6 Corporation
J. Garcia Balboa
Petitioners: Respondents:
RODOLFO HERMOSO, ANTONIO JACOBE, C.L. REALTY CORPORATION, RESPONDENT.
BRIGIDO PORTUGUESE, REGALADO AUSTRIA,
LOLITA ANGELES, PRESINA BERSABE,
ANGELITO ROSQUETA, CONSTANCIO
PROTUGUESE, ROGELIO SANTOS, ALIAS FIEL,
CATALINA VALENZUELA, JAIME PANGILINAN,
ESTELA DE VERA MACALALAD, LETICIA
LOPEZ, NOEMI BAUTISTA, GREGORIO
ANTAZO, ELPIDIO CRIZALDO, OSCAR
VICTORIO AND ANTONIO ZURITA

DOCTRINE
Section 22 of the CARP law provides merely for an order of priority in the distribution of the land to
beneficiaries. In the case at bar, there appears to be no applicants other than the petitioners. Thus, even
if it be assumed that petitioners fall under the last enumerated order of beneficiaries, namely, "others
directly working on the land," still they are qualified as beneficiaries since they are all residents of
Mariveles, Bataan, where the land is located, though not necessarily all residents of the same barangay.

FACTS
Respondent C.L. Realty Corporation is the registered owner of a parcel of land with an area of 46.1476
hectares located at Brgy. Alas-asin, Mariveles, Bataan. C.L. Realty received a Notice of Acquisition of the
said parcel of land from Regional Office No. III of the Department of Agrarian Reform (DAR), followed by
a Notice of Valuation under which the property in question was valued at P273,559.00. C.L. Realty
challenged the valuation thus made, claiming it to be unconscionably low.

On September 8, 1992, C.L. Realty wrote DAR Regional Director Antonio Nuesa requesting that the
issuance of the Certificates of Land Ownership Award (CLOAs) covering the property in question
be held in abeyance. The following day, Director Nuesa indorsed the request to Bataan Provincial
Agrarian Reform Officer (PARO) Florencio Siman for appropriate action.

Barely a month after, C.L. Realty, without requesting for the lifting of the land coverage, formally
requested and applied with DAR-Region III for conversion of the land from agricultural to
industrial/commercial use which request was also indorsed in due time to the PARO.

However, C.L. Realty did not know that when it made its deferment request and filed its application for
conversion, CLOAs were already issued to petitioners Hermoso et al. Some of them were able to
secure CLOAs on September 1, 1992 while the others, the following day, the corresponding certificates of
title. Since then, the petitioners appeared to have entered into possession of said land and planted crops
thereon.

CL then filed with the DARAB region III a petition for cancellation of the CLOAs on the ground of irregular,
premature and anomalous issuance. It also alleged that the CLOA recipients do not meet the basic
famer-beneficiary qualification requirement.

Petitioners denied the allegations of irregularity in the issuance of the CLOAs and also contend that the

29
petition to cancel was erroneously directed at them when it should have been addressed to the DAR
officials who processed/approved their applications filed in good faith.

PROCEDURAL HISTORY
PARAD found irregularities in the processing of the CLOAs and cancelled such.
DARAB reversed PARAD’s ruling
 The DARAB Proper predicated its disposition on the premise that C.L. Realty, failing as it did
to substantiate its allegations respecting the lack of qualification as farmer-beneficiaries of
petitioners, had not overturned the presumption that official duty had been duly performed.
CA reinstated the PARAD’s ruling

ISSUES Ruling
1. Whether petitioners qualify as CARP beneficiaries 1. YES
RATIONALE
1. YES

As the DARAB Proper aptly observed: It is the Municipal Agrarian Reform Officer (MARO) or the
Provincial Agrarian Reform Officer (PARO) together with the Barangay Agrarian Reform Committee
(BARC) who screen and select the possible agrarian beneficiaries. If there are farmers who claimed they
have a priority over those who have been identified by the MARO as beneficiaries of the land, said
farmers can file a protest with the MARO or the PARO who is currently processing the Land Distribution
Folder (Administrative Order No. 10, Series of 1990).

xxx The landowner, however, does not have the right to select who the beneficiaries should be.
Hence, other farmers who were not selected and claimed they have a priority over those who have been
identified as such can file a written protest with the MARO or the PARO who is currently processing the
claim folder.

Denying a landowner the right to choose a CARP beneficiary is, in context, only proper. For a covered
landholding does not revert back to the owner even if the beneficiaries thus selected do not meet
all necessary qualifications. Should it be found that the beneficiaries are indeed disqualified, the land
acquired by the State for agrarian reform purposes will not be returned to the landowner but shall go
instead to other qualified beneficiaries.

Under DAR Administrative Order (AO) No. 1, series of 1990, as amended by AO No. 12, series of 1994,
"[A]fter the DAR has issued a Notice of Acquisition of an agricultural land under the compulsory
acquisition process ... no application for conversion of said land from the landowner or anyone
acting on his behalf shall be given due course." Given this perspective, it cannot plausibly be said that
the issuance of CLOAs during the pendency of the conversion proceedings was anomalous, irregular or
premature. As it were, the application for conversion was improper from the start, the notice of acquisition
having previously been issued.

All the law requires, in the minimum, is that the prospective beneficiary be a landless resident preferably
of the barangay or municipality, as the case may be, where the landholding is located, provided he has, in
the language of Section 22 of RA 6657, the "willingness, aptitude and ability to cultivate and make
the land as productive as possible". A farmer-beneficiary need not undertake every chore in the
cultivation of the farmholding all by his personal self; he may be assisted in the farm work and the care of
plants by his immediate farm household without forfeiting his right to continue as such beneficiary.

In the case at bench, it appears that the BARC, the MARO and/or PARO have screened and, after
investigation, identified, or at least are presumed to have duly screened and identified, the petitioners as
qualified beneficiaries of the land in question and have found the property to be suitable for agricultural
productivity. This determination has not been overcome by proof to the contrary. To be sure, the
provincial adjudicator's posture, as affirmed by the appellate court, that none of the petitioners meet the
qualifications of a farmer beneficiary, since they are factory workers, private employees or fishermen,

30
cannot be accorded the weight of overturning evidence. For one, the provincial adjudicator did not
identify who among the petitioners are self-employed, factory workers or fishermen, if that be the
case. And for another, the provincial adjudicator did not point to any evidence to establish his simplistic
conclusion about petitioners not being qualified as farmer-beneficiaries.

Another argument was that some of the beneficiaries were not even residents of Brgy. Alas-asin
where the land is located. It ought to be pointed out, however, that the petitioners were residents of
neighboring barangays, many of which were within walking distance from Brgy. Alas-asin. While
farmers or farm workers already in the place should be given preferential rights in the distribution of lands,
even people living outside of the barangay where the property is situated may be qualified as CARP
beneficiaries. Section 22 of R.A. No. 6657 says so:

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 land;
f) collective or cooperative of the above beneficiaries; and
g) others directly working on the land.

xxx xxx xxx

As stressed by the DARAB Proper in its decision, the very essence of the CARP is to uplift and help as
many farmers as possible and make them beneficiaries of the program. Thus, a liberal interpretation is
preferred.

Section 22 of the CARP law provides merely for an order of priority in the distribution of the land to
beneficiaries. In the case at bar, there appears to be no applicants other than the petitioners. Thus, even
if it be assumed that petitioners fall under the last enumerated order of beneficiaries, namely, "others
directly working on the land," still they are qualified as beneficiaries since they are all residents of
Mariveles, Bataan, where the land is located, though not necessarily all residents of the same barangay.

DISPOSITIVE

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R.
SP No. 43795 dated March 31, 1999, and its Resolutions dated June 17, 1999 and October 11, 1999 are
SET ASIDE and the decision of the Department of Agrarian Reform Adjudication Board in DARAB Case
No. 1999 is hereby REINSTATED.

SO ORDERED.

31