Beruflich Dokumente
Kultur Dokumente
Secretary of DAR
EN BANC
G.R. No. 78742
July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D.
GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE,
CANUTO RAMIR B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA,
REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B.
MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO,
CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310
July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,
HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM COUNCIL,
respondents.
G.R. No. 79744
July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM,
HON. JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT,
and Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and
ROBERTO TAAY, respondents.
G.R. No. 79777
July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.
DECISION
CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged
Hercules for his life on his way to Mycenae after performing his eleventh labor. The
two wrestled mightily and Hercules flung his adversary to the ground thinking him
dead, but Antaeus rose even stronger to resume their struggle. This happened
several times to Hercules increasing amazement. Finally, as they continued
grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never
die as long as any part of his body was touching his Mother Earth. Thus forewarned,
Hercules then held Antaeus up in the air, beyond the reach of the sustaining soil,
and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch
even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the
elemental forces of life and death, of men and women who, like Antaeus need the
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6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the
earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4
The above-captioned cases have been consolidated because they involve common
legal questions, including serious challenges to the constitutionality of the several
measures mentioned above. They will be the subject of one common discussion and
resolution. The different antecedents of each case will require separate treatment,
however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228
and 229, and R.A. No. 6657.
The subjects of this
owned by petitioner
by four tenants and
declared full owners
No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds
inter alia of separation of powers, due process, equal protection and the
constitutional limitation that no private property shall be taken for public use
without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of Article
XIII, Section 4, of the Constitution, for failure to provide for retention limits for small
landowners. Moreover, it does not conform to Article VI, Section 25(4) and the other
requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue
that the same may be made only by a court of justice and not by the President of
the Philippines. They invoke the recent cases of EPZA v. Dulay 5 and Manotok v.
National Food Authority. 6 Moreover, the just compensation contemplated by the Bill
of Rights is payable in money or in cash and not in the form of bonds or other things
of value.
In considering the rentals as advance payment on the land, the executive order also
deprives the petitioners of their property rights as protected by due process. The
equal protection clause is also violated because the order places the burden of
solving the agrarian problems on the owners only of agricultural lands. No similar
obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to
be the owners of the lands occupied by them, E.O. No. 228 ignored judicial
prerogatives and so violated due process. Worse, the measure would not solve the
agrarian problem because even the small farmers are deprived of their lands and
the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been
upheld in the earlier cases of Chavez v. Zobel, 7 Gonzales v. Estrella, 8 and
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Association of Rice and Corn Producers of the Philippines, Inc. v. The National Land
Reform Council. 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is at
best initial or preliminary only. It does not foreclose judicial intervention whenever
sought or warranted. At any rate, the challenge to the order is premature because
no valuation of their property has as yet been made by the Department of Agrarian
Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not
provide for retention limits on tenanted lands and that in any event their petition is
a class suit brought in behalf of landowners with landholdings below 24 hectares.
They maintain that the determination of just compensation by the administrative
authorities is a final ascertainment. As for the cases invoked by the public
respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez,
while what was decided in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27,
E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed by
R.A. No. 6657. Nevertheless, this statute should itself also be declared
unconstitutional because it suffers from substantially the same infirmities as the
earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente
Cruz, owner of a 1. 83- hectare land, who complained that the DAR was insisting on
the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic
amended petition that the above- mentioned enactments have been impliedly
repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters Committee, Inc. is an
organization composed of 1,400 planter-members. This petition seeks to prohibit
the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not the
President. Although they agree that the President could exercise legislative power
until the Congress was convened, she could do so only to enact emergency
measures during the transition period. At that, even assuming that the interim
legislative power of the President was properly exercised, Proc. No. 131 and E.O. No.
229 would still have to be annulled for violating the constitutional provisions on just
compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the
Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian
Reform Program from 1987 to 1992 which shall be sourced from the receipts of the
sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
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(2) The said executive orders are violative of the constitutional provision that no
private property shall be taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention provided for under the
1987 Constitution.
The petitioner contends that the issuance of E.O. Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the
Transitory Provisions refers only to emergency measures that may be promulgated
in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due
process of law and to the retention of his small parcels of riceholding as guaranteed
under Article XIII, Section 4 of the Constitution. He likewise argues that, besides
denying him just compensation for his land, the provisions of E.O. No. 228 declaring
that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21,
1972 shall be considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that
the inclusion of even small landowners in the program along with other landowners
with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian Reform is
still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he
argues that they were enacted pursuant to Section 6, Article XVIII of the Transitory
Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first
Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was
deemed the owner of the land he was tilling. The leasehold rentals paid after that
date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he
filed was resolved on December 14, 1987. An appeal to the Office of the President
would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect
sanctioned the validity of the public respondents acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to
owners of rice and corn lands not exceeding seven hectares as long as they are
cultivating or intend to cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:
earnest studies were made by Congress or the President, or both, to insure that the
Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members
of the Supreme Court who took part in the deliberations and voted on the issue
during their session en banc. 11 And as established by judge made doctrine, the
Court will assume jurisdiction over a constitutional question only if it is shown that
the essential requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of the question is
unavoidably necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the cases
before us, we hold that the same is satisfied by the petitioners and intervenors
because each of them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion
of the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general interest
shared in common with the public. The Court dismissed the objection that they were
not proper parties and ruled that the transcendental importance to the public of
these cases demands that they be settled promptly and definitely, brushing aside, if
we must, technicalities of procedure. We have since then applied this exception in
many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not hesitate
to declare a law or act invalid when it is convinced that this must be done. In
arriving at this conclusion, its only criterion will be the Constitution as God and its
conscience give it the light to probe its meaning and discover its purpose. Personal
motives and political considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not
hesitate to make the hammer fall, and heavily, to use Justice Laurels pithy
language, where the acts of these departments, or of any public official, betray the
peoples will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine conflicting claims of
authority under the Constitution and to establish for the parties in an actual
controversy the rights which that instrument secures and guarantees to them. This
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is in truth all that is involved in what is termed judicial supremacy which properly
is the power of judicial review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must
categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the
more serious challenges to the constitutionality of the several measures involved in
these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers
under martial law has already been sustained in Gonzales v. Estrella and we find no
reason to modify or reverse it on that issue. As for the power of President Aquino to
promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized
under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the
Congress of the Philippines was formally convened and took over legislative power
from her. They are not midnight enactments intended to pre-empt the legislature
because E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e.,
Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it
correct to say that these measures ceased to be valid when she lost her legislative
power for, like any statute, they continue to be in force unless modified or repealed
by subsequent law or declared invalid by the courts. A statute does not ipso facto
become inoperative simply because of the dissolution of the legislature that
enacted it. By the same token, President Aquinos loss of legislative power did not
have the effect of invalidating all the measures enacted by her when and as long as
she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in
fact substantially affirmed the challenged measures and has specifically provided
that they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17 Indeed, some portions of the said measures, like the creation of the
P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No.
229, have been incorporated by reference in the CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground that it does not
conform to the requirements of a valid appropriation as specified in the
Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure even if
it does provide for the creation of said fund, for that is not its principal purpose. An
appropriation law is one the primary and specific purpose of which is to authorize
the release of public funds from the treasury.19 The creation of the fund is only
incidental to the main objective of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24
and Section 25(4) of Article VI, are not applicable. With particular reference to
Section 24, this obviously could not have been complied with for the simple reason
that the House of Representatives, which now has the exclusive power to initiate
appropriation measures, had not yet been convened when the proclamation was
issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should
be invalidated because they do not provide for retention limits as required by Article
XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide
for such limits now in Section 6 of the law, which in fact is one of its most
controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which
shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land
or directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill
shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue of its
contents and will suffice if the matters embodied in the text are relevant to each
other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law because it
came from President Marcos. Such are the ways of despots. Hence, it is futile to
argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed
P.D. No. 27 because the former was only a letter of instruction. The important thing
is that it was issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had
to comply with the requirement for publication as this Court held in Tanada v.
Tuvera. 21 Hence, unless published in the Official Gazette in accordance with Article
2 of the Civil Code, they could not have any force and effect if they were among
those enactments successfully challenged in that case. LOI 474 was published,
though, in the Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the
writ of mandamus cannot issue to compel the performance of a discretionary act,
especially by a specific department of the government. That is true as a general
proposition but is subject to one important qualification. Correctly and categorically
stated, the rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be exercised. In other
words, mandamus can issue to require action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary and
unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed
by law, the courts will intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will require specific action.
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If the duty is purely discretionary, the courts by mandamus will require action only.
For example, if an inferior court, public official, or board should, for an unreasonable
length of time, fail to decide a particular question to the great detriment of all
parties concerned, or a court should refuse to take jurisdiction of a cause when the
law clearly gave it jurisdiction mandamus will issue, in the first case to require a
decision, and in the second to require that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a
plain, speedy and adequate remedy available from the administrative authorities,
resort to the courts may still be permitted if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the same
time on the same subject. In the case of City of Baguio v. NAWASA, 24 for example,
where a law required the transfer of all municipal waterworks systems to the
NAWASA in exchange for its assets of equivalent value, the Court held that the
power being exercised was eminent domain because the property involved was
wholesome and intended for a public use. Property condemned under the police
power is noxious or intended for a noxious purpose, such as a building on the verge
of collapse, which should be demolished for the public safety, or obscene materials,
which should be destroyed in the interest of public morals. The confiscation of such
property is not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the
limits of the police power in a famous aphorism: The general rule at least is that
while property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking. The regulation that went too far was a law prohibiting
mining which might cause the subsidence of structures for human habitation
constructed on the land surface. This was resisted by a coal company which had
earlier granted a deed to the land over its mine but reserved all mining rights
thereunder, with the grantee assuming all risks and waiving any damage claim. The
Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of
the police power. He said:
Every restriction upon the use of property imposed in the exercise of the police
power deprives the owner of some right theretofore enjoyed, and is, in that sense,
an abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition
of a noxious use. The property so restricted remains in the possession of its owner.
The state does not appropriate it or make any use of it. The state merely prevents
the owner from making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious as it may because of further
changes in local or social conditions the restriction will have to be removed and
the owner will again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as an
implement of the former like the power of taxation. The employment of the taxing
power to achieve a police purpose has long been accepted. 26 As for the power of
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elaborate on this matter. In any event, the Congress is allowed a wide leeway in
providing for a valid classification. Its decision is accorded recognition and respect
by the courts of justice except only where its discretion is abused to the detriment
of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished from
those of a particular class require the interference of the State and, no less
important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As
the subject and purpose of agrarian reform have been laid down by the Constitution
itself, we may say that the first requirement has been satisfied. What remains to be
examined is the validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it
be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the
most urgent public need, subject only to a few notable exceptions, will excuse the
bypassing of an individuals rights. It is no exaggeration to say that a, person
invoking a right guaranteed under Article III of the Constitution is a majority of one
even as against the rest of the nation who would deny him that right.
That right covers the persons life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the
added protection of Section 9, which reaffirms the familiar rule that private property
shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of
sale may be agreed upon by the parties. 35 It is only where the owner is unwilling to
sell, or cannot accept the price or other conditions offered by the vendee, that the
power of eminent domain will come into play to assert the paramount authority of
the State over the interests of the property owner. Private rights must then yield to
the irresistible demands of the public interest on the time-honored justification, as
in the case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that private property shall not be taken for public use
without just compensation and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a proper
exercise of the power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that
the State should first distribute public agricultural lands in the pursuit of agrarian
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(b) Transferability and negotiability. Such LBP bonds may be used by the landowner,
his successors-in- interest or his assigns, up to the amount of their face value, for
any of the following:
(i) Acquisition of land or other real properties of the government, including assets
under the Asset Privatization Program and other assets foreclosed by government
financial institutions in the same province or region where the lands for which the
bonds were paid are situated;
(ii) Acquisition of shares of stock of government-owned or controlled corporations or
shares of stock owned by the government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release of accused
persons, or for performance bonds;
(iv) Security for loans with any government financial institution, provided the
proceeds of the loans shall be invested in an economic enterprise, preferably in a
small and medium- scale industry, in the same province or region as the land for
which the bonds are paid;
(v) Payment for various taxes and fees to government: Provided, That the use of
these bonds for these purposes will be limited to a certain percentage of the
outstanding balance of the financial instruments; Provided, further, That the PARC
shall determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original bondholder in
government universities, colleges, trade schools, and other institutions;
(vii) Payment for fees of the immediate family of the original bondholder in
government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is
unconstitutional insofar as it requires the owners of the expropriated properties to
accept just compensation therefor in less than money, which is the only medium of
payment allowed. In support of this contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the property
expropriated is entitled to a just compensation, which should be neither more nor
less, whenever it is possible to make the assessment, than the money equivalent of
said property. Just compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short
of that is less, than just compensation. It means a fair and full equivalent for the
loss sustained, which is the measure of the indemnity, not whatever gain would
accrue to the expropriating entity. The market value of the land taken is the just
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the other things of value constituting the total payment, as determined on the basis
of the areas of the lands expropriated, is not unduly oppressive upon the landowner.
It is noted that the smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the big landowners, who
can afford a bigger balance in bonds and other things of value. No less importantly,
the government financial instruments making up the balance of the payment are
negotiable at any time. The other modes, which are likewise available to the
landowner at his option, are also not unreasonable because payment is made in
shares of stock, LBP bonds, other properties or assets, tax credits, and other things
of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners,
big and small, not a little inconvenience. As already remarked, this cannot be
avoided. Nevertheless, it is devoutly hoped that these countrymen of ours,
conscious as we know they are of the need for their forbearance and even sacrifice,
will not begrudge us their indispensable share in the attainment of the ideal of
agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for
the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No. 229
does not seem to be viable any more as it appears that Section 4 of the said Order
has been superseded by Section 14 of the CARP Law. This repeats the requisites of
registration as embodied in the earlier measure but does not provide, as the latter
did, that in case of failure or refusal to register the land, the valuation thereof shall
be that given by the provincial or city assessor for tax purposes. On the contrary,
the CARP Law says that the just compensation shall be ascertained on the basis of
the factors mentioned in its Section 17 and in the manner provided for in Section
16.
The last major challenge to CARP is that the landowner is divested of his property
even before actual payment to him in full of just compensation, in contravention of
a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from
the owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other
democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest
the condemnor until the judgment fixing just compensation is entered and paid, but
the condemnors title relates back to the date on which the petition under the
Eminent Domain Act, or the commissioners report under the Local Improvement
Act, is filed. 51
although the right to appropriate and use land taken for a canal is complete at
the time of entry, title to the property taken remains in the owner until payment is
actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation had
actually been made. In fact, the decisions appear to be uniformly to this effect. As
early as 1838, in Rubottom v. McLure, 54 it was held that actual payment to the
owner of the condemned property was a condition precedent to the investment of
ELS: Summer 2016
the title to the property in the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, 55 the Court of Appeals of New York said that the
construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and appropriate
the land was complete prior to the payment. Kennedy further said that both on
principle and authority the rule is that the right to enter on and use the property
is complete, as soon as the property is actually appropriated under the authority of
law for a public use, but that the title does not pass from the owner without his
consent, until just compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56
that:
If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation adopted in
this jurisdiction is such as to afford absolute reassurance that no piece of land can
be finally and irrevocably taken from an unwilling owner until compensation is paid
. (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as
October 21, 1972 and declared that he shall be deemed the owner of a portion of
land consisting of a family-sized farm except that no title to the land owned by him
was to be actually issued to him unless and until he had become a full-fledged
member of a duly recognized farmers cooperative. It was understood, however,
that full payment of the just compensation also had to be made first, conformably to
the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of October 21,
1972 of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis
supplied.)
it was obviously referring to lands already validly acquired under the said decree,
after proof of full-fledged membership in the farmers cooperatives and full payment
of just compensation. Hence, it was also perfectly proper for the Order to also
provide in its Section 2 that the lease rentals paid to the landowner by the farmerbeneficiary after October 21, 1972 (pending transfer of ownership after full payment
of just compensation), shall be considered as advance payment for the land.
The CARP Law, for its part, conditions the transfer of possession and ownership of
the land to the government on receipt by the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds with
an accessible bank. Until then, title also remains with the landowner. 57 No outright
change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under
P.D. No. 27, as recognized under E.O. No. 228, are retained by him even now under
R.A. No. 6657. This should counter-balance the express provision in Section 6 of the
said law that the landowners whose lands have been covered by Presidential
ELS: Summer 2016
Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead.
In connection with these retained rights, it does not appear in G.R. No. 78742 that
the appeal filed by the petitioners with the Office of the President has already been
resolved. Although we have said that the doctrine of exhaustion of administrative
remedies need not preclude immediate resort to judicial action, there are factual
issues that have yet to be examined on the administrative level, especially the
claim that the petitioners are not covered by LOI 474 because they do not own
other agricultural lands than the subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that the
petitioners have not yet exercised their retention rights, if any, under P.D. No. 27,
the Court holds that they are entitled to the new retention rights provided for by
R.A. No. 6657, which in fact are on the whole more liberal than those granted by the
decree.
V
The CARP Law and the other enactments also involved in these cases have been the
subject of bitter attack from those who point to the shortcomings of these measures
and ask that they be scrapped entirely. To be sure, these enactments are less than
perfect; indeed, they should be continuously re-examined and rehoned, that they
may be sharper instruments for the better protection of the farmers rights. But we
have to start somewhere. In the pursuit of agrarian reform, we do not tread on
familiar ground but grope on terrain fraught with pitfalls and expected difficulties.
This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to
use Justice Holmess words, it is an experiment, as all life is an experiment, and so
we learn as we venture forward, and, if necessary, by our own mistakes. We cannot
expect perfection although we should strive for it by all means. Meantime, we
struggle as best we can in freeing the farmer from the iron shackles that have
unconscionably, and for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive
agrarian reform program are removed, to clear the way for the true freedom of the
farmer. We may now glimpse the day he will be released not only from want but also
from the exploitation and disdain of the past and from his own feelings of
inadequacy and helplessness. At last his servitude will be ended forever. At last the
farm on which he toils will be his farm. It will be his portion of the Mother Earth that
will give him not only the staff of life but also the joy of living. And where once it
bred for him only deep despair, now can he see in it the fruition of his hopes for a
more fulfilling future. Now at last can he banish from his small plot of earth his
insecurities and dark resentments and rebuild in it the music and the dream.
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State only upon full
payment of compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are
retained and recognized.
4. Landowners who were unable to exercise their rights of retention under P.D. No.
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27 shall enjoy the retention rights granted by R.A. No. 6657 under the conditions
therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.
SO ORDERED.
Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.
acquisition of the two Haciendas. The LBP trust accounts as compensation for
Hacienda Palico were replaced by respondent DAR with cash and LBP bonds.[15] On
October 22, 1993, from the mother title of TCT No. 985 of the Hacienda, respondent
DAR registered Certificate of Land Ownership Award (CLOA) No. 6654. On October
30, 1993, CLOAs were distributed to farmer beneficiaries.[16]
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas[17]
The MARO informed Pimentel that Hacienda Banilad was subject to compulsory
acquisition under the CARL; that should petitioner wish to avail of the other
schemes such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent DAR
was willing to provide assistance thereto.[18]
On September 18, 1989, the MARO sent an Invitation to Parties again to Pimentel
inviting the latter to attend a conference on September 21, 1989 at the MARO Office
in Nasugbu to discuss the results of the MAROs investigation over Hacienda Banilad.
[19]
On September 21, 1989, the same day the conference was held, the MARO
submitted two (2) Reports. In his first Report, he found that approximately 709
hectares of land under Tax Declaration Nos. 0237 and 0236 were flat to undulating
(0-8% slope). On this area were discovered 162 actual occupants and tillers of
sugarcane.[20] In the second Report, it was found that approximately 235 hectares
under Tax Declaration No. 0390 were flat to undulating, on which were 92 actual
occupants and tillers of sugarcane.[21]
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the BARC,
the LBP, and Jaime Pimentel on behalf of the landowner.[22] After the meeting, on
the same day, September 21, 1989, a Summary Investigation Report was submitted
jointly by the MARO, representatives of the BARC, LBP, and the PARO. They
recommended that after ocular inspection of the property, 234.6498 hectares under
Tax Declaration No. 0390 be subject to compulsory acquisition and distribution by
CLOA.[23] The following day, September 22, 1989, a second Summary Investigation
was submitted by the same officers. They recommended that 737.2590 hectares
under Tax Declaration Nos. 0236 and 0237 be likewise placed under compulsory
acquisition for distribution.[24]
On December 12, 1989, respondent DAR, through the Department Secretary, sent
to petitioner two (2) separate Notices of Acquisition over Hacienda Banilad. These
Notices were sent on the same day as the Notice of Acquisition over Hacienda
Palico. Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda
Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
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Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993,
petitioner filed its application for conversion of both Haciendas Palico and Banilad.
[36] On July 14, 1993, petitioner, through its President, Eduardo Roxas, reiterated its
request to withdraw the VOS over Hacienda Caylaway in light of the following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of
Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated March 1,
1993 stating that the lands subject of referenced titles are not feasible and
economically sound for further agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the
Zoning Ordinance reclassifying areas covered by the referenced titles to nonagricultural which was enacted after extensive consultation with government
agencies, including [the Department of Agrarian Reform], and the requisite public
hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas dated March 8,
1993 approving the Zoning Ordinance enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal
Planning & Development, Coordinator and Deputized Zoning Administrator
addressed to Mrs. Alicia P. Logarta advising that the Municipality of Nasugbu,
Batangas has no objection to the conversion of the lands subject of referenced titles
to non-agricultural.[37]
On August 24, 1993, petitioner instituted Case No. N-0017-96-46 (BA) with
respondent DAR Adjudication Board (DARAB) praying for the cancellation of the
CLOAs issued by respondent DAR in the name of several persons. Petitioner alleged
that the Municipality of Nasugbu, where the haciendas are located, had been
declared a tourist zone, that the land is not suitable for agricultural production, and
that the Sangguniang Bayan of Nasugbu had reclassified the land to nonagricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case
involved the prejudicial question of whether the property was subject to agrarian
reform, hence, this question should be submitted to the Office of the Secretary of
Agrarian Reform for determination.[38]
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No.
32484. It questioned the expropriation of its properties under the CARL and the
denial of due process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by the
MARO on November 8, 1993.
Petitioners petition was dismissed by the Court of Appeals on April 28, 1994.[39]
Petitioner moved for reconsideration but the motion was denied on January 17,
1997 by respondent court.[40]
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS CAUSE OF ACTION IS PREMATURE FOR FAILURE TO EXHAUST
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b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative shall
inform the DAR of his acceptance or rejection of the offer.
c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner
the purchase price of the land within thirty (30) days after he executes and delivers
a deed of transfer in favor of the Government and surrenders the Certificate of Title
and other muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land requiring
the landowner, the LBP and other interested parties to submit evidence as to the
just compensation for the land, within fifteen (15) days from receipt of the notice.
After the expiration of the above period, the matter is deemed submitted for
decision. The DAR shall decide the case within thirty (30) days after it is submitted
for decision.
e) Upon receipt by the landowner of the corresponding payment, or, in case of
rejection or no response from the landowner, upon the deposit with an accessible
bank designated by the DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall take immediate possession of the land and
shall request the proper Register of Deeds to issue a Transfer Certificate of Title
(TCT) in the name of the Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land to the qualified beneficiaries.
f) Any party who disagrees with the decision may bring the matter to the court of
proper jurisdiction for final determination of just compensation.
In the compulsory acquisition of private lands, the landholding, the landowners and
the farmer beneficiaries must first be identified. After identification, the DAR shall
send a Notice of Acquisition to the landowner, by personal delivery or registered
mail, and post it in a conspicuous place in the municipal building and barangay hall
of the place where the property is located. Within thirty days from receipt of the
Notice of Acquisition, the landowner, his administrator or representative shall inform
the DAR of his acceptance or rejection of the offer. If the landowner accepts, he
executes and delivers a deed of transfer in favor of the government and surrenders
the certificate of title. Within thirty days from the execution of the deed of transfer,
the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the
landowner rejects the DARs offer or fails to make a reply, the DAR conducts
summary administrative proceedings to determine just compensation for the land.
The landowner, the LBP representative and other interested parties may submit
evidence on just compensation within fifteen days from notice. Within thirty days
from submission, the DAR shall decide the case and inform the owner of its decision
and the amount of just compensation. Upon receipt by the owner of the
corresponding payment, or, in case of rejection or lack of response from the latter,
the DAR shall deposit the compensation in cash or in LBP bonds with an accessible
bank. The DAR shall immediately take possession of the land and cause the
issuance of a transfer certificate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer beneficiaries. Any
party may question the decision of the DAR in the regular courts for final
determination of just compensation.
The DAR has made compulsory acquisition the priority mode of land acquisition to
hasten the implementation of the Comprehensive Agrarian Reform Program (CARP).
[46] Under Section 16 of the CARL, the first step in compulsory acquisition is the
identification of the land, the landowners and the beneficiaries. However, the law is
silent on how the identification process must be made. To fill in this gap, the DAR
issued on July 26, 1989 Administrative Order No. 12, Series of 1989, which set the
operating procedure in the identification of such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A. The Municipal Agrarian Reform Officer, with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the CARP in his area
of responsibility. The masterlist shall include such information as required under the
attached CARP Masterlist Form which shall include the name of the landowner,
landholding area, TCT/OCT number, and tax declaration number.
2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the
landowners have already filed applications to avail of other modes of land
acquisition. A case folder shall contain the following duly accomplished forms:
a) CARP CA Form 1MARO Investigation Report
b) CARP CA Form 2-- Summary Investigation Report of Findings and Evaluation
c) CARP CA Form 3Applicants Information Sheet
d) CARP CA Form 4Beneficiaries Undertaking
e) CARP CA Form 5Transmittal Report to the PARO
The MARO/ BARC shall certify that all information contained in the above-mentioned
forms have been examined and verified by him and that the same are true and
correct.
3. Send a Notice of Coverage and a letter of invitation to a conference/ meeting to
the landowner covered by the Compulsory Case Acquisition Folder. Invitations to the
said conference/ meeting shall also be sent to the prospective farmer-beneficiaries,
the BARC representative(s), the Land Bank of the Philippines (LBP) representative,
and other interested parties to discuss the inputs to the valuation of the property.
He shall discuss the MARO/ BARC investigation report and solicit the views,
objection, agreements or suggestions of the participants thereon. The landowner
shall also be asked to indicate his retention area. The minutes of the meeting shall
be signed by all participants in the conference and shall form an integral part of the
CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform Officer
(PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to him by his MAROs.
ELS: Summer 2016
2. Immediately upon receipt of a case folder, compute the valuation of the land in
accordance with A.O. No. 6, Series of 1988.[47] The valuation worksheet and the
related CACF valuation forms shall be duly certified correct by the PARO and all the
personnel who participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO through ocular
inspection and verification of the property. This ocular inspection and verification
shall be mandatory when the computed value exceeds 500,000 per estate.
4. Upon determination of the valuation, forward the case folder, together with the
duly accomplished valuation forms and his recommendations, to the Central Office.
The LBP representative and the MARO concerned shall be furnished a copy each of
his report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO, review, evaluate
and determine the final land valuation of the property covered by the case folder. A
summary review and evaluation report shall be prepared and duly certified by the
BLAD Director and the personnel directly participating in the review and final
valuation.
2. Prepare, for the signature of the Secretary or her duly authorized representative,
a Notice of Acquisition (CARP CA Form 8) for the subject property. Serve the Notice
to the landowner personally or through registered mail within three days from its
approval. The Notice shall include, among others, the area subject of compulsory
acquisition, and the amount of just compensation offered by DAR.
3. Should the landowner accept the DARs offered value, the BLAD shall prepare and
submit to the Secretary for approval the Order of Acquisition. However, in case of
rejection or non-reply, the DAR Adjudication Board (DARAB) shall conduct a
summary administrative hearing to determine just compensation, in accordance
with the procedures provided under Administrative Order No. 13, Series of 1989.
Immediately upon receipt of the DARABs decision on just compensation, the BLAD
shall prepare and submit to the Secretary for approval the required Order of
Acquisition.
4. Upon the landowners receipt of payment, in case of acceptance, or upon deposit
of payment in the designated bank, in case of rejection or non-response, the
Secretary shall immediately direct the pertinent Register of Deeds to issue the
corresponding Transfer Certificate of Title (TCT) in the name of the Republic of the
Philippines. Once the property is transferred, the DAR, through the PARO, shall take
possession of the land for redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian
Reform Officer (MARO) keep an updated master list of all agricultural lands under
the CARP in his area of responsibility containing all the required information. The
MARO prepares a Compulsory Acquisition Case Folder (CACF) for each title covered
by CARP. The MARO then sends the landowner a Notice of Coverage and a letter of
invitation to a conference/ meeting over the land covered by the CACF. He also
sends invitations to the prospective farmer-beneficiaries, the representatives of the
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Barangay Agrarian Reform Committee (BARC), the Land Bank of the Philippines
(LBP) and other interested parties to discuss the inputs to the valuation of the
property and solicit views, suggestions, objections or agreements of the parties. At
the meeting, the landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer
(PARO) who shall complete the valuation of the land. Ocular inspection and
verification of the property by the PARO shall be mandatory when the computed
value of the estate exceeds P500,000.00. Upon determination of the valuation, the
PARO shall forward all papers together with his recommendation to the Central
Office of the DAR. The DAR Central Office, specifically, the Bureau of Land
Acquisition and Distribution (BLAD), shall review, evaluate and determine the final
land valuation of the property. The BLAD shall prepare, on the signature of the
Secretary or his duly authorized representative, a Notice of Acquisition for the
subject property.[48] From this point, the provisions of Section 16 of R.A. 6657 then
apply.[49]
For a valid implementation of the CAR Program, two notices are required: (1) the
Notice of Coverage and letter of invitation to a preliminary conference sent to the
landowner, the representatives of the BARC, LBP, farmer beneficiaries and other
interested parties pursuant to DAR A. O. No. 12, Series of 1989; and (2) the Notice
of Acquisition sent to the landowner under Section 16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated. They are
steps designed to comply with the requirements of administrative due process. The
implementation of the CARL is an exercise of the States police power and the power
of eminent domain. To the extent that the CARL prescribes retention limits to the
landowners, there is an exercise of police power for the regulation of private
property in accordance with the Constitution.[50] But where, to carry out such
regulation, the owners are deprived of lands they own in excess of the maximum
area allowed, there is also a taking under the power of eminent domain. The taking
contemplated is not a mere limitation of the use of the land. What is required is the
surrender of the title to and physical possession of the said excess and all beneficial
rights accruing to the owner in favor of the farmer beneficiary.[51] The Bill of Rights
provides that [n]o person shall be deprived of life, liberty or property without due
process of law.[52] The CARL was not intended to take away property without due
process of law.[53] The exercise of the power of eminent domain requires that due
process be observed in the taking of private property.
DAR A. O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung,
was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O.
No. 1, Series of 1993. The Notice of Coverage and letter of invitation to the
conference meeting were expanded and amplified in said amendments.
DAR A. O. No. 9, Series of 1990 entitled Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition
Pursuant to R. A. 6657, requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting
documents.
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2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares
corresponding VOCF/ CACF by landowner/ landholding.
3. Notifies/ invites the landowner and representatives of the LBP, DENR, BARC and
prospective beneficiaries of the schedule of ocular inspection of the property at
least one week in advance.
4. MARO/ LAND BANK FIELD OFFICE/ BARC
a) Identify the land and landowner, and determine the suitability for agriculture and
productivity of the land and jointly prepare Field Investigation Report (CARP Form
No. 2), including the Land Use Map of the property.
b) Interview applicants and assist them in the preparation of the Application For
Potential CARP Beneficiary (CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for those found qualified, cause the
signing of the respective Application to Purchase and Farmers Undertaking (CARP
Form No. 4).
d) Complete the Field Investigation Report based on the result of the ocular
inspection/ investigation of the property and documents submitted. See to it that
Field Investigation Report is duly accomplished and signed by all concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision survey
delineating areas covered by OLT, retention, subject of VOS, CA (by phases, if
possible), infrastructures, etc., whichever is applicable.
b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his duly
authorized representative inviting him for a conference.
c) Sends Invitation Letter (CARP Form No. 6) for a conference/ public hearing to
prospective farmer-beneficiaries, landowner, representatives of BARC, LBP, DENR,
DA, NGOs, farmers organizations and other interested parties to discuss the
following matters:
Result of Field Investigation
Inputs to valuation
Issues raised
Comments/ recommendations by all parties concerned.
d) Prepares Summary of Minutes of the conference/ public hearing to be guided by
CARP Form No. 7.
e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform Office
(PARO) using CARP Form No. 8 (Transmittal Memo to PARO).
x x x.
DAR A. O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell
(VOS) and Compulsory Acquisition (CA) transactions involving lands enumerated
under Section 7 of the CARL.[54] In both VOS and CA transactions, the MARO
prepares the Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory
Acquisition Case Folder (CACF), as the case may be, over a particular landholding.
The MARO notifies the landowner as well as representatives of the LBP, BARC and
prospective beneficiaries of the date of the ocular inspection of the property at least
one week before the scheduled date and invites them to attend the same. The
MARO, LBP or BARC conducts the ocular inspection and investigation by identifying
the land and landowner, determining the suitability of the land for agriculture and
productivity, interviewing and screening prospective farmer beneficiaries. Based on
its investigation, the MARO, LBP or BARC prepares the Field Investigation Report
which shall be signed by all parties concerned. In addition to the field investigation,
a boundary or subdivision survey of the land may also be conducted by a Survey
Party of the Department of Environment and Natural Resources (DENR) to be
assisted by the MARO.[55] This survey shall delineate the areas covered by
Operation Land Transfer (OLT), areas retained by the landowner, areas with
infrastructure, and the areas subject to VOS and CA. After the survey and field
investigation, the MARO sends a Notice of Coverage to the landowner or his duly
authorized representative inviting him to a conference or public hearing with the
farmer beneficiaries, representatives of the BARC, LBP, DENR, Department of
Agriculture (DA), non-government organizations, farmers organizations and other
interested parties. At the public hearing, the parties shall discuss the results of the
field investigation, issues that may be raised in relation thereto, inputs to the
valuation of the subject landholding, and other comments and recommendations by
all parties concerned. The Minutes of the conference/ public hearing shall form part
of the VOCF or CACF which files shall be forwarded by the MARO to the PARO. The
PARO reviews, evaluates and validates the Field Investigation Report and other
documents in the VOCF/ CACF. He then forwards the records to the RARO for another
review.
DAR A. O. No. 9, Series of 1990 was amended by DAR A. O. No. 1, Series of 1993.
DAR A. O. No. 1, Series of 1993 provided, among others, that:
IV. OPERATING PROCEDURES:
"Steps Responsible Activity Forms/
Agency/Unit Document
(Requirements)
A. Identification and
Documentation
xxx
5 DARMO Issues Notice of Coverage to LO CARP by personal delivery with proof of
Form No.2 service, or by registered mail with return card, informing him that his
property is now under CARP coverage and for LO to select his retention area, if he
desires to avail of his right of retention; and at the same time invites him to join the
field investigation to be conducted on his property which should be scheduled at
least two weeks in advance of said notice.
A copy of said Notice CARP shall be posted for at least Form No.17 one week on the
bulletin board of the municipal and barangay halls where the property is located.
LGU office concerned notifies DAR about compliance with posting requirement thru
return indorsement on CARP Form No. 17.
6 DARMO Sends notice to the LBP, CARP BARC, DENR Form No.3 representatives
and prospective ARBs of the schedule of the field investigation to be conducted on
the subject property.
7 DARMO With the participation of CARP BARC the LO, representatives of Form No.4
LBP the LBP, BARC, DENR Land Use DENR and prospective ARBs, Map Local Office
conducts the investigation on subject property to identify the landholding,
determines its suitability and productivity; and jointly prepares the Field
Investigation Report (FIR) and Land Use Map. However, the field investigation shall
proceed even if the LO, the representatives of the DENR and prospective ARBs are
not available provided, they were given due notice of the time and date of the
investigation to be conducted. Similarly, if the LBP representative is not available or
could not come on the scheduled date, the field investigation shall also be
conducted, after which the duly accomplished Part I of CARP Form No. 4 shall be
forwarded to the LBP representative for validation. If he agrees to the ocular
inspection report
of DAR, he signs the FIR (Part I) and accomplishes Part II thereof.
In the event that there is a difference or variance between the findings of the DAR
and the LBP as to the propriety of covering the land under CARP, whether in whole
or in part, on the issue of suitability to agriculture, degree of development or slope,
and on issues affecting idle lands, the conflict shall be resolved by a composite
team of DAR, LBP, DENR and DA which shall jointly conduct further investigation
thereon. The team shall submit its report of findings which shall be binding to both
DAR and LBP, pursuant to Joint Memorandum Circular of the DAR, LBP, DENR and DA
dated 27 January 1992.
8 DARMO Screens prospective ARBS CARP BARC and causes the signing of Form No.
5 the Application of Purchase and Farmers' Undertaking (APFU).
9 DARMO Furnishes a copy of the CARP duly accomplished FIR to Form No. the
landowner by personal 4 delivery with proof of service or registered
mail with return card and posts a copy thereof for at least one week on the bulletin
board of the municipal and barangay halls where the property is located.
LGU office concerned CARP Notifies DAR about Form No. compliance with posting 17
requirement thru return endorsement on CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter And/or segregation survey or DENR
delineating areas covered Segregation Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope and above, unproductive/ unsuitable to agriculture,
retention, infrastructure. In case of segregation or subdivision survey, the plan shall
be approved by DENR-LMS.
C. Review and Completion of Documents.
11 DARMO Forwards VOCF/CACF CARP to DARPO. Form No. 6
x x x."
DAR A. O. No. 1, Series of 1993, modified the identification process and increased
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Minutes was also signed by the representatives of the BARC, the LBP and farmer
beneficiaries.[59] No letter of invitation was sent or conference meeting held with
respect to Hacienda Caylaway because it was subject to a Voluntary Offer to Sell to
respondent DAR.[60]
When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent
to the various parties the Notice of Coverage and invitation to the conference, DAR
A. O. No. 12, Series of 1989 was already in effect more than a month earlier. The
Operating Procedure in DAR Administrative Order No. 12 does not specify how
notices or letters of invitation shall be sent to the landowner, the representatives of
the BARC, the LBP, the farmer beneficiaries and other interested parties. The
procedure in the sending of these notices is important to comply with the requisites
of due process especially when the owner, as in this case, is a juridical entity.
Petitioner is a domestic corporation,[61] and therefore, has a personality separate
and distinct from its shareholders, officers and employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the
landowner by personal delivery or registered mail. Whether the landowner be a
natural or juridical person to whose address the Notice may be sent by personal
delivery or registered mail, the law does not distinguish. The DAR Administrative
Orders also do not distinguish. In the proceedings before the DAR, the distinction
between natural and juridical persons in the sending of notices may be found in the
Revised Rules of Procedure of the DAR Adjudication Board (DARAB). Service of
pleadings before the DARAB is governed by Section 6, Rule V of the DARAB Revised
Rules of Procedure. Notices and pleadings are served on private domestic
corporations or partnerships in the following manner:
Sec. 6. Service upon Private Domestic Corporation or Partnership.-- If the defendant
is a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier,
agent, or any of its directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14
provides:
Sec. 13. Service upon private domestic corporation or partnership.If the defendant
is a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier,
agent, or any of its directors.
Summonses, pleadings and notices in cases against a private domestic corporation
before the DARAB and the regular courts are served on the president, manager,
secretary, cashier, agent or any of its directors. These persons are those through
whom the private domestic corporation or partnership is capable of action.[62]
Jaime Pimentel is not the president, manager, secretary, cashier or director of
petitioner corporation. Is he, as administrator of the two Haciendas, considered an
agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it
reasonably certain that the corporation will receive prompt and proper notice in an
action against it.[63] Service must be made on a representative so integrated with
the corporation as to make it a priori supposable that he will realize his
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responsibilities and know what he should do with any legal papers served on him,
[64] and bring home to the corporation notice of the filing of the action.[65]
Petitioners evidence does not show the official duties of Jaime Pimentel as
administrator of petitioners haciendas. The evidence does not indicate whether
Pimentels duties is so integrated with the corporation that he would immediately
realize his responsibilities and know what he should do with any legal papers served
on him. At the time the notices were sent and the preliminary conference
conducted, petitioners principal place of business was listed in respondent DARs
records as Soriano Bldg., Plaza Cervantes, Manila,[66] and 7th Flr. Cacho-Gonzales
Bldg., 101 Aguirre St., Makati, Metro Manila.[67] Pimentel did not hold office at the
principal place of business of petitioner. Neither did he exercise his functions in
Plaza Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He
performed his official functions and actually resided in the haciendas in Nasugbu,
Batangas, a place over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of petitioners principal
place of business. The Notices of Acquisition over Haciendas Palico and Banilad
were addressed to petitioner at its offices in Manila and Makati. These Notices were
sent barely three to four months after Pimentel was notified of the preliminary
conference. [68] Why respondent DAR chose to notify Pimentel instead of the
officers of the corporation was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and
the notices and letters of invitation were validly served on petitioner through him,
there is no showing that Pimentel himself was duly authorized to attend the
conference meeting with the MARO, BARC and LBP representatives and farmer
beneficiaries for purposes of compulsory acquisition of petitioners landholdings.
Even respondent DARs evidence does not indicate this authority. On the contrary,
petitioner claims that it had no knowledge of the letter-invitation, hence, could not
have given Pimentel the authority to bind it to whatever matters were discussed or
agreed upon by the parties at the preliminary conference or public hearing. Notably,
one year after Pimentel was informed of the preliminary conference, DAR A.O. No. 9,
Series of 1990 was issued and this required that the Notice of Coverage must be
sent to the landowner concerned or his duly authorized representative.[69]
Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly identified
before they were taken over by respondent DAR. Respondents insist that the lands
were identified because they are all registered property and the technical
description in their respective titles specifies their metes and bounds. Respondents
admit at the same time, however, that not all areas in the haciendas were placed
under the comprehensive agrarian reform program invariably by reason of elevation
or character or use of the land.[70] The acquisition of the landholdings did not cover
the entire expanse of the two haciendas, but only portions thereof. Hacienda Palico
has an area of 1,024 hectares and only 688.7576 hectares were targetted for
acquisition. Hacienda Banilad has an area of 1,050 hectares but only 964.0688
hectares were subject to CARP. The haciendas are not entirely agricultural lands. In
fact, the various tax declarations over the haciendas describe the landholdings as
sugarland, and forest, sugarland, pasture land, horticulture and woodland.[71]
Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically
requires that the land subject to land reform be first identified. The two haciendas in
the instant case cover vast tracts of land. Before Notices of Acquisition were sent to
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petitioner, however, the exact areas of the landholdings were not properly
segregated and delineated. Upon receipt of this notice, therefore, petitioner
corporation had no idea which portions of its estate were subject to compulsory
acquisition, which portions it could rightfully retain, whether these retained portions
were compact or contiguous, and which portions were excluded from CARP
coverage. Even respondent DARs evidence does not show that petitioner, through
its duly authorized representative, was notified of any ocular inspection and
investigation that was to be conducted by respondent DAR. Neither is there proof
that petitioner was given the opportunity to at least choose and identify its
retention area in those portions to be acquired compulsorily. The right of retention
and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:
Section 6. Retention Limits.x x x.
The right to choose the area to be retained, which shall be compact or contiguous,
shall pertain to the landowner; Provided, however, That in case the area selected for
retention by the landowner is tenanted, the tenant shall have the option to choose
whether to remain therein or be a beneficiary in the same or another agricultural
land with similar or comparable features. In case the tenant chooses to remain in
the retained area, he shall be considered a leaseholder and shall lose his right to be
a beneficiary under this Act. In case the tenant chooses to be a beneficiary in
another agricultural land, he loses his right as a leaseholder to the land retained by
the landowner. The tenant must exercise this option within a period of one (1) year
from the time the landowner manifests his choice of the area for retention.
Under the law, a landowner may retain not more than five hectares out of the total
area of his agricultural land subject to CARP. The right to choose the area to be
retained, which shall be compact or contiguous, pertains to the landowner. If the
area chosen for retention is tenanted, the tenant shall have the option to choose
whether to remain on the portion or be a beneficiary in the same or another
agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which was
the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made
on May 6, 1988,[72] before the effectivity of R.A. 6657 on June 15, 1988. VOS
transactions were first governed by DAR Administrative Order No. 19, series of
1989,[73] and under this order, all VOS filed before June 15, 1988 shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229, thus:
III. All VOS transactions which are now pending before the DAR and for which no
payment has been made shall be subject to the notice and hearing requirements
provided in Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section
II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229.
"x x x."
Section 9 of E.O. 229 provides:
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Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural lands
it deems productive and suitable to farmer cultivation voluntarily offered for sale to
it at a valuation determined in accordance with Section 6. Such transaction shall be
exempt from the payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of private
land as set forth in DAR A. O. No. 12, Series of 1989. Section 5 of E.O. 229 merely
reiterates the procedure of acquisition in Section 16, R.A. 6657. In other words, the
E.O. is silent as to the procedure for the identification of the land, the notice of
coverage and the preliminary conference with the landowner, representatives of the
BARC, the LBP and farmer beneficiaries. Does this mean that these requirements
may be dispensed with regard to VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land,
landowner and beneficiaries of the land subject to agrarian reform be identified
before the notice of acquisition should be issued.[74] Hacienda Caylaway was
voluntarily offered for sale in 1989. The Hacienda has a total area of 867.4571
hectares and is covered by four (4) titles. In two separate Resolutions both dated
January 12, 1989, respondent DAR, through the Regional Director, formally accepted
the VOS over two of these four titles.[75] The land covered by the two titles has an
area of 855.5257 hectares, but only 648.8544 hectares thereof fell within the
coverage of R.A. 6657.[76] Petitioner claims it does not know where these portions
are located.
Respondent DAR, on the other hand, avers that surveys on the land covered by the
four titles were conducted in 1989, and that petitioner, as landowner, was not
denied participation therein. The results of the survey and the land valuation
summary report, however, do not indicate whether notices to attend the same were
actually sent to and received by petitioner or its duly authorized representative.[77]
To reiterate, Executive Order No. 229 does not lay down the operating procedure,
much less the notice requirements, before the VOS is accepted by respondent DAR.
Notice to the landowner, however, cannot be dispensed with. It is part of
administrative due process and is an essential requisite to enable the landowner
himself to exercise, at the very least, his right of retention guaranteed under the
CARL.
III. The Conversion of the three Haciendas.
It is petitioners claim that the three haciendas are not subject to agrarian reform
because they have been declared for tourism, not agricultural purposes.[78] In
1975, then President Marcos issued Proclamation No. 1520 declaring the
municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the
subject haciendas, were allegedly reclassified as non-agricultural 13 years before
the effectivity of R. A. No. 6657.[79] In 1993, the Regional Director for Region IV of
the Department of Agriculture certified that the haciendas are not feasible and
sound for agricultural development.[80] On March 20, 1992, pursuant to
Proclamation No. 1520, the Sangguniang Bayan of Nasugbu, Batangas adopted
Resolution No. 19 reclassifying certain areas of Nasugbu as non-agricultural.[81]
This Resolution approved Municipal Ordinance No. 19, Series of 1992, the Revised
Zoning Ordinance of Nasugbu[82] which zoning ordinance was based on a Land Use
Plan for Planning Areas for New Development allegedly prepared by the University
of the Philippines.[83] Resolution No. 19 of the Sangguniang Bayan was approved
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accompanying ordinances passed upon and approved by the local government units
concerned, together with the National Land Use Policy, pursuant to R. A. No. 6657
and E. O. No. 129-A.[87]
Applications for conversion were initially governed by DAR A. O. No. 1, Series of
1990 entitled Revised Rules and Regulations Governing Conversion of Private
Agricultural Lands and Non-Agricultural Uses, and DAR A. O. No. 2, Series of 1990
entitled Rules of Procedure Governing the Processing and Approval of Applications
for Land Use Conversion. These A.O.s and other implementing guidelines, including
Presidential issuances and national policies related to land use conversion have
been consolidated in DAR A. O. No. 07, Series of 1997. Under this recent issuance,
the guiding principle in land use conversion is:
to preserve prime agricultural lands for food production while, at the same time,
recognizing the need of the other sectors of society (housing, industry and
commerce) for land, when coinciding with the objectives of the Comprehensive
Agrarian Reform Law to promote social justice, industrialization and the optimum
use of land as a national resource for public welfare.[88]
Land Use refers to the manner of utilization of land, including its allocation,
development and management. Land Use Conversion refers to the act or process of
changing the current use of a piece of agricultural land into some other use as
approved by the DAR.[89] The conversion of agricultural land to uses other than
agricultural requires field investigation and conferences with the occupants of the
land. They involve factual findings and highly technical matters within the special
training and expertise of the DAR. DAR A. O. No. 7, Series of 1997 lays down with
specificity how the DAR must go about its task. This time, the field investigation is
not conducted by the MARO but by a special task force, known as the Center for
Land Use Policy Planning and Implementation (CLUPPI- DAR Central Office). The
procedure is that once an application for conversion is filed, the CLUPPI prepares the
Notice of Posting. The MARO only posts the notice and thereafter issues a certificate
to the fact of posting. The CLUPPI conducts the field investigation and dialogues
with the applicants and the farmer beneficiaries to ascertain the information
necessary for the processing of the application. The Chairman of the CLUPPI
deliberates on the merits of the investigation report and recommends the
appropriate action. This recommendation is transmitted to the Regional Director,
thru the Undersecretary, or Secretary of Agrarian Reform. Applications involving
more than fifty hectares are approved or disapproved by the Secretary. The
procedure does not end with the Secretary, however. The Order provides that the
decision of the Secretary may be appealed to the Office of the President or the
Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made to the Secretary, and
from the Secretary to the Office of the President or the Court of Appeals as the case
may be. The mode of appeal/ motion for reconsideration, and the appeal fee, from
Undersecretary to the Office of the Secretary shall be the same as that of the
Regional Director to the Office of the Secretary.[90]
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate
unto itself authority to resolve a controversy the jurisdiction over which is initially
lodged with an administrative body of special competence.[91] Respondent DAR is
in a better position to resolve petitioners application for conversion, being primarily
the agency possessing the necessary expertise on the matter. The power to
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CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO,
REYES,
PERLAS-BERNABE, JJ.
Promulgated:
November 22, 2011
x-----------------------------------------------------------------------------------------x
RESOLUTION
VELASCO, JR., J.:
For resolution are the (1) Motion for Clarification and Partial Reconsideration dated
July 21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents Presidential
Agrarian Reform Council (PARC) and Department of Agrarian Reform (DAR); (3)
Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa
ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4) Motion for
Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July
21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group
of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively
referred to as Mallari, et al.); and (6) Motion for Reconsideration dated July 22, 2011
filed by private respondents Rene Galang and AMBALA.[2]
On July 5, 2011, this Court promulgated a Decision[3] in the above-captioned case,
denying the petition filed by HLI and affirming Presidential Agrarian Reform Council
(PARC) Resolution No. 2005-32-01 dated December 22, 2005 and PARC Resolution
No. 2006-34-01 dated May 3, 2006 with the modification that the original 6,296
qualified farmworker-beneficiaries of Hacienda Luisita (FWBs) shall have the option
to remain as stockholders of HLI.
In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI
raises the following issues for Our consideration:
A
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE ORIGINAL
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For its part, AMBALA poses the following issues in its Motion for Reconsideration
dated July 19, 2011:
I
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS
CONSTITUTIONAL.
II
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT ONLY THE [PARCS] APPROVAL OF HLIs PROPOSAL FOR
STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE REVOKED AND NOT THE
STOCK DISTRIBUTION OPTION AGREEMENT (SDOA).
III
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN APPLYING THE DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE
[FWBs] CHOOSE TO OPT FOR ACTUAL LAND DISTRIBUTION OR TO REMAIN AS
STOCKHOLDERS OF [HLI].
IV
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT
AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE SDP AND AN IMPERATIVE
IMPOSITION BY [RA 6657] AND DEPARTMENT OF AGRARIAN REFORM
ADMINISTRATIVE ORDER NO. 10 (DAO 10).
V
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT THE
CONVERSION OF THE AGRICULTURAL LANDS DID NOT VIOLATE THE CONDITIONS OF
RA 6657 AND DAO 10.
VI
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT PETITIONER
IS ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD THE HONORABLE
COURT AFFIRM THE ENTITLEMENT OF THE PETITIONER TO JUST COMPENSATION, THE
SAME SHOULD BE PEGGED TO FORTY THOUSAND PESOS (PhP 40,000.00) PER
HECTARE.
VII
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT LUISITA
INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL COMMERCIAL BANKING CORPORATION
(RCBC) ARE INNOCENT PURCHASERS FOR VALUE.
In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the
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following issues:
I
THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN SECTION 31 OF
[RA 6657] FOR BEING UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE THAT
WAS RAISED BY THE RESPONDENTS-INTERVENORS IS THE LIS MOTA OF THE CASE.
II
THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE DOCTRINE OF
OPERATIVE FACT TO THE CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN AS
STOCKHOLDERS OF HACIENDA LUISITA IS EQUIVALENT TO AN OPTION FOR
HACIENDA LUISITA TO RETAIN LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE
AGRARIAN REFORM LAW. THE DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE
SUPREME COURT HAS AFFIRMED ITS REVOCATION.
III
THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED [LIPCO] AND
[RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE INSTANT CASE.
Mallari, et al., on the other hand, advance the following grounds in support of their
Motion for Reconsideration dated July 21, 2011:
(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN DISTRIBUTED
PURSUANT TO THE MEMORANDUM OF AGREEMENT. WHAT REMAINS MERELY IS THE
RELEASE OF TITLE FROM THE REGISTER OF DEEDS.
(2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE RECORDS WOULD
SHOW THAT IF EVER NOT ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE
ACTUAL ORIGINAL FARMWORKER BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE
IS THE NEXT OF KIN OR CHILDREN OF SAID ORIGINAL [FWBs]. HENCE, WE
RESPECTFULLY SUBMIT THAT SINCE THE SHARES WERE GIVEN TO THE SAME FAMILY
BENEFICIARY, THIS SHOULD BE DEEMED AS SUBSTANTIAL COMPLIANCE WITH THE
PROVISIONS OF SECTION 4 OF DAO 10.
(3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO IMPLEMENT THE
[SDP] AS PROVIDED FOR BY SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE
READ IN LIGHT OF SECTION 10 OF EXECUTIVE ORDER NO. 229, THE PERTINENT
PORTION OF WHICH READS, THE APPROVAL BY THE PARC OF A PLAN FOR SUCH
STOCK DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION, SHALL BE DEEMED
COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE CARP.
(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF NOVEMBER 21, 1989,
THE DATE OF APPROVAL OF THE STOCK DISTRIBUTION OPTION. INSTEAD, WE
RESPECTFULLY SUBMIT THAT THE TIME OF TAKING FOR VALUATION PURPOSES IS A
FACTUAL ISSUE BEST LEFT FOR THE TRIAL COURTS TO DECIDE.
(5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT WAS GIVEN TO
THEM UNDER THE SDP. IT WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE
LAND AND AT THE SAME TIME HOLD ON TO THE BENEFITS THEY RECEIVED
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PURSUANT TO THE SDP IN THE SAME WAY AS THOSE WHO WILL CHOOSE TO STAY
WITH THE SDO.
Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC),
submit the following grounds in support of their Motion for Reconsideration dated
July 22, 2011:
I
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN ORDERING THE
HOLDING OF A VOTING OPTION INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT
LANDS TO [FWBs] in [HLI].
A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE REVOCATION OF
THE [SDP] CARRIES WITH IT THE REVOCATION OF THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS OF HLI WITHOUT
MAKING THE NECESSARY CHANGES IN THE CORPORATE STRUCTURE WOULD ONLY
SUBJECT THEM TO FURTHER MANIPULATION AND HARDSHIP.
C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND PERTINENT
LAWS JUSTIFY TOTAL LAND REDISTRIBUTION OF HACIENDA LUISITA.
II
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN HOLDING THAT
THE [RCBC] AND [LIPCO] ARE INNOCENT PURCHASERS FOR VALUE OF THE 300HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS SOLD TO THEM PRIOR TO THE
INCEPTION OF THE PRESENT CONTROVERSY.
Ultimately, the issues for Our consideration are the following: (1) applicability of the
operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the
Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory
acquisition; (4) just compensation; (5) sale to third parties; (6) the violations of HLI;
and (7) control over agricultural lands.
We shall discuss these issues accordingly.
I. Applicability of the Operative Fact Doctrine
In their motion for partial reconsideration, DAR and PARC argue that the doctrine of
operative fact does not apply to the instant case since: (1) there is no law or rule
which has been invalidated on the ground of unconstitutionality;[4] (2) the doctrine
of operative fact is a rule of equity which may be applied only in the absence of a
law, and in this case, they maintain that there is a positive law which mandates the
distribution of the land as a result of the revocation of the stock distribution plan
(SDP).[5]
Echoing the stance of DAR and PARC, AMBALA submits that the operative fact
doctrine should only be made to apply in the extreme case in which equity demands
it, which allegedly is not in the instant case.[6] It further argues that there would be
no undue harshness or injury to HLI in case lands are actually distributed to the
farmworkers, and that the decision which orders the farmworkers to choose whether
ELS: Summer 2016
No. 60, issued by then President Ferdinand E. Marcos was subsequently declared by
the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein
how such a declaration might affect acts done on a presumption of their validity, the
Court said:
. . .. In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. . . . It is quite clear, however, that such broad statements as to the effect of
a determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to [the determination of its invalidity], is an operative
fact and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects with respect to
particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal, and
it is manifest from numerous decisions that an all-inclusive statement of a principle
of absolute retroactive invalidity cannot be justified.
xxx xxx xxx
Similarly, the implementation/ enforcement of presidential decrees prior to their
publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased by
a new judicial declaration . . . that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence
as an operative fact negating the acceptance of a principle of absolute retroactive
invalidity. Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 long before our Decision
in Taada and the arrest of petitioner is an operative fact that can no longer be
disturbed or simply ignored. (Citations omitted; emphasis in the original.)
Bearing in mind that PARC Resolution No. 89-12-2[10]an executive actwas declared
invalid in the instant case, the operative fact doctrine is clearly applicable.
Nonetheless, the minority is of the persistent view that the applicability of the
operative fact doctrine should be limited to statutes and rules and regulations
ELS: Summer 2016
issued by the executive department that are accorded the same status as that of a
statute or those which are quasi-legislative in nature. Thus, the minority concludes
that the phrase executive act used in the case of De Agbayani v. Philippine National
Bank[11] refers only to acts, orders, and rules and regulations that have the force
and effect of law. The minority also made mention of the Concurring Opinion of
Justice Enrique Fernando in Municipality of Malabang v. Benito,[12] where it was
supposedly made explicit that the operative fact doctrine applies to executive acts,
which are ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of
Malabang case elaborates what executive act mean. Moreover, while orders, rules
and regulations issued by the President or the executive branch have fixed
definitions and meaning in the Administrative Code and jurisprudence, the phrase
executive act does not have such specific definition under existing laws. It should be
noted that in the cases cited by the minority, nowhere can it be found that the term
executive act is confined to the foregoing. Contrarily, the term executive act is
broad enough to encompass decisions of administrative bodies and agencies under
the executive department which are subsequently revoked by the agency in
question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as
Chairman of the Presidential Commission on Good Government (PCGG) and as Chief
Presidential Legal Counsel (CPLC) which was declared unconstitutional by this Court
in Public Interest Center, Inc. v. Elma.[13] In said case, this Court ruled that the
concurrent appointment of Elma to these offices is in violation of Section 7, par. 2,
Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably,
the appointment of Elma as Chairman of the PCGG and as CPLC is, without a
question, an executive act. Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in good faith and in reliance
of the appointment of Elma which cannot just be set aside or invalidated by its
subsequent invalidation.
In Tan v. Barrios,[14] this Court, in applying the operative fact doctrine, held that
despite the invalidity of the jurisdiction of the military courts over civilians, certain
operative facts must be acknowledged to have existed so as not to trample upon
the rights of the accused therein. Relevant thereto, in Olaguer v. Military
Commission No. 34,[15] it was ruled that military tribunals pertain to the Executive
Department of the Government and are simply instrumentalities of the executive
power, provided by the legislature for the President as Commander-in-Chief to aid
him in properly commanding the army and navy and enforcing discipline therein,
and utilized under his orders or those of his authorized military representatives.[16]
Evidently, the operative fact doctrine is not confined to statutes and rules and
regulations issued by the executive department that are accorded the same status
as that of a statute or those which are quasi-legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to
executive issuances like orders and rules and regulations, said principle can
nonetheless be applied, by analogy, to decisions made by the President or the
agencies under the executive department. This doctrine, in the interest of justice
and equity, can be applied liberally and in a broad sense to encompass said
decisions of the executive branch. In keeping with the demands of equity, the Court
can apply the operative fact doctrine to acts and consequences that resulted from
ELS: Summer 2016
the reliance not only on a law or executive act which is quasi-legislative in nature
but also on decisions or orders of the executive branch which were later nullified.
This Court is not unmindful that such acts and consequences must be recognized in
the higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to
be complied with because it has the force and effect of law, springing from the
powers of the President under the Constitution and existing laws. Prior to the
nullification or recall of said decision, it may have produced acts and consequences
in conformity to and in reliance of said decision, which must be respected. It is on
this score that the operative fact doctrine should be applied to acts and
consequences that resulted from the implementation of the PARC Resolution
approving the SDP of HLI.
More importantly, respondents, and even the minority, failed to clearly explain how
the option to remain in HLI granted to individual farmers would result in inequity
and prejudice. We can only surmise that respondents misinterpreted the option as a
referendum where all the FWBs will be bound by a majority vote favoring the
retention of all the 6,296 FWBs as HLI stockholders. Respondents are definitely
mistaken. The fallo of Our July 5, 2011 Decision is unequivocal that only those FWBs
who signified their desire to remain as HLI stockholders are entitled to 18,804.32
shares each, while those who opted not to remain as HLI stockholders will be given
land by DAR. Thus, referendum was not required but only individual options were
granted to each FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the FWBs is not iniquitous and
prejudicial to their interests but is actually beneficial and fair to them. First, they are
granted the right to remain in HLI as stockholders and they acquired said shares
without paying their value to the corporation. On the other hand, the qualified FWBs
are required to pay the value of the land to the Land Bank of the Philippines (LBP) if
land is awarded to them by DAR pursuant to RA 6657. If the qualified FWBs really
want agricultural land, then they can simply say no to the option. And second, if the
operative fact doctrine is not applied to them, then the FWBs will be required to
return to HLI the 3% production share, the 3% share in the proceeds of the sale of
the 500-hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac
Expressway (SCTEX) lot, the homelots and other benefits received by the FWBs from
HLI. With the application of the operative fact doctrine, said benefits, homelots and
the 3% production share and 3% share from the sale of the 500-hectare and SCTEX
lots shall be respected with no obligation to refund or return them. The receipt of
these things is an operative fact that can no longer be disturbed or simply ignored.
(b) The Operative Fact Doctrine as Recourse in Equity
As mentioned above, respondents contend that the operative fact doctrine is a rule
of equity which may be applied only in the absence of a law, and that in the instant
case, there is a positive law which mandates the distribution of the land as a result
of the revocation of the SDP.
Undeniably, the operative fact doctrine is a rule of equity.[17] As a complement of
legal jurisdiction, equity seeks to reach and complete justice where courts of law,
through the inflexibility of their rules and want of power to adapt their judgments to
the special circumstances of cases, are incompetent to do so. Equity regards the
spirit and not the letter, the intent and not the form, the substance rather than the
ELS: Summer 2016
the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP and
DAO 10. By applying the operative fact doctrine, this Court merely gave the
qualified FWBs the option to remain as stockholders of HLI and ruled that they will
retain the homelots and other benefits which they received from HLI by virtue of the
SDP.
It bears stressing that the application of the operative fact doctrine by the Court in
its July 5, 2011 Decision is favorable to the FWBs because not only were the FWBs
allowed to retain the benefits and homelots they received under the stock
distribution scheme, they were also given the option to choose for themselves
whether they want to remain as stockholders of HLI or not. This is in recognition of
the fact that despite the claims of certain farmer groups that they represent the
qualified FWBs in Hacienda Luisita, none of them can show that they are duly
authorized to speak on their behalf. As We have mentioned, To date, such
authorization document, which would logically include a list of the names of the
authorizing FWBs, has yet to be submitted to be part of the records.
II. Constitutionality of Sec. 31, RA 6657
FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota
of the case, raised at the earliest opportunity, and not to be considered as moot and
academic.[25]
This contention is unmeritorious. As We have succinctly discussed in Our July 5,
2011 Decision:
While there is indeed an actual case or controversy, intervenor FARM, composed of
a small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time
thereafter and why its members received benefits from the SDP without so much of
a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via
PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving
resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT
question the constitutionality of Sec. 31 of RA 6657, but concentrated on the
purported flaws and gaps in the subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM
some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits
were derived. The Court cannot now be goaded into resolving a constitutional issue
that FARM failed to assail after the lapse of a long period of time and the occurrence
of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality
will not be passed upon by the Court unless it is properly raised and presented in an
appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly
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AMBALA insists that the conversion of the agricultural lands violated the conditions
of RA 6657 and DAO 10, stating that keeping the land intact and unfragmented is
one of the essential conditions of [the] SD[P], RA 6657 and DAO 10.[36] It asserts
that this provision or conditionality is not mere decoration and is intended to ensure
that the farmers can continue with the tillage of the soil especially since it is the
only occupation that majority of them knows.[37]
We disagree. As We amply discussed in Our July 5, 2011 Decision:
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657,
and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to
the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too
many words, the Report and the resolution view the conversion as an infringement
of Sec. 5(a) of DAO 10 which reads: a. that the continued operation of the
corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability.
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased
income and greater benefits to qualified beneficiariesis but one of the stated criteria
to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does
not exact from the corporate landowner-applicant the undertaking to keep the farm
intact and unfragmented ad infinitum. And there is logic to HLIs stated observation
that the key phrase in the provision of Sec. 5(a) is viability of corporate operations:
[w]hat is thus required is not the agricultural land remaining intact x x x but the
viability of the corporate operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable even if the corporate agricultural
land does not remain intact or [un]fragmented.[38]
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisitas
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of
RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the
land ceases to be economically feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the
beneficiary or landowner with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of the land and its dispositions. x
xx
Moreover, it is worth noting that the application for conversion had the backing of
5,000 or so FWBs, including respondents Rene Galang, and Jose Julio Suniga, then
leaders of the AMBALA and the Supervisory Group, respectively, as evidenced by
the Manifesto of Support they signed and which was submitted to the DAR.[39] If at
all, this means that AMBALA should be estopped from questioning the conversion of
a portion of Hacienda Luisita, which its leader has fully supported.
(b)
The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial
Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not
innocent purchasers for value. The AMBALA, in particular, argues that LIPCO, being
ELS: Summer 2016
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 wellfounded 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. (Emphasis supplied.)
In the second place, the allegation that the converted lands remain undeveloped is
contradicted by the evidence on record, particularly, Annex X of LIPCOs
Memorandum dated September 23, 2010,[45] which has photographs showing that
the land has been partly developed.[46] Certainly, it is a general rule that the
factual findings of administrative agencies are conclusive and binding on the Court
when supported by substantial evidence.[47] However, this rule admits of certain
exceptions, one of which is when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record.[48]
In the third place, by arguing that the companies involved in the transfers of the
300-hectare portion of Hacienda Luisita have interlocking directors and, thus,
knowledge of one may already be imputed upon all the other companies, AMBALA
and Rene Galang, in effect, want this Court to pierce the veil of corporate fiction.
However, piercing the veil of corporate fiction is warranted only in cases when the
separate legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, such that in the case of two corporations, the law will regard
the corporations as merged into one.[49] As succinctly discussed by the Court in
Velarde v. Lopez, Inc.:[50]
Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by
piercing the veil of corporate fiction. Piercing the veil of corporate fiction is
warranted, however, only in cases when the separate legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, such that in the
case of two corporations, the law will regard the corporations as merged into one.
The rationale behind piercing a corporations identity is to remove the barrier
between the corporation from the persons comprising it to thwart the fraudulent
and illegal schemes of those who use the corporate personality as a shield for
undertaking certain proscribed activities.
In applying the doctrine of piercing the veil of corporate fiction, the following
requisites must be established: (1) control, not merely majority or complete stock
control; (2) such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest acts in contravention of plaintiffs legal rights; and (3) the aforesaid
control and breach of duty must proximately cause the injury or unjust loss
complained of. (Citations omitted.)
Nowhere, however, in the pleadings and other records of the case can it be
gathered that respondent has complete control over Sky Vision, not only of finances
ELS: Summer 2016
but of policy and business practice in respect to the transaction attacked, so that
Sky Vision had at the time of the transaction no separate mind, will or existence of
its own. The existence of interlocking directors, corporate officers and shareholders
is not enough justification to pierce the veil of corporate fiction in the absence of
fraud or other public policy considerations.
Absent any allegation or proof of fraud or other public policy considerations, the
existence of interlocking directors, officers and stockholders is not enough
justification to pierce the veil of corporate fiction as in the instant case.
And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered
the payment of the proceeds of the sale of the converted land, and even of the
80.51-hectare land sold to the government, through the Bases Conversion
Development Authority, to the qualified FWBs, effectively fulfils the conditions in the
conversion order, to wit: (1) that its approval shall in no way amend, diminish, or
alter the undertaking and obligations of HLI as contained in the SDP approved on
November 21, 1989; and (2) that the benefits, wages and the like, received by the
FWBs shall not in any way be reduced or adversely affected, among others.
A view has also been advanced that the 200-hectare lot transferred to Luisita Realty
Corporation (LRC) should be included in the compulsory coverage because the
corporation did not intervene.
We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by
PARC Resolution 2005-32-01, this Court is constrained to make a ruling on the rights
of LRC over the said lot. Moreover, the 500-hectare portion of Hacienda Luisita, of
which the 200-hectare portion sold to LRC and the 300-hectare portion subsequently
acquired by LIPCO and RCBC were part of, was already the subject of the August 14,
1996 DAR Conversion Order. By virtue of the said conversion order, the land was
already reclassified as industrial/commercial land not subject to compulsory
coverage. Thus, if We place the 200-hectare lot sold to LRC under compulsory
coverage, this Court would, in effect, be disregarding the DAR Conversion Order,
which has long attained its finality. And as this Court held in Berboso v. CA,[51]
Once final and executory, the Conversion Order can no longer be questioned.
Besides, to disregard the Conversion Order through the revocation of the approval
of the SDP would create undue prejudice to LRC, which is not even a party to the
proceedings below, and would be tantamount to deprivation of property without due
process of law.
Nonethess, the minority is of the adamant view that since LRC failed to intervene in
the instant case and was, therefore, unable to present evidence supporting its good
faith purchase of the 200-hectare converted land, then LRC should be given full
opportunity to present its case before the DAR. This minority view is a contradiction
in itself. Given that LRC did not intervene and is, therefore, not a party to the instant
case, then it would be incongruous to order them to present evidence before the
DAR. Such an order, if issued by this Court, would not be binding upon the LRC.
Moreover, LRC may be considered to have waived its right to participate in the
instant petition since it did not intervene in the DAR proceedings for the nullification
of the PARC Resolution No. 89-12-2 which approved the SDP.
(c) Proceeds of the sale of the 500-hectare converted land
and of the 80.51-hectare land used for the SCTEX
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As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and
the 80.51-hectare SCTEX lot acquired by the government from compulsory
coverage, then HLI and its subsidiary, Centennary, should be liable to the FWBs for
the price received for said lots. Thus:
There is a claim that, since the sale and transfer of the 500 hectares of land subject
of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came
after compulsory coverage has taken place, the FWBs should have their
corresponding share of the lands value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec.
31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August
14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary,
shall be liable to the FWBs for the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for
the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into
account the payment of taxes and expenses relating to the transfer of the land and
HLIs statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will
engage the services of a reputable accounting firm to be approved by the parties to
audit the books of HLI to determine if the proceeds of the sale of the 500-hectare
land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the
balance shall be distributed to the qualified FWBs.
HLI, however, takes exception to the above-mentioned ruling and contends that it is
not proper to distribute the unspent or unused balance of the proceeds of the sale
of the 500-hectare converted land and 80.51-hectare SCTEX lot to the qualified
FWBs for the following reasons: (1) the proceeds of the sale belong to the
corporation, HLI, as corporate capital and assets in substitution for the portions of
its land asset which were sold to third parties; (2) to distribute the cash sales
proceeds of the portions of the land asset to the FWBs, who are stockholders of HLI,
is to dissolve the corporation and distribute the proceeds as liquidating dividends
without even paying the creditors of the corporation; and (3) the doing of said acts
would violate the stringent provisions of the Corporation Code and corporate
practice.[52]
Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability
to the FWBs for the price received for the 500-hectare converted lot and the 80.51hectare SCTEX lot. However, as We have established in Our July 5, 2011 Decision,
ELS: Summer 2016
the rights, obligations and remedies of the parties in the instant case are primarily
governed by RA 6657 and HLI cannot shield itself from the CARP coverage merely
under the convenience of being a corporate entity. In this regard, it should be
underscored that the agricultural lands held by HLI by virtue of the SDP are no
ordinary assets. These are special assets, because, originally, these should have
been distributed to the FWBs were it not for the approval of the SDP by PARC. Thus,
the government cannot renege on its responsibility over these assets. Likewise, HLI
is no ordinary corporation as it was formed and organized precisely to make use of
these agricultural lands actually intended for distribution to the FWBs. Thus, it
cannot shield itself from the coverage of CARP by invoking the Corporation Code. As
explained by the Court:
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the
SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly
be made clear that HLI was precisely created in order to comply with RA 6657,
which the OSG aptly described as the mother law of the SDOA and the SDP.[53] It is,
thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under the guise of being a corporate
entity.
Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the
parties arising from the SDP should not be made to supplant or circumvent the
agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is
the special law on agrarian reform. As between a general and special law, the latter
shall prevailgeneralia specialibus non derogant.[54] Besides, the present impasse
between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents
questioned before the DAR is the proper implementation of the SDP and HLIs
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the
instant case. (Emphasis supplied.)
Considering that the 500-hectare converted land, as well as the 80.51-hectare
SCTEX lot, should have been included in the compulsory coverage were it not for
their conversion and valid transfers, then it is only but proper that the price
received for the sale of these lots should be given to the qualified FWBs. In effect,
the proceeds from the sale shall take the place of the lots.
The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the
payment of taxes and expenses relating to the transfer of the land, as well as HLIs
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. Accordingly, We ordered the deduction of the taxes and expenses relating
to the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary for legitimate corporate purposes, among others.
On this note, DAR claims that the [l]egitimate corporate expenses should not be
deducted as there is no basis for it, especially since only the auditing to be
conducted on the financial records of HLI will reveal the amounts to be offset
between HLI and the FWBs.[55]
The contention is unmeritorious. The possibility of an offsetting should not prevent
Us from deducting the legitimate corporate expenses incurred by HLI and
Centennary. After all, the Court has ordered for a proper auditing [i]n order to
determine once and for all whether or not all the proceeds were properly utilized by
HLI and its subsidiary, Centennary. In this regard, DAR is tasked to engage the
services of a reputable accounting firm to be approved by the parties to audit the
books of HLI to determine if the proceeds of the sale of the 500-hectare land and
the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes,
titling expenses and in compliance with the August 14, 1996 Conversion Order. Also,
it should be noted that it is HLI which shall shoulder the cost of audit to reduce the
burden on the part of the FWBs. Concomitantly, the legitimate corporate expenses
incurred by HLI and Centennary, as will be determined by a reputable accounting
firm to be engaged by DAR, shall be among the allowable deductions from the
proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot.
We, however, find that the 3% production share should not be deducted from the
proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot. The 3% production share, like the homelots, was among the benefits
received by the FWBs as farmhands in the agricultural enterprise of HLI and, thus,
should not be taken away from the FWBs.
Contrarily, the minority is of the view that as a consequence of the revocation of the
SDP, the parties should be restored to their respective conditions prior to its
execution and approval, subject to the application of the principle of set-off or
compensation. Such view is patently misplaced.
The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To
reiterate, what was actually revoked by this Court, in its July 5, 2011 Decision, is
PARC Resolution No. 89-12-2 approving the SDP. To elucidate, it was the SDP, not the
SDOA, which was presented for approval by Tadeco to DAR.[56] The SDP explained
the mechanics of the stock distribution but did not make any reference nor
correlation to the SDOA. The pertinent portions of the proposal read:
MECHANICS OF STOCK DISTRIBUTION PLAN
Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land
may distribute among the qualified beneficiaries such proportion or percentage of
its capital stock that the value of the agricultural land actually devoted to
agricultural activities, bears in relation to the corporations total assets. Conformably
with this legal provision, Tarlac Development Corporation hereby submits for
approval a stock distribution plan that envisions the following:[57] (Terms and
conditions omitted; emphasis supplied)
xxxx
The above stock distribution plan is hereby submitted on the basis of all these
benefits that the farmworker-beneficiaries of Hacienda Luisita will receive under its
provisions in addition to their regular compensation as farmhands in the agricultural
ELS: Summer 2016
enterprise and the fringe benefits granted to them by their collective bargaining
agreement with management.[58]
Also, PARC Resolution No. 89-12-2 reads as follows:
RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF
DEVELOPMENT COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)
TARLAC
became subject of the agrarian reform coverage through the stock distribution
scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such
approval is akin to a notice of coverage ordinarily issued under compulsory
acquisition. Further, any doubt should be resolved in favor of the FWBs. As this
Court held in Perez-Rosario v. CA:[64]
It is an established social and economic fact that the escalation of poverty is the
driving force behind the political disturbances that have in the past compromised
the peace and security of the people as well as the continuity of the national order.
To subdue these acute disturbances, the legislature over the course of the history of
the nation passed a series of laws calculated to accelerate agrarian reform,
ultimately to raise the material standards of living and eliminate discontent.
Agrarian reform is a perceived solution to social instability. The edicts of social
justice found in the Constitution and the public policies that underwrite them, the
extraordinary national experience, and the prevailing national consciousness, all
command the great departments of government to tilt the balance in favor of the
poor and underprivileged whenever reasonable doubt arises in the interpretation of
the law. But annexed to the great and sacred charge of protecting the weak is the
diametric function to put every effort to arrive at an equitable solution for all parties
concerned: the jural postulates of social justice cannot shield illegal acts, nor do
they sanction false sympathy towards a certain class, nor yet should they deny
justice to the landowner whenever truth and justice happen to be on her side. In the
occupation of the legal questions in all agrarian disputes whose outcomes can
significantly affect societal harmony, the considerations of social advantage must
be weighed, an inquiry into the prevailing social interests is necessary in the
adjustment of conflicting demands and expectations of the people, and the social
interdependence of these interests, recognized. (Emphasis supplied.)
The minority contends that it is the date of the notice of coverage, that is, January
2, 2006, which is determinative of the just compensation HLI is entitled to for its
expropriated lands. To support its contention, it cited numerous cases where the
time of the taking was reckoned on the date of the issuance of the notice of
coverage.
However, a perusal of the cases cited by the minority would reveal that none of
them involved the stock distribution scheme. Thus, said cases do not squarely apply
to the instant case. Moreover, it should be noted that it is precisely because the
stock distribution option is a distinctive mechanism under RA 6657 that it cannot be
treated similarly with that of compulsory land acquisition as these are two (2)
different modalities under the agrarian reform program. As We have stated in Our
July 5, 2011 Decision, RA 6657 provides two (2) alternative modalities, i.e., land or
stock transfer, pursuant to either of which the corporate landowner can comply with
CARP.
In this regard, it should be noted that when HLI submitted the SDP to DAR for
approval, it cannot be gainsaid that the stock distribution scheme is clearly HLIs
preferred modality in order to comply with CARP. And when the SDP was approved,
stocks were given to the FWBs in lieu of land distribution. As aptly observed by the
minority itself, [i]nstead of expropriating lands, what the government took and
distributed to the FWBs were shares of stock of petitioner HLI in proportion to the
value of the agricultural lands that should have been expropriated and turned over
to the FWBs. It cannot, therefore, be denied that upon the approval of the SDP
submitted by HLI, the agricultural lands of Hacienda Luisita became subject of CARP
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coverage. Evidently, the approval of the SDP took the place of a notice of coverage
issued under compulsory acquisition.
Also, it is surprising that while the minority opines that under the stock distribution
option, title to the property remains with the corporate landowner, which should
presumably be dominated by farmers with majority stockholdings in the
corporation, it still insists that the just compensation that should be given to HLI is
to be reckoned on January 2, 2006, the date of the issuance of the notice of
coverage, even after it found that the FWBs did not have the majority stockholdings
in HLI contrary to the supposed avowed policy of the law. In effect, what the
minority wants is to prejudice the FWBs twice. Given that the FWBs should have had
majority stockholdings in HLI but did not, the minority still wants the government to
pay higher just compensation to HLI. Even if it is the government which will pay the
just compensation to HLI, this will also affect the FWBs as they will be paying higher
amortizations to the government if the taking will be considered to have taken place
only on January 2, 2006.
The foregoing notwithstanding, it bears stressing that the DAR's land valuation is
only preliminary and is not, by any means, final and conclusive upon the landowner.
The landowner can file an original action with the RTC acting as a special agrarian
court to determine just compensation. The court has the right to review with finality
the determination in the exercise of what is admittedly a judicial function.[65]
A view has also been advanced that HLI should pay the qualified FWBs rental for the
use and possession of the land up to the time it surrenders possession and control
over these lands. What this view fails to consider is the fact that the FWBs are also
stockholders of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also, the
income earned by the corporation from its possession and use of the land ultimately
redounded to the benefit of the FWBs based on its business operations in the form
of salaries, benefits voluntarily granted by HLI and other fringe benefits under their
Collective Bargaining Agreement. That being so, there would be unjust enrichment
on the part of the FWBs if HLI will still be required to pay rent for the use of the land
in question.
V. Sale to Third Parties
There is a view that since the agricultural lands in Hacienda Luisita were placed
under CARP coverage through the SDOA scheme on May 11, 1989, then the 10-year
period prohibition on the transfer of awarded lands under RA 6657 lapsed on May
10, 1999, and, consequently, the qualified FWBs should already be allowed to sell
these lands with respect to their land interests to third parties, including HLI,
regardless of whether they have fully paid for the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657 states:
SEC. 27. Transferability of Awarded Lands. - Lands acquired by beneficiaries under
this Act may not be sold, transferred or conveyed except through hereditary
succession, or to the government, or to the LBP, or to other qualified beneficiaries
for a period of ten (10) years: Provided, however, That the children or the spouse of
the transferor shall have a right to repurchase the land from the government or LBP
within a period of two (2) years. Due notice of the availability of the land shall be
given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the
barangay where the land is situated. The Provincial Agrarian Coordinating
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Those in favor of the government, DAR or the Land Bank of the Philippines.
3.
Those covering lands retained by the landowner under Section 6 of R.A. 6657
duly certified by the designated DAR Provincial Agrarian Reform Officer (PARO) as a
retention area, executed in favor of transferees whose total landholdings inclusive
of the land to be acquired do not exceed five (5) hectares; subject, however, to the
right of pre-emption and/or redemption of tenant/lessee under Section 11 and 12 of
R.A. 3844, as amended.
xxxx
4.
Those executed by beneficiaries covering lands acquired under any agrarian
reform law in favor of the government, DAR, LBP or other qualified beneficiaries
certified by DAR.
5.
Those executed after ten (10) years from the issuance and registration of the
Emancipation Patent or Certificate of Land Ownership Award.
B. The following transactions are not valid:
1.
Sale, disposition, lease management contract or transfer of possession of
private lands executed by the original landowner prior to June 15, 1988, which are
registered on or before September 13, 1988, or those executed after June 15, 1988,
covering an area in excess of the five-hectare retention limit in violation of R.A.
6657.
2.
Those covering lands acquired by the beneficiary under R.A. 6657 and
executed within ten (10) years from the issuance and registration of an
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proposed buy-back scheme; hence, the general rules on retention limits should
apply.
Further, the position that the qualified FWBs are now free to transact with third
parties concerning their land interests, regardless of whether they have fully paid
for the lands or not, also transgresses the second paragraph of Sec. 27 of RA 6657,
which plainly states that [i]f the land has not yet been fully paid by the beneficiary,
the right to the land may be transferred or conveyed, with prior approval of the
DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition
for such transfer or conveyance, shall cultivate the land himself. Failing compliance
herewith, the land shall be transferred to the LBP x x x. When the words and
phrases in the statute are clear and unequivocal, the law is applied according to its
express terms.[68] Verba legis non est recedendum, or from the words of a statute
there should be no departure.[69]
The minority, however, posits that [t]o insist that the FWBs rights sleep for a period
of ten years is unrealistic, and may seriously deprive them of real opportunities to
capitalize and maximize the victory of direct land distribution. By insisting that We
disregard the ten-year restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation, which is violative of the
principle of separation of powers.[70] The discourse by Ruben E. Agpalo, in his book
on statutory construction, is enlightening:
Where the law is clear and unambiguous, it must be taken to mean exactly what it
says and the court has no choice but to see to it that its mandate is obeyed. Where
the law is clear and free from doubt or ambiguity, there is no room for construction
or interpretation. Thus, where what is not clearly provided in the law is read into the
law by construction because it is more logical and wise, it would be to encroach
upon legislative prerogative to define the wisdom of the law, which is judicial
legislation. For whether a statute is wise or expedient is not for the courts to
determine. Courts must administer the law, not as they think it ought to be but as
they find it and without regard to consequences.[71] (Emphasis supplied.)
And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang
Ladlad LGBT Party v. COMELEC:[72]
Regardless of the personal beliefs and biases of its individual members, this Court
can only apply and interpret the Constitution and the laws. Its power is not to create
policy but to recognize, review or reverse the policy crafted by the political
departments if and when a proper case is brought before it. Otherwise, it will tread
on the dangerous grounds of judicial legislation.
Considerably, this Court is left with no other recourse but to respect and apply the
law.
VI. Grounds for Revocation of the SDP
AMBALA and FARM reiterate that improving the economic status of the FWBs is
among the legal obligations of HLI under the SDP and is an imperative imposition by
RA 6657 and DAO 10.[73] FARM further asserts that [i]f that minimum threshold is
not met, why allow [stock distribution option] at all, unless the purpose is not social
justice but a political accommodation to the powerful.[74]
Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657 and
DAO 10 can it be inferred that improving the economic status of the FWBs is among
the legal obligations of HLI under the SDP or is an imperative imposition by RA 6657
and DAO 10, a violation of which would justify discarding the stock distribution
option. As We have painstakingly explained in Our July 5, 2011 Decision:
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the FWBs through greater productivity
of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the
landless farmers and farm workers will receive the highest consideration to promote
social justice and to move the nation towards sound rural development and
industrialization, and the establishment of owner cultivatorship of economic-sized
farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard to
the rights of landowners to just compensation and to the ecological needs of the
nation, shall be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof. To this end, the
State shall encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment
of just compensation. The State shall respect the right of small landowners and shall
provide incentives for voluntary land-sharing.
Paragraph 2 of the above-quoted provision specifically mentions that a more
equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of agricultural lands. Of note is
the term opportunity which is defined as a favorable chance or opening offered by
circumstances. Considering this, by no stretch of imagination can said provision be
construed as a guarantee in improving the lives of the FWBs. At best, it merely
provides for a possibility or favorable chance of uplifting the economic status of the
FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal
obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO
10, a violation of which would justify discarding the stock distribution option.
Nothing in that option agreement, law or department order indicates otherwise.
ELS: Summer 2016
Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and
higher benefits exclusive of free hospital and medical benefits to their immediate
family. And attached as Annex G to HLIs Memorandum is the certified true report of
the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations,
captioned as HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP, detailing
what HLI gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) =
PhP 303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of
the 500-hectare converted lands. While not included in the report, HLI manifests
having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land
traversed by the SCTEX. On top of these, it is worth remembering that the shares of
stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from
the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has
not anyway earned profits through the years, it cannot be over-emphasized that, as
a matter of common business sense, no corporation could guarantee a profitable
run all the time. As has been suggested, one of the key features of an SDP of a
corporate landowner is the likelihood of the corporate vehicle not earning, or, worse
still, losing money.
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood that
the plan would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them individually. But
as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
actually exact assurance of success on something that is subject to the will of man,
the forces of nature or the inherent risky nature of business.[75] Just like in actual
land distribution, an SDP cannot guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the
fact that there were many instances wherein after a farmworker beneficiary has
been awarded with an agricultural land, he just subsequently sells it and is
eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship,
if that really be the case, can hardly be attributed to HLI and its SDP and provide a
valid ground for the plans revocation. (Citations omitted; emphasis in the original.)
This Court, despite the above holding, still affirmed the revocation by PARC of its
approval of the SDP based on the following grounds: (1) failure of HLI to fully comply
with its undertaking to distribute homelots to the FWBs under the SDP; (2)
distribution of shares of stock to the FWBs based on the number of man days or
number of days worked by the FWB in a years time; and (3) 30-year timeframe for
the implementation or distribution of the shares of stock to the FWBs.
Just the same, Mallari, et al. posit that the homelots required to be distributed have
all been distributed pursuant to the SDOA, and that what merely remains to be done
ELS: Summer 2016
is the release of title from the Register of Deeds.[76] They further assert that there
has been no dilution of shares as the corporate records would show that if ever not
all of the 18,804.32 shares were given to the actual original FWB, the recipient of
the difference is the next of kin or children of said original FWB.[77] Thus, they
submit that since the shares were given to the same family beneficiary, this should
be deemed as substantial compliance with the provisions of Sec. 4 of DAO 10.[78]
Also, they argue that there has been no violation of the three-month period to
implement the SDP as mandated by Sec. 11 of DAO, since this provision must be
read in light of Sec. 10 of Executive Order No. 229, the pertinent portion of which
reads, The approval by the PARC of a plan for such stock distribution, and its initial
implementation, shall be deemed compliance with the land distribution requirement
of the CARP.[79]
Again, the matters raised by Mallari, et al. have been extensively discussed by the
Court in its July 5, 2011 Decision. As stated:
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land distribution.
Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding section
shall be provided with homelots and small farmlots for their family use, to be taken
from the land owned by the cooperative or corporation.
The preceding section referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be
owned collectively by the worker-beneficiaries who shall form a workers cooperative
or association which will deal with the corporation or business association. Until a
new agreement is entered into by and between the workers cooperative or
association and the corporation or business association, any agreement existing at
the time this Act takes effect between the former and the previous landowner shall
be respected by both the workers cooperative or association and the corporation or
business association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to subdivide and allocate for free and without charge
among the qualified family-beneficiaries x x x residential or homelots of not more
than 240 sq. m. each, with each family beneficiary being assured of receiving and
owning a homelot in the barrio or barangay where it actually resides, within a
reasonable time.
ELS: Summer 2016
More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240square meter homelots and, of those who were already given, some still do not
have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can
you also [prove] that the qualified family beneficiaries were already provided the
240 square meter homelots.
Atty. Asuncion: We will, your Honor please.
Other than the financial report, however, no other substantial proof showing that all
the qualified beneficiaries have received homelots was submitted by HLI. Hence,
this Court is constrained to rule that HLI has not yet fully complied with its
undertaking to distribute homelots to the FWBs under the SDP.
On Man Days and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the
SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI]
shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the
THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them
of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND
PARTY that are presently owned and held by the FIRST PARTY, until such time as the
entire block of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of
man days, that is, the number of days that the FWBs have worked during the year.
This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes
of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landownerapplicant shall provide for the distribution of an equal number of shares of the same
class and value, with the same rights and features as all other shares, to each of the
qualified beneficiaries. This distribution plan in all cases, shall be at least the
minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter of
sound company policy.
ELS: Summer 2016
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to
be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum
ratio contemplates of that proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets. It is this set of shares of stock which, in line with Sec. 4 of
DAO 10, is supposed to be allocated for the distribution of an equal number of
shares of stock of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries.
On the other hand, the second set or category of shares partakes of a gratuitous
extra grant, meaning that this set or category constitutes an augmentation share/s
that the corporate landowner may give under an additional stock distribution
scheme, taking into account such variables as rank, seniority, salary, position and
like factors which the management, in the exercise of its sound discretion, may
deem desirable.
Before anything else, it should be stressed that, at the time PARC approved HLIs
SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the 30-year
stock distribution program envisaged under the plan, FWBs who came in after 1989,
new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of man days, HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had
given up their rights to the land that could have been distributed to them, suffered
a dilution of their due share entitlement. As has been observed during the oral
arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs. Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter
SDOA instead of placing the land under CARP. And for that reason those who would
have gotten their shares of the land actually gave up their rights to this land in
place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to
the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to
ELS: Summer 2016
the farmers at that time that numbered x x x those who signed five thousand four
hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None,
if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original
(interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for
new workers who come in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already fixed. The TADECO who
has shares there about sixty six percent (66%) and the five thousand four hundred
ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will
you x x x what right or where did you get that right to use this shares, to water
down the shares of those who should have been benefited, and to use it as a reward
system decided by the company?
From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from watering
down of shares. As determined earlier, each original FWB is entitled to 18,804.32
HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares
per beneficiary, because the acquisition and distribution of the HLI shares were
based on man days or number of days worked by the FWB in a years time. As
explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work
in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs,
such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to
the Court, the total number of farmworkers of HLI as of said date stood at 10,502.
All these farmworkers, which include the original 6,296 FWBs, were given shares out
of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding
capital stock of HLI. Clearly, the minimum individual allocation of each original FWB
of 18,804.32 shares was diluted as a result of the use of man days and the hiring of
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additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a
30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to
what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of
the approved stock distribution plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by PARC. In fact, based on the said
provision, the transfer of the shares of stock in the names of the qualified FWBs
should be recorded in the stock and transfer books and must be submitted to the
SEC within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan
shall be implemented within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the PARC, and the transfer of the
shares of stocks in the names of the qualified beneficiaries shall be recorded in
stock and transfer books and submitted to the Securities and Exchange Commission
(SEC) within sixty (60) days from the said implementation of the stock distribution
plan.
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by PARC.
While neither of the clashing parties has made a compelling case of the thrust of
this provision, the Court is of the view and so holds that the intent is to compel the
corporate landowner to complete, not merely initiate, the transfer process of shares
within that three-month timeframe. Reinforcing this conclusion is the 60-day stock
transfer recording (with the SEC) requirement reckoned from the implementation of
the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can
veritably evade compliance with agrarian reform by simply deferring to absurd
limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by
the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To HLI,
said section provides a justifying dimension to its 30-year stock distribution
program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as
the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid
for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what is
involved is stock distribution, it is the corporate landowner who has the obligation to
distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
pay the cost of the land thus awarded them to make it less cumbersome for them to
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In line with Our finding that control over agricultural lands must always be in the
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hands of the farmers, We reconsider our ruling that the qualified FWBs should be
given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs
will never gain control given the present proportion of shareholdings in HLI.
A revisit of HLIs Proposal for Stock Distribution under CARP and the Stock
Distribution Option Agreement (SDOA) upon which the proposal was based reveals
that the total assets of HLI is PhP 590,554,220, while the value of the 4,915.7466
hectares is PhP 196,630,000. Consequently, the share of the farmer-beneficiaries in
the HLI capital stock is 33.296% (196,630,000 divided by 590,554.220);
118,391,976.85 HLI shares represent 33.296%. Thus, even if all the holders of the
118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which
is unlikely, control will never be placed in the hands of the farmer-beneficiaries.
Control, of course, means the majority of 50% plus at least one share of the
common shares and other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the majority is 295,112,101
shares (590,554,220 divided by 2 plus one [1] HLI share). The 118,391,976.85
shares subject to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control over HLI. Hence, control
can NEVER be attained by the FWBs. There is even no assurance that 100% of the
118,391,976.85 shares issued to the FWBs will all be voted in favor of staying in HLI,
taking into account the previous referendum among the farmers where said shares
were not voted unanimously in favor of retaining the SDP. In light of the foregoing
consideration, the option to remain in HLI granted to the individual FWBs will have
to be recalled and revoked.
Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI
will no longer be operating under SDP and will only be treated as an ordinary private
corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary
stockholders and will no longer be under the protective mantle of RA 6657.
In addition to the foregoing, in view of the operative fact doctrine, all the benefits
and homelots[80] received by all the FWBs shall be respected with no obligation to
refund or return them, since, as We have mentioned in our July 5, 2011 Decision,
the benefits x x x were received by the FWBs as farmhands in the agricultural
enterprise of HLI and other fringe benefits were granted to them pursuant to the
existing collective bargaining agreement with Tadeco.
One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The
remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the
rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22
of RA 6657.
In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent
with its administrative prerogative to identify and select the agrarian reform
beneficiaries under RA 6657.[81]
WHEREFORE, the Motion for Partial Reconsideration dated July 20, 2011 filed by
public respondents Presidential Agrarian Reform Council and Department of
Agrarian Reform, the Motion for Reconsideration dated July 19, 2011 filed by private
respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita, the Motion
for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc., and the Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA are PARTIALLY
GRANTED with respect to the option granted to the original farmworker-beneficiaries
of Hacienda Luisita to remain with Hacienda Luisita, Inc., which is hereby RECALLED
and SET ASIDE. The Motion for Clarification and Partial Reconsideration dated July
21, 2011 filed by petitioner HLI and the Motion for Reconsideration dated July 21,
2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of
Hacienda Luisita, Inc. and Windsor Andaya are DENIED.
The fallo of the Courts July 5, 2011 Decision is hereby amended and shall read:
PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No.
2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition scheme of the CARP, are hereby
AFFIRMED with the following modifications:
All salaries, benefits, the 3% of the gross sales of the production of the agricultural
lands, the 3% share in the proceeds of the sale of the 500-hectare converted land
and the 80.51-hectare SCTEX lot and the homelots already received by the 10,502
FWBs composed of 6,296 original FWBs and the 4,206 non-qualified FWBs shall be
respected with no obligation to refund or return them. The 6,296 original FWBs shall
forfeit and relinquish their rights over the HLI shares of stock issued to them in favor
of HLI. The HLI Corporate Secretary shall cancel the shares issued to the said FWBs
and transfer them to HLI in the stocks and transfer book, which transfers shall be
exempt from taxes, fees and charges. The 4,206 non-qualified FWBs shall remain as
stockholders of HLI.
DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARCs SDP-approving Resolution No. 89-12-2 the 500-hectare lot subject
of the August 14, l996 Conversion Order and the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX complex. After the segregation
process, as indicated, is done, the remaining area shall be turned over to DAR for
immediate land distribution to the original 6,296 FWBs or their successors-ininterest which will be identified by the DAR. The 4,206 non-qualified FWBs are not
entitled to any share in the land to be distributed by DAR.
HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out
of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary
Holdings, Inc., for the sale of the remaining 300 hectares of the aforementioned
500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases Conversion Development
Authority for the sale of the 80.51-hectare lot used for the construction of the
SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000
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3. Ejecting from the land the so-called tenants, namely; Gabino Alita, Jesus Julian,
Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando Salamar, as the
owners would want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2) parcels
of land, acquired by private respondents' predecessors-in-interest through
homestead patent under the provisions of Commonwealth Act No. 141. Said lands
are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but
petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and
appurtenant regulations issued by the then Ministry of Agrarian Reform (DAR for
short), now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint
against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon
as Regional Director of MAR Region IX, and herein petitioners (then defendants) for
the declaration of P.D. 27 and all other Decrees, Letters of Instructions and General
Orders issued in connection therewith as inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8, 1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer and
from being issued land transfer certificates to which the defendants filed their
opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional District,
Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch XVIII)
rendered its decision dismissing the said complaint and the motion to enjoin the
defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which
defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision
prompting defendants to move for a reconsideration but the same was denied in its
Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the decision appealed from is
hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
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The pivotal issue is whether or not lands obtained through homestead patent are
covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of
tenants from the bondage of the soil and transferring to them ownership of the land
they till is a sweeping social legislation, a remedial measure promulgated pursuant
to the social justice precepts of the Constitution. However, such contention cannot
be invoked to defeat the very purpose of the enactment of the Public Land Act or
Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and protection of the poor.
The law gives a needy citizen a piece of land where he may build a modest house
for himself and family and plant what is necessary for subsistence and for the
satisfaction of life's other needs. The right of the citizens to their homes and to the
things necessary for their subsistence is as vital as the right to life itself. They have
a right to live with a certain degree of comfort as become human beings, and the
State which looks after the welfare of the people's happiness is under a duty to
safeguard the satisfaction of this vital right. (Patricio v. Bayog, 112 SCRA 45)
In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian
Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine Constitution
which provides:
Section 6. The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization of other
natural resources, including lands of public domain under lease or concession
suitable to agriculture, subject to prior rights, homestead rights of small settlers,
and the rights of indigenous communities to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive
Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a proviso
supporting the inapplicability of P.D. 27 to lands covered by homestead patents like
those of the property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or their direct compulsory
heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of Appeals
sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.
5. Natalia Realty GR103302 8/12/93
EN BANC
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agency," are "not deemed 'agricultural lands' within the meaning and intent of
Section 3 (c) of R.A. No. 6657." Not being deemed "agricultural lands," they are
outside the coverage of CARL.
DECISION
BELLOSILLO, J p:
Are lands already classified for residential, commercial or industrial use, as
approved by the Housing and Land Use Regulatory Board and its precursor agencies
1 prior to 15 June 1988, 2 covered by R.A. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988? This is the pivotal issue in this
petition for certiorari assailing the Notice of Coverage 3 of the Department of
Agrarian Reform over parcels of land already reserved as townsite areas before the
enactment of the law.
Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3)
contiguous parcels of land located in Banaba, Antipolo, Rizal, with areas of 120.9793
hectares, 1.3205 hectares and 2.7080 hectares, or a total of 125.0078 hectares, and
embraced in Transfer Certificate of Title No. 31527 of the Register of Deeds of the
Province of Rizal.
On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares
of land located in the Municipalities of Antipolo, San Mateo and Montalban as
townsite areas to absorb the population overspill in the metropolis which were
designated as the Lungsod Silangan Townsite. The NATALIA properties are situated
within the areas proclaimed as townsite reservation.
Since private landowners were allowed to develop their properties into low-cost
housing subdivisions within the reservation, petitioner Estate Developers and
Investors Corporation (EDIC, for brevity), as developer of NATALIA properties,
applied for and was granted preliminary approval and locational clearances by the
Human Settlements Regulatory Commission. The necessary permit for Phase I of the
subdivision project, which consisted of 13.2371 hectares, was issued sometime in
1982; 4 for Phase II, with an area of 80.0000 hectares, on 13 October 1983; 5 and
for Phase III, which consisted of the remaining 31.7707 hectares, on 25 April 1986. 6
Petitioners were likewise issued development permits 7 after complying with the
requirements. Thus the NATALIA properties later became the Antipolo Hills
Subdivision.
On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian
Reform Law of 1988" (CARL, for brevity), went into effect. Conformably therewith,
respondent Department of Agrarian Reform (DAR, for brevity), through its Municipal
Agrarian Reform Officer, issued on 22 November 1990 a Notice of Coverage on the
undeveloped portions of the Antipolo Hills Subdivision which consisted of roughly
90.3307 hectares. NATALIA immediately registered its objection to the Notice of
Coverage.
EDIC also protested to respondent Director Wilfredo Leano of the DAR Region
IV Office and twice wrote him requesting the cancellation of the Notice of Coverage.
On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo,
Inc. (SAMBA, for brevity), filed a complaint against NATALIA and EDIC before the
DAR Regional Adjudicator to restrain petitioners from developing areas under
cultivation by SAMBA members. 8 The Regional Adjudicator temporarily restrained
petitioners from proceeding with the development of the subdivision. Petitioners
then moved to dismiss the complaint; it was denied. Instead, the Regional
Adjudicator issued on 5 March 1991 a Writ of Preliminary Injunction.
Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication
Board (DARAB); however, on 16 December 1991 the DARAB merely remanded the
case to the Regional Adjudicator for further proceedings. 9
In the interim, NATALIA wrote respondent Secretary of Agrarian Reform
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reiterating its request to set aside the Notice of Coverage. Neither respondent
Secretary nor respondent Director took action on the protest-letters, thus
compelling petitioners to institute this proceeding more than a year thereafter.
NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for
including undeveloped portions of the Antipolo Hills Subdivision within the coverage
of the CARL. They argue that NATALIA properties already ceased to be agricultural
lands when they were included in the areas reserved by presidential fiat for townsite
reservation.
Public respondents through the Office of the Solicitor General dispute this
contention. They maintain that the permits granted petitioners were not valid and
binding because they did not comply with the implementing Standards, Rules and
Regulations of P.D. 957, otherwise known as "The Subdivision and Condominium
Buyers' Protective Decree," in that no application for conversion of the NATALIA
lands from agricultural to residential was ever filed with the DAR. In other words,
there was no valid conversion. Moreover, public respondents allege that the instant
petition was prematurely filed because the case instituted by SAMBA against
petitioners before the DAR Regional Adjudicator has not yet terminated.
Respondents conclude, as a consequence, that petitioners failed to fully exhaust
administrative remedies available to them before coming to court.
The petition is impressed with merit. A cursory reading of the Preliminary
Approval and Locational Clearances as well as the Development Permits granted
petitioners for Phases I, II and III of the Antipolo Hills Subdivision reveals that
contrary to the claim of public respondents, petitioners NATALIA and EDIC did in fact
comply with all the requirements of law.
Petitioners first secured favorable recommendations from the Lungsod
Silangan Development Corporation, the agency tasked to oversee the
implementation of the development of the townsite reservation, before applying for
the necessary permits from the Human Settlements Regulatory Commission. 10
And, in all permits granted to petitioners, the Commission stated invariably therein
that the applications were in "conformance" 11 or "conformity" 12 or "conforming"
13 with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the
argument of public respondents that not all of the requirements were complied with
cannot be sustained. llcd
As a matter of fact, there was even no need for petitioners to secure a
clearance or prior approval from DAR. The NATALIA properties were within the areas
set aside for the Lungsod Silangan Reservation. Since Presidential Proclamation No.
1637 created the townsite reservation for the purpose of providing additional
housing to the burgeoning population of Metro Manila, it in effect converted for
residential use what were erstwhile agricultural lands provided all requisites were
met. And, in the case at bar, there was compliance with all relevant rules and
requirements. Even in their applications for the development of the Antipolo Hills
Subdivision, the predecessor agency of HLURB noted that petitioners NATALIA and
EDIC complied with all the requirements prescribed by P.D. 957
The implementing Standards, Rules and Regulations of P.D. 957 applied to all
subdivisions and condominiums in general. On the other hand, Presidential
Proclamation No. 1637 referred only to the Lungsod Silangan Reservation, which
makes it a special law. It is a basic tenet in statutory construction that between a
general law and a special law, the latter prevails. 14
Interestingly, the Office of the Solicitor General does not contest the
conversion of portions of the Antipolo Hills Subdivision which have already been
developed. 15 Of course, this is contrary to its earlier position that there was no
valid conversion. The applications for the developed and undeveloped portions of
subject subdivision were similarly situated. Consequently, both did not need prior
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DAR approval.
We now determine whether such lands are covered by the CARL. Section 4 of
R.A. 6657 provides that the CARL shall "cover, regardless of tenurial arrangement
and commodity produced, all public and private agricultural lands." As to what
constitutes "agricultural land," it is referred to as "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land. 16 The deliberations of the Constitutional Commission
confirm this limitation. "Agricultural lands" are only those lands which are "arable
and suitable agricultural lands" and "do not include commercial, industrial and
residential lands." 17
Based on the foregoing, it is clear that the undeveloped portions of the
Antipolo Hills Subdivision cannot in any language be considered as "agricultural
lands." These lots were intended for residential use. They ceased to be agricultural
lands upon approval of their inclusion in the Lungsod Silangan Reservation. Even
today, the areas in question continue to be developed as a low-cost housing
subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that
SAMBA members even instituted an action to restrain petitioners from continuing
with such development. The enormity of the resources needed for developing a
subdivision may have delayed its completion but this does not detract from the fact
that these lands are still residential lands and outside the ambit of the CARL.
Indeed, lands not devoted to agricultural activity are outside the coverage of
CARL. These include lands previously converted to non-agricultural uses prior to the
effectivity of CARL by government agencies other than respondent DAR. In its
Revised Rules and Regulations Governing Conversion of Private Agricultural Lands to
Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus
". . . Agricultural land refers to those devoted to agricultural activity as defined in
R.A. 6657 and not classified as mineral or forest by the Department of Environment
and Natural Resources (DENR) and its predecessor agencies, and not classified in
town plans and zoning ordinances as approved by the Housing and Land Use
Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June
1988 for residential, commercial or industrial use."
Since the NATALIA lands were converted prior to 15 June 1988, respondent
DAR is bound by such conversion. It was therefore error to include the undeveloped
portions of the Antipolo Hills Subdivision within the coverage of CARL.
Be that as it may, the Secretary of Justice, responding to a query by the
Secretary of Agrarian Reform, noted in an Opinion 19 that lands covered by
Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part,
having been reserved for townsite purposes "to be developed as human settlements
by the proper land and housing agency," are "not deemed 'agricultural lands' within
the meaning and intent of Section 3 (c) of R.A. No. 6657." Not being deemed
"agricultural lands," they are outside the coverage of CARL.
Anent the argument that there was failure to exhaust administrative remedies
in the instant petition, suffice it to say that the issues raised in the case filed by
SAMBA members differ from those of petitioners. The former involve possession; the
latter, the propriety of including under the operation of CARL lands already
converted for residential use prior to its effectivity.
Besides, petitioners were not supposed to wait until public respondents acted
on their letter-protests, this after sitting it out for almost a year. Given the official
indifference, which under the circumstances could have continued forever,
petitioners had to act to assert and protect their interests. 20
In fine, we rule for petitioners and hold that public respondents gravely abused
their discretion in issuing the assailed Notice of Coverage dated 22 November 1990
of lands over which they no longer have jurisdiction.
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DECISION
PARAS, J p:
This is a petition for prohibition with prayer for restraining order and/or
preliminary and permanent injunction against the Honorable Secretary of the
Department of Agrarian Reform for acting without jurisdiction in enforcing the
assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure
Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the
same apply to herein petitioner, and further from performing an act in violation of
the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as
follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657,
which includes the raising of livestock, poultry and swine in its coverage (Rollo, p.
80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the
Guidelines and Procedures Implementing Production and Profit Sharing as embodied
in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules
and Regulations implementing Section 11 of R.A. No. 6657 (Commercial Farms).
(Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and
ELS: Summer 2016
poultry business and together with others in the same business allegedly stands to
be adversely affected by the enforcement of Section 3(b), Section 11, Section 13,
Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise known as
Comprehensive Agrarian Reform Law and of the Guidelines and Procedures
Implementing Production and Profit Sharing under R.A. No. 6657 promulgated on
January 2, 1989 and the Rules and Regulations Implementing Section 11 thereof as
promulgated by the DAR on January 9, 1989 (Rollo, pp. 2-36).
Hence, this petition praying that aforesaid laws, guidelines and rules be
declared unconstitutional. Meanwhile, it is also prayed that a writ of preliminary
injunction or restraining order be issued enjoining public respondents from enforcing
the same, insofar as they are made to apply to Luz Farms and other livestock and
poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among others,
Luz Farms' prayer for the issuance of a preliminary injunction in its Manifestation
dated May 26, and 31, 1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved to
grant said Motion for Reconsideration regarding the injunctive relief, after the filing
and approval by this Court of an injunction bond in the amount of P100,000.00. This
Court also gave due course to the petition and required the parties to file their
respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131168).
On December 22, 1989, the Solicitor General adopted his Comment to the
petition as his Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are
made to apply to it:
(a)
Section 3(b) which includes the "raising of livestock (and poultry)" in the
definition of "Agricultural, Agricultural Enterprise or Agricultural Activity."
(b)
Section 11 which defines "commercial farms" as "private agricultural lands
devoted to commercial, livestock, poultry and swine raising . . ."
(c)
Section 13 which calls upon petitioner to execute a production-sharing plan.
(d)
Section 16(d) and 17 which vest on the Department of Agrarian Reform the
authority to summarily determine the just compensation to be paid for lands
covered by the Comprehensive Agrarian Reform Law.
(e)
Section 32 which spells out the production-sharing plan mentioned in Section
13
". . . (W)hereby three percent (3%) of the gross sales from the production of such
lands are distributed within sixty (60) days of the end of the fiscal year as
compensation to regular and other farmworkers in such lands over and above the
compensation they currently receive: Provided, That these individuals or entities
realize gross sales in excess of five million pesos per annum unless the DAR, upon
proper application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional ten (10%) of
the net profit after tax shall be distributed to said regular and other farmworkers
within ninety (90) days of the end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13
ELS: Summer 2016
and 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988), insofar
as the said law includes the raising of livestock, poultry and swine in its coverage as
well as the Implementing Rules and Guidelines promulgated in accordance
therewith.
The constitutional provision under consideration reads as follows:
ARTICLE XIII
xxx
xxx
xxx
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4.
The State shall, by law, undertake an agrarian reform program
founded on the right of farmers and regular farmworkers, who are landless, to own
directly or collectively the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the payment of
just compensation. In determining retention limits, the State shall respect the rights
of small landowners. The State shall further provide incentives for voluntary landsharing.
xxx
xxx
xxx"
Luz Farms contended that it does not seek the nullification of R.A. 6657 in its
entirety. In fact, it acknowledges the correctness of the decision of this Court in the
case of the Association of Small Landowners in the Philippines, Inc. vs. Secretary of
Agrarian Reform (G.R. 78742, 14 July 1989) affirming the constitutionality of the
Comprehensive Agrarian Reform Law. It, however, argued that Congress in enacting
the said law has transcended the mandate of the Constitution, in including land
devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131).
Livestock or poultry raising is not similar to crop or tree farming. Land is not the
primary resource in this undertaking and represents no more than five percent (5%)
of the total investment of commercial livestock and poultry raisers. Indeed, there
are many owners of residential lands all over the country who use available space in
their residence for commercial livestock and raising purposes, under "contractgrowing arrangements," whereby processing corporations and other commercial
livestock and poultry raisers (Rollo, p. 10). Lands support the buildings and other
amenities attendant to the raising of animals and birds. The use of land is incidental
to but not the principal factor or consideration in productivity in this industry.
Including backyard raisers, about 80% of those in commercial livestock and poultry
production occupy five hectares or less. The remaining 20% are mostly corporate
farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry
raising is embraced in the term "agriculture" and the inclusion of such enterprise
under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International
Dictionary, Second Edition (1954), defines the following words:
"Agriculture the art or science of cultivating the ground and raising and
harvesting crops, often, including also, feeding, breeding and management of
livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
Livestock domestic animals used or raised on a farm, especially for profit.
Farm a plot or tract of land devoted to the raising of domestic or other animals."
(Rollo, pp. 82-83).
ELS: Summer 2016
Thus, where the legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary to declare what the other
branches of the government had assumed to do, as void. This is the essence of
judicial power conferred by the Constitution "(I)n one Supreme Court and in such
lower courts as may be established by law" (Art. VIII, Section 1 of the 1935
Constitution; Article X, Section I of the 1973 Constitution and which was adopted as
part of the Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution)
and which power this Court has exercised in many instances (Demetria v. Alba, 148
SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b),
11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock,
poultry and swine in its coverage as well as the Implementing Rules and Guidelines
promulgated in accordance therewith, are hereby DECLARED null and void for being
unconstitutional and the writ of preliminary injunction issued is hereby MADE
permanent.
SO ORDERED.
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla,
Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., is on leave.
Separate Opinions
purpose of the law, i.e., the welfare of the landless farmers and farmworkers in the
promotion of social justice, by the expedient conversion of agricultural lands into
livestock, poultry, and swine raising by scheming landowners, thus, rendering the
comprehensive nature of the agrarian program merely illusory.
The instant controversy, I submit, boils down to the question of whether or not
the assailed provisions violate the equal protection clause of the Constitution
(Article II, section 1) which teaches simply that all persons or things similarly
situated should be treated alike, both as to rights conferred and responsibilities
imposed. 2
There is merit in the contention of the petitioner that substantial distinctions
exist between land directed purely to cultivation and harvesting of fruits or crops
and land exclusively used for livestock, poultry and swine raising, that make real
differences, to wit:
xxx
xxx
xxx
No land is tilled and no crop is harvested in livestock and poultry farming. There are
no tenants nor landlords, only employers and employees.
Livestock and poultry do not sprout from land nor are they "fruits of the land."
Land is not even a primary resource in this industry. The land input is
inconsequential that all the commercial hog and poultry farms combined occupy
less than one percent (1%) (0.4% for piggery, 0.2% for poultry) of the 5.45 million
hectares of land supposedly covered by the CARP. And most farms utilize only 2 to 5
hectares of land.
In every respect livestock and poultry production is an industrial activity. Its use of
an inconsequential portion of land is a mere incident of its operation, as in any other
undertaking, business or otherwise.
The fallacy of defining livestock and poultry production as an agricultural enterprise
is nowhere more evident when one considers that at least 95% of total investment
in these farms is in the form of fixed assets which are industrial in nature.
These include (1) animal housing structures and facilities complete with drainage,
waterers, blowers, misters and in some cases even piped-in music; (2) feedmills
complete with grinders, mixers, conveyors, exhausts, generators, etc.; (3) extensive
warehousing facilities for feeds and other supplies; (4) anti-pollution equipment
such as bio-gas and digester plants augmented by lagoons and concrete ponds; (5)
deepwells, elevated water tanks, pumphouses and accessory facilities; (6) modern
equipment such as sprayers, pregnancy testers, etc.; (7) laboratory facilities
complete with expensive tools and equipment; and a myriad other such
technologically advanced appurtances.
How then can livestock and poultry farmlands be arable when such are almost
totally occupied by these structures?
The fallacy of equating the status of livestock and poultry farmworkers with that of
agricultural tenants surfaces when one considers contribution to output. Labor cost
of livestock and poultry farms is no more than 4% of total operating cost. The 98%
balance represents inputs not obtained from the land nor provided by the
farmworkers inputs such as feeds and biochemicals (80% of the total cost), power
cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by minimum wage law
rather than by tenancy law. They are entitled to social security benefits where
tenant-farmers are not. They are paid fixed wages rather than crop shares. And as
in any other industry, they receive additional benefits such as allowances, bonuses,
and other incentives such as free housing privileges, light and water.
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Equating livestock and poultry farming with other agricultural activities is also
fallacious in the sense that like the manufacturing sector, it is a market for, rather
than a source of agricultural output. At least 60% of the entire domestic supply of
corn is absorbed by livestock and poultry farms. So are the by-products of rice (ricebran), coconut (copra meal), banana (banana pulp meal), and fish (fish meal). 3
xxx
xxx
xxx
In view of the foregoing, it is clear that both kinds of lands are not similarly
situated and hence, can not be treated alike. Therefore, the assailed provisions
which allow for the inclusion of livestock and poultry industry within the coverage of
the agrarian reform program constitute invalid classification and must accordingly
be struck down as repugnant to the equal protection clause of the Constitution.
7. DAR vs. Sutton GR 162070 10/19/05
EN BANC
DEPARTMENT OF AGRARIAN G.R. No. 162070
REFORM, represented by SECRETARY
JOSE MARI B. PONCE (OIC), Present:
Petitioner, Davide, C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
Carpio,
- versus - Austria-Martinez,
Corona,
Carpio Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario and
Garcia, JJ.
DELIA T. SUTTON, ELLA T.
SUTTON-SOLIMAN and Promulgated:
HARRY T. SUTTON,
Respondents. October 19, 2005
x-----------------------------------x
DECISION
PUNO, J.:
This is a petition for review filed by the Department of Agrarian Reform (DAR) of the
Decision and Resolution of the Court of Appeals, dated September 19, 2003 and
February 4, 2004, respectively, which declared DAR Administrative Order (A.O.) No.
9, series of 1993, null and void for being violative of the Constitution.
The case at bar involves a land in Aroroy, Masbate, inherited by respondents which
has been devoted exclusively to cow and calf breeding. On October 26, 1987,
pursuant to the then existing agrarian reform program of the government,
respondents made a voluntary offer to sell (VOS)[1] their landholdings to petitioner
DAR to avail of certain incentives under the law.
On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as
ELS: Summer 2016
the Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. It included in
its coverage farms used for raising livestock, poultry and swine.
On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary
of DAR,[2] this Court ruled that lands devoted to livestock and poultry-raising are
not included in the definition of agricultural land. Hence, we declared as
unconstitutional certain provisions of the CARL insofar as they included livestock
farms in the coverage of agrarian reform.
In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal
request to withdraw their VOS as their landholding was devoted exclusively to
cattle-raising and thus exempted from the coverage of the CARL.[3]
On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate,
inspected respondents land and found that it was devoted solely to cattle-raising
and breeding. He recommended to the DAR Secretary that it be exempted from the
coverage of the CARL.
On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their
VOS and requested the return of the supporting papers they submitted in
connection therewith.[4] Petitioner ignored their request.
On December 27, 1993, DAR issued A.O. No. 9, series of 1993,[5] which provided
that only portions of private agricultural lands used for the raising of livestock,
poultry and swine as of June 15, 1988 shall be excluded from the coverage of the
CARL. In determining the area of land to be excluded, the A.O. fixed the following
retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head of
animal shall be retained by the landowner), and a ratio of 1.7815 hectares for
livestock infrastructure for every 21 heads of cattle shall likewise be excluded from
the operations of the CARL.
On February 4, 1994, respondents wrote the DAR Secretary and advised him to
consider as final and irrevocable the withdrawal of their VOS as, under the Luz
Farms doctrine, their entire landholding is exempted from the CARL.[6]
On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order[7]
partially granting the application of respondents for exemption from the coverage of
CARL. Applying the retention limits outlined in the DAR A.O. No. 9, petitioner
exempted 1,209 hectares of respondents land for grazing purposes, and a
maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of
respondents landholding to be segregated and placed under Compulsory
Acquisition.
Respondents moved for reconsideration. They contend that their entire landholding
should be exempted as it is devoted exclusively to cattle-raising. Their motion was
denied.[8] They filed a notice of appeal[9] with the Office of the President assailing:
(1) the reasonableness and validity of DAR A.O. No. 9, s. 1993, which provided for a
ratio between land and livestock in determining the land area qualified for exclusion
from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view of
the Luz Farms case which declared cattle-raising lands excluded from the coverage
of agrarian reform.
On October 9, 2001, the Office of the President affirmed the impugned Order of
petitioner DAR.[10] It ruled that DAR A.O. No. 9, s. 1993, does not run counter to the
ELS: Summer 2016
Luz Farms case as the A.O. provided the guidelines to determine whether a certain
parcel of land is being used for cattle-raising. However, the issue on the
constitutionality of the assailed A.O. was left for the determination of the courts as
the sole arbiters of such issue.
On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR
A.O. No. 9, s. 1993, void for being contrary to the intent of the 1987 Constitutional
Commission to exclude livestock farms from the land reform program of the
government. The dispositive portion reads:
WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993
is hereby DECLARED null and void. The assailed order of the Office of the President
dated 09 October 2001 in so far as it affirmed the Department of Agrarian Reforms
ruling that petitioners landholding is covered by the agrarian reform program of the
government is REVERSED and SET ASIDE.
SO ORDERED.[11]
Hence, this petition.
The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of
1993, which prescribes a maximum retention limit for owners of lands devoted to
livestock raising.
Invoking its rule-making power under Section 49 of the CARL, petitioner submits
that it issued DAR A.O. No. 9 to limit the area of livestock farm that may be retained
by a landowner pursuant to its mandate to place all public and private agricultural
lands under the coverage of agrarian reform. Petitioner also contends that the A.O.
seeks to remedy reports that some unscrupulous landowners have converted their
agricultural farms to livestock farms in order to evade their coverage in the agrarian
reform program.
Petitioners arguments fail to impress.
Administrative agencies are endowed with powers legislative in nature, i.e., the
power to make rules and regulations. They have been granted by Congress with the
authority to issue rules to regulate the implementation of a law entrusted to them.
Delegated rule-making has become a practical necessity in modern governance due
to the increasing complexity and variety of public functions. However, while
administrative rules and regulations have the force and effect of law, they are not
immune from judicial review.[12] They may be properly challenged before the
courts to ensure that they do not violate the Constitution and no grave abuse of
administrative discretion is committed by the administrative body concerned.
The fundamental rule in administrative law is that, to be valid, administrative rules
and regulations must be issued by authority of a law and must not contravene the
provisions of the Constitution.[13] The rule-making power of an administrative
agency may not be used to abridge the authority given to it by Congress or by the
Constitution. Nor can it be used to enlarge the power of the administrative agency
beyond the scope intended. Constitutional and statutory provisions control with
respect to what rules and regulations may be promulgated by administrative
agencies and the scope of their regulations.[14]
In the case at bar, we find that the impugned A.O. is invalid as it contravenes the
Constitution. The A.O. sought to regulate livestock farms by including them in the
coverage of agrarian reform and prescribing a maximum retention limit for their
ownership. However, the deliberations of the 1987 Constitutional Commission show
a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine
ELS: Summer 2016
and poultry- raising. The Court clarified in the Luz Farms case that livestock, swine
and poultry-raising are industrial activities and do not fall within the definition of
agriculture or agricultural activity. The raising of livestock, swine and poultry is
different from crop or tree farming. It is an industrial, not an agricultural, activity. A
great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and
blowers, feedmill with grinders, mixers, conveyors, exhausts and generators,
extensive warehousing facilities for feeds and other supplies, anti-pollution
equipment like bio-gas and digester plants augmented by lagoons and concrete
ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other
technological appurtenances.[15]
Clearly, petitioner DAR has no power to regulate livestock farms which have been
exempted by the Constitution from the coverage of agrarian reform. It has exceeded
its power in issuing the assailed A.O.
The subsequent case of Natalia Realty, Inc. v. DAR[16] reiterated our ruling in the
Luz Farms case. In Natalia Realty, the Court held that industrial, commercial and
residential lands are not covered by the CARL.[17] We stressed anew that while
Section 4 of R.A. No. 6657 provides that the CARL shall cover all public and private
agricultural lands, the term agricultural land does not include lands classified as
mineral, forest, residential, commercial or industrial. Thus, in Natalia Realty, even
portions of the Antipolo Hills Subdivision, which are arable yet still undeveloped,
could not be considered as agricultural lands subject to agrarian reform as these
lots were already classified as residential lands.
A similar logical deduction should be followed in the case at bar. Lands devoted to
raising of livestock, poultry and swine have been classified as industrial, not
agricultural, lands and thus exempt from agrarian reform. Petitioner DAR argues
that, in issuing the impugned A.O., it was seeking to address the reports it has
received that some unscrupulous landowners have been converting their
agricultural lands to livestock farms to avoid their coverage by the agrarian reform.
Again, we find neither merit nor logic in this contention. The undesirable scenario
which petitioner seeks to prevent with the issuance of the A.O. clearly does not
apply in this case. Respondents family acquired their landholdings as early as 1948.
They have long been in the business of breeding cattle in Masbate which is
popularly known as the cattle-breeding capital of the Philippines.[18] Petitioner DAR
does not dispute this fact. Indeed, there is no evidence on record that respondents
have just recently engaged in or converted to the business of breeding cattle after
the enactment of the CARL that may lead one to suspect that respondents intended
to evade its coverage. It must be stressed that what the CARL prohibits is the
conversion of agricultural lands for non-agricultural purposes after the effectivity of
the CARL. There has been no change of business interest in the case of
respondents.
Moreover, it is a fundamental rule of statutory construction that the reenactment of
a statute by Congress without substantial change is an implied legislative approval
and adoption of the previous law. On the other hand, by making a new law,
Congress seeks to supersede an earlier one.[19] In the case at bar, after the
passage of the 1988 CARL, Congress enacted R.A. No. 7881[20] which amended
certain provisions of the CARL. Specifically, the new law changed the definition of
the terms agricultural activity and commercial farming by dropping from its
coverage lands that are devoted to commercial livestock, poultry and swine-raising.
ELS: Summer 2016
[21] With this significant modification, Congress clearly sought to align the
provisions of our agrarian laws with the intent of the 1987 Constitutional
Commission to exclude livestock farms from the coverage of agrarian reform.
In sum, it is doctrinal that rules of administrative bodies must be in harmony with
the provisions of the Constitution. They cannot amend or extend the Constitution. To
be valid, they must conform to and be consistent with the Constitution. In case of
conflict between an administrative order and the provisions of the Constitution, the
latter prevails.[22] The assailed A.O. of petitioner DAR was properly stricken down
as unconstitutional as it enlarges the coverage of agrarian reform beyond the scope
intended by the 1987 Constitution.
IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution
of the Court of Appeals, dated September 19, 2003 and February 4, 2004,
respectively, are AFFIRMED. No pronouncement as to costs.
SO ORDERED.
8. Milestone Farms GR 182332 2/23/2011
SECOND DIVISION
MILESTONE FARMS, INC.,
Petitioner,
- versus OFFICE OF THE PRESIDENT,
Respondent.
G.R. No. 182332
Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
VILLARAMA, JR.,* JJ.
Promulgated:
February 23, 2011
x-----------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules
of Civil Procedure, seeking the reversal of the Court of Appeals (CA) Amended
Decision[2] dated October 4, 2006 and its Resolution[3] dated March 27, 2008.
The Facts
Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the Securities and
Exchange Commission on January 8, 1960.[4] Among its pertinent secondary
purposes are: (1) to engage in the raising of cattle, pigs, and other livestock; to
ELS: Summer 2016
acquire lands by purchase or lease, which may be needed for this purpose; and to
sell and otherwise dispose of said cattle, pigs, and other livestock and their produce
when advisable and beneficial to the corporation; (2) to breed, raise, and sell
poultry; to purchase or acquire and sell, or otherwise dispose of the supplies, stocks,
equipment, accessories, appurtenances, products, and by-products of said business;
and (3) to import cattle, pigs, and other livestock, and animal food necessary for the
raising of said cattle, pigs, and other livestock as may be authorized by law.[5]
On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL), took effect,
which included the raising of livestock, poultry, and swine in its coverage. However,
on December 4, 1990, this Court, sitting en banc, ruled in Luz Farms v. Secretary of
the Department of Agrarian Reform[6] that agricultural lands devoted to livestock,
poultry, and/or swine raising are excluded from the Comprehensive Agrarian Reform
Program (CARP).
Thus, in May 1993, petitioner applied for the exemption/exclusion of its 316.0422hectare property, covered by Transfer Certificate of Title Nos. (T-410434) M-15750,
(T-486101) M-7307, (T-486102) M-7308, (T-274129) M-15751, (T-486103) M-7309,
(T-486104) M-7310, (T-332694) M-15755, (T-486105) M-7311, (T-486106) M-7312,
M-8791, (T-486107) M-7313, (T-486108) M-7314, M-8796, (T-486109) M-7315, (T486110) M-9508, and M-6013, and located in Pinugay, Baras, Rizal, from the
coverage of the CARL, pursuant to the aforementioned ruling of this Court in Luz
Farms.
Meanwhile, on December 27, 1993, the Department of Agrarian Reform (DAR)
issued Administrative Order No. 9, Series of 1993 (DAR A.O. No. 9), setting forth
rules and regulations to govern the exclusion of agricultural lands used for livestock,
poultry, and swine raising from CARP coverage. Thus, on January 10, 1994,
petitioner re-documented its application pursuant to DAR A.O. No. 9.[7]
Acting on the said application, the DARs Land Use Conversion and Exemption
Committee (LUCEC) of Region IV conducted an ocular inspection on petitioners
property and arrived at the following findings:
[T]he actual land utilization for livestock, swine and poultry is 258.8422 hectares;
the area which served as infrastructure is 42.0000 hectares; ten (10) hectares are
planted to corn and the remaining five (5) hectares are devoted to fish culture; that
the livestock population are 371 heads of cow, 20 heads of horses, 5,678 heads of
swine and 788 heads of cocks; that the area being applied for exclusion is far below
the required or ideal area which is 563 hectares for the total livestock population;
that the approximate area not directly used for livestock purposes with an area of
15 hectares, more or less, is likewise far below the allowable 10% variance; and,
though not directly used for livestock purposes, the ten (10) hectares planted to
sweet corn and the five (5) hectares devoted to fishpond could be considered
supportive to livestock production.
The LUCEC, thus, recommended the exemption of petitioners 316.0422-hectare
property from the coverage of CARP. Adopting the LUCECs findings and
recommendation, DAR Regional Director Percival Dalugdug (Director Dalugdug)
issued an Order dated June 27, 1994, exempting petitioners 316.0422-hectare
property from CARP.[8]
3.
4.
5.
there is a possibility that the landowners would increase the number of their cattle
for headcount purposes only. The OP observed that there was a big variance
between the actual headcount of 448 heads of cattle and only 86 certificates of
ownership of large cattle.
Consequently, petitioner sought recourse from the CA.[22]
The Proceedings Before the CA and Its Rulings
On April 29, 2005, the CA found that, based on the documentary evidence
presented, the property subject of the application for exclusion had more than
satisfied the animal-land and infrastructure-animal ratios under DAR A.O. No. 9. The
CA also found that petitioner applied for exclusion long before the effectivity of DAR
A.O. No. 9, thus, negating the claim that petitioner merely converted the property
for livestock, poultry, and swine raising in order to exclude it from CARP coverage.
Petitioner was held to have actually engaged in the said business on the property
even before June 15, 1988. The CA disposed of the case in this wise:
WHEREFORE, the instant petition is hereby GRANTED. The assailed Resolution of the
Office of the President dated September 16, 2002 is hereby SET ASIDE, and its
Decision dated February 4, 2000 declaring the entire 316.0422 hectares exempt
from the coverage of the Comprehensive Agrarian Reform Program is hereby
REINSTATED without prejudice to the outcome of the continuing review and
verification proceedings which the Department of Agrarian Reform, through the
proper Municipal Agrarian Reform Officer, may undertake pursuant to Policy
Statement (D) of DAR Administrative Order No. 9, Series of 1993.
SO ORDERED.[23]
Meanwhile, six months earlier, or on November 4, 2004, without the knowledge of
the CA as the parties did not inform the appellate court then DAR Secretary Rene C.
Villa (Secretary Villa) issued DAR Conversion Order No. CON-0410-0016[24]
(Conversion Order), granting petitioners application to convert portions of the
316.0422-hectare property from agricultural to residential and golf courses use. The
portions converted with a total area of 153.3049 hectares were covered by TCT Nos.
M-15755 (T-332694), M-15751 (T-274129), and M-15750 (T-410434). With this
Conversion Order, the area of the property subject of the controversy was
effectively reduced to 162.7373 hectares.
On the CAs decision of April 29, 2005, Motions for Reconsideration were filed by
farmer-groups, namely: the farmers represented by Miguel Espinas[25] (Espinas
group), the Pinugay Farmers,[26] and the SAPLAG.[27] The farmer-groups all
claimed that the CA should have accorded respect to the factual findings of the OP.
Moreover, the farmer-groups unanimously intimated that petitioner already
converted and developed a portion of the property into a leisure-residentialcommercial estate known as the Palo Alto Leisure and Sports Complex (Palo Alto).
Subsequently, in a Supplement to the Motion for Reconsideration on Newly Secured
Evidence pursuant to DAR Administrative Order No. 9, Series of 1993[28]
(Supplement) dated June 15, 2005, the Espinas group submitted the following as
evidence:
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accorded the findings of MARO Elma and MARO Celi the presumption of regularity in
the performance of official functions in the absence of evidence proving misconduct
and/or dishonesty when they inspected the subject property and rendered their
report. Thus, the CA disposed:
WHEREFORE, this Courts Decision dated April 29, 2005 is hereby amended in that
the exemption of the subject landholding from the coverage of the Comprehensive
Agrarian Reform Program is hereby lifted, and the 162.7373 hectare-agricultural
portion thereof is hereby declared covered by the Comprehensive Agrarian Reform
Program.
SO ORDERED.[39]
Unperturbed, petitioner filed a Motion for Reconsideration.[40] On January 8, 2007,
MARO Elma, in compliance with the Memorandum of DAR Regional Director
Dominador B. Andres, tendered another Report[41] reiterating that, upon inspection
of the subject property, together with petitioners counsel-turned witness, Atty.
Grace Eloisa J. Que (Atty. Que), PARO Danilo M. Obarse, Chairman Ruba, and several
occupants thereof, he, among others, found no livestock farm within the subject
property. About 43 heads of cattle were shown, but MARO Elma observed that the
same were inside an area adjacent to Palo Alto. Subsequently, upon Atty. Ques
request for reinvestigation, designated personnel of the DAR Provincial and Regional
Offices (Investigating Team) conducted another ocular inspection on the subject
property on February 20, 2007. The Investigating Team, in its Report[42] dated
February 21, 2007, found that, per testimony of petitioners caretaker, Rogelio
Ludivices (Roger),[43] petitioner has 43 heads of cattle taken care of by the
following individuals: i) Josefino Custodio (Josefino) 18 heads; ii) Andy Amahit 15
heads; and iii) Bert Pangan 2 heads; that these individuals pastured the herd of
cattle outside the subject property, while Roger took care of 8 heads of cattle inside
the Palo Alto area; that 21 heads of cattle owned by petitioner were seen in the area
adjacent to Palo Alto; that Josefino confirmed to the Investigating Team that he
takes care of 18 heads of cattle owned by petitioner; that the said Investigating
Team saw 9 heads of cattle in the Palo Alto area, 2 of which bore MFI marks; and
that the 9 heads of cattle appear to have matched the Certificates of Ownership of
Large Cattle submitted by petitioner.
Because of the contentious factual issues and the conflicting averments of the
parties, the CA set the case for hearing and reception of evidence on April 24, 2007.
[44] Thereafter, as narrated by the CA, the following events transpired:
On May 17, 2007, [petitioner] presented the Judicial Affidavits of its witnesses,
namely, [petitioners] counsel, [Atty. Que], and the alleged caretaker of [petitioners]
farm, [Roger], who were both cross-examined by counsel for farmers-movants and
SAPLAG. [Petitioner] and SAPLAG then marked their documentary exhibits.
On May 24, 2007, [petitioners] security guard and third witness, Rodolfo G. Febrada,
submitted his Judicial Affidavit and was cross-examined by counsel for fa[r]mersmovants and SAPLAG. Farmers-movants also marked their documentary exhibits.
Thereafter, the parties submitted their respective Formal Offers of Evidence.
Farmers-movants and SAPLAG filed their objections to [petitioners] Formal Offer of
Evidence. Later, [petitioner] and farmers-movants filed their respective Memoranda.
ELS: Summer 2016
In December 2007, this Court issued a Resolution on the parties offer of evidence
and considered [petitioners] Motion for Reconsideration submitted for resolution.
[45]
Finally, petitioners motion for reconsideration was denied by the CA in its
Resolution[46] dated March 27, 2008. The CA discarded petitioners reliance on
Sutton. It ratiocinated that the MARO Reports and the DARs Manifestation could not
be disregarded simply because DAR A.O. No. 9 was declared unconstitutional. The
Sutton ruling was premised on the fact that the Sutton property continued to
operate as a livestock farm. The CA also reasoned that, in Sutton, this Court did not
remove from the DAR the power to implement the CARP, pursuant to the latters
authority to oversee the implementation of agrarian reform laws under Section
50[47] of the CARL. Moreover, the CA found:
Petitioner-appellant claimed that they had 43 heads of cattle which are being cared
for and pastured by 4 individuals. To prove its ownership of the said cattle,
petitioner-appellant offered in evidence 43 Certificates of Ownership of Large Cattle.
Significantly, however, the said Certificates were all dated and issued on November
24, 2006, nearly 2 months after this Court rendered its Amended Decision lifting the
exemption of the 162-hectare portion of the subject landholding. The acquisition of
such cattle after the lifting of the exemption clearly reveals that petitioner-appellant
was no longer operating a livestock farm, and suggests an effort to create a
semblance of livestock-raising for the purpose of its Motion for Reconsideration.[48]
On petitioners assertion that between MARO Elmas Report dated January 8, 2007
and the Investigating Teams Report, the latter should be given credence, the CA
held that there were no material inconsistencies between the two reports because
both showed that the 43 heads of cattle were found outside the subject property.
Hence, this Petition assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT LANDS
DEVOTED TO LIVESTOCK FARMING WITHIN THE MEANING OF LUZ FARMS AND
SUTTON, AND WHICH ARE THEREBY EXEMPT FROM CARL COVERAGE, ARE
NEVERTHELESS SUBJECT TO DARS CONTINUING VERIFICATION AS TO USE, AND, ON
THE BASIS OF SUCH VERIFICATION, MAY BE ORDERED REVERTED TO AGRICULTURAL
CLASSIFICATION AND COMPULSORY ACQUISITION[;]
II.
GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO REVERTED TO
AGRICULTURAL CLASSIFICATION, STILL THE PROCEEDINGS FOR SUCH PURPOSE
BELONGS TO THE EXCLUSIVE ORIGINAL JURISDICTION OF THE DAR, BEFORE WHICH
THE CONTENDING PARTIES MAY VENTILATE FACTUAL ISSUES, AND AVAIL
THEMSELVES OF USUAL REVIEW PROCESSES, AND NOT TO THE COURT OF APPEALS
EXERCISING APPELLATE JURISDICTION OVER ISSUES COMPLETELY UNRELATED TO
REVERSION [; AND]
III.
IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT HELD THAT THE PROPERTY IN DISPUTE IS NO
LONGER BEING USED FOR LIVESTOCK FARMING.[49]
Petitioner asseverates that lands devoted to livestock farming as of June 15, 1988
are classified as industrial lands, hence, outside the ambit of the CARP; that Luz
Farms, Sutton, and R.A. No. 7881 clearly excluded such lands on constitutional
grounds; that petitioners lands were actually devoted to livestock even before the
enactment of the CARL; that livestock farms are exempt from the CARL, not by
reason of any act of the DAR, but because of their nature as industrial lands; that
petitioners property was admittedly devoted to livestock farming as of June 1988
and the only issue before was whether or not petitioners pieces of evidence comply
with the ratios provided under DAR A.O. No. 9; and that DAR A.O. No. 9 having been
declared as unconstitutional, DAR had no more legal basis to conduct a continuing
review and verification proceedings over livestock farms. Petitioner argues that, in
cases where reversion of properties to agricultural use is proper, only the DAR has
the exclusive original jurisdiction to hear and decide the same; hence, the CA, in
this case, committed serious errors when it ordered the reversion of the property
and when it considered pieces of evidence not existing as of June 15, 1988, despite
its lack of jurisdiction; that the CA should have remanded the case to the DAR due
to conflicting factual claims; that the CA cannot ventilate allegations of fact that
were introduced for the first time on appeal as a supplement to a motion for
reconsideration of its first decision, use the same to deviate from the issues pending
review, and, on the basis thereof, declare exempt lands reverted to agricultural use
and compulsorily covered by the CARP; that the newly discovered [pieces of]
evidence were not introduced in the proceedings before the DAR, hence, it was
erroneous for the CA to consider them; and that piecemeal presentation of evidence
is not in accord with orderly justice. Finally, petitioner submits that, in any case, the
CA gravely erred and committed grave abuse of discretion when it held that the
subject property was no longer used for livestock farming as shown by the Report of
the Investigating Team. Petitioner relies on the 1997 LUCEC and DAR findings that
the subject property was devoted to livestock farming, and on the 1999 CA Decision
which held that the occupants of the property were squatters, bereft of any
authority to stay and possess the property.[50]
On one hand, the farmer-groups, represented by the Espinas group, contend that
they have been planting rice and fruit-bearing trees on the subject property, and
helped the National Irrigation Administration in setting up an irrigation system
therein in 1997, with a produce of 1,500 to 1,600 sacks of palay each year; that
petitioner came to court with unclean hands because, while it sought the exemption
and exclusion of the entire property, unknown to the CA, petitioner surreptitiously
filed for conversion of the property now known as Palo Alto, which was actually
granted by the DAR Secretary; that petitioners bad faith is more apparent since,
despite the conversion of the 153.3049-hectare portion of the property, it still seeks
to exempt the entire property in this case; and that the fact that petitioner applied
for conversion is an admission that indeed the property is agricultural. The farmergroups also contend that petitioners reliance on Luz Farms and Sutton is unavailing
because in these cases there was actually no cessation of the business of raising
cattle; that what is being exempted is the activity of raising cattle and not the
property itself; that exemptions due to cattle raising are not permanent; that the
ELS: Summer 2016
declaration of DAR A.O. No. 9 as unconstitutional does not at all diminish the
mandated duty of the DAR, as the lead agency of the Government, to implement
the CARL; that the DAR, vested with the power to identify lands subject to CARP,
logically also has the power to identify lands which are excluded and/or exempted
therefrom; that to disregard DARs authority on the matter would open the
floodgates to abuse and fraud by unscrupulous landowners; that the factual finding
of the CA that the subject property is no longer a livestock farm may not be
disturbed on appeal, as enunciated by this Court; that DAR conducted a review and
monitoring of the subject property by virtue of its powers under the CARL; and that
the CA has sufficient discretion to admit evidence in order that it could arrive at a
fair, just, and equitable ruling in this case.[51]
On the other hand, respondent OP, through the Office of the Solicitor General (OSG),
claims that the CA correctly held that the subject property is not exempt from the
coverage of the CARP, as substantial pieces of evidence show that the said property
is not exclusively devoted to livestock, swine, and/or poultry raising; that the issues
presented by petitioner are factual in nature and not proper in this case; that under
Rule 43 of the 1997 Rules of Civil Procedure, questions of fact may be raised by the
parties and resolved by the CA; that due to the divergence in the factual findings of
the DAR and the OP, the CA was duty bound to review and ascertain which of the
said findings are duly supported by substantial evidence; that the subject property
was subject to continuing review and verification proceedings due to the then
prevailing DAR A.O. No. 9; that there is no question that the power to determine if a
property is subject to CARP coverage lies with the DAR Secretary; that pursuant to
such power, the MARO rendered the assailed reports and certification, and the DAR
itself manifested before the CA that the subject property is no longer devoted to
livestock farming; and that, while it is true that this Courts ruling in Luz Farms
declared that agricultural lands devoted to livestock, poultry, and/or swine raising
are excluded from the CARP, the said ruling is not without any qualification.[52]
In its Reply[53] to the farmer-groups and to the OSGs comment, petitioner counters
that the farmer-groups have no legal basis to their claims as they admitted that
they entered the subject property without the consent of petitioner; that the rice
plots actually found in the subject property, which were subsequently taken over by
squatters, were, in fact, planted by petitioner in compliance with the directive of
then President Ferdinand Marcos for the employer to provide rice to its employees;
that when a land is declared exempt from the CARP on the ground that it is not
agricultural as of the time the CARL took effect, the use and disposition of that land
is entirely and forever beyond DARs jurisdiction; and that, inasmuch as the subject
property was not agricultural from the very beginning, DAR has no power to
regulate the same. Petitioner also asserts that the CA cannot uncharacteristically
assume the role of trier of facts and resolve factual questions not previously
adjudicated by the lower tribunals; that MARO Elma rendered the assailed MARO
reports with bias against petitioner, and the same were contradicted by the
Investigating Teams Report, which confirmed that the subject property is still
devoted to livestock farming; and that there has been no change in petitioners
business interest as an entity engaged in livestock farming since its inception in
1960, though there was admittedly a decline in the scale of its operations due to the
illegal acts of the squatter-occupants.
Our Ruling
The Petition is bereft of merit.
ELS: Summer 2016
Let it be stressed that when the CA provided in its first Decision that continuing
review and verification may be conducted by the DAR pursuant to DAR A.O. No. 9,
the latter was not yet declared unconstitutional by this Court. The first CA Decision
was promulgated on April 29, 2005, while this Court struck down as unconstitutional
DAR A.O. No. 9, by way of Sutton, on October 19, 2005. Likewise, let it be
emphasized that the Espinas group filed the Supplement and submitted the assailed
MARO reports and certification on June 15, 2005, which proved to be adverse to
petitioners case. Thus, it could not be said that the CA erred or gravely abused its
discretion in respecting the mandate of DAR A.O. No. 9, which was then subsisting
and in full force and effect.
While it is true that an issue which was neither alleged in the complaint nor raised
during the trial cannot be raised for the first time on appeal as it would be offensive
to the basic rules of fair play, justice, and due process,[54] the same is not without
exception,[55] such as this case. The CA, under Section 3,[56] Rule 43 of the Rules
of Civil Procedure, can, in the interest of justice, entertain and resolve factual
issues. After all, technical and procedural rules are intended to help secure, and not
suppress, substantial justice. A deviation from a rigid enforcement of the rules may
thus be allowed to attain the prime objective of dispensing justice, for dispensation
of justice is the core reason for the existence of courts.[57] Moreover, petitioner
cannot validly claim that it was deprived of due process because the CA afforded it
all the opportunity to be heard.[58] The CA even directed petitioner to file its
comment on the Supplement, and to prove and establish its claim that the subject
property was excluded from the coverage of the CARP. Petitioner actively
participated in the proceedings before the CA by submitting pleadings and pieces of
documentary evidence, such as the Investigating Teams Report and judicial
affidavits. The CA also went further by setting the case for hearing. In all these
proceedings, all the parties rights to due process were amply protected and
recognized.
With the procedural issue disposed of, we find that petitioners arguments fail to
persuade. Its invocation of Sutton is unavailing. In Sutton, we held:
In the case at bar, we find that the impugned A.O. is invalid as it contravenes the
Constitution. The A.O. sought to regulate livestock farms by including them in the
coverage of agrarian reform and prescribing a maximum retention limit for their
ownership. However, the deliberations of the 1987 Constitutional Commission show
a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine
and poultry-raising. The Court clarified in the Luz Farms case that livestock, swine
and poultry-raising are industrial activities and do not fall within the definition of
agriculture or agricultural activity. The raising of livestock, swine and poultry is
different from crop or tree farming. It is an industrial, not an agricultural, activity. A
great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and
blowers, feedmill with grinders, mixers, conveyors, exhausts and generators,
extensive warehousing facilities for feeds and other supplies, anti-pollution
equipment like bio-gas and digester plants augmented by lagoons and concrete
ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other
technological appurtenances.
Clearly, petitioner DAR has no power to regulate livestock farms which have been
exempted by the Constitution from the coverage of agrarian reform. It has exceeded
its power in issuing the assailed A.O.[59]
Indeed, as pointed out by the CA, the instant case does not rest on facts parallel to
those of Sutton because, in Sutton, the subject property remained a livestock farm.
We even highlighted therein the fact that there has been no change of business
interest in the case of respondents.[60] Similarly, in Department of Agrarian Reform
v. Uy,[61] we excluded a parcel of land from CARP coverage due to the factual
findings of the MARO, which were confirmed by the DAR, that the property was
entirely devoted to livestock farming. However, in A.Z. Arnaiz Realty, Inc.,
represented by Carmen Z. Arnaiz v. Office of the President; Department of Agrarian
Reform; Regional Director, DAR Region V, Legaspi City; Provincial Agrarian Reform
Officer, DAR Provincial Office, Masbate, Masbate; and Municipal Agrarian Reform
Officer, DAR Municipal Office, Masbate, Masbate,[62] we denied a similar petition for
exemption and/or exclusion, by according respect to the CAs factual findings and its
reliance on the findings of the DAR and the OP that
the subject parcels of land were not directly, actually, and exclusively used for
pasture.[63]
Petitioners admission that, since 2001, it leased another ranch for its own livestock
is fatal to its cause.[64] While petitioner advances a defense that it leased this
ranch because the occupants of the subject property harmed its cattle, like the CA,
we find it surprising that not even a single police and/or barangay report was filed
by petitioner to amplify its indignation over these alleged illegal acts. Moreover, we
accord respect to the CAs keen observation that the assailed MARO reports and the
Investigating Teams Report do not actually contradict one another, finding that the
43 cows, while owned by petitioner, were actually pastured outside the subject
property.
`
Finally, it is established that issues of Exclusion and/or Exemption are characterized
as Agrarian Law Implementation (ALI) cases which are well within the DAR
Secretarys competence and jurisdiction.[65] Section 3, Rule II of the 2003
Department of Agrarian Reform Adjudication Board Rules of Procedure provides:
Section 3. Agrarian Law Implementation Cases.
The Adjudicator or the Board shall have no jurisdiction over matters involving the
administrative implementation of RA No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL) of 1988 and other agrarian laws as
enunciated by pertinent rules and administrative orders, which shall be under the
exclusive prerogative of and cognizable by the Office of the Secretary of the DAR in
accordance with his issuances, to wit:
xxxx
3.8 Exclusion from CARP coverage of agricultural land used for livestock, swine, and
poultry raising.
Thus, we cannot, without going against the law, arbitrarily strip the DAR Secretary
of his legal mandate to exercise jurisdiction and authority over all ALI cases. To
succumb to petitioners contention that when a land is declared exempt from the
CARP on the ground that it is not agricultural as of the time the CARL took effect,
the use and disposition of that land is entirely and forever beyond DARs jurisdiction
is dangerous, suggestive of self-regulation. Precisely, it is the DAR Secretary who is
vested with such jurisdiction and authority to exempt and/or exclude a property
from CARP coverage based on the factual circumstances of each case and in
accordance with law and applicable jurisprudence. In addition, albeit
parenthetically, Secretary Villa had already granted the conversion into residential
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and golf courses use of nearly one-half of the entire area originally claimed as
exempt from CARP coverage because it was allegedly devoted to livestock
production.
In sum, we find no reversible error in the assailed Amended Decision and Resolution
of the CA which would warrant the modification, much less the reversal, thereof.
WHEREFORE, the Petition is DENIED and the Court of Appeals Amended Decision
dated October 4, 2006 and Resolution dated March 27, 2008 are AFFIRMED. No
costs.
SO ORDERED.