FIRST DIVISION

G.R. No. 112526 October 12, 2001

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner,

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

PARDO, J.:

The case before the Court is a petition for review on certiorari of the decision of the Court of
Appeals1 affirming the decision of the Department of Agrarian Reform Adjudication Board2 (hereafter
DARAB) ordering the compulsory acquisition of petitioner's property under the Comprehensive
Agrarian Reform Program (CARP).

Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC) was the registered owner
of two parcels of land, situated at Barangay Casile, Cabuyao, Laguna covered by TCT Nos. 81949
and 84891, with a total area of 254.6 hectares. According to petitioner, the parcels of land are
watersheds, which provide clean potable water to the Canlubang community, and that ninety (90)
light industries are now located in the area.3

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the
ecosystem. Sometime in December 1985, respondents filed a civil case4 with the Regional Trial
Court, Laguna, seeking an easement of a right of way to and from Barangay Casile. By way of
counterclaim, however, petitioner sought the ejectment of private respondents.

In October 1986 to August 1987, petitioner filed with the Municipal Trial Court, Cabuyao, Laguna
separate complaints for forcible entry against respondents.5

After the filing of the ejectment cases, respondents petitioned the Department of Agrarian Reform
(DAR) for the compulsory acquisition of the SRRDC property under the CARP.

On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna issued a
notice of coverage to petitioner and invited its officials or representatives to a conference on August
18, 1989.6 During the meeting, the following were present: representatives of petitioner, the Land
Bank of the Philippines, PARCCOM, PARO of Laguna, MARO of Laguna, the BARC Chairman of
Barangay Casile and some potential farmer beneficiaries, who are residents of Barangay Casile,
Cabuyao, Laguna. It was the consensus and recommendation of the assembly that the landholding
of SRRDC be placed under compulsory acquisition.

On August 17, 1989, petitioner filed with the Municipal Agrarian Reform Office (MARO), Cabuyao,
Laguna a "Protest and Objection" to the compulsory acquisition of the property on the ground that
the area was not appropriate for agricultural purposes. The area was rugged in terrain with slopes of
18% and above and that the occupants of the land were squatters, who were not entitled to any land
as beneficiaries.7

On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the
protest and objection stating that the slope of the land is not 18% but only 5-10% and that the land is
suitable and economically viable for agricultural purposes, as evidenced by the Certification of the
Department of Agriculture, municipality of Cabuyao, Laguna.8

On September 8, 1989, MARO Belen dela Torre made a summary investigation report and
forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform
Officer (hereafter, PARO).9

On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory
acquisition to the Secretary of Agrarian Reform.

On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and
Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders covering the
landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the President, Land Bank of
the Philippines for further review and evaluation.10

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2)
notices of acquisition11 to petitioner, stating that petitioner's landholdings covered by TCT Nos.
81949 and 84891, containing an area of 188.2858 and 58.5800 hectares, valued at P4,417,735.65
and P1,220,229.93, respectively, had been placed under the Comprehensive Agrarian Reform
Program.
On February 6, 1990, petitioner SRRDC in two letters12 separately addressed to Secretary Florencio
B. Abad and the Director, Bureau of Land Acquisition and Distribution, sent its formal protest,
protesting not only the amount of compensation offered by DAR for the property but also the two (2)
notices of acquisition.

On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings to
determine just compensation under R. A. No. 6657, Section 16.

On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review and
evaluation to the Director of BLAD mentioning its inability to value the SRRDC landholding due to
some deficiencies.

On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land Bank President Deogracias
Vistan to forward the two (2) claim folders involving the property of SRRDC to the DARAB for it to
conduct summary proceedings to determine the just compensation for the land.

On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its property
under the aforesaid land titles were exempt from CARP coverage because they had been classified
as watershed area and were the subject of a pending petition for land conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders
(CACF's) to the Executive Director of the DAR Adjudication Board for proper administrative
valuation. Acting on the CACF's, on September 10, 1990, the Board promulgated a resolution asking
the office of the Secretary of Agrarian Reform (DAR) to first resolve two (2) issues before it proceeds
with the summary land valuation proceedings.13

The issues that need to be threshed out were as follows: (1) whether the subject parcels of land fall
within the coverage of the Compulsory Acquisition Program of the CARP; and (2) whether the
petition for land conversion of the parcels of land may be granted.

On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for Operations
(Assistant Secretary for Luzon Operations) and the Regional Director of Region IV, submitted a
report answering the two issues raised. According to them, firstly, by virtue of the issuance of the
notice of coverage on August 11, 1989, and notice of acquisition on December 12, 1989, the
property is covered under compulsory acquisition. Secondly, Administrative Order No. 1, Series of
1990, Section IV D also supports the DAR position on the coverage of the said property. During the
consideration of the case by the Board, there was no pending petition for land conversion specifically
concerning the parcels of land in question.

On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the
hearing for the administrative valuation of the subject parcels of land on March 6, 1991. However, on
February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC, wrote the Board
requesting for its assistance in the reconstruction of the records of the case because the records
could not be found as her co-counsel, Atty. Ricardo Blancaflor, who originally handled the case for
SRRDC and had possession of all the records of the case was on indefinite leave and could not be
contacted. The Board granted counsel's request and moved the hearing to April 4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDC's
petition for exemption from CARP coverage before any administrative valuation of their landholding
could be had by the Board.
On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different dates
of hearing were set without objection from counsel of SRRDC. During the April 15, 1991 hearing, the
subdivision plan of subject property at Casile, Cabuyao, Laguna was submitted and marked as
Exhibit "5" for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a period of one
month to value the land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B. Opina
was presented. The certification issued on September 8, 1989, stated that the parcels of land
subject of the case were classified as "industrial Park" per Sanguniang Bayan Resolution No. 45-89
dated March 29, 1989.14

To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on
April 30, 1991, petitioner filed a petition15 with DARAB to disqualify private respondents as
beneficiaries. However, DARAB refused to address the issue of beneficiaries.

In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a
decision,16 finding that private respondents illegally entered the SRRDC property, and ordered them
evicted.

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land
Bank of the Philippines to open a trust account in favor of SRRDC, for P5,637,965.55, as valuation
for the SRRDC property.

On December 19, 1991, DARAB promulgated a decision, the decretal portion of which reads:

"WHEREFORE, based on the foregoing premises, the Board hereby orders:

"1. The dismissal for lack of merit of the protest against the compulsory coverage of the
landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title
Nos. 81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of
Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby
affirmed;

"2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development
Corporation the amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred
Ninety Seven Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings covered
by the two (2) Transfer Certificates of Title mentioned above. Should there be a rejection of
the payment tendered, to open, if none has yet been made, a trust account for said amount
in the name of Sta. Rosa Realty Development Corporation;

"3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer
certificate of Title Nos. 84891 and 81949 and new one be issued in the name of the Republic
of the Philippines, free from liens and encumbrances;

"4 The Department of Environment and Natural Resources either through its Provincial
Office in Laguna or the Regional Office, Region IV, to conduct a final segregation survey on
the lands covered by Transfer certificate of Title Nos. 84891 and 81949 so the same can be
transferred by the Register of Deeds to the name of the Republic of the Philippines;

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

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision in Civil
Case No. B-233318 ruling that respondents were builders in bad faith.

On February 6, 1992, petitioner filed with the Court of Appeals a petition for review of the DARAB
decision.19 On November 5, 1993, the Court of Appeals promulgated a decision affirming the
decision of DARAB. The decretal portion of the Court of Appeals decision reads:

"WHEREFORE, premises considered, the DARAB decision dated September 19, 1991 is
AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation
ventilating its case with the Special Agrarian Court on the issue of just
compensation."20Hence, this petition.21

On December 15, 1993, the Court issued a Resolution which reads:

"G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of Appeals, et. al.)
– Considering the compliance, dated December 13, 1993, filed by counsel for petitioner, with
the resolution of December 8, 1993 which required petitioner to post a cash bond or surety
bond in the amount of P1,500,000.00 Pesos before issuing a temporary restraining order
prayed for, manifesting that it has posted a CASH BOND in the same amount with the
Cashier of the Court as evidenced by the attached official receipt no. 315519, the Court
resolved to ISSUE the Temporary Retraining Order prayed for.

"The Court therefore, resolved to restrain: (a) the Department of Agrarian Reform
Adjudication Board from enforcing its decision dated December 19, 1991 in DARAB Case
No. JC-R-IV-LAG-0001, which was affirmed by the Court of Appeals in a Decision dated
November 5, 1993, and which ordered, among others, the Regional Office of the Department
of Agrarian Reform through its Municipal and Provincial Reform Office to take immediate
possession of the landholding in dispute after title shall have been transferred to the name of
the Republic of the Philippines and to distribute the same through the immediate issuance of
Emancipation Patents to the farmer-beneficiaries as determined by the Municipal Agrarian
Officer of Cabuyao, Laguna, (b) The Department of Agrarian Reform and/or the Department
of Agrarian Reform Adjudication Board, and all persons acting for and in their behalf and
under their authority from entering the properties involved in this case and from introducing
permanent infrastructures thereon; and (c) the private respondents from further clearing the
said properties of their green cover by the cutting or burning of trees and other vegetation,
effective today until further orders from this Court."22

The main issue raised is whether the property in question is covered by CARP despite the fact that
the entire property formed part of a watershed area prior to the enactment of R. A. No. 6657.

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

"Sec. 16. Procedure for Acquisition of Private Lands. – For purposes of acquisition of private
lands, the following procedures shall be followed:
 a.) After having identified the land, the landowners and the beneficiaries, the DAR
shall send its notice to acquire the land to the owners thereof, by personal delivery or
registered mail, and post the same in a conspicuous place in the municipal building
and barangay hall of the place where the property is located. Said notice shall
contain the offer of the DAR to pay corresponding value in accordance with the
valuation set forth in Sections 17, 18, and other pertinent provisions hereof.

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

c.) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner
the purchase price of the land within thirty (30) days after he executes and delivers a
deed of transfer in favor of the government and other muniments of title.

d.) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land requiring the
landowner, the LBP and other interested parties to submit fifteen (15) days from
receipt of the notice. After the expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case within thirty (30) days after it
is submitted for decision.

e.) Upon receipt by the landowner of the corresponding payment, or, in case of
rejection or no response from the landowner, upon the deposit with an accessible
bank designated by the DAR of the compensation in cash or in LBP bonds in
accordance with this act, the DAR shall make immediate possession of the land and
shall request the proper Register of Deeds to issue Transfer Certificate of Titles
(TCT) in the name of the Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land to the qualified beneficiaries.

f.) Any party who disagrees with the decision may bring the matter to the court23 of
proper jurisdiction for final determination of just compensation.

In compulsory acquisition of private lands, the landholding, the landowners and farmer beneficiaries
must first be identified. After identification, the DAR shall send a notice of acquisition to the
landowner, by personal delivery or registered mail, and post it in a conspicuous place in the
municipal building and barangay hall of the place where the property is located.

Within thirty (30) days from receipt of the notice of acquisition, the landowner, his administrator or
representative shall inform the DAR of his acceptance or rejection of the offer.

If the landowner accepts, he executes and delivers a deed of transfer in favor of the government and
surrenders the certificate of title. Within thirty (30) days from the execution of the deed of transfer,
the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the landowner accepts,
he executes and delivers a deed of transfer in favor of the government and surrenders the certificate
of title. Within thirty days from the execution of the deed of transfer, the Land Bank of the Philippines
(LBP) pays the owner the purchase price. If the landowner rejects the DAR's offer or fails to make a
reply, the DAR conducts summary administrative proceedings to determine just compensation for
the land. The landowner, the LBP representative and other interested parties may submit evidence
on just compensation within fifteen days from notice. Within thirty days from submission, the DAR
shall decide the case and inform the owner of its decision and the amount of just compensation.
Upon receipt by the owner of the corresponding payment, or, in case of rejection or lack of response
from the latter, the DAR shall deposit the compensation in cash or in LBP bonds with an accessible
bank. The DAR shall immediately take possession of the land and cause the issuance of a transfer
certificate of title in the name of the Republic of the Philippines. The land shall then be redistributed
to the farmer beneficiaries. Any party may question the decision of the DAR in the special agrarian
courts (provisionally the Supreme Court designated branches of the regional trial court as special
agrarian courts) for final determination of just compensation.

The DAR has made compulsory acquisition the priority mode of land acquisition to hasten the
implementation of the Comprehensive Agrarian Reform Program (CARP). Under Sec. 16 of the
CARL, the first step in compulsory acquisition is the identification of the land, the landowners and the
farmer beneficiaries. However, the law is silent on how the identification process shall be made. To
fill this gap, on July 26, 1989, the DAR issued Administrative Order No. 12, series of 1989, which set
the operating procedure in the identification of such lands. The procedure is as follows:

A. The Municipal Agrarian Reform Officer (MARO), with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:

1. Update the masterlist of all agricultural lands covered under the CARP in his area of
responsibility; the masterlist should include such information as required under the attached
CARP masterlist form which shall include the name of the landowner, landholding area,
TCT/OCT number, and tax declaration number.

2. Prepare the Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the
landowners have already filed applications to avail of other modes of land acquisition. A case
folder shall contain the following duly accomplished forms:

a) CARP CA Form 1—MARO investigation report

b) CARP CA Form No 2 – Summary investigation report findings and evaluation

c) CARP CA Form 3—Applicant's Information sheet

d) CARP CA Form 4 – Beneficiaries undertaking

e) CARP CA Form 5 – Transmittal report to the PARO

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

3. Send notice of coverage and a letter of invitation to a conference/meeting to the

landowner covered by the Compulsory Case Acquisition Folder. Invitations to the said
conference meeting shall also be sent to the prospective farmer-beneficiaries, the BARC
representatives, the Land Bank of the Philippines (LBP) representative, and the other
interested parties to discuss the inputs to the valuation of the property.

He shall discuss the MARO/BARC investigation report and solicit the views, objection,
agreements or suggestions of the participants thereon. The landowner shall also ask to
indicate his retention area. The minutes of the meeting shall be signed by all participants in
the conference and shall form an integral part of the CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO).

B. The PARO shall:

1. Ensure the individual case folders are forwarded to him by his MAROs.

2. Immediately upon receipt of a case folder, compute the valuation of the land in
accordance with A.O. No. 6, series of 1988. The valuation worksheet and the related CACF
valuation forms shall be duly certified correct by the PARO and all the personnel who
participated in the accomplishment of these forms.

3. In all cases, the PARO may validate the report of the MARO through ocular inspection and
verification of the property. This ocular inspection and verification shall be mandatory when
the computed value exceeds P500,000 per estate.

4. Upon determination of the valuation, forward the case folder, together with the duly
accomplished valuation forms and his recommendations, to the Central Office.

The LBP representative and the MARO concerned shall be furnished a copy each of his
report.

C. DAR Central Office, specifically through the Bureau of Land Acquisition and Distribution
(BLAD), shall:

1. Within three days from receipt of the case folder from the PARO, review, evaluate and
determine the final land valuation of the property covered by the case folder. A summary
review and evaluation report shall be prepared and duly certified by the BLAD Director and
the personnel directly participating in the review and final valuation.

2. Prepare, for the signature of the Secretary or her duly authorized representative, a notice
of acquisition (CARP Form 8) for the subject property. Serve the notice to the landowner
personally or through registered mail within three days from its approval. The notice shall
include among others, the area subject of compulsory acquisition, and the amount of just
compensation offered by DAR.

3. Should the landowner accept the DAR's 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 DARAB's
decision on just compensation, the BLAD shall prepare and submit to the Secretary for
approval the required order of acquisition.

4. Upon the landowner's receipt of payment, in case of acceptance, or upon deposit of

payment in the designated bank, in case of rejection or non-response, the Secretary shall
immediately direct the pertinent Register of Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. Once the property is
transferred, the DAR, through the PARO, shall take possession of the land for redistribution
to qualified beneficiaries."
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform Officer
(MARO) keep an updated master list of all agricultural lands under the CARP in his area of
responsibility containing all the required information. The MARO prepares a Compulsory Acquisition
Case Folder (CACF) for each title covered by CARP. The MARO then sends the landowner a
"Notice of Coverage" and a "letter of invitation" to a "conference/ meeting" over the land covered by
the CACF. He also sends invitations to the prospective farmer-beneficiaries, the representatives of
the Barangay Agrarian Reform Committee (BARC), the Land Bank of the Philippines (LBP) and
other interested parties to discuss the inputs to the valuation of the property and solicit views,
suggestions, objections or agreements of the parties. At the meeting, the landowner is asked to
indicate his retention area.

The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO) who
shall complete the valuation of the land. Ocular inspection and verification of the property by the
PARO shall be mandatory when the computed value of the estate exceeds P500,000.00. Upon
determination of the valuation, the PARO shall forward all papers together with his recommendation
to the Central Office of the DAR. The DAR Central Office, specifically, the Bureau of Land
Acquisition and Distribution (BLAD) shall prepare, on the signature of the Secretary or his duly
authorized representative, a notice of acquisition of the subject property. From this point, the
provisions of R. A. No. 6657, Section 16 shall apply.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of
coverage and letter of invitation to a preliminary conference sent to the landowner, the
representative of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to DAR
A. O. No. 12, series of 1989; and (2) the notice of acquisition sent to the landowner under Section 16
of the CARL.

The importance of the first notice, that is, the notice of coverage and the letter of invitation to a
conference, and its actual conduct cannot be understated. They are steps designed to comply with
the requirements of administrative due process. The implementation of the CARL is an exercise of
the State's police power and the power of eminent domain. To the extent that the CARL prescribes
retention limits to the landowners, there is an exercise of police power for the regulation of private
property in accordance with the Constitution. But where, to carry out such regulation, the owners are
deprived of lands they own in excess of the maximum area allowed, there is also a taking under the
power of eminent domain. The taking contemplated is not mere limitation of the use of the land.
What is required is the surrender of the title to and physical possession of the excess and all
beneficial rights accruing to the owner in favor of the farmer beneficiary.

In the case at bar, DAR has executed the taking of the property in question. However, payment of
just compensation was not in accordance with the procedural requirement. The law required
payment in cash or LBP bonds, not by trust account as was done by DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, we held that
"The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt of the landowner of the corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with
the landowner. No outright change of ownership is contemplated either."24

Consequently, petitioner questioned before the Court of Appeals DARAB's decision ordering the
compulsory acquisition of petitioner's property.25 Here, petitioner pressed the question of whether the
property was a watershed, not covered by CARP.

Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:
 "Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any
ground water may be declared by the Department of Natural resources as a protected area.
Rules and Regulations may be promulgated by such Department to prohibit or control such
activities by the owners or occupants thereof within the protected area which may damage or
cause the deterioration of the surface water or ground water or interfere with the
investigation, use, control, protection, management or administration of such waters."

Watersheds may be defined as "an area drained by a river and its tributaries and enclosed by a
boundary or divide which separates it from adjacent watersheds." Watersheds generally are outside
the commerce of man, so why was the Casile property titled in the name of SRRDC? The answer is
simple. At the time of the titling, the Department of Agriculture and Natural Resources had not
declared the property as watershed area. The parcels of land in Barangay Casile were declared as
"PARK" by a Zoning Ordinance adopted by the municipality of Cabuyao in 1979, as certified by the
Housing and Land Use Regulatory Board. On January 5, 1994, the Sangguniang Bayan of Cabuyao,
Laguna issued a Resolution26 voiding the zoning classification of the land at Barangay Casile as
Park and declaring that the land is now classified as agricultural land.

The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of
its police power, not the power of eminent domain. "A zoning ordinance is defined as a local city or
municipal legislation which logically arranges, prescribes, defines and apportions a given political
subdivision into specific land uses as present and future projection of needs."27

In Natalia Realty, Inc. v. Department of Agrarian Reform28 we held that lands classified as non-
agricultural prior to the effectivity of the CARL may not be compulsorily acquired for distribution to
farmer beneficiaries.

However, more than the classification of the subject land as PARK is the fact that subsequent
studies and survey showed that the parcels of land in question form a vital part of a watershed
area.29

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

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

"The Casile barangay covered by CLOA in question is situated in the heartland of both
watersheds. Considering the barangays proximity to the Matangtubig waterworks, the
activities of the farmers which are in conflict with proper soil and water conservation
practices jeopardize and endanger the vital waterworks. Degradation of the land would have
double edge detrimental effects. On the Casile side this would mean direct siltation of the
Mangumit river which drains to the water impounding reservoir below. On the Kabanga-an
side, this would mean destruction of forest covers which acts as recharged areas of the
Matang Tubig springs. Considering that the people have little if no direct interest in the
 protection of the Matang Tubig structures they couldn't care less even if it would be
destroyed.

The Casile and Kabanga-an watersheds can be considered a most vital life support system
to thousands of inhabitants directly and indirectly affected by it. From these watersheds
come the natural God-given precious resource – water. x x x x x

Clearing and tilling of the lands are totally inconsistent with sound watershed management.
More so, the introduction of earth disturbing activities like road building and erection of
permanent infrastructures. Unless the pernicious agricultural activities of the Casile farmers
are immediately stopped, it would not be long before these watersheds would cease to be of
value. The impact of watershed degredation threatens the livelihood of thousands of people
dependent upon it. Toward this, we hope that an acceptable comprehensive watershed
development policy and program be immediately formulated and implemented before the
irreversible damage finally happens.

Hence, the following are recommended:

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

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

rehabilitation.

7.4 A comprehensive and detailed watershed management plan and program be

formulated and implemented by the Canlubang Estate in coordination with pertinent
government agencies."30

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

Also, DENR Secretary Angel Alcala submitted a Memorandum for the President dated September 7,
1993 (Subject: PFVR HWI Ref.: 933103 Presidential Instructions on the Protection of Watersheds of
the Canlubang Estates at Barrio Casile, Cabuyao, Laguna) which reads:

"It is the opinion of this office that the area in question must be maintained for watershed
purposes for ecological and environmental considerations, among others. Although the 88
families who are the proposed CARP beneficiaries will be affected, it is important that a
larger view of the situation be taken as one should also consider the adverse effect on
thousands of residents downstream if the watershed will not be protected and maintained for
watershed purposes.

"The foregoing considered, it is recommended that if possible, an alternate area be allocated

for the affected farmers, and that the Canlubang Estates be mandated to protect and
maintain the area in question as a permanent watershed reserved."31

The definition does not exactly depict the complexities of a watershed. The most important product
of a watershed is water which is one of the most important human necessity. The protection of
watersheds ensures an adequate supply of water for future generations and the control of
flashfloods that not only damage property but cause loss of lives. Protection of watersheds is an
"intergenerational responsibility" that needs to be answered now.

Another factor that needs to be mentioned is the fact that during the DARAB hearing, petitioner
presented proof that the Casile property has slopes of 18% and over, which exempted the land from
the coverage of CARL. R. A. No. 6657, Section 10, provides:

"Section 10. Exemptions and Exclusions. – Lands actually, directly and exclusively used and
found to be necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and
breeding grounds, watersheds and mangroves, national defense, school sites and campuses
including experimental farm stations operated by public or private schools for educational
purposes, seeds and seedlings research and pilot production centers, church sites and
convents appurtenent thereto, communal burial grounds and cemeteries, penal colonies and
penal farms actually worked by the inmates, government and private research and
quarantine centers, and all lands with eighteen percent (18%) slope and over, except those
already developed shall be exempt from coverage of this Act."

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land may
be excluded from the compulsory acquisition coverage of CARP because of its very high slopes.

To resolve the issue as to the true nature of the parcels of land involved in the case at bar, the Court
directs the DARAB to conduct a re-evaluation of the issue.

IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G. R. SP
No. 27234.

In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and determination of
the nature of the parcels of land involved to resolve the issue of its coverage by the Comprehensive
Land Reform Program.

In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries shall
continue to be stayed by the temporary restraining order issued on December 15, 1993, which shall
remain in effect until final decision on the case.

No costs.

SO ORDERED.