Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ, GERARDO
B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO
T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G. ESTRADA, FELISA C. BAUTISTA,
ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA,
FELICISIMA C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE &
NAPOLEON S. FERRER,petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA, HERMINIGILDO
GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias,
Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM COUNCIL, respondents.
G.R. No. 79744 July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON. JOKER
ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs. SALVADOR
TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO TAAY, respondents.
G.R. No. 79777 July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES,respondents.

CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life on his way
to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules flung his adversary to
the ground thinking him dead, but Antaeus rose even stronger to resume their struggle. This happened several
times to Hercules' increasing amazement. Finally, as they continued grappling, it dawned on Hercules that
Antaeus was the son of Gaea and could never die as long as any part of his body was touching his Mother

Earth. Thus forewarned, Hercules then held Antaeus up in the air, beyond the reach of the sustaining soil, and
crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful Antaeus
weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces of life
and death, of men and women who, like Antaeus need the sustaining strength of the precious earth to stay
alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this precious
resource among our people. But it is more than a slogan. Through the brooding centuries, it has become a
battle-cry dramatizing the increasingly urgent demand of the dispossessed among us for a plot of earth as their
place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the well-being
and economic security of all the people," 1 especially the less privileged. In 1973, the new Constitution affirmed
this goal adding specifically that "the State shall regulate the acquisition, ownership, use, enjoyment and
disposition of private property and equitably diffuse property ownership and profits." 2 Significantly, there was
also the specific injunction to "formulate and implement an agrarian reform program aimed at emancipating the
tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted one whole
and separate Article XIII on Social Justice and Human Rights, containing grandiose but undoubtedly sincere
provisions for the uplift of the common people. These include a call in the following words for the adoption by
the State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the right
offarmers and regular farmworkers, who are landless, to own directly or collectively the lands
they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress may prescribe, taking
into account ecological, developmental, or equity considerations and subject to the payment of
just compensation. In determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already been
enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated principles. This
was substantially superseded almost a decade later by P.D. No. 27, which was promulgated on October 21,
1972, along with martial law, to provide for the compulsory acquisition of private lands for distribution among
tenant-farmers and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian reform.
Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in
favor of the beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued lands covered by the
decree as well as the manner of their payment. This was followed on July 22, 1987 by Presidential
Proclamation No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O. No. 229,
providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took over
legislative power from the President and started its own deliberations, including extensive public hearings, on
the improvement of the interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the earlier mentioned
enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions, including
serious challenges to the constitutionality of the several measures mentioned above. They will be the subject
of one common discussion and resolution, The different antecedents of each case will require separate
treatment, however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A. No.
6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner Nicolas
Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by petitioner Augustin
Hermano, Jr. The tenants were declared full owners of these lands by E.O. No. 228 as qualified farmers under
P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of separation of
powers, due process, equal protection and the constitutional limitation that no private property shall be taken
for public use without just compensation.
They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228. The said
measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure to provide for
retention limits for small landowners. Moreover, it does not conform to Article VI, Section 25(4) and the other
requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue that the same may be made
only by a court of justice and not by the President of the Philippines. They invoke the recent cases of EPZA v.
Dulay 5and Manotok v. National Food Authority. 6 Moreover, the just compensation contemplated by the Bill of
Rights is payable in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order also deprives the petitioners of
their property rights as protected by due process. The equal protection clause is also violated because the
order places the burden of solving the agrarian problems on the owners only of agricultural lands. No similar
obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of the
lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due process. Worse, the
measure would not solve the agrarian problem because even the small farmers are deprived of their lands and
the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier cases
ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn Producers of the Philippines, Inc.
v. The National Land Reform Council. 9 The determination of just compensation by the executive authorities
conformably to the formula prescribed under the questioned order is at best initial or preliminary only. It does
not foreclose judicial intervention whenever sought or warranted. At any rate, the challenge to the order is
premature because no valuation of their property has as yet been made by the Department of Agrarian
Reform. The petitioners are also not proper parties because the lands owned by them do not exceed the
maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for retention limits
on tenanted lands and that in any event their petition is a class suit brought in behalf of landowners with
landholdings below 24 hectares. They maintain that the determination of just compensation by the
administrative authorities is a final ascertainment. As for the cases invoked by the public respondent, the

constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was decided in Gonzales was the
validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228 and 229
(except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless, this statute should
itself also be declared unconstitutional because it suffers from substantially the same infirmities as the earlier
measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1. 83hectare land, who complained that the DAR was insisting on the implementation of P.D. No. 27 and E.O. No.
228 despite a compromise agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic amended petition that the
above- mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros
Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400 planter-members.
This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as decreed by
the Constitution belongs to Congress and not the President. Although they agree that the President could
exercise legislative power until the Congress was convened, she could do so only to enact emergency
measures during the transition period. At that, even assuming that the interim legislative power of the President
was properly exercised, Proc. No. 131 and E.O. No. 229 would still have to be annulled for violating the
constitutional provisions on just compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform Fund, an
initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost of the
Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the receipts of the
sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten wealth received through the
Presidential Commission on Good Government and such other sources as government may deem appropriate.
The amounts collected and accruing to this special fund shall be considered automatically appropriated for the
purpose authorized in this Proclamation the amount appropriated is in futuro, not in esse. The money needed
to cover the cost of the contemplated expropriation has yet to be raised and cannot be appropriated at this
time.
Furthermore, they contend that taking must be simultaneous with payment of just compensation as it is
traditionally understood, i.e., with money and in full, but no such payment is contemplated in Section 5 of the
E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the Philippines "shall
compensate the landowner in an amount to be established by the government, which shall be based on the
owner's declaration of current fair market value as provided in Section 4 hereof, but subject to certain controls
to be defined and promulgated by the Presidential Agrarian Reform Council." This compensation may not be
paid fully in money but in any of several modes that may consist of part cash and part bond, with interest,
maturing periodically, or direct payment in cash or bond as may be mutually agreed upon by the beneficiary
and the landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was made to make a careful
study of the sugar planters' situation. There is no tenancy problem in the sugar areas that can justify the

application of the CARP to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with problems exclusively their own, their
right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane Planters
(NASP) which claims a membership of at least 20,000 individual sugar planters all over the country. On
September 10, 1987, another motion for intervention was filed, this time by Manuel Barcelona, et al.,
representing coconut and riceland owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that, in any
event, the appropriation is invalid because of uncertainty in the amount appropriated. Section 2 of Proc. No.
131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty billion pesos and thus
specifies the minimum rather than the maximum authorized amount. This is not allowed. Furthermore, the
stated initial amount has not been certified to by the National Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and convincing
evidence the necessity for the exercise of the powers of eminent domain, and the violation of the fundamental
right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of the said
land for an amount equal to the government assessor's valuation of the land for tax purposes. On the other
hand, if the landowner declares his own valuation he is unjustly required to immediately pay the corresponding
taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in favor of
Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as explained in the
"whereas" clauses of the Proclamation and submits that, contrary to the petitioner's contention, a pilot project
to determine the feasibility of CARP and a general survey on the people's opinion thereon are not
indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed to show that they belong
to a different class and should be differently treated. The Comment also suggests the possibility of Congress
first distributing public agricultural lands and scheduling the expropriation of private agricultural lands later.
From this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against the payment of public money
without the corresponding appropriation. There is no rule that only money already in existence can be the
subject of an appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian Reform Fund, although
denominated as an initial amount, is actually the maximum sum appropriated. The word "initial" simply means
that additional amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing the
constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends that the
measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;
(3) The power of the President to legislate was terminated on July 2, 1987; and

(4) The appropriation of a P50 billion special fund from the National Treasury did not originate
from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due process
and the requirement for just compensation, placed his landholding under the coverage of Operation Land
Transfer. Certificates of Land Transfer were subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under
Operation Land transfer and asked for the recall and cancellation of the Certificates of Land Transfer in the
name of the private respondents. He claims that on December 24, 1986, his petition was denied without
hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been acted upon when
E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and academic because they
directly effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.
(2) The said executive orders are violative of the constitutional provision that no private property
shall be taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention provided for under the 1987
Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress convened is
anomalous and arbitrary, besides violating the doctrine of separation of powers. The legislative power granted
to the President under the Transitory Provisions refers only to emergency measures that may be promulgated
in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due process of law and to the
retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of the Constitution. He
likewise argues that, besides denying him just compensation for his land, the provisions of E.O. No. 228
declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972 shall be
considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of even small
landowners in the program along with other landowners with lands consisting of seven hectares or more is
undemocratic.
In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the issuance
of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article XVIII of the
Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first Congress is convened.

On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October 21.
1972, the tenant-farmer of agricultural land was deemed the owner of the land he was tilling. The leasehold
rentals paid after that date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved on
December 14, 1987. An appeal to the Office of the President would be useless with the promulgation of E.O.
Nos. 228 and 229, which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and corn lands
not exceeding seven hectares as long as they are cultivating or intend to cultivate the same. Their respective
lands do not exceed the statutory limit but are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be ejected or
removed from his farmholding until such time as the respective rights of the tenant- farmers and
the landowner shall have been determined in accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention because
the Department of Agrarian Reform has so far not issued the implementing rules required under the abovequoted decree. They therefore ask the Court for a writ of mandamus to compel the respondent to issue the
said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474 removing any
right of retention from persons who own other agricultural lands of more than 7 hectares in aggregate area or
lands used for residential, commercial, industrial or other purposes from which they derive adequate income
for their family. And even assuming that the petitioners do not fall under its terms, the regulations implementing
P.D. No. 27 have already been issued, to wit, the Memorandum dated July 10, 1975 (Interim Guidelines on
Retention by Small Landowners, with an accompanying Retention Guide Table), Memorandum Circular No. 11
dated April 21, 1978, (Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated
December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners),
and DAR Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to Apply for
Retention and/or to Protest the Coverage of their Landholdings under Operation Land Transfer pursuant to
P.D. No. 27). For failure to file the corresponding applications for retention under these measures, the
petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated this case notwithstanding
the pendency of their appeal to the President of the Philippines. Moreover, the issuance of the implementing
rules, assuming this has not yet been done, involves the exercise of discretion which cannot be controlled
through the writ of mandamus. This is especially true if this function is entrusted, as in this case, to a separate
department of the government.
In their Reply, the petitioners insist that the above-cited measures are not applicable to them because they do
not own more than seven hectares of agricultural land. Moreover, assuming arguendo that the rules were
intended to cover them also, the said measures are nevertheless not in force because they have not been
published as required by law and the ruling of this Court in Tanada v. Tuvera. 10 As for LOI 474, the same is

ineffective for the additional reason that a mere letter of instruction could not have repealed the presidential
decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the three departments of the
government, the judiciary is nonetheless vested with the power to annul the acts of either the legislative or the
executive or of both when not conformable to the fundamental law. This is the reason for what some quarters
call the doctrine of judicial supremacy. Even so, this power is not lightly assumed or readily exercised. The
doctrine of separation of powers imposes upon the courts a proper restraint, born of the nature of their
functions and of their respect for the other departments, in striking down the acts of the legislative and the
executive as unconstitutional. The policy, indeed, is a blend of courtesy and caution. To doubt is to sustain.
The theory is that before the act was done or the law was enacted, earnest studies were made by Congress or
the President, or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality,
requiring therefor the concurrence of a majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc. 11 And as established by judge made
doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or
controversy involving a conflict of legal rights susceptible of judicial determination, the constitutional question
must have been opportunely raised by the proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the cases before us, we hold that the
same is satisfied by the petitioners and intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion of the Court to waive the
requirement and so remove the impediment to its addressing and resolving the serious constitutional questions
raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking only an
indirect and general interest shared in common with the public. The Court dismissed the objection that they
were not proper parties and ruled that "the transcendental importance to the public of these cases demands
that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure." We have
since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when confronted with constitutional
issues like the ones now before it, it will not hesitate to declare a law or act invalid when it is convinced that this
must be done. In arriving at this conclusion, its only criterion will be the Constitution as God and its conscience
give it the light to probe its meaning and discover its purpose. Personal motives and political considerations are
irrelevancies that cannot influence its decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make the
hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these departments, or of
any public official, betray the people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional boundaries, it does not assert any
superiority over the other departments; it does not in reality nullify or invalidate an act of the
Legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution
to determine conflicting claims of authority under the Constitution and to establish for the parties
in an actual controversy the rights which that instrument secures and guarantees to them. This
is in truth all that is involved in what is termed "judicial supremacy" which properly is the power
of judicial review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must categorically resolve. And
so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the more serious challenges to
the constitutionality of the several measures involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law has
already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on that issue. As
for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was
authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the Congress of the
Philippines was formally convened and took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987, and the
other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it correct
to say that these measures ceased to be valid when she lost her legislative power for, like any statute, they
continue to be in force unless modified or repealed by subsequent law or declared invalid by the courts. A
statute does not ipso facto become inoperative simply because of the dissolution of the legislature that enacted
it. By the same token, President Aquino's loss of legislative power did not have the effect of invalidating all the
measures enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially affirmed
the challenged measures and has specifically provided that they shall be suppletory to R.A. No. 6657
whenever not inconsistent with its provisions. 17 Indeed, some portions of the said measures, like the creation
of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have been
incorporated by reference in the CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No. 131 is not an
appropriation measure even if it does provide for the creation of said fund, for that is not its principal purpose.
An appropriation law is one the primary and specific purpose of which is to authorize the release of public
funds from the treasury.19 The creation of the fund is only incidental to the main objective of the proclamation,
which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section 25(4) of Article
VI, are not applicable. With particular reference to Section 24, this obviously could not have been complied
with for the simple reason that the House of Representatives, which now has the exclusive power to initiate

appropriation measures, had not yet been convened when the proclamation was issued. The legislative power
was then solely vested in the President of the Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated because
they do not provide for retention limits as required by Article XIII, Section 4 of the Constitution is no longer
tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law, which in fact is one of its most
controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no person may own or retain,
directly or indirectly, any public or private agricultural land, the size of which shall vary according
to factors governing a viable family-sized farm, such as commodity produced, terrain,
infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council
(PARC) created hereunder, but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the
following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually
tilling the land or directly managing the farm; Provided, That landowners whose lands have
been covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct compulsory
heirs who still own the original homestead at the time of the approval of this Act shall retain the
same areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one subject,
to be expressed in its title, deserves only short attention. It is settled that the title of the bill does not have to be
a catalogue of its contents and will suffice if the matters embodied in the text are relevant to each other and
may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name it
was called, had the force and effect of law because it came from President Marcos. Such are the ways of
despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have
repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was
issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had to comply with the
requirement for publication as this Court held in Tanada v. Tuvera. 21 Hence, unless published in the Official
Gazette in accordance with Article 2 of the Civil Code, they could not have any force and effect if they were
among those enactments successfully challenged in that case. LOI 474 was published, though, in the Official
Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus cannot
issue to compel the performance of a discretionary act, especially by a specific department of the government.
That is true as a general proposition but is subject to one important qualification. Correctly and categorically
stated, the rule is that mandamus will lie to compel the discharge of the discretionary duty itself but not to
control the discretion to be exercised. In other words, mandamus can issue to require action only but not
specific action.
Whenever a duty is imposed upon a public official and an unnecessary and unreasonable delay
in the exercise of such duty occurs, if it is a clear duty imposed by law, the courts will intervene
by the extraordinary legal remedy of mandamus to compel action. If the duty is purely
ministerial, the courts will require specific action. If the duty is purely discretionary, the courts
by mandamus will require action only. For example, if an inferior court, public official, or board

should, for an unreasonable length of time, fail to decide a particular question to the great
detriment of all parties concerned, or a court should refuse to take jurisdiction of a cause when
the law clearly gave it jurisdiction mandamus will issue, in the first case to require a decision,
and in the second to require that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy and adequate
remedy available from the administrative authorities, resort to the courts may still be permitted if the issue
raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of eminent domain that logically
preclude the application of both powers at the same time on the same subject. In the case of City of Baguio v.
NAWASA, 24 for example, where a law required the transfer of all municipal waterworks systems to the
NAWASA in exchange for its assets of equivalent value, the Court held that the power being exercised was
eminent domain because the property involved was wholesome and intended for a public use. Property
condemned under the police power is noxious or intended for a noxious purpose, such as a building on the
verge of collapse, which should be demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is not compensable, unlike the
taking of property under the power of expropriation, which requires the payment of just compensation to the
owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police power in a
famous aphorism: "The general rule at least is that while property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking." The regulation that went "too far" was a law prohibiting
mining which might cause the subsidence of structures for human habitation constructed on the land surface.
This was resisted by a coal company which had earlier granted a deed to the land over its mine but reserved
all mining rights thereunder, with the grantee assuming all risks and waiving any damage claim. The Court held
the law could not be sustained without compensating the grantor. Justice Brandeis filed a lone dissent in which
he argued that there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the exercise of the police power deprives
the owner of some right theretofore enjoyed, and is, in that sense, an abridgment by the State of
rights in property without making compensation. But restriction imposed to protect the public
health, safety or morals from dangers threatened is not a taking. The restriction here in question
is merely the prohibition of a noxious use. The property so restricted remains in the possession
of its owner. The state does not appropriate it or make any use of it. The state merely prevents
the owner from making a use which interferes with paramount rights of the public. Whenever the
use prohibited ceases to be noxious as it may because of further changes in local or social
conditions the restriction will have to be removed and the owner will again be free to enjoy
his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the police power and the power of
eminent domain, with the latter being used as an implement of the former like the power of taxation. The
employment of the taxing power to achieve a police purpose has long been accepted. 26 As for the power of
expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring to the earlier case of
Euclid v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the police power) makes the
following significant remarks:

Euclid, moreover, was decided in an era when judges located the Police and eminent domain
powers on different planets. Generally speaking, they viewed eminent domain as encompassing
public acquisition of private property for improvements that would be available for public use,"
literally construed. To the police power, on the other hand, they assigned the less intrusive task
of preventing harmful externalities a point reflected in the Euclid opinion's reliance on an
analogy to nuisance law to bolster its support of zoning. So long as suppression of a privately
authored harm bore a plausible relation to some legitimate "public purpose," the pertinent
measure need have afforded no compensation whatever. With the progressive growth of
government's involvement in land use, the distance between the two powers has contracted
considerably. Today government often employs eminent domain interchangeably with or as a
useful complement to the police power-- a trend expressly approved in the Supreme Court's
1954 decision in Berman v. Parker, which broadened the reach of eminent domain's "public use"
test to match that of the police power's standard of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of blighted areas in the District of
Columbia as a proper exercise of the police power. On the role of eminent domain in the attainment of this
purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that the Nation's Capital should be beautiful
as well as sanitary, there is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to realize it through the exercise of
eminent domain is clear.
For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S Supreme Court
sustained the respondent's Landmarks Preservation Law under which the owners of the Grand Central
Terminal had not been allowed to construct a multi-story office building over the Terminal, which had been
designated a historic landmark. Preservation of the landmark was held to be a valid objective of the police
power. The problem, however, was that the owners of the Terminal would be deprived of the right to use the
airspace above it although other landowners in the area could do so over their respective properties. While
insisting that there was here no taking, the Court nonetheless recognized certain compensatory rights accruing
to Grand Central Terminal which it said would "undoubtedly mitigate" the loss caused by the regulation. This
"fair compensation," as he called it, was explained by Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized to transfer
to neighboring properties the authorized but unused rights accruing to the site prior to the Terminal's
designation as a landmark the rights which would have been exhausted by the 59-story building that the city
refused to countenance atop the Terminal. Prevailing bulk restrictions on neighboring sites were
proportionately relaxed, theoretically enabling Penn Central to recoup its losses at the Terminal site by
constructing or selling to others the right to construct larger, hence more profitable buildings on the transferee
sites. 30
The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for landowners,
there is an exercise of the police power for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, it becomes necessary to deprive such owners of
whatever lands they may own in excess of the maximum area allowed, there is definitely a taking under the
power of eminent domain for which payment of just compensation is imperative. The taking contemplated is

not a mere limitation of the use of the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner in favor of the farmer-beneficiary.
This is definitely an exercise not of the police power but of the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain, the several measures before
us are challenged as violative of the due process and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many bitter
exchanges during the deliberation of the CARP Law in Congress, the retention limits finally agreed upon are,
curiously enough, not being questioned in these petitions. We therefore do not discuss them here. The Court
will come to the other claimed violations of due process in connection with our examination of the adequacy of
just compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal protection because of the absence of
retention limits has also become academic under Section 6 of R.A. No. 6657. Significantly, they too have not
questioned the area of such limits. There is also the complaint that they should not be made to share the
burden of agrarian reform, an objection also made by the sugar planters on the ground that they belong to a
particular class with particular interests of their own. However, no evidence has been submitted to the Court
that the requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to each other in certain particulars
and different from each other in these same particulars. 31 To be valid, it must conform to the following
requirements: (1) it must be based on substantial distinctions; (2) it must be germane to the purposes of the
law; (3) it must not be limited to existing conditions only; and (4) it must apply equally to all the members of the
class. 32 The Court finds that all these requisites have been met by the measures here challenged as arbitrary
and discriminatory.
Equal protection simply means that all persons or things similarly situated must be treated alike both as to the
rights conferred and the liabilities imposed. 33 The petitioners have not shown that they belong to a different
class and entitled to a different treatment. The argument that not only landowners but also owners of other
properties must be made to share the burden of implementing land reform must be rejected. There is a
substantial distinction between these two classes of owners that is clearly visible except to those who will not
see. There is no need to elaborate on this matter. In any event, the Congress is allowed a wide leeway in
providing for a valid classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the police power only if there is a
concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the public generally as
distinguished from those of a particular class require the interference of the State and, no less important, the
means employed are reasonably necessary for the attainment of the purpose sought to be achieved and not
unduly oppressive upon individuals. 34 As the subject and purpose of agrarian reform have been laid down by
the Constitution itself, we may say that the first requirement has been satisfied. What remains to be examined
is the validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of the individual are concerned,
the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the
means employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse
constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent
public need, subject only to a few notable exceptions, will excuse the bypassing of an individual's rights. It is no

exaggeration to say that a, person invoking a right guaranteed under Article III of the Constitution is a majority
of one even as against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of Article III of the Constitution.
With regard to his property, the owner enjoys the added protection of Section 9, which reaffirms the familiar
rule that private property shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire private lands
intended for public use upon payment of just compensation to the owner. Obviously, there is no
need to expropriate where the owner is willing to sell under terms also acceptable to the
purchaser, in which case an ordinary deed of sale may be agreed upon by the parties. 35 It is
only where the owner is unwilling to sell, or cannot accept the price or other conditions offered
by the vendee, that the power of eminent domain will come into play to assert the paramount
authority of the State over the interests of the property owner. Private rights must then yield to
the irresistible demands of the public interest on the time-honored justification, as in the case of
the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed no power is
absolute). The limitation is found in the constitutional injunction that "private property shall not be taken for
public use without just compensation" and in the abundant jurisprudence that has evolved from the
interpretation of this principle. Basically, the requirements for a proper exercise of the power are: (1) public use
and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should first
distribute public agricultural lands in the pursuit of agrarian reform instead of immediately disturbing property
rights by forcibly acquiring private agricultural lands. Parenthetically, it is not correct to say that only public
agricultural lands may be covered by the CARP as the Constitution calls for "the just distribution of all
agricultural lands." In any event, the decision to redistribute private agricultural lands in the manner prescribed
by the CARP was made by the legislative and executive departments in the exercise of their discretion. We are
not justified in reviewing that discretion in the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political departments when they decide
what is known as the political question. As explained by Chief Justice Concepcion in the case of Taada v.
Cuenco: 36
The term "political question" connotes what it means in ordinary parlance, namely, a question of
policy. It refers to "those questions which, under the Constitution, are to be decided by the
people in their sovereign capacity; or in regard to which full discretionary authority has been
delegated to the legislative or executive branch of the government." It is concerned with issues
dependent upon the wisdom, not legality, of a particular measure.
It is true that the concept of the political question has been constricted with the enlargement of judicial power,
which now includes the authority of the courts "to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government." 37 Even so, this should not be construed as a license for us to reverse the other departments
simply because their views may not coincide with ours.

The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the redistribution
of private landholdings (even as the distribution of public agricultural lands is first provided for, while also
continuing apace under the Public Land Act and other cognate laws). The Court sees no justification to
interpose its authority, which we may assert only if we believe that the political decision is not unwise, but
illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March 3,1909 that the entire St. Mary's river
between the American bank and the international line, as well as all of the upland north of the
present ship canal, throughout its entire length, was "necessary for the purpose of navigation of
said waters, and the waters connected therewith," that determination is conclusive in
condemnation proceedings instituted by the United States under that Act, and there is no room
for judicial review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled for us by the Constitution itself No
less than the 1987 Charter calls for agrarian reform, which is the reason why private agricultural lands are to
be taken from their owners, subject to the prescribed maximum retention limits. The purposes specified in P.D.
No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional injunction that the State
adopt the necessary measures "to encourage and undertake the just distribution of all agricultural lands to
enable farmers who are landless to own directly or collectively the lands they till." That public use, as
pronounced by the fundamental law itself, must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a longer and more thoughtful
examination.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. 39 It has been repeatedly stressed by this Court that the measure is not the taker's gain but the
owner's loss.40 The word "just" is used to intensify the meaning of the word "compensation" to convey the idea
that the equivalent to be rendered for the property to be taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate more than a mere regulation of
the use of private lands under the police power. We deal here with an actual taking of private agricultural lands
that has dispossessed the owners of their property and deprived them of all its beneficial use and enjoyment,
to entitle them to the just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following conditions
concur: (1) the expropriator must enter a private property; (2) the entry must be for more than a momentary
period; (3) the entry must be under warrant or color of legal authority; (4) the property must be devoted to
public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for
public use must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property.
All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking possession
of the condemned property, as "the compensation is a public charge, the good faith of the public is pledged for
its payment, and all the resources of taxation may be employed in raising the amount." 43 Nevertheless,
Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment or, in case of rejection or no
response from the landowner, upon the deposit with an accessible bank designated by the DAR

of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take
immediate possession of the land and shall request the proper Register of Deeds to issue a
Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall
thereafter proceed with the redistribution of the land to the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted to
the administrative authorities in violation of judicial prerogatives. Specific reference is made to Section 16(d),
which provides that in case of the rejection or disregard by the owner of the offer of the government to buy his
land... the DAR shall conduct summary administrative proceedings to determine the compensation
for the land by requiring the landowner, the LBP and other interested parties to submit evidence
as to the just compensation for the land, within fifteen (15) days from the receipt of the notice.
After the expiration of the above period, the matter is deemed submitted for decision. The DAR
shall decide the case within thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the courts of justice and may not
be usurped by any other branch or official of the government. EPZA v. Dulay 44 resolved a challenge to several
decrees promulgated by President Marcos providing that the just compensation for property under
expropriation should be either the assessment of the property by the government or the sworn valuation
thereof by the owner, whichever was lower. In declaring these decrees unconstitutional, the Court held through
Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees constitutes
impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a
matter which under this Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically would still have the power to
determine the just compensation for the property, following the applicable decrees, its task
would be relegated to simply stating the lower value of the property as declared either by the
owner or the assessor. As a necessary consequence, it would be useless for the court to
appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the
due process clause in the taking of private property is seemingly fulfilled since it cannot be said
that a judicial proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or charade as
the court has only to choose between the valuation of the owner and that of the assessor, and
its choice is always limited to the lower of the two. The court cannot exercise its discretion or
independence in determining what is just or fair. Even a grade school pupil could substitute for
the judge insofar as the determination of constitutional just compensation is concerned.
xxx
In the present petition, we are once again confronted with the same question of whether the
courts under P.D. No. 1533, which contains the same provision on just compensation as its
predecessor decrees, still have the power and authority to determine just compensation,
independent of what is stated by the decree and to this effect, to appoint commissioners for
such purpose.
This time, we answer in the affirmative.

xxx
It is violative of due process to deny the owner the opportunity to prove that the valuation in the
tax documents is unfair or wrong. And it is repulsive to the basic concepts of justice and fairness
to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the
judgment of a court promulgated only after expert commissioners have actually viewed the
property, after evidence and arguments pro and con have been presented, and after all factors
and considerations essential to a fair and just determination have been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that
rendered the challenged decrees constitutionally objectionable. Although the proceedings are described as
summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit
evidence on the real value of the property. But more importantly, the determination of the just compensation by
the DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section
16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise,
the courts of justice will still have the right to review with finality the said determination in the exercise of what
is admittedly a judicial function.
The second and more serious objection to the provisions on just compensation is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the landowner in
such amount as may be agreed upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16 and 17, and other pertinent provisions
hereof, or as may be finally determined by the court, as the just compensation for the land.
The compensation shall be paid in one of the following modes, at the option of the landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50) hectares, insofar as the excess
hectarage is concerned Twenty-five percent (25%) cash, the
balance to be paid in government financial instruments negotiable
at any time.
(b) For lands above twenty-four (24) hectares and up to fifty (50)
hectares Thirty percent (30%) cash, the balance to be paid in
government financial instruments negotiable at any time.
(c) For lands twenty-four (24) hectares and below Thirty-five
percent (35%) cash, the balance to be paid in government
financial instruments negotiable at any time.

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

physical assets or other qualified investments in accordance with guidelines set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates.
Ten percent (10%) of the face value of the bonds shall mature
every year from the date of issuance until the tenth (10th) year:
Provided, That should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid correspondingly
in LBP bonds;
(b) Transferability and negotiability. Such LBP bonds may be used
by the landowner, his successors-in- interest or his assigns, up to
the amount of their face value, for any of the following:
(i) Acquisition of land or other real properties of the government,
including assets under the Asset Privatization Program and other
assets foreclosed by government financial institutions in the same
province or region where the lands for which the bonds were paid
are situated;
(ii) Acquisition of shares of stock of government-owned or
controlled corporations or shares of stock owned by the
government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release
of accused persons, or for performance bonds;
(iv) Security for loans with any government financial institution,
provided the proceeds of the loans shall be invested in an
economic enterprise, preferably in a small and medium- scale
industry, in the same province or region as the land for which the
bonds are paid;
(v) Payment for various taxes and fees to government: Provided,
That the use of these bonds for these purposes will be limited to a
certain percentage of the outstanding balance of the financial
instruments; Provided, further, That the PARC shall determine the
percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original
bondholder in government universities, colleges, trade schools,
and other institutions;
(vii) Payment for fees of the immediate family of the original
bondholder in government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.

The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional insofar as it
requires the owners of the expropriated properties to accept just compensation therefor in less than money,
which is the only medium of payment allowed. In support of this contention, they cite jurisprudence holding
that:
The fundamental rule in expropriation matters is that the owner of the property expropriated is
entitled to a just compensation, which should be neither more nor less, whenever it is possible
to make the assessment, than the money equivalent of said property. Just compensation has
always been understood to be the just and complete equivalent of the loss which the owner of
the thing expropriated has to suffer by reason of the expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for the value of the property at the
time of its taking. Anything beyond that is more, and anything short of that is less, than just
compensation. It means a fair and full equivalent for the loss sustained, which is the measure of
the indemnity, not whatever gain would accrue to the expropriating entity. The market value of
the land taken is the just compensation to which the owner of condemned property is entitled,
the market value being that sum of money which a person desirous, but not compelled to buy,
and an owner, willing, but not compelled to sell, would agree on as a price to be given and
received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been derived, the weight of authority
is also to the effect that just compensation for property expropriated is payable only in money and not
otherwise. Thus
The medium of payment of compensation is ready money or cash. The condemnor cannot
compel the owner to accept anything but money, nor can the owner compel or require the
condemnor to pay him on any other basis than the value of the property in money at the time
and in the manner prescribed by the Constitution and the statutes. When the power of eminent
domain is resorted to, there must be a standard medium of payment, binding upon both parties,
and the law has fixed that standard as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the nature of things, be regarded as a
reliable and constant standard of compensation. 48
"Just compensation" for property taken by condemnation means a fair equivalent in money,
which must be paid at least within a reasonable time after the taking, and it is not within the
power of the Legislature to substitute for such payment future obligations, bonds, or other
valuable advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment of just compensation is
money and no other. And so, conformably, has just compensation been paid in the past solely in that medium.
However, we do not deal here with the traditional excercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State
from its owner for a specific and perhaps local purpose.
What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever kind as long
as they are in excess of the maximum retention limits allowed their owners. This kind of expropriation is
intended for the benefit not only of a particular community or of a small segment of the population but of the
entire Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted owner. Its
purpose does not cover only the whole territory of this country but goes beyond in time to the foreseeable
future, which it hopes to secure and edify with the vision and the sacrifice of the present generation of Filipinos.
Generations yet to come are as involved in this program as we are today, although hopefully only as
beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow through our thoughtfulness
today. And, finally, let it not be forgotten that it is no less than the Constitution itself that has ordained this
revolution in the farms, calling for "a just distribution" among the farmers of lands that have heretofore been the
prison of their dreams but can now become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the vast
areas of land subject to expropriation under the laws before us, we estimate that hundreds of billions of pesos
will be needed, far more indeed than the amount of P50 billion initially appropriated, which is already
staggering as it is by our present standards. Such amount is in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty when they called for agrarian
reform as a top priority project of the government. It is a part of this assumption that when they envisioned the
expropriation that would be needed, they also intended that the just compensation would have to be paid not in
the orthodox way but a less conventional if more practical method. There can be no doubt that they were
aware of the financial limitations of the government and had no illusions that there would be enough money to
pay in cash and in full for the lands they wanted to be distributed among the farmers. We may therefore
assume that their intention was to allow such manner of payment as is now provided for by the CARP Law,
particularly the payment of the balance (if the owner cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of value. We may also suppose that what they had in mind
was a similar scheme of payment as that prescribed in P.D. No. 27, which was the law in force at the time they
deliberated on the new Charter and with which they presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any categorical agreement among the
members regarding the meaning to be given the concept of just compensation as applied to the
comprehensive agrarian reform program being contemplated. There was the suggestion to "fine tune" the
requirement to suit the demands of the project even as it was also felt that they should "leave it to Congress" to
determine how payment should be made to the landowner and reimbursement required from the farmerbeneficiaries. Such innovations as "progressive compensation" and "State-subsidized compensation" were
also proposed. In the end, however, no special definition of the just compensation for the lands to be
expropriated was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates against the assumptions we are making
of the general sentiments and intention of the members on the content and manner of the payment to be made
to the landowner in the light of the magnitude of the expenditure and the limitations of the expropriator.
With these assumptions, the Court hereby declares that the content and manner of the just compensation
provided for in the afore- quoted Section 18 of the CARP Law is not violative of the Constitution. We do not
mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all this
Court is not a cloistered institution removed from the realities and demands of society or oblivious to the need
for its enhancement. The Court is as acutely anxious as the rest of our people to see the goal of agrarian
reform achieved at last after the frustrations and deprivations of our peasant masses during all these
disappointing decades. We are aware that invalidation of the said section will result in the nullification of the

entire program, killing the farmer's hopes even as they approach realization and resurrecting the spectre of
discontent and dissent in the restless countryside. That is not in our view the intention of the Constitution, and
that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always required to be made fully in money,
we find further that the proportion of cash payment to the other things of value constituting the total payment,
as determined on the basis of the areas of the lands expropriated, is not unduly oppressive upon the
landowner. It is noted that the smaller the land, the bigger the payment in money, primarily because the small
landowner will be needing it more than the big landowners, who can afford a bigger balance in bonds and other
things of value. No less importantly, the government financial instruments making up the balance of the
payment are "negotiable at any time." The other modes, which are likewise available to the landowner at his
option, are also not unreasonable because payment is made in shares of stock, LBP bonds, other properties or
assets, tax credits, and other things of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little
inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their forebearance and even sacrifice, will
not begrudge us their indispensable share in the attainment of the ideal of agrarian reform. Otherwise, our
pursuit of this elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be viable
any more as it appears that Section 4 of the said Order has been superseded by Section 14 of the CARP Law.
This repeats the requisites of registration as embodied in the earlier measure but does not provide, as the
latter did, that in case of failure or refusal to register the land, the valuation thereof shall be that given by the
provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the just compensation
shall be ascertained on the basis of the factors mentioned in its Section 17 and in the manner provided for in
Section 16.
The last major challenge to CARP is that the landowner is divested of his property even before actual payment
to him in full of just compensation, in contravention of a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the condemnor until the
judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date on
which the petition under the Eminent Domain Act, or the commissioner's report under the Local Improvement
Act, is filed.51
... although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the
property taken remains in the owner until payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property does not
pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be
uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was held that "actual payment to the
owner of the condemned property was a condition precedent to the investment of the title to the property in the
State" albeit "not to the appropriation of it to public use." In Rexford v. Knight, 55 the Court of Appeals of New
York said that the construction upon the statutes was that the fee did not vest in the State until the payment of
the compensation although the authority to enter upon and appropriate the land was complete prior to the

payment. Kennedy further said that "both on principle and authority the rule is ... that the right to enter on and
use the property is complete, as soon as the property is actually appropriated under the authority of law for a
public use, but that the title does not pass from the owner without his consent, until just compensation has
been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction is such
as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from
an unwilling owner until compensation is paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972 and
declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized farm except that
"no title to the land owned by him was to be actually issued to him unless and until he had become a fullfledged 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 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 farmer's rights. But we have to start
somewhere. In the pursuit of agrarian reform, we do not tread on familiar ground but grope on terrain fraught
with pitfalls and expected difficulties. This is inevitable. The CARP Law is not a tried and tested project. On the
contrary, to use Justice Holmes's words, "it is an experiment, as all life is an experiment," and so we learn as
we venture forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should
strive for it by all means. Meantime, we struggle as best we can in freeing the farmer from the iron shackles
that have unconscionably, and for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform program are
removed, to clear the way for the true freedom of the farmer. We may now glimpse the day he will be released
not only from want but also from the exploitation and disdain of the past and from his own feelings of
inadequacy and helplessness. At last his servitude will be ended forever. At last the farm on which he toils will
be his farm. It will be his portion of the Mother Earth that will give him not only the staff of life but also the joy of
living. And where once it bred for him only deep despair, now can he see in it the fruition of his hopes for a
more fulfilling future. Now at last can he banish from his small plot of earth his insecurities and dark
resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED
against all the constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State only upon full payment of
compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are retained and
recognized.
4. Landowners who were unable to exercise their rights of retention under P.D. No. 27 shall
enjoy the retention rights granted by R.A. No. 6657 under the conditions therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.
SO ORDERED.
Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 127876 December 17, 1999

ROXAS & CO., INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, DEPARTMENT OF AGRARIAN REFORM, SECRETARY OF
AGRARIAN REFORM, DAR REGIONAL DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN REFORM
OFFICER OF NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN REFORM ADJUDICATION
BOARD,respondents.

PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the validity of the
acquisition of these haciendas by the government under Republic Act No. 6657, the Comprehensive Agrarian
Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three haciendas, namely,
Haciendas Palico, Banilad and Caylaway, all located in the Municipality of Nasugbu, Batangas. Hacienda
Palico is 1,024 hectares in area and is registered under Transfer Certificate of Title (TCT) No. 985. This land is
covered by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050 hectares
in area, registered under TCT No. 924 and covered by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda
Caylaway is 867.4571 hectares in area and is registered under TCT Nos. T-44662, T-44663, T-44664 and T44665.
The events of this case occurred during the incumbency of then President Corazon C. Aquino. In February
1986, President Aquino issued Proclamation No. 3 promulgating a Provisional Constitution. As head of the
provisional government, the President exercised legislative power "until a legislature is elected and convened
under a new Constitution." 1 In the exercise of this legislative power, the President signed on July 22, 1987,
Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and Executive Order No. 229
providing the mechanisms necessary to initially implement the program.
On July 27, 1987, the Congress of the Philippines formally convened and took over legislative power from the
President. 2 This Congress passed Republic Act No. 6657, the Comprehensive Agrarian Reform Law (CARL)
of 1988. The Act was signed by the President on June 10, 1988 and took effect on June 15, 1988.
Before the law's effectivity, on May 6, 1988, petitioner filed with respondent DAR a voluntary offer
to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229. Haciendas Palico and Banilad were
later placed under compulsory acquisition by respondent DAR in accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal Agrarian Reform Officer (MARO) of
Nasugbu, Batangas, sent a notice entitled "Invitation to Parties" to petitioner. The Invitation was addressed to
"Jaime Pimentel, Hda. Administrator, Hda. Palico." 3 Therein, the MARO invited petitioner to a conference on
October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR investigation of Hacienda

Palico, which was "scheduled for compulsory acquisition this year under the Comprehensive Agrarian Reform
Program." 4
On October 25, 1989, the MARO completed three (3) Investigation Reports after investigation and ocular
inspection of the Hacienda. In the first Report, the MARO found that 270 hectares under Tax Declaration Nos.
465, 466, 468 and 470 were "flat to undulating (0-8% slope)" and actually occupied and cultivated by 34 tillers
of sugarcane. 5 In the second Report, the MARO identified as "flat to undulating" approximately 339 hectares
under TaxDeclaration No. 0234 which also had several actual occupants and tillers of sugarcane; 6 while in the
third Report, the MARO found approximately 75 hectare under Tax Declaration No. 0354 as "flat to undulating"
with 33 actual occupants and tillersalso of sugarcane. 7
On October 27, 1989, a "Summary Investigation Report" was submitted and signed jointly by the MARO,
representatives of the Barangay Agrarian Reform Committee (BARC) and Land Bank of the Philippines (LBP),
and by the Provincial Agrarian Reform Officer (PARO). The Report recommended that 333.0800 hectares of
Hacienda Palico be subject to compulsory acquisition at a value of P6,807,622.20. 8 The following day, October
28, 1989, two (2) more Summary Investigation Reports were submitted by the same officers and
representatives. They recommended that 270.0876 hectares and 75.3800 hectares be placed under
compulsory acquisition at a compensation of P8,109,739.00 and P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary Miriam D. Santiago sent a
"Notice of Acquisition" to petitioner. The Notice was addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila. 10
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were subject to immediate
acquisition and distribution by the government under the CARL; that based on the DAR's valuation criteria, the
government was offering compensation of P3.4 million for 333.0800 hectares; that whether this offer was to be
accepted or rejected, petitioner was to inform the Bureau of Land Acquisition and Distribution (BLAD) of the
DAR; that in case of petitioner's rejection or failure to reply within thirty days, respondent DAR shall conduct
summary administrative proceedings with notice to petitioner to determine just compensation for the land; that
if petitioner accepts respondent DAR's offer, or upon deposit of the compensation with an accessible bank if it
rejects the same, the DAR shall take immediate possession of the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager three (3) separate Memoranda entitled "Request to Open Trust Account." Each Memoranda
requested that a trust account representing the valuation of three portions of Hacienda Palico be opened in
favor of the petitioner in view of the latter's rejection of its offered value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of Haciendas Palico
and Banilad from agricultural to non-agricultural lands under the provisions of the CARL. 13 On July 14, 1993,
petitioner sent a letter to the DAR Regional Director reiterating its request for conversion of the two
haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded with the acquisition of the two
Haciendas. The LBP trust accounts as compensation for Hacienda Palico were replaced by respondent DAR
withcash 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,
CLOA's 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 MARO's
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.
Makati, Metro Manila. 25
Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190 hectares and
P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation Manager a "Request to
Open Trust Account" in petitioner's name as compensation for 234.6493 hectares of Hacienda Banilad. 27 A
second "Request to Open Trust Account" was sent on November 18, 1991 over 723.4130 hectares of said
Hacienda. 28
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and P21,234,468.78 in cash and
LBP bonds had been earmarked as compensation for petitioner's land in Hacienda Banilad. 29

On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988 before the effectivity of
the CARL. The Hacienda has a total area of 867.4571 hectares and is covered by four (4) titles TCT Nos. T44662, T-44663, T-44664 and T-44665. On January 12, 1989, respondent DAR, through the Regional Director
for Region IV, sent to petitioner two (2) separate Resolutions accepting petitioner's voluntary offer to sell
Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663. 30 The Resolutions were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M 31
On September 4, 1990, the DAR Regional Director issued two separate Memoranda to the LBP Regional
Manager requesting for the valuation of the land under TCT Nos. T-44664 and T-44663. 32 On the same day,
respondent DAR, through the Regional Director, sent to petitioner a "Notice of Acquisition" over 241.6777
hectares under TCT No. T-44664 and 533.8180 hectares under TCT No. T-44663. 33 Like the Resolutions of
Acceptance, the Notice of Acquisition was addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent a letter to the
Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway. The Sangguniang Bayan of
Nasugbu, Batangas allegedly authorized the reclassification of Hacienda Caylaway from agricultural to nonagricultural. As a result, petitioner informed respondent DAR that it was applying for conversion of Hacienda
Caylaway from agricultural to other
uses. 34
In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that a reclassification of
the land would not exempt it from agrarian reform. Respondent Secretary also denied petitioner's withdrawal of
the VOS on the ground that withdrawal could only be based on specific grounds such as unsuitability of the soil
for agriculture, or if the slope of the land is over 18 degrees and that the land is undeveloped. 35
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 non-agricultural 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 CLOA's 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 non-agricultural.
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.
Petitioner's 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
PETITIONER'S CAUSE OF ACTION IS PREMATURE FOR FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT ILLEGALITY OF THE
RESPONDENTS' ACTS, THE IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL ACTS,
AND THE ABSENCE OF A PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY
COURSE OF LAW ALL OF WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONER'S LANDHOLDINGS ARE SUBJECT TO COVERAGE UNDER THE
COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED FACT THAT
PETITIONER'S LANDHOLDINGS HAVE BEEN CONVERTED TO NON-AGRICULTURAL
USES BY PRESIDENTIAL PROCLAMATION NO. 1520 WHICH DECLARED THE
MUNICIPALITY NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE ZONING
ORDINANCE OF THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING CERTAIN
PORTIONS OF PETITIONER'S LANDHOLDINGS AS NON-AGRICULTURAL, BOTH OF
WHICH PLACE SAID LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR
AT THE VERY LEAST ENTITLE PETITIONER TO APPLY FOR CONVERSION AS CONCEDED
BY RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO DECLARE
THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR FAILURE TO OBSERVE DUE
PROCESS, CONSIDERING THAT RESPONDENTS BLATANTLY DISREGARDED THE
PROCEDURE FOR THE ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER AND TO
PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO
RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS
PROPERTY WITHOUT JUST COMPENSATION, CONSIDERING THAT PETITIONER WAS

NOT PAID JUST COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF

ITS LANDHOLDINGS THROUGH THE ISSUANCE OF CLOA'S TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1) whether this Court can take cognizance of this
petition despite petitioner's failure to exhaust administrative remedies; (2) whether the acquisition proceedings
over the three haciendas were valid and in accordance with law; and (3) assuming the haciendas may be
reclassified from agricultural to non-agricultural, whether this court has the power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals gravely erred in finding that
petitioner failed to exhaust administrative remedies. As a general rule, before a party may be allowed to invoke
the jurisdiction of the courts of justice, he is expected to have exhausted all means of administrative redress.
This is not absolute, however. There are instances when judicial action may be resorted to immediately. Among
these exceptions are: (1) when the question raised is purely legal; (2) when the administrative body is in
estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial
intervention; (5) when the respondent acted in disregard of due process; (6) when the respondent is a
department secretary whose acts, as an alter ego of the President, bear the implied or assumed approval of
the latter; (7) when irreparable damage will be suffered; (8) when there is no other plain, speedy and adequate
remedy; (9) when strong public interest is involved; (10) when the subject of the controversy is private land;
and (11) in quo warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation of its rights and to require it to
exhaust administrative remedies before the DAR itself was not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to farmer beneficiaries over portions
of petitioner's land without just compensation to petitioner. A Certificate of Land Ownership Award (CLOA) is
evidence of ownership of land by a beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of
1988. 43 Before this may be awarded to a farmer beneficiary, the land must first be acquired by the State from
the landowner and ownership transferred to the former. The transfer of possession and ownership of the land
to the government are conditioned upon the receipt by the landowner of the corresponding payment or deposit
by the DAR of the compensation with an accessible bank. Until then, title remains with the landowner. 44 There
was no receipt by petitioner of any compensation for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law provides that the deposit must be
made only in "cash" or "LBP bonds." 45 Respondent DAR's opening of trust account deposits in petitioner' s
name with the Land Bank of the Philippines does not constitute payment under the law. Trust account deposits
are not cash or LBP bonds. The replacement of the trust account with cash or LBP bonds did not ipso
facto cure the lack of compensation; for essentially, the determination of this compensation was marred by lack
of due process. In fact, in the entire acquisition proceedings, respondent DAR disregarded the basic
requirements of administrative due process. Under these circumstances, the issuance of the CLOA's to farmer
beneficiaries necessitated immediate judicial action on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the acquisition proceedings themselves.
Before we rule on this matter, however, there is need to lay down the procedure in the acquisition of private
lands under the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL), provides for two (2) modes
of acquisition of private land: compulsory and voluntary. The procedure for the compulsory acquisition of
private lands is set forth in Section 16 of R.A. 6657, viz:

Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private
lands, the following procedures shall be followed:
a). After having identified the land, the landowners and the beneficiaries, the
DAR shall send its notice to acquire the land to the owners thereof, by personal
delivery or registered mail, and post the same in a conspicuous place in the
municipal building and barangay hall of the place where the property is located.
Said notice shall contain the offer of the DAR to pay a corresponding value in
accordance with the valuation set forth in Sections 17, 18, and other pertinent
provisions hereof.
b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative
shall inform the DAR of his acceptance or rejection of the offer.
c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner
the purchase price of the land within thirty (30) days after he executes and
delivers a deed of transfer in favor of the Government and surrenders the
Certificate of Title and other muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation 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 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 regular
courts for final determination of just compensation.

The DAR has made compulsory acquisition the priority mode of the 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 or 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 1 MARO Investigation Report
b) CARP CA Form 2 Summary Investigation Report of 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 abovementioned 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 farmerbeneficiaries, 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.

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 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 farmerbeneficiaries the representatives of the Barangay Agrarian Reform Committee (BARC), the Land Bank of the
Philippines (LBP) and other interested parties to discuss the inputs to the valuation of the property and solicit
views, suggestions, objections or agreements of the parties. At the meeting, the landowner is asked to indicate
his retention area.

The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO) who shall
complete the valuation of the land. Ocular inspection and verification of the property by the PARO shall be
mandatory when the computed value of the estate exceeds P500,000.00. Upon determination of the valuation,
the PARO shall forward all papers together with his recommendation to the Central Office of the DAR. The
DAR Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD), shall 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 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. 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.
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 Farmer's
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 farmerbeneficiaries, landowner, representatives of BARC,
LBP, DENR, DA, NGO's, 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).
xxx xxx xxx
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), nongovernment organizations, farmer's 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 xxx xxx
5 DARMO Issue Notice of Coverage CARP
to LO by personal delivery Form No. 2
with proof of service, or
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 shall CARP
be posted for at least one Form No. 17
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 requirements thru
return indorsement on CARP
Form No. 17.
6 DARMO Send notice to the LBP, CARP
BARC, DENR representatives Form No. 3
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
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 Screen prospective ARBs
BARC and causes the signing of CARP
the Application of Purchase Form No. 5
and Farmer's Undertaking
(APFU).
9 DARMO Furnishes a copy of the CARP
duly accomplished FIR to Form No. 4
the landowner by personal
delivery with proof of
service or registered mail
will 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. 17
compliance with posting
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 Forward VOCF/CACF CARP

to DARPO. Form No. 6

xxx xxx xxx.
DAR A.O. No. 1, Series of 1993, modified the identification process and increased the number of government
agencies involved in the identification and delineation of the land subject to acquisition. 56 This time, the Notice
of Coverage is sent to the landowner before the conduct of the field investigation and the sending must comply
with specific requirements. Representatives of the DAR Municipal Office (DARMO) must send the Notice of
Coverage to the landowner by "personal delivery with proof of service, or by registered mail with return card,"
informing him that his property is under CARP coverage and that if he desires to avail of his right of retention,
he may choose which area he shall retain. The Notice of Coverage shall also invite the landowner to attend the
field investigation to be scheduled at least two weeks from notice. The field investigation is for the purpose of
identifying the landholding and determining its suitability for agriculture and its productivity. A copy of the Notice
of Coverage shall be posted for at least one week on the bulletin board of the municipal and barangay halls
where the property is located. The date of the field investigation shall also be sent by the DAR Municipal Office
to representatives of the LBP, BARC, DENR and prospective farmer beneficiaries. The field investigation shall
be conducted on the date set with the participation of the landowner and the various representatives. If the
landowner and other representatives are absent, the field investigation shall proceed, provided they were duly
notified thereof. Should there be a variance between the findings of the DAR and the LBP as to whether the
land be placed under agrarian reform, the land's suitability to agriculture, the degree or development of the
slope, etc., the conflict shall be resolved by a composite team of the DAR, LBP, DENR and DA which shall
jointly conduct further investigation. The team's findings shall be binding on both DAR and LBP. After the field
investigation, the DAR Municipal Office shall prepare the Field Investigation Report and Land Use Map, a copy
of which shall be furnished the landowner "by personal delivery with proof of service or registered mail with
return card." Another copy of the Report and Map shall likewise be posted for at least one week in the
municipal or barangay halls where the property is located.
Clearly then, the notice requirements under the CARL are not confined to the Notice of Acquisition set forth in
Section 16 of the law. They also include the Notice of Coverage first laid down in DAR A.O. No. 12, Series of
1989 and subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993. This
Notice of Coverage does not merely notify the landowner that his property shall be placed under CARP and
that he is entitled to exercise his retention right; it also notifies him, pursuant to DAR A.O. No. 9, Series of
1990, that a public hearing, shall be conducted where he and representatives of the concerned sectors of
society may attend to discuss the results of the field investigation, the land valuation and other pertinent
matters. Under DAR A.O. No. 1, Series of 1993, the Notice of Coverage also informs the landowner that a field
investigation of his landholding shall be conducted where he and the other representatives may be present.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano, sent a letter of invitation
entitled "Invitation to Parties" dated September 29, 1989 to petitioner corporation, through Jaime Pimentel, the
administrator of Hacienda Palico. 57 The invitation was received on the same day it was sent as indicated by a
signature and the date received at the bottom left corner of said invitation. With regard to Hacienda Banilad,
respondent DAR claims that Jaime Pimentel, administrator also of Hacienda Banilad, was notified and sent an
invitation to the conference. Pimentel actually attended the conference on September 21, 1989 and signed the
Minutes of the meeting on behalf of petitioner corporation. 58 The 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
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. 65Petitioner's evidence does not show the official duties of Jaime
Pimentel as administrator of petitioner's haciendas. The evidence does not indicate whether Pimentel's 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, petitioner's principal place of business was listed in respondent DAR's records as
"Soriano Bldg., Plaza Cervantes, Manila," 66 and "7th Flr. Cacho-Gonzales Bldg., 101 Aguirre St., Makati, Metro
Manila." 67Pimentel 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 petitioner's 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. 68Why 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 petitioner's landholdings. Even respondent DAR's
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 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 DAR's 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:
Sec. 6. Retention Limits. . . . .
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.
xxx xxx xxx.
Sec. 9 of E.O. 229 provides:
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 the two of these four
titles. 75 The land covered by 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 petitioner's 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 nonagricultural. 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 by the Sangguniang Panlalawigan of Batangas on March 8, 1993. 84
Petitioner claims that proclamation No. 1520 was also upheld by respondent DAR in 1991 when it approved
conversion of 1,827 hectares in Nasugbu into a tourist area known as the Batulao Resort Complex, and 13.52
hectares in Barangay Caylaway as within the potential tourist belt. 85 Petitioner present evidence before us that
these areas are adjacent to the haciendas subject of this petition, hence, the haciendas should likewise be
converted. Petitioner urges this Court to take cognizance of the conversion proceedings and rule accordingly. 6
We do not agree. Respondent DAR's failure to observe due process in the acquisition of petitioner's
landholdings does not ipso facto give this Court the power to adjudicate over petitioner's application for
conversion of its haciendas from agricultural to non-agricultural. The agency charged with the mandate of
approving or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure governing the processing and
approval of applications for land use conversion was the DAR A.O. No. 2, Series of 1990. Under this A.O., the
application for conversion is filed with the MARO where the property is located. The MARO reviews the
application and its supporting documents and conducts field investigation and ocular inspection of the property.
The findings of the MARO are subject to review and evaluation by the Provincial Agrarian Reform Officer
(PARO). The PARO may conduct further field investigation and submit a supplemental report together with his
recommendation to the Regional Agrarian Reform Officer (RARO) who shall review the same. For lands less
than five hectares, the RARO shall approve or disapprove applications for conversion. For lands exceeding five
hectares, the RARO shall evaluate the PARO Report and forward the records and his report to the
Undersecretary for Legal Affairs. Applications over areas exceeding fifty hectares are approved or disapproved
by the Secretary of Agrarian Reform.
The DAR's mandate over applications for conversion was first laid down in Section 4 (j) and Section 5 (l) of
Executive Order No. 129-A, Series of 1987 and reiterated in the CARL and Memorandum Circular No. 54,
Series of 1993 of the Office of the President. The DAR's jurisdiction over applications for conversion is
provided as follows:
A. The Department of Agrarian Reform (DAR) is mandated to "approve or
disapprove applications for conversion, restructuring or readjustment of
agricultural lands into non-agricultural uses," pursuant to Section 4 (j) of
Executive Order No. 129-A, Series of 1987.
B. Sec. 5 (l) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority
to approve or disapprove applications for conversion of agricultural lands for
residential, commercial, industrial and other land uses.
C. Sec. 65 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, likewise empowers the DAR to authorize under certain
conditions, the conversion of agricultural lands.
D. Sec. 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the
President, provides that "action on applications for land use conversion on
individual landholdings shall remain as the responsibility of the DAR, which shall
utilize as its primary reference, documents on the comprehensive land use plans
and 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. 91Respondent DAR is in a better position to resolve petitioner's application for conversion, being
primarily the agency possessing the necessary expertise on the matter. The power to determine whether
Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of the CARL
lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of due process in the
acquisition proceedings does not give this Court the power to nullify the CLOA's already issued to the farmer
beneficiaries. To assume the power is to short-circuit the administrative process, which has yet to run its
regular course. Respondent DAR must be given the chance to correct its procedural lapses in the acquisition
proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993. 92 Since then
until the present, these farmers have been cultivating their lands. 93 It goes against the basic precepts of
justice, fairness and equity to deprive these people, through no fault of their own, of the land they till. Anyhow,
the farmer beneficiaries hold the property in trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over the three haciendas
are nullified for respondent DAR's failure to observe due process therein. In accordance with the guidelines set
forth in this decision and the applicable administrative procedure, the case is hereby remanded to respondent
DAR for proper acquisition proceedings and determination of petitioner's application for conversion.
SO ORDERED.

Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena, Gonzaga-Reyes and De Leon, Jr.,
JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Ynares-Santiago, J., concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of Justice C. Y. Santiago.
Quisumbing, J., I join the in the concurring and dissenting opinion of J. Santiago.
Pardo, J., I join the concurring and dissenting opinion of J. Santiago.
Separate Opinions
MELO, J., concurring and dissenting opinion;
I concur in the ponencia of Justice Ynares-Santiago, broad and exhaustive as it is in its treatment of the issues.
However, I would like to call attention to two or three points which I believe are deserving of special emphasis.
The apparent incongruity or shortcoming in the petition is DAR's disregard of a law which settled the nonagricultural nature of the property as early as 1975. Related to this are the inexplicable contradictions between
DAR's own official issuances and its challenged actuations in this particular case.
Presidential Proclamation No. 1520 has the force and effect of law unless repealed. This law declared
Nasugbu, Batangas as a tourist zone.
Considering the new and pioneering stage of the tourist industry in 1975, it can safely be assumed that
Proclamation 1520 was the result of empirical study and careful determination, not political or extraneous
pressures. It cannot be disregarded by DAR or any other department of Government.
In Province of Camarines Sur, et al. vs. Court of Appeals, et al. (222 SCRA 173, 182 [1993]), we ruled that
local governments need not obtain the approval of DAR to reclassify lands from agricultural to non-agricultural
use. In the present case, more than the exercise of that power, the local governments were merely putting into
effect a law when they enacted the zoning ordinances in question.
Any doubts as to the factual correctness of the zoning reclassifications are answered by the February 2, 1993
certification of the Department of Agriculture that the subject landed estates are not feasible and economically
viable for agriculture, based on the examination of their slope, terrain, depth, irrigability, fertility, acidity, and
erosion considerations.
I agree with the ponencia's rejection of respondent's argument that agriculture is not incompatible and may be
enforced in an area declared by law as a tourist zone. Agriculture may contribute to the scenic views and
variety of countryside profiles but the issue in this case is not the beauty of ricefields, cornfields, or coconut
groves. May land found to be non-agricultural and declared as a tourist zone by law, be withheld from the
owner's efforts to develop it as such? There are also plots of land within Clark Field and other commercialindustrial zones capable of cultivation but this does not subject them to compulsory land reform. It is the best
use of the land for tourist purposes, free trade zones, export processing or the function to which it is dedicated
that is the determining factor. Any cultivation is temporary and voluntary.
The other point I wish to emphasize is DAR's failure to follow its own administrative orders and regulations in
this case.
The contradictions between DAR administrative orders and its actions in the present case may be
summarized:

1. DAR Administrative Order No. 6, Series of 1994, subscribes to Department of Justice Opinion No. 44, Series
of 1990 that lands classified as non-agricultural prior to June 15, 1988 when the CARP Law was passed are
exempt from its coverage. By what right can DAR now ignore its own Guidelines in this case of land declared
as forming a tourism zone since 1975?
2. DAR Order dated January 22, 1991 granted the conversion of the adjacent and contiguous property of
Group Developers and Financiers, Inc. (GDFI) into the Batulao Tourist Resort. Why should DAR have a
contradictory stance in the adjoining property of Roxas and Co., Inc. found to be similar in nature and declared
as such?
3. DAR Exemption Order, Case No. H-9999-050-97 dated May 17, 1999 only recently exempted 13.5 hectares
of petitioner's property also found in Caylaway together, and similarly situated, with the bigger parcel
(Hacienda Caylaway) subject of this petition from CARL coverage. To that extent, it admits that its earlier
blanket objections are unfounded.
4. DAR Administrative Order No. 3, Series of 1996 identifies the land outside of CARP coverage as:
(a) Land found by DAR as no longer suitable for agriculture and which cannot be
given appropriate valuation by the Land Bank;
(b) Land where DAR has already issued a conversion order;
(c) Land determined as exempt under DOJ Opinions Nos. 44 and 181; or
(d) Land declared for non-agricultural use by Presidential Proclamation.
It is readily apparent that the land in this case falls under all the above categories except the second one. DAR
is acting contrary to its own rules and regulations.
I should add that DAR has affirmed in a Rejoinder (August 20, 1999) the issuance and effectivity of the above
administrative orders.
DAR Administrative Order No. 3, Series of 1996, Paragraph 2 of Part II, Part III and Part IV outlines the
procedure for reconveyance of land where CLOAs have been improperly issued. The procedure is
administrative, detailed, simple, and speedy. Reconveyance is implemented by DAR which treats the
procedure as "enshrined . . . in Section 50 of Republic Act No. 6657" (Respondent's Rejoinder). Administrative
Order No. 3, Series of 1996 shows there are no impediments to administrative or judicial cancellations of
CLOA's improperly issued over exempt property. Petitioner further submits, and this respondent does not
refute, that 25 CLOAs covering 3,338 hectares of land owned by the Manila Southcoast Development
Corporation also found in Nasugbu, Batangas, have been cancelled on similar grounds as those in the case at
bar.
The CLOAs in the instant case were issued over land declared as non-agricultural by a presidential
proclamation and confirmed as such by actions of the Department of Agriculture and the local government
units concerned. The CLOAs were issued over adjoining lands similarly situated and of like nature as those
declared by DAR as exempt from CARP coverage. The CLOAs were surprisingly issued over property which
were the subject of pending cases still undecided by DAR. There should be no question over the CLOAs
having been improperly issued, for which reason, their cancellation is warranted.

YNARES-SANTIAGO, J., concurring and dissenting opinion;

I concur in the basic premises of the majority opinion. However, I dissent in its final conclusions and the
dispositive portion.

With all due respect, the majority opinion centers on procedure but unfortunately ignores the substantive merits
which this procedure should unavoidably sustain.
The assailed decision of the Court of Appeals had only one basic reason for its denial of the petition, i.e., the
application of the doctrine of non-exhaustion of administrative remedies. This Court's
majority ponencia correctly reverses the Court of Appeals on this issue. The ponencia now states that the
issuance of CLOA's to farmer beneficiaries deprived petitioner Roxas & Co. of its property without just
compensation. It rules that the acts of the Department of Agrarian Reform are patently illegal. It concludes that
petitioner's rights were violated, and thus to require it to exhaust administrative remedies before DAR was not
a plain, speedy, and adequate remedy. Correctly, petitioner sought immediate redress from the Court of
Appeals to this Court.
However, I respectfully dissent from the judgment which remands the case to the DAR. If the acts of DAR are
patently illegal and the rights of Roxas & Co. violated, the wrong decisions of DAR should be reversed and set
aside. It follows that the fruits of the wrongful acts, in this case the illegally issued CLOAs, must be declared
null and void.
Petitioner Roxas & Co. Inc. is the registered owner of three (3) haciendas located in Nasugbu, Batangas,
namely: Hacienda Palico comprising of an area of 1,024 hectares more or less, covered by Transfer Certificate
of Title No. 985 (Petition, Annex "G"; Rollo, p. 203); Hacienda Banilad comprising an area of 1,050 hectares
and covered by TCT No. 924 (Petition, Annex "I"; Rollo, p. 205); and Hacienda Caylaway comprising an area of
867.4571 hectares and covered by TCT Nos. T-44655 (Petition, Annex "O"; Rollo, p. 216), T-44662 (Petition,
Annex "P"; Rollo, p. 217), T-44663 (Petition, Annex "Q"; Rollo, p. 210) and T-44664 (Petition, Annex "R"; Rollo,
p. 221).
Sometime in 1992 and 1993, petitioner filed applications for conversion with DAR. Instead of either denying or
approving the applications, DAR ignored and sat on them for seven (7) years. In the meantime and in acts of
deceptive lip-service, DAR excluded some small and scattered lots in Palico and Caylaway from CARP
coverage. The majority of the properties were parceled out to alleged farmer-beneficiaries, one at a time, even
as petitioner's applications were pending and unacted upon.
The majority ponencia cites Section 16 of Republic Act No. 6657 on the procedure for acquisition of private
lands.
The ponencia cites the detailed procedures found in DAR Administrative Order No. 12, Series of 1989 for the
identification of the land to be acquired. DAR did not follow its own prescribed procedures. There was no valid
issuance of a Notice of Coverage and a Notice of Acquisition.
The procedure on the evaluation and determination of land valuation, the duties of the Municipal Agrarian
Reform Officer (MARO), the Barangay Agrarian Reform Committee (BARC), Provincial Agrarian Reform Officer
(PARO) and the Bureau of Land Acquisition and Distribution (BLAD), the documentation and reports on the
step-by-step process, the screening of prospective Agrarian Reform Beneficiaries (ARBs), the land survey and
segregation survey plan, and other mandatory procedures were not followed. The landowner was not properly
informed of anything going on.
Equally important, there was no payment of just compensation. I agree with the ponencia that due process was
not observed in the taking of petitioner's properties. Since the DAR did not validly acquire ownership over the
lands, there was no acquired property to validly convey to any beneficiary. The CLOAs were null and void from
the start.
Petitioner states that the notices of acquisition were sent by respondents by ordinary mail only, thereby
disregarding the procedural requirement that notices be served personally or by registered mail. This is not
disputed by respondents, but they allege that petitioner changed its address without notifying the DAR.
Notably, the procedure prescribed speaks of only two modes of service of notices of acquisition personal
service and service by registered mail. The non-inclusion of other modes of service can only mean that the

legislature intentionally omitted them. In other words, service of a notice of acquisition other than personally or
by registered mail is not valid. Casus omissus pro omisso habendus est. The reason is obvious. Personal
service and service by registered mail are methods that ensure the receipt by the addressee, whereas service
by ordinary mail affords no reliable proof of receipt.
Since it governs the extraordinary method of expropriating private property, the CARL should be strictly
construed. Consequently, faithful compliance with its provisions, especially those which relate to the procedure
for acquisition of expropriated lands, should be observed. Therefore, the service by respondent DAR of the
notices of acquisition to petitioner by ordinary mail, not being in conformity with the mandate of R.A. 6657, is
invalid and ineffective.
With more reason, the compulsory acquisition of portions of Hacienda Palico, for which no notices of
acquisition were issued by the DAR, should be declared invalid.
The entire ponencia, save for the last six (6) pages, deals with the mandatory procedures promulgated by law
and DAR and how they have not been complied with. There can be no debate over the procedures and their
violation. However, I respectfully dissent in the conclusions reached in the last six pages. Inspite of all the
violations, the deprivation of petitioner's rights, the non-payment of just compensation, and the consequent
nullity of the CLOAs, the Court is remanding the case to the DAR for it to act on the petitioner's pending
applications for conversion which have been unacted upon for seven (7) years.
Petitioner had applications for conversion pending with DAR. Instead of deciding them one way or the other,
DAR sat on the applications for seven (7) years. At that same time it rendered the applications inutile by
distributing CLOAs to alleged tenants. This action is even worse than a denial of the applications because DAR
had effectively denied the application against the applicant without rendering a formal decision. This kind of
action preempted any other kind of decision except denial. Formal denial was even unnecessary. In the case of
Hacienda Palico, the application was in fact denied on November 8, 1993.
There are indisputable and established factors which call for a more definite and clearer judgment.
The basic issue in this case is whether or not the disputed property is agricultural in nature and covered by
CARP. That petitioner's lands are non-agricultural in character is clearly shown by the evidence presented by
petitioner, all of which were not disputed by respondents. The disputed property is definitely not subject to
CARP.
The nature of the land as non-agricultural has been resolved by the agencies with primary jurisdiction and
competence to decide the issue, namely (1) a Presidential Proclamation in 1975; (2) Certifications from the
Department of Agriculture; (3) a Zoning Ordinance of the Municipality of Nasugbu, approved by the Province of
Batangas; and (4) by clear inference and admissions, Administrative Orders and Guidelines promulgated by
DAR itself.
The records show that on November 20, 1975 even before the enactment of the CARP law, the Municipality of
Nasugbu, Batangas was declared a "tourist zone" in the exercise of lawmaking power by then President
Ferdinand E. Marcos under Proclamation No. 1520 (Rollo, pp. 122-123). This Presidential Proclamation is
indubitably part of the law of the land.
On 20 March 1992 the Sangguniang Bayan of Nasugbu promulgated its Resolution No. 19, a zonification
ordinance (Rollo, pp. 124-200), pursuant to its powers under Republic Act No. 7160, i.e., the Local
Government Code of 1991. The municipal ordinance was approved by the Sangguniang Panlalawigan of
Batangas (Rollo, p. 201). Under this enactment, portions of the petitioner's properties within the municipality
were re-zonified as intended and appropriate for non-agricultural uses. These two issuances, together with
Proclamation 1520, should be sufficient to determine the nature of the land as non-agricultural. But there is
more.

The records also contain a certification dated March 1, 1993 from the Director of Region IV of the Department
of Agriculture that the disputed lands are no longer economically feasible and sound for agricultural purposes
(Rollo, p. 213).
DAR itself impliedly accepted and determined that the municipality of Nasugbu is non-agricultural when it
affirmed the force and effect of Presidential Proclamation 1520. In an Order dated January 22, 1991, DAR
granted the conversion of the adjoining and contiguous landholdings owned by Group Developer and
Financiers, Inc. in Nasugbu pursuant to the Presidential Proclamation. The property alongside the disputed
properties is now known as "Batulao Resort Complex". As will be shown later, the conversion of various other
properties in Nasugbu has been ordered by DAR, including a property disputed in this petition, Hacienda
Caylaway.
Inspite of all the above, the Court of Appeals concluded that the lands comprising petitioner's haciendas are
agricultural, citing, among other things, petitioner's acts of voluntarily offering Hacienda Caylaway for sale and
applying for conversion its lands from agricultural to non-agricultural.
Respondents, on the other hand, did not only ignore the administrative and executive decisions. It also
contended that the subject land should be deemed agricultural because it is neither residential, commercial,
industrial or timber. The character of a parcel of land, however, is not determined merely by a process of
elimination. The actual use which the land is capable of should be the primordial factor.
RA 6657 explicitly limits its coverage thus:
The Comprehensive Agrarian Reform Law of 1998 shall cover, regardless of tenurial
arrangement and commodity produced, all public and private agricultural lands as provided in
Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain
suitable for agriculture.
More specifically, the following lands are covered by the Comprehensive Agrarian Reform
Program:
(a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture.
No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the
approval of this Act until Congress, taking into account, ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the public domain;
(b) All lands of the public domain in excess of the specific limits as determined by Congress in
the preceding paragraph;
(c) All other lands owned by the Government devoted to or suitable for agriculture; and
(d) All private lands devoted to or suitable for a agriculture regardless of the agricultural
products raised or that can be raised thereon." (RA 6657, Sec. 4; emphasis provided)
In Luz Farms v. Secretary of the Department of Agrarian Reform and Natalia Realty, Inc. v. Department of
Agrarian Reform, this Court had occasion to rule that agricultural lands are only those which are arable and
suitable.
It is at once noticeable that the common factor that classifies land use as agricultural, whether it be public or
private land, is its suitability for agriculture. In this connection, RA 6657 defines "agriculture" as follows:
Agriculture, Agricultural Enterprises or Agricultural Activity means the cultivation of the soil,
planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the
harvesting of such farm products, and other farm activities, and practices performed by a farmer

in conjunction with such farming operations done by persons whether natural or juridical. (RA
6657, sec. 3[b])
In the case at bar, petitioner has presented certifications issued by the Department of Agriculture to the effect
that Haciendas Palico, Banilad and Caylaway are not feasible and economically viable for agricultural
development due to marginal productivity of the soil, based on an examination of their slope, terrain, depth,
irrigability, fertility, acidity, and erosion factors (Petition, Annex "L", Rollo, p. 213; Annex "U", Rollo, p. 228). This
finding should be accorded respect considering that it came from competent authority, said Department being
the agency possessed with the necessary expertise to determine suitability of lands to agriculture. The DAR
Order dated January 22, 1991 issued by respondent itself stated that the adjacent land now known as the
Batulao Resort Complex is hilly, mountainous, and with long and narrow ridges and deep gorges. No
permanent sites are planted. Cultivation is by kaingin method. This confirms the findings of the Department of
Agriculture.
Parenthetically, the foregoing finding of the Department of Agriculture also explains the validity of the
reclassification of petitioner's lands by the Sangguniang Bayan of Nasugbu, Batangas, pursuant to Section 20
of the Local Government Code of 1991. It shows that the condition imposed by respondent Secretary of
Agrarian Reform on petitioner for withdrawing its voluntary offer to sell Hacienda Caylaway, i.e., that the soil be
unsuitable for agriculture, has been adequately met. In fact, the DAR in its Order in Case No. A-9999-050-97,
involving a piece of land also owned by petitioner and likewise located in Caylaway, exempted it from the
coverage of CARL (Order dated May 17, 1999; Annex "D" of Petitioner's Manifestation), on these grounds.
Furthermore, and perhaps more importantly, the subject lands are within an area declared in 1975 by
Presidential Proclamation No. 1520 to be part of a tourist zone. This determination was made when the tourism
prospects of the area were still for the future. The studies which led to the land classification were relatively
freer from pressures and, therefore, more objective and open-minded. Respondent, however, contends that
agriculture is not incompatible with the lands' being part of a tourist zone since "agricultural production, by
itself, is a natural asset and, if properly set, can command tremendous aesthetic value in the form of scenic
views and variety of countryside profiles." (Comment, Rollo, 579).
The contention is untenable. Tourist attractions are not limited to scenic landscapes and lush greeneries. Verily,
tourism is enhanced by structures and facilities such as hotels, resorts, rest houses, sports clubs and golf
courses, all of which bind the land and render it unavailable for cultivation. As aptly described by petitioner:
The development of resorts, golf courses, and commercial centers is inconsistent with
agricultural development. True, there can be limited agricultural production within the context of
tourism development. However, such small scale farming activities will be dictated by, and
subordinate to the needs or tourism development. In fact, agricultural use of land within
Nasugbu may cease entirely if deemed necessary by the Department of Tourism (Reply, Rollo,
p. 400).
The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary offer to sell Hacienda Caylaway
should not be deemed an admission that the land is agricultural. Rather, the offer was made by petitioner in
good faith, believing at the time that the land could still be developed for agricultural production. Notably, the
offer to sell was made as early as May 6, 1988, before the soil thereon was found by the Department of
Agriculture to be unsuitable for agricultural development (the Certifications were issued on 2 February 1993
and 1 March 1993). Petitioner's withdrawal of its voluntary offer to sell, therefore, was not borne out of a
whimsical or capricious change of heart. Quite simply, the land turned out to be outside of the coverage of the
CARL, which by express provision of RA 6657, Section 4, affects only public and private agricultural lands. As
earlier stated, only on May 17, 1999, DAR Secretary Horacio Morales, Jr. approved the application for a lot in
Caylaway, also owned by petitioner, and confirmed the seven (7) documentary evidences proving the
Caylaway area to be non-agricultural (DAR Order dated 17 May 1999, in Case No. A-9999-050-97, Annex "D"
Manifestation).
The DAR itself has issued administrative circulars governing lands which are outside of CARP and may not be
subjected to land reform. Administrative Order No. 3, Series of 1996 declares in its policy statement what

landholdings are outside the coverage of CARP. The AO is explicit in providing that such non-covered
properties shall be reconveyed to the original transferors or owners.
These non-covered lands are:
a. Land, or portions thereof, found to be no longer suitable for agriculture and,
therefore, could not be given appropriate valuation by the Land Bank of the
Philippines (LBP);
b. Those were a Conversion Order has already been issued by the DAR allowing
the use of the landholding other than for agricultural purposes in accordance with
Section 65 of R.A. No. 6657 and Administrative Order No. 12, Series of 1994;
c. Property determined to be exempted from CARP coverage pursuant to
Department of Justice Opinion Nos. 44 and 181; or
d. Where a Presidential Proclamation has been issued declaring the subject
property for certain uses other than agricultural. (Annex "F", Manifestation dated
July 23, 1999)
The properties subject of this Petition are covered by the first, third, and fourth categories of the Administrative
Order. The DAR has disregarded its own issuances which implement the law.
To make the picture clearer, I would like to summarize the law, regulations, ordinances, and official acts which
show beyond question that the disputed property is non-agricultural, namely:
(a) The Law. Proclamation 1520 dated November 20, 1975 is part of the law of the land. It
declares the area in and around Nasugbu, Batangas, as a Tourist Zone. It has not been
repealed, and has in fact been used by DAR to justify conversion of other contiguous and
nearby properties of other parties.
(b) Ordinances of Local Governments. Zoning ordinance of the Sangguniang Bayan of
Nasugbu, affirmed by the Sangguniang Panlalawigan of Batangas, expressly defines the
property as tourist, not agricultural. The power to classify its territory is given by law to the local
governments.
(c) Certification of the Department of Agriculture that the property is not suitable and viable for
agriculture. The factual nature of the land, its marginal productivity and non-economic feasibility
for cultivation, are described in detail.
(d) Acts of DAR itself which approved conversion of contiguous or adjacent land into the Batulao
Resorts Complex. DAR described at length the non-agricultural nature of Batulao and of portion
of the disputed property, particularly Hacienda Caylaway.
(e) DAR Circulars and Regulations. DAR Administrative Order No. 6, Series of 1994 subscribes
to the Department of Justice opinion that the lands classified as non-agricultural before the
CARP Law, June 15, 1988, are exempt from CARP. DAR Order dated January 22, 1991 led to
the Batulao Tourist Area. DAR Order in Case No. H-9999-050-97, May 17, 1999, exempted 13.5
hectares of Caylaway, similarly situated and of the same nature as Batulao, from coverage.
DAR Administrative Order No. 3, Series of 1996, if followed, would clearly exclude subject
property from coverage.
As earlier shown, DAR has, in this case, violated its own circulars, rules and regulations.

In addition to the DAR circulars and orders which DAR itself has not observed, the petitioner has submitted a
municipal map of Nasugbu, Batangas (Annex "E", Manifestation dated July 23, 1999). The geographical
location of Palico, Banilad, and Caylaway in relation to the GDFI property, now Batulao Tourist Resort, shows
that the properties subject of this case are equally, if not more so, appropriate for conversion as the GDFI
resort.
Petitioner's application for the conversion of its lands from agricultural to non-agricultural was meant to stop the
DAR from proceeding with the compulsory acquisition of the lands and to seek a clear and authoritative
declaration that said lands are outside of the coverage of the CARL and can not be subjected to agrarian
reform.
Petitioner assails respondent's refusal to convert its lands to non-agricultural use and to recognize Presidential
Proclamation No. 1520, stating that respondent DAR has not been consistent in its treatment of applications of
this nature. It points out that in the other case involving adjoining lands in Nasugbu, Batangas, respondent
DAR ordered the conversion of the lands upon application of Group Developers and Financiers, Inc.
Respondent DAR, in that case, issued an Order dated January 22, 1991 denying the motion for
reconsideration filed by the farmers thereon and finding that:
In fine, on November 27, 1975, or before the movants filed their instant motion for
reconsideration, then President Ferdinand E. Marcos issued Proclamation No. 1520, declaring
the municipalities of Maragondon and Ternate in the province of Cavite and the municipality of
Nasugbu in the province of Batangas as tourist zone. Precisely, the landholdings in question are
included in such proclamation. Up to now, this office is not aware that said issuance has been
repealed or amended (Petition, Annex "W"; Rollo, p. 238).
The DAR Orders submitted by petitioner, and admitted by DAR in its Rejoinder (Rejoinder of DAR dated
August 20, 1999), show that DAR has been inconsistent to the extent of being arbitrary.
Apart from the DAR Orders approving the conversion of the adjoining property now called Batulao Resort
Complex and the DAR Order declaring parcels of the Caylaway property as not covered by CARL, a major
Administrative Order of DAR may also be mentioned.
The Department of Justice in DOJ Opinion No. 44 dated March 16, 1990 (Annex "A" of Petitioner's
Manifestation) stated that DAR was given authority to approve land conversions only after June 15, 1988 when
RA 6657, the CARP Law, became effective. Following the DOJ Opinion, DAR issued its AO No. 06, Series of
1994 providing for the Guidelines on Exemption Orders (Annex "B", Id.). The DAR Guidelines state that lands
already classified as non-agricultural before the enactment of CARL are exempt from its coverage.
Significantly, the disputed properties in this case were classified as tourist zone by no less than a Presidential
Proclamation as early as 1975, long before 1988.
The above, petitioner maintains, constitute unequal protection of the laws. Indeed, the Constitution guarantees
that "(n)o person shall be deprived of life, liberty or property without due process of law, nor shall any person
be denied the equal protection of the laws" (Constitution, Art. III, Sec. 1). Respondent DAR, therefore, has no
alternative but to abide by the declaration in Presidential Proclamation 1520, just as it did in the case of Group
Developers and Financiers, Inc., and to treat petitioners' properties in the same way it did the lands of Group
Developers, i.e., as part of a tourist zone not suitable for agriculture.
On the issue of non-payment of just compensation which results in a taking of property in violation of the
Constitution, petitioner argues that the opening of a trust account in its favor did not operate as payment of the
compensation within the meaning of Section 16 (e) of RA 6657. In Land Bank of the Philippines v. Court of
Appeals (249 SCRA 149, at 157 [1995]), this Court struck down as null and void DAR Administrative Circular
No. 9, Series of 1990, which provides for the opening of trust accounts in lieu of the deposit in cash or in bonds
contemplated in Section 16 (e) of RA 6657.

It is very explicit therefrom (Section 16 [e]) that the deposit must be made only in "cash" or in
"LBP bonds." Nowhere does it appear nor can it be inferred that the deposit can be made in any
other form. If it were the intention to include a "trust account" among the valid modes of deposit,
that should have been made express, or at least, qualifying words ought to have appeared from
which it can be fairly deduced that a "trust account" is allowed. In sum, there is no ambiguity in
Section 16(e) of RA 6657 to warrant an expanded construction of the term "deposit."
xxx xxx xxx
In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and
regulations when it issued Administrative Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the landowner as compensation for his property because,
as heretofore discussed, section 16(e) of RA 6657 is very specific that the deposit must be
made only in "cash" or in "LBP bonds." In the same vein, petitioners cannot invoke LRA Circular
Nos. 29, 29-A and 54 because these implementing regulations cannot outweigh the clear
provision of the law. Respondent court therefore did not commit any error in striking down
Administrative Circular No. 9 for being null and void.
There being no valid payment of just compensation, title to petitioner's landholdings cannot be validly
transferred to the Government. A close scrutiny of the procedure laid down in Section 16 of RA 6657 shows the
clear legislative intent that there must first be payment of the fair value of the land subject to agrarian reform,
either directly to the affected landowner or by deposit of cash or LBP bonds in the DAR-designated bank,
before the DAR can take possession of the land and request the register of deeds to issue a transfer certificate
of title in the name of the Republic of the Philippines. This is only proper inasmuch as title to private property
can only be acquired by the government after payment of just compensation In Association of Small
Landowners in the Philippines v. Secretary of Agrarian Reform (175 SCRA 343, 391 [1989]), this Court held:
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.
Necessarily, the issuance of the CLOAs by respondent DAR on October 30, 1993 and their distribution to
farmer-beneficiaries were illegal inasmuch as no valid payment of compensation for the lands was as yet
effected. By law, Certificates of Land Ownership Award are issued only to the beneficiaries after the DAR takes
actual possession of the land (RA 6657, Sec. 24), which in turn should only be after the receipt by the
landowner of payment or, in case of rejection or no response from the landowner, after the deposit of the
compensation for the land in cash or in LBP bonds (RA 6657, Sec. 16[e]).
Respondents argue that the Land Bank ruling should not be made to apply to the compulsory acquisition of
petitioner's landholdings in 1993, because it occurred prior to the promulgation of the said decision (October 6,
1995). This is untenable. Laws may be given retroactive effect on constitutional considerations, where the
prospective application would result in a violation of a constitutional right. In the case at bar, the expropriation
of petitioner's lands was effected without a valid payment of just compensation, thus violating the Constitutional
mandate that "(p)rivate property shall not be taken for public use without just compensation" (Constitution, Art.
III, Sec. 9). Hence, to deprive petitioner of the benefit of the Land Bank ruling on the mere expedient that it
came later than the actual expropriation would be repugnant to petitioner's fundamental rights.
The controlling last two (2) pages of the ponencia state:
Finally, we stress that the failure of respondent DAR to comply with the requisites of due
process in the acquisition proceedings does not give this Court the power to nullify the CLOA's
already issued to the farmer beneficiaries. To assume the power is to short-circuit the
administrative process, which has yet to run its regular course. Respondent DAR must be given
the chance to correct its procedural lapses in the acquisition proceedings. In Hacienda Palico
alone, CLOA's were issued to 177 farmer beneficiaries in 1993. Since then until the present,

these farmers have been cultivating their lands. It goes against the basic precepts of justice,
fairness and equity to deprive these people, through no fault of their own, of the land they till.
Anyhow, the farmer beneficiaries hold the property in trust for the rightful owner of the land.
I disagree with the view that this Court cannot nullify illegally issued CLOA's but must ask the DAR to first
reverse and correct itself.
Given the established facts, there was no valid transfer of petitioner's title to the Government. This being so,
there was also no valid title to transfer to third persons; no basis for the issuance of CLOAs.
Equally important, CLOAs do not have the nature of Torrens Title. Administrative cancellation of title is
sufficient to invalidate them.
The Court of Appeals said so in its Resolution in this case. It stated:
Contrary to the petitioner's argument that issuance of CLOAs to the beneficiaries prior to the
deposit of the offered price constitutes violation of due process, it must be stressed that the
mere issuance of the CLOAs does not vest in the farmer/grantee ownership of the land
described therein.
At most the certificate merely evidences the government's recognition of the grantee as the
party qualified to avail of the statutory mechanisms for the acquisition of ownership of the
land. Thus failure on the part of the farmer/grantee to comply with his obligations is a ground for
forfeiture of his certificate of transfer. Moreover, where there is a finding that the property is
indeed not covered by CARP, then reversion to the landowner shall consequently be made,
despite issuance of CLOAs to the beneficiaries. (Resolution dated January 17, 1997, p. 6)
DAR Administrative Order 03, Series of 1996 (issued on August 8, 1996; Annex "F" of Petitioner's
Manifestation) outlines the procedure for the reconveyance to landowners of properties found to be outside the
coverage of CARP. DAR itself acknowledges that they can administratively cancel CLOAs if found to be
erroneous. From the detailed provisions of the Administrative Order, it is apparent that there are no
impediments to the administrative cancellation of CLOAs improperly issued over exempt properties. The
procedure is followed all over the country. The DAR Order spells out that CLOAs are not Torrens Titles. More
so if they affect land which is not covered by the law under which they were issued. In its Rejoinder,
respondent DAR states:
3.2. And, finally, on the authority of DAR/DARAB to cancel erroneously issued Emancipation
Patents (EPs) or Certificate of Landownership Awards (CLOAs), same is enshrined, it is
respectfully submitted, in Section 50 of Republic Act No. 6657.
In its Supplemental Manifestation, petitioner points out, and this has not been disputed by respondents, that
DAR has also administratively cancelled twenty five (25) CLOAs covering Nasugbu properties owned by the
Manila Southcoast Development Corporation near subject Roxas landholdings. These lands were found not
suitable for agricultural purposes because of soil and topographical characteristics similar to those of the
disputed properties in this case.
The former DAR Secretary, Benjamin T. Leong, issued DAR Order dated January 22, 1991 approving the
development of property adjacent and contiguous to the subject properties of this case into the Batulao Tourist
Resort. Petitioner points out that Secretary Leong, in this Order, has decided that the land
1. Is, as contended by the petitioner GDFI "hilly, mountainous, and characterized by poor soil
condition and nomadic method of cultivation, hence not suitable to agriculture."

2. Has as contiguous properties two haciendas of Roxas y Cia and found by Agrarian Reform
Team Leader Benito Viray to be "generally rolling, hilly and mountainous and strudded (sic) with
long and narrow ridges and deep gorges. Ravines are steep grade ending in low dry creeks."
3. Is found in an. area where "it is quite difficult to provide statistics on rice and corn yields
because there are no permanent sites planted. Cultivation is by Kaingin Method."
4. Is contiguous to Roxas Properties in the same area where "the people entered the property
surreptitiously and were difficult to stop because of the wide area of the two haciendas and that
the principal crop of the area is sugar . . .." (emphasis supplied).
I agree with petitioner that under DAR AO No. 03, Series of 1996, and unlike lands covered by Torrens Titles,
the properties falling under improperly issued CLOAs are cancelled by mere administrative procedure which
the Supreme Court can declare in cases properly and adversarially submitted for its decision. If CLOAs can
under the DAR's own order be cancelled administratively, with more reason can the courts, especially the
Supreme Court, do so when the matter is clearly in issue.
With due respect, there is no factual basis for the allegation in the motion for intervention that farmers have
been cultivating the disputed property.
The property has been officially certified as not fit for agriculture based on slope, terrain, depth, irrigability,
fertility, acidity, and erosion. DAR, in its Order dated January 22, 1991, stated that "it is quite difficult to provide
statistics on rice and corn yields (in the adjacent property) because there are no permanent sites planted.
Cultivation is by kaingin method." Any allegations of cultivation, feasible and viable, are therefore falsehoods.
The DAR Order on the adjacent and contiguous GDFI property states that "(T)he people entered the property
surreptitiously and were difficult to stop . . .."
The observations of Court of Appeals Justices Verzola and Magtolis in this regard, found in their dissenting
opinion (Rollo, p. 116), are relevant:
2.9 The enhanced value of land in Nasugbu, Batangas, has attracted unscrupulous individuals
who distort the spirit of the Agrarian Reform Program in order to turn out quick profits. Petitioner
has submitted copies of CLOAs that have been issued to persons other than those who were
identified in the Emancipation Patent Survey Profile as legitimate Agrarian Reform beneficiaries
for particular portions of petitioner's lands. These persons to whom the CLOAs were awarded,
according to petitioner, are not and have never been workers in petitioner's lands. Petitioners
say they are not even from Batangas but come all the way from Tarlac. DAR itself is not
unaware of the mischief in the implementation of the CARL in some areas of the country,
including Nasugbu. In fact, DAR published a "WARNING TO THE PUBLIC" which appeared in
the Philippine Daily Inquirer of April 15, 1994 regarding this malpractice.
2.10 Agrarian Reform does not mean taking the agricultural property of one and giving it to
another and for the latter to unduly benefit therefrom by subsequently "converting" the same
property into non-agricultural purposes.
2.11 The law should not be interpreted to grant power to the State, thru the DAR, to choose who
should benefit from multi-million peso deals involving lands awarded to supposed agrarian
reform beneficiaries who then apply for conversion, and thereafter sell the lands as nonagricultural land.
Respondents, in trying to make light of this problem, merely emphasize that CLOAs are not titles. They state
that "rampant selling of rights", should this occur, could be remedied by the cancellation or recall by DAR.

In the recent case of "Hon. Carlos O. Fortich, et. al. vs. Hon. Renato C. Corona, et. al." (G.R. No. 131457, April
24, 1998), this Court found the CLOAs given to the respondent farmers to be improperly issued and declared
them invalid. Herein petitioner Roxas and Co., Inc. has presented a stronger case than petitioners in the
aforementioned case. The procedural problems especially the need for referral to the Court of Appeals are not
present. The instant petition questions the Court of Appeals decision which acted on the administrative
decisions. The disputed properties in the present case have been declared non-agricultural not so much
because of local government action but by Presidential Proclamation. They were found to be non-agricultural
by the Department of Agriculture, and through unmistakable implication, by DAR itself. The zonification by the
municipal government, approved by the provincial government, is not the only basis.
On a final note, it may not be amiss to stress that laws which have for their object the preservation and
maintenance of social justice are not only meant to favor the poor and underprivileged. They apply with equal
force to those who, notwithstanding their more comfortable position in life, are equally deserving of protection
from the courts. Social justice is not a license to trample on the rights of the rich in the guise of defending the
poor, where no act of injustice or abuse is being committed against them. As we held in Land Bank (supra.):
It has been declared that the duty of the court to protect the weak and the underprivileged
should not be carried out to such an extent as to deny justice to the landowner whenever truth
and justice happen to be on his side. As eloquently stated by Justice Isagani Cruz:
. . . social justice or any justice for that matter is for the deserving, whether
he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case
of reasonable doubt, we are called upon to tilt the balance in favor of the poor
simply because they are poor, to whom the Constitution fittingly extends its
sympathy and compassion. But never is it justified to prefer the poor simply
because they are poor, or to eject the rich simply because they are rich, for
justice must always be served, for poor and rich alike, according to the mandate
of the law.
IN THE LIGHT OF THE FOREGOING, I vote to grant the petition for certiorari; and to declare Haciendas
Palico, Banilad and Caylaway, all situated in Nasugbu, Batangas, to be non-agricultural and outside the scope
of Republic Act No. 6657. I further vote to declare the Certificates of Land Ownership Award issued by
respondent Department of Agrarian Reform null and void and to enjoin respondents from proceeding with the
compulsory acquisition of the lands within the subject properties. I finally vote to DENY the motion for
intervention.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
HACIENDA LUISITA, INCORPORATED,
Petitioner,

G.R. No. 171101

Present:

LUISITA INDUSTRIAL PARK CORPORATION

and RIZAL COMMERCIAL BANKING
CORPORATION,
Petitioners-in-Intervention,
- versus PRESIDENTIAL AGRARIAN REFORM
COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF
AGRARIAN REFORM; ALYANSA NG MGA
MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI,
and JULIO SUNIGA[1] and his SUPERVISORY
GROUP OF THE HACIENDA LUISITA, INC.
and WINDSOR ANDAYA,
Respondents.

CORONA, C.J.,
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 PresidentialAgrarian 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 Reconsiderationdated 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 Reconsiderationdated 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 FWBs
OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF THE SALE OF THE
500 HECTARES AND 80.51 HECTARES OF THE HLI LAND, BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION, HLI, AS CORPORATE
CAPITAL AND ASSETS INSUBSTITUTION FOR THE PORTIONS OF ITS LAND ASSET WHICH
WERE SOLD TO THIRD PARTY;
(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;
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT PROVISIONS OF
THE CORPORATION CODE AND CORPORATE PRACTICE.
B
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE PAYMENT OF JUST
COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE
CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR-SANTIAGO, APPROVED THE
STOCK DISTRIBUTION PLAN (SDP) PROPOSED BY TADECO/HLI, BECAUSE:
(1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989 WAS NOT THE
ACTUAL TAKING OF THE TADECOs/HLIs AGRICULTURAL LAND;
(2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01 OF THAT SDP BY
THE NEW PARC UNDER THE CHAIRMANSHIP OF DAR SECRETARY NASSER
PANGANDAMAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN THE SDP WAS
APPROVED DID NOT RESULT IN ACTUAL TAKING ON NOVEMBER 21, 1989;
(3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR 22 YEARS BACK
WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE, CONSIDERING THE IMPROVEMENTS,
EXPENSES IN THE MAINTENANCE AND PRESERVATION OF THE LAND, AND RISE IN LAND
PRICES OR VALUE OF THE PROPERTY.
On the other hand, PARC and DAR, through the Office of the Solicitor General (OSG), raise the following issues
in theirMotion for Partial Reconsideration dated July 20, 2011:
THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR THE
FOLLOWING REASONS:
I

THERE IS NO LAW OR RULE WHICH HAS BEEN INVALIDATED ON THE GROUND OF

UNCONSTITUTIONALITY; AND
II
THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE ABSENCE OF
A LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH MANDATES THE DISTRIBUTION
OF THE LAND AS A RESULT OF THE REVOCATION OF THE STOCK DISTRIBUTION PLAN
(SDP).

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 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 THELIS 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 PURCHASERSFOR 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 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 300-HECTARE
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 to remain as stockholders of HLI or to opt for land distribution

would result in inequity and prejudice to the farmworkers. [7] The foregoing views are also similarly shared by Rene
Galang and AMBALA, through the PILC. [8]In addition, FARM posits that the option given to the FWBs is equivalent to
an option for HLI to retain land in direct violation of RA 6657. [9]
(a) Operative Fact Doctrine Not Limited to
Invalid or Unconstitutional Laws

Contrary to the stance of respondents, the operative fact doctrine does not only apply to laws subsequently
declared unconstitutional or unlawful, as it also applies to executive acts subsequently declared as invalid. As We have
discussed in Our July 5, 2011 Decision:
That the operative fact doctrine squarely applies to executive actsin this case, the approval by
PARC of the HLI proposal for stock distributionis well-settled in our jurisprudence. In Chavez v.
National Housing Authority, We held:
Petitioner postulates that the operative fact doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to countenance
an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no longer be
disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The operative fact doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative orexecutive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
xxx

xxx

xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of
suspension, as we have no reason to do so, much less retroactively apply such
nullification to deprive private respondent of a compelling and valid reason for not filing
the leave application.For as we have held, a void act though in law a mere scrap of
paper nonetheless confers legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. It would
indeed be ghastly unfair to prevent private respondent from relying upon the order of
suspension in lieu of a formal leave application.
The applicability of the operative fact doctrine to executive acts was further explicated by this
Court in Rieta v. People, thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated General Order
No. 60, issued by then President Ferdinand E. Marcos was subsequently declared by

the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein how
such a declaration might affect acts done on a presumption of their validity, the Court
said:
. . .. In similar situations in the past this Court had taken the
pragmatic and realistic course set forth inChicot 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 allinclusive 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 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 inPublic 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 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 circumstance, as it is variously expressed by different
courts.[18] Remarkably, it is applied only in the absence of statutory law and never in contravention of said law. [19]

In the instant case, respondents argue that the operative fact doctrine should not be applied since there is a positive
law, particularly, Sec. 31 of RA 6657, which directs the distribution of the land as a result of the revocation of the SDP.
Pertinently, the last paragraph of Sec. 31 of RA 6657 states:
If within two (2) years from the approval of this Act, the land or stock transfer envisioned above
is not made or realized or the plan for such stock distribution approved by the PARC within the same
period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Emphasis supplied.)

Markedly, the use of the word or under the last paragraph of Sec. 31 of RA 6657 connotes that the law gives
the corporate landowner an option to avail of the stock distribution option or to have the SDP approved within two (2)
years from the approval of RA 6657. This interpretation is consistent with the well-established principle in statutory
construction that [t]he word or is a disjunctive term signifying disassociation and independence of one thing from the
other things enumerated; it should, as a rule, be construed in the sense in which it ordinarily implies, as a disjunctive
word.[20] In PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc.,[21] this Court held:
Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return
of the equipment; only either one of the two was required. The demand letter was prepared and signed by
Atty. Florecita R. Gonzales, presumably petitioners counsel. As such, the use ofor instead of and in
the letter could hardly be treated as a simple typographical error, bearing in mind the nature of the
demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would
have known that a world of difference exists between and and or in the manner that the word was
employed in the letter.
A rule in statutory construction is that the word or is a disjunctive term
signifying dissociation and independence of one thing from other things enumerated
unless the context requires a different interpretation. [22]
In its elementary sense, or, as used in a statute, is a disjunctive article
indicating an alternative. It often connects a series of words or propositions
indicating a choice of either. When or is used, the various members of the
enumeration are to be taken separately.[23]
The word or is a disjunctive term signifying disassociation and independence
of one thing from each of the other things enumerated. [24] (Emphasis in the original.)

Given that HLI secured approval of its SDP in November 1989, well within the two-year period reckoned from
June 1988 when RA 6657 took effect, then HLI did not violate the last paragraph of Sec. 31 of RA 6657. Pertinently, said
provision does not bar Us from applying the operative fact doctrine.

Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed the revocation of
Resolution No. 89-12-2 and ruled for the compulsory coverage of 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 questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be raised at the earliest possible
opportunity is clearly wanting.

The last but the most important requisite that the constitutional issue must be the very lis mota of
the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not
being critical to the resolution of the case. The unyielding rule has been to avoid, whenever plausible, an
issue assailing the constitutionality of a statute or governmental act. If some other grounds exist by which
judgment can be made without touching the constitutionality of a law, such recourse is favored. Garcia v.
Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake
judicial review means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed of on some
other ground, such as the application of the statute or the general law. The petitioner
must be able to show that the case cannot be legally resolved unless the constitutional
question raised is determined. This requirement is based on the rule that every law has in
its favor the presumption of constitutionality; to justify its nullification, there must be a
clear and unequivocal breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to
which the FARM members previously belonged) and the Supervisory Group, is the alleged noncompliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the
Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of
the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain
constitutional and statutory provisions. To be sure, any of these key issues may be resolved without
plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying
petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged
application of the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has
all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec. 31. In its
pertinent part, Sec. 5 of RA 9700 provides: [T]hat after June 30, 2009, the modes of acquisition shall
be limited to voluntary offer to sell and compulsory acquisition. Thus, for all intents and purposes,
the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing
law. The question of whether or not it is unconstitutional should be a moot issue. (Citations omitted;
emphasis in the original.)

Based on the foregoing disquisitions, We maintain that this Court is NOT compelled to rule on the
constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that this Court, in its July 5, 2011 Decision, made no
ruling in favor of the constitutionality of Sec. 31 of RA 6657. There was, however, a determination of the existence of an
apparent grave violation of the Constitution that may justify the resolution of the issue of constitutionality, to which this
Court ruled in the negative. Having clarified this matter, all other points raised by both FARM and AMBALA concerning
the constitutionality of RA 6657 deserve scant consideration.

III.

Coverage of Compulsory Acquisition

FARM argues that this Court ignored certain material facts when it limited the maximum area to be covered to
4,915.75 hectares, whereas the area that should, at the least, be covered is 6,443 hectares, [26] which is the agricultural land
allegedly covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco). [27]

We cannot subscribe to this view. Since what is put in issue before the Court is the propriety of the revocation of
the SDP, which only involves 4,915.75 has. of agricultural land and not 6,443 has., then We are constrained to rule only as
regards the 4,915.75 has. of agricultural land.

Moreover, as admitted by FARM itself, this issue was raised for the first time by FARM in its Memorandum dated
September 24, 2010 filed before this Court. [28] In this regard, it should be noted that [a]s a legal recourse, the special civil
action of certiorari is a limited form of review. [29] The certiorari jurisdiction of this Court is narrow in scope as it is
restricted to resolving errors of jurisdiction and grave abuse of discretion, and not errors of judgment. [30] To allow
additional issues at this stage of the proceedings is violative of fair play, justice and due process. [31]

Nonetheless, it should be taken into account that this should not prevent the DAR, under its mandate under the
agrarian reform law, from subsequently subjecting to agrarian reform other agricultural lands originally held by Tadeco
that were allegedly not transferred to HLI but were supposedly covered by RA 6657.

DAR, however, contends that the declaration of the area [32] to be awarded to each FWB is too restrictive. It
stresses that in agricultural landholdings like Hacienda Luisita, there are roads, irrigation canals, and other portions of the
land that are considered commonly-owned by farmworkers, and this may necessarily result in the decrease of the area size
that may be awarded per FWB. [33] DAR also argues that the July 5, 2011 Decision of this Court does not give it any
leeway in adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs decreases. [34]

The argument is meritorious. In order to ensure the proper distribution of the agricultural lands of Hacienda
Luisita per qualified FWB, and considering that matters involving strictly the administrative implementation and
enforcement of agrarian reform laws are within the jurisdiction of the DAR, [35] it is the latter which shall determine the
area with which each qualified FWB will be awarded.
(a)

Conversion of Agricultural Lands

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 x x

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)

LIPCO and RCBC as Innocent Purchasers for Value

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 a wholly-owned subsidiary of HLI, is conclusively presumed to have knowledge of the agrarian
dispute on the subject land and could not feign ignorance of this fact, especially since they have the same directors and
stockholders.[40] This is seconded by Rene Galang and AMBALA, through the PILC, which intimate that a look at the
General Information Sheets of the companies involved in the transfers of the 300-hectare portion of Hacienda Luisita,
specifically, Centennary Holdings, Inc. (Centennary), LIPCO and RCBC, would readily reveal that their directors are
interlocked and connected to Tadeco and HLI. [41] Rene Galang and AMBALA, through the PILC, also allege that with the
clear-cut involvement of the leadership of all the corporations concerned, LIPCO and RCBC cannot feign ignorance that
the parcels of land they bought are under the coverage of the comprehensive agrarian reform program [CARP] and that

the conditions of the respective sales are imbued with public interest where normal property relations in the Civil Law
sense do not apply.[42]
Avowing that the land subject of conversion still remains undeveloped, Rene Galang and AMBALA, through the
PILC, further insist that the condition that [t]he development of the land should be completed within the period of five
[5] years from the issuance of this Order was not complied with. AMBALA also argues that since RCBC and LIPCO
merely stepped into the shoes of HLI, then they must comply with the conditions imposed in the conversion order. [43]

In addition, FARM avers that among the conditions attached to the conversion order, which RCBC and LIPCO
necessarily have knowledge of, are (a) 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 (b) that the benefits, wages and the
like, received by the FWBs shall not in any way be reduced or adversely affected, among others. [44]

The contentions of respondents are wanting. In the first place, there is no denying that RCBC and LIPCO knew
that the converted lands they bought were under the coverage of CARP. Nevertheless, as We have mentioned in Our July
5, 2011 Decision, this does not necessarily mean that both LIPCO and RCBC already acted in bad faith in purchasing the
converted lands. As this Court explained:
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were
previously covered by the SDP. Good faith consists in the possessors belief that the person from whom
he received it was the owner of the same and could convey his title. Good faith requires a well-founded
belief that the person from whom title was received was himself the owner of the land, with the right to
convey it. There is good faith where there is an honest intention to abstain from taking any
unconscientious advantage from another. It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to
CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated
at the back of the titles of the lots they acquired. However, they are of the honest belief that the
subject lots were validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be
legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and
disposition of agricultural lands previously covered by CARP land acquisition after the lapse of five (5)
years from its award when the land ceases to be economically feasible and sound for agricultural purposes
or the locality has become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes. Moreover, DAR notified all the affected parties, more particularly
the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR, after
going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita
pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform
matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian
reform. The DAR conversion order became final and executory after none of the FWBs interposed an
appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest
and well-founded belief that the previous registered owners could legally sell and convey the lots though
these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in
acquiring the subject lots. (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 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 2005-3201, 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

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 80.51-hectare SCTEX lot. However, as We have established in Our July
5, 2011 Decision, 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 500hectare 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 setoff 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 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
DEVELOPMENT COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)

OF

TARLAC

NOW THEREFORE, on motion duly seconded,

RESOLVED, as it is hereby resolved, to approve the stock distribution plan of TDC/HLI.
UNANIMOUSLY APPROVED.[59] (Emphasis supplied)

Clearly, what was approved by PARC is the SDP and not the SDOA. There is, therefore, no basis for this Court to
apply the law on contracts to the revocation of the said PARC Resolution.

IV. Just Compensation

In Our July 5, 2011 Decision, We stated that HLI shall be paid just compensation for the remaining agricultural
land that will be transferred to DAR for land distribution to the FWBs. We also ruled that the date of the taking is
November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2.

In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the foregoing ruling and contends
that the taking should be reckoned from finality of the Decision of this Court, or at the very least, the reckoning period
may be tacked to January 2, 2006, the date when the Notice of Coverage was issued by the DAR pursuant to PARC
Resolution No. 2006-34-01 recalling/revoking the approval of the SDP.[60]

For their part, Mallari, et al. argue that the valuation of the land cannot be based on November 21, 1989, the date
of approval of the SDP. Instead, they aver that the date of taking for valuation purposes is a factual issue best left to the
determination of the trial courts.[61]

At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid just compensation for the
agricultural land that will be distributed to the FWBs, since the Manila Regional Trial Court (RTC) already rendered a
decision ordering the Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian Reform, which
will distribute the land to small farmers after compensating the landowners P3.988 million. [62] In the event, however, that
this Court will rule that HLI is indeed entitled to compensation, AMBALA contends that it should be pegged at forty
thousand pesos

(PhP 40,000) per hectare, since this was the same value that Tadeco declared in 1989 to make sure that

the farmers will not own the majority of its stocks. [63]

Despite the above propositions, We maintain that the date of taking is November 21, 1989, the date when PARC
approved HLIs SDP per PARC Resolution No. 89-12-2, in view of the fact that this is the time that the FWBs were
considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands 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 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 Committee
(PARCCOM), as herein provided, shall, in turn, be given due notice thereof by the BARC.
If 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 which shall give due notice
of the availability of the land in the manner specified in the immediately preceding paragraph.
In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump
sum for the amounts the latter has already paid, together with the value of improvements he has made on
the land. (Emphasis supplied.)

To implement the above-quoted provision, inter alia, DAR issued Administrative Order No. 1, Series of 1989
(DAO 1) entitled Rules and Procedures Governing Land Transactions. Said Rules set forth the rules on validity of land
transactions, to wit:
II. RULES ON VALIDITY OF LAND TRANSACTIONS
A. The following transactions are valid:

1.
2.
3.

Those executed by the original landowner in favor of the qualified beneficiary from among
those certified by DAR.
Those in favor of the government, DAR or the Land Bank of the Philippines.
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 Emancipation Patent or Certificate of Land
Ownership Award.

3.

Those executed in favor of a person or persons not qualified to acquire land under R.A. 6657.

4.

Sale, transfer, conveyance or change of nature of the land outside of urban centers and city
limits either in whole or in part as of June 15, 1988, when R.A. 6657 took effect, except as
provided for under DAR Administrative Order No. 15, series of 1988.

5.

Sale, transfer or conveyance by beneficiary of the right to use or any other usufructuary right
over the land he acquired by virtue of being a beneficiary, in order to circumvent the law.
x x x x (Emphasis supplied.)

Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten
(10) years from the issuance and registration of the emancipation patent (EP) or certificate of land ownership award
(CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in the instant case, the 10year prohibitive period has not even started. Significantly, the reckoning point is the issuance of the EP or CLOA,
and not the placing of the agricultural lands under CARP coverage.

Moreover, if We maintain the position that the qualified FWBs should be immediately allowed the option to sell
or convey the agricultural lands in Hacienda Luisita, then all efforts at agrarian reform would be rendered nugatory by this
Court, since, at the end of the day, these lands will just be transferred to persons not entitled to land distribution under

CARP. As aptly noted by the late Senator Neptali Gonzales during the Joint Congressional Conference Committee on the
Comprehensive Agrarian Reform Program Bills:
SEN. GONZALES. My point is, as much as possible let the said lands be distributed under
CARP remain with the beneficiaries and their heirs because that is the lesson that we have to learn
from PD No. 27. If you will talk with the Congressmen representing Nueva Ecija, Pampanga and Central
Luzon provinces, law or no law, you will find out that more than one-third of the original, of the
lands distributed under PD 27 are no longer owned, possessed or being worked by the grantees or
the awardees of the same, something which we ought to avoid under the CARP bill that we are
going to enact.[66] (Emphasis supplied.)

Worse, by raising that the qualified beneficiaries may sell their interest back to HLI, this smacks of outright
indifference to the provision on retention limits [67] under RA 6657, as this Court, in effect, would be allowing HLI, the
previous landowner, to own more than five (5) hectares of agricultural land, which We cannot countenance. There is a big
difference between the ownership of agricultural lands by HLI under the stock distribution scheme and its eventual
acquisition of the agricultural lands from the qualified FWBs under the proposed buy-back scheme. The rule on retention
limits does not apply to the former but only to the latter in view of the fact that the stock distribution scheme is sanctioned
by Sec. 31 of RA 6657, which specifically allows corporations to divest a proportion of their capital stock that the
agricultural land, actually devoted to agricultural activities, bears in relation to the companys total assets. On the other
hand, no special rules exist under RA 6657 concerning the 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.
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 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 workerbeneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall
be owned collectively by the worker-beneficiaries who shall form a workers cooperative
or association which will deal with the corporation or business association. Until a new
agreement is entered into by and between the workers cooperative or association and the
corporation or business association, any agreement existing at the time this Act takes
effect between the former and the previous landowner shall be respected by both the
workers cooperative or association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations which opted for stock
distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it
except by stipulation, as in this case.
Under the SDP, HLI undertook to subdivide and allocate for free and without charge among the
qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each
family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it
actually resides, within a reasonable time.
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and
yet, it is still the contention of the FWBs that not all was given the 240-square meter homelots and, of
those who were already given, some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by
submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can you
also [prove] that the qualified family beneficiaries were already provided the 240 square
meter homelots.
Atty. Asuncion: We will, your Honor please.
Other than the financial report, however, no other substantial proof showing that all the qualified
beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that
HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP.
On Man Days and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock
distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
3.
At the end of each fiscal year, for a period of 30 years, the SECOND
PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at
no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the
SECOND PARTY that are presently owned and held by the FIRST PARTY, until such
time as the entire block of 118,391,976.85 shares shall have been completely acquired
and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit
not entailing a cash out from them, is contingent on the number of man days, that is, the number of days
that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for
purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan. The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of shares of
the same class and value, with the same rights and features as all other shares, to

each of the qualified beneficiaries. This distribution plan in all cases, shall be at least
the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock distribution
schemes taking into account factors such as rank, seniority, salary, position and
other circumstances which may be deemed desirable as a matter of sound company
policy.
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 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 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 threemonth timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC)
requirement reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month
threshold. Remove this timeline and the corporate landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the fact that,
under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in
thirty (30) annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock
distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said
provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries. Lands awarded pursuant to this Act shall
be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the
other hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the
corporate landowner who has the obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost
of the land thus awarded them to make it less cumbersome for them to pay the government. To be sure,
the reason underpinning the 30-year accommodation does not apply to corporate landowners in
distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter
period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be upheld
for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the
power to issue rules and regulations, substantive or procedural. Being a product of such rule-making
power, DAO 10 has the force and effect of law and must be duly complied with. The PARC is, therefore,
correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989
approving the HLIs SDP is nullified and voided. (Citations omitted; emphasis in the original.)

Based on the foregoing ruling, the contentions of Mallari, et al. are either not supported by the evidence on record
or are utterly misplaced. There is, therefore, no basis for the Court to reverse its ruling affirming PARC Resolution No.
2005-32-01 and PARC Resolution No. 2006-34-01, revoking the previous approval of the SDP by PARC.
VII. Control over Agricultural Lands

After having discussed and considered the different contentions raised by the parties in their respective motions,
We are now left to contend with one crucial issue in the case at bar, that is, control over the agricultural lands by the
qualified FWBs.

Upon a review of the facts and circumstances, We realize that the FWBs will never have control over these
agricultural lands for as long as they remain as stockholders of HLI. In Our July 5, 2011 Decision, this Court made the
following observations:
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on
agrarian reform is that control over the agricultural land must always be in the hands of the
farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own
majority of the common shares entitled to elect the members of the board of directors to ensure that the
farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the
proposed SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural
land contributed to the corporation must always be more than 50% of the total assets of the corporation to
ensure that the majority of the members of the board of directors are composed of the farmers. The
PARC composed of the President of the Philippinesand cabinet secretaries must see to it that control over
the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which
will yield the majority in the board of directors to non-farmers. Any deviation, however, by PARC or
DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA
6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision
that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring
control by the farmers. (Emphasis supplied.)

In line with Our finding that control over agricultural lands must always be in the 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 RECALLEDand SET ASIDE. The Motion
for Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner HLI and theMotion 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 herebyAFFIRMED 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 SDPapproving Resolution No. 89-12-2 the 500-hectare lot subject of the August 14, l996 Conversion Order and the 80.51hectare 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-in-interest 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 80.51hectare lot used for the construction of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP
500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the proceeds of said
transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the
expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is
ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and

Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots
were actually used or spent for legitimate corporate purposes. Any unspent or unused balance and any disallowed
expenditures as determined by the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from
November 21, 1989 which is the date of issuance of PARC Resolution No. 89-12-2. DAR and LBP are ordered to
determine the compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after
submission of the compliance report, quarterly reports on the execution of this judgment within the first 15 days after the
end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.