B2022 REPORTS ANNOTATED
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
I. Recit-ready summary
The case is a consolidation of four suits assailing the constitutionality
of various orders, proclamations, and laws relating to agrarian reform.
Petitioners are mainly assailing the constitutionality of the laws on the
violation of their property rights; specifically, there right to due process in
relation to the State’s exercise of police power and power of eminent domain.
The Court held that the laws and orders relating to agrarian reform are
all valid and constitutional. The provisions validly exercise both police power
and eminent domain.
Police power is exercised with respect to the regulation of the ownership
of lands beyond five hectares – the retention limits prescribed by the
Comprehensive Agrarian Reform Law (CARL). Its exercise requires a lawful
purpose and a lawful means. The lawful purpose is provided by Art XIII,
Section 4, which institutionalized agrarian reform in the country to promote
social justice. The lawful means are exercised through expropriation of lands
in excess of the retention limits, which already falls under the power of
eminent domain.
Eminent domain is the power of the State to forcibly acquire private
lands for public use upon payment of just compensation. It has two
requirements: public purpose and payment of just compensation. The first is
the same lawful purpose under the Constitution. The second, under agrarian
reform, is more complex.
Two objections were raised as to the payment of just compensation
under the agrarian reforms law. The first relates to the manner of fixing just
compensation. Petitioners claim that there is breach of the doctrine of
separation of powers because the Department of Agrarian Reform, an
administrative agency, determines the just compensation whereas it is
primarily a judicial prerogative. The Court held that the provisions of the law
allows DAR to preliminary set the compensation but, on objection, will be
set with finality by the Court. As long as there is opportunity granted to the
owner to contest the compensation, there is no violation of due process.
The second objection relates to the payment of money and “other
modes”, as provided in Section 18 of CARL. While the Court recognized that
jurisprudence only provides for money as valid just compensation, the Court
held that agrarian reform is a revolutionary exercise of the power of eminent
domain – including all agricultural lands in the country and affecting all
Filipinos. Hence, the Court held that payment of just compensation through
other modes to be valid.
G.R. NO: 78742
ARTICLE; TOPIC OF CASE: Agrarian Reform; constitutionality, eminent domain, police power
VOL 32 [July 14, 1989]
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
II. Facts of the case
Legal history of Agrarian Reform
Constitutions. The 1935 Constitution mandated the policy of social justice,
especially the less privileged. The 1973 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. 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. The 1987 Constitution adopted an
entire separate provision – Article XIII, Section 4.
Legislature. The Agricultural Land Reform Code (RA 3844) had already
been enacted in 1963 espousing the principles in Art XIII, Section 4. This
was substantially superseded by PD 27, promulgated in 1972, shortly after
the declaration of Martial Law. On 1987, President Cory issued EO No. 228,
which declared full land ownership of beneficiaries under PD 27,
Proclamation No. 131, instituting the Comprehensive Agrarian Reform
Program (CARP), and EO No. 229, providing the rules for its
implementation. Finally, the Comprehensive Agrarian Reform Law of 1988
(RA 6657) was passed with the reinstatement of the Congress in 1988.
Petition proper
The petition is a consolidation of four suits assailing the
constitutionality of the above-stated laws.
Under GR 79777, the petitioners are owners of a 9-hectare Riceland
worked by several tenant-beneficiaries under PD 27. They are questioning
PD 27, EO 228 and 229, and RA 6657 on the grounds of separation of
powers, due process, equal protection, and the invalid exercise of the power
of eminent domain. In connection with the last one, they argue that just
compensation is payable in money or in cash, not in the form of bonds or
other things of value.
They also content that President Cory usurped legislative power when
she promulgated EO 228.
Under GR 79310, the petitioners are landowners and sugar plants in the
Victorias Mill District, Victorias, Negros Occidental. They seek to prohibit
the implementation of Proc 131 and EO 229. Although they agree that the
President could exercise legislative power until Congress was convened, she
PONENTE: Cruz, J
DIGEST MAKER: Ash
 B2022 REPORTS ANNOTATED
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
could do so only to enact emergency measures during the transition period.
They also invoke violations of the constitutional provisions on just
compensation, due process, and equal protection.
Additionally, they argue that the State should first distribute public
agricultural lands instead of immediately disturbing property rights by
forcibly acquiring private agricultural lands.
Under GR 79744, the petitioner assails the constitutionality of EO 228
and 229, alleging that they were invalidly issued by the President, that they
were violative of the constitutional provision that no private property shall be
taken without due process or just compensation, and that the petitioner is
denied the right of maximum retention provided under the Constitution.
Under GR 78742, the petitioners invoke the right of retention granted
by PD 27 to owners of rice and corn lands not exceeding 7 hectares as long
as they are cultivating or intend to cultivate the same.
III. Issue/s
Whether the above-mentioned laws/orders are constitutional. YES
1. Can the President validly issue the assailed orders/proclamations? YES
2. What is the power exercised by the State in implementing agrarian
reform? Both police power and power of eminent domain.
3. Whether or not the exercise of eminent domain is valid? VALID
a. Is there violation of the doctrine of separation of powers? NO.
b. Are “other modes of payment” of just compensation? YES, because
of the extraordinary nature of agrarian reform.
c. Is there arbitrary expropriation of land? NO.
IV. Ratio/Legal Basis
On the exercise of legislative power by Marcos and Cory
The promulgation of PD 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 131 and EO Nos. 228 and 229, the
same was authorized under Section 6 of the Transitory Provisions of the 1987
Constitution.
Significantly, the Congress has substantially affirmed the challenged
measures and has specifically provided that they shall be suppletory to RA
G.R. NO: 78742
ARTICLE; TOPIC OF CASE: Agrarian Reform; constitutionality, eminent domain, police power
VOL 32 [July 14, 1989]
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
6657 whenever not inconsistent with its provisions. Indeed, some portions of
the said measures have been incorporated by reference in the CARP law.
On police power and power of eminent domain
In the case of Pennsylvania Coal Co v Mahon, the Court said that 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. Recent trends
would indicate not a polarization but a mingling of police power and the
power of eminent domain, with the latter being used as an implement of the
former like the power of taxation.
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 (5 hectares), 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.
On the violation of the equal protection clause
The argument of the small farmers that they have been denied equal
protection because of the absence of retention limits has become academic
under Section 6 of RA 6657. The objection of the sugar planters is also
untenable for no evidence has been submitted to the Court that the requisites
of a valid classification have been violated (Note: not gonna bother including
the discussion on the EPC).
Police power
A statute may be sustained under the power police 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 the means employed are
PONENTE: Cruz, J
DIGEST MAKER: Ash
 B2022 REPORTS ANNOTATED
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
reasonably necessary for the attainment of the purpose sought to be achieved
and not unduly oppressive upon individuals. 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. The validity of the method
employed to achieve the constitutional goal brings us to the power of eminent
domain.
Power of eminent domain
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. The requirements for a proper exercise of the
power are: (1) public use and (2) just compensation.
The argument by petitioners that the State should first distribute public
agricultural lands is a political question which the Court cannot review in the
absence of a clear showing that the executive and legislative abused its
discretion.
The first requirement of public use has already been settled by the
Constitution itself.
The second requirement of just compensation needs a longer examination.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. The measure is not the taker’s gain
but the owner’s loss.
Separation of powers
Two objections are raised. The first is raised as to the manner of fixing
the just compensation, which is claimed to be entrusted to the administrative
authorities in violation of judicial prerogatives. But the Court has held in
EPZA v Dulay that the courts cannot exercise its discretion or independence
in determining what is just or fair insofar as just compensation is concerned.
There is only violation of due process to deny the owner the opportunity to
prove that the valuation is unfair or wrong.
In this case, the determination made by the DAR is only preliminary
unless accepted by all parties concerned. Otherwise, the courts still have the
right to review with finality the said determination in the exercise of what is
admittedly a judicial function.
Payment of money and other modes
G.R. NO: 78742
ARTICLE; TOPIC OF CASE: Agrarian Reform; constitutionality, eminent domain, police power
VOL 32 [July 14, 1989]
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
The second objection is raised as to the payment of money and other
modes, at the option of the landowner (See notes). The contention is that the
above provision is unconstitutional insofar as it requires the owners of the
expropriated properties to accept just compensation therefor in less that
money, which is the only medium of payment allowed.
It cannot be denied from these cases that the traditional medium for the
payment of just compensation is money and no other. However, we do not
deal here with the traditional exercise of the power of eminent domain.
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.
We assume that the framers of the Constitution were aware of this
difficulty when they called for agrarian reform as a top priority of the
government. We also 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 or of the entire amount of the just compensation with
other things of value. With these assumptions, the Court hereby declares that
the content and manner of the just compensation provided for in Section 18
of the CARP Law is not violative of the Constitution.
Arbitrary expropriation
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. The
recognized rule is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation.
Under PD 27, the tenant-farmer shall be deemed the owner only when he
had become a full-fledged member of a duly recognized farmers’
cooperative. Under EO 228, all qualified farmer-beneficiaries are now
deemed full owners of the land they acquired, referring to lands after proof
of full-fledged members in the farmers’ cooperatives and full payment of just
compensation. Under the CARP law, conditions for the transfer of possession
PONENTE: Cruz, J
DIGEST MAKER: Ash
 B2022 REPORTS ANNOTATED
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
and ownership of the land to the government happens only upon receipt of
the landowner of the corresponding payment. Until then, title also remains
with the landowner.
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.
V. Disposition
Petitions dismissed.
VI. Notes
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.
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 􀁆nally 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.
G.R. NO: 78742
ARTICLE; TOPIC OF CASE: Agrarian Reform; constitutionality, eminent domain, police power
VOL 32 [July 14, 1989]
Association of Small Landowners in the Philippines, Inc
v Secretary of Agrarian Reform
(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 quali􀁆ed 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 􀁆nancial 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 a ny government 􀁆nancial 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 􀁆nancial 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 hospital; and
(viii) Such other uses as the PARC may from time to time allow.
PONENTE: Cruz, J
DIGEST MAKER: Ash