Central Mindanao University vs.

Department of Agrarian Reform Adjudication Board

215 SCRA 86 (1992)
Facts:
On 16 January 1958, President Carlos Garcia issued Proclamation No. 467 reserving for the Mindanao Agricultural
College, now the CMU, a piece of land to be used as its future campus. In 1984, CMU embarked on a project titled
"Kilusang Sariling Sikap" wherein parcels of land were leased to its faculty members and employees. Under the terms of
the program, CMU will assist faculty members and employee groups through the extension of technical know-how,
training and other kinds of assistance. In turn, they paid the CMU a service fee for use of the land. The agreement
explicitly provided that there will be no tenancy relationship between the lessees and the CMU.
When the program was terminated, a case was filed by the participants of the "Kilusang Sariling Sikap" for declaration of
status as tenants under the CARP. In its resolution, DARAB, ordered, among others, the segregation of 400 hectares of
the land for distribution under CARP. The land was subjected to coverage on the basis of DAR's determination that the
lands do not meet the condition for exemption, that is, it is not "actually, directly, and exclusively used" for educational
purposes.
Issue:
Is the CMU land covered by CARP? Who determines whether lands reserved for public use by presidential proclamation
is no longer actually, directly and exclusively used and necessary for the purpose for which they are reserved?
Held:
The land is exempted from CARP. CMU is in the best position to resolve and answer the question of when and what lands
are found necessary for its use. The Court also chided the DARAB for resolving this issue of exemption on the basis of
"CMU's present needs." The Court stated that the DARAB decision stating that for the land to be exempt it must be
"presently, actively exploited and utilized by the university in carrying out its present educational program with its present
student population and academic faculty" overlooked the very significant factor of growth of the university in the years to
come.
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES vs.HONORABLE SECRETARY OF AGRARIAN
REFORM
FACTS
The association of the Small Landowners of the Philippines invokes 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 on intend to cultivate the same. Their
respected lands do not exceed the statutory limits but are occupied by tenants who re actually cultivating such lands.
Because PD No. 316 provides that no tenant-farmer in agricultural land primarily devoted to rice and corn shall be ejected
or removed from his farm holding until such time as the respective rights of the tenant-farmers and the land owners shall
have been determined, they petitioned the court for a writ of mandamus to compel the DAR Secretary to issue the IRR, as
they could not eject their tenants and so are unable to enjoy their right of retention.
ISSUE
Whether or not the assailed statutes are valid exercises of police power.
Whether or not the content and manner of just compensation provided for the CARP is violative of the Constitution.
Whether or not the CARP and EO 228 contravene a well accepted principle of eminent domain by divesting the land
owner of his property even before actual payment to him in full of just compensation
HELD
Yes. The subject and purpose of agrarian reform have been laid down by the Constitution itself, which satisfies the first
requirement of the lawful subject. However, objection is raised to the manner fixing the just compensation, which it is
claimed is judicial prerogatives. However, there is no arbitrariness in the provision as the determination of just
compensation by DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts will still have
the right to review with finality the said determination.
No. Although the traditional medium for payment of just compensation is money and no other, what is being dealt with
here is not the traditional exercise of the power and eminent domain. This is a revolutionary kind of expropriation, which
involves not mere millions of pesos. The initially intended amount of P50B may not be enough, and is in fact not even fully
available at the time. The invalidation of the said section resulted in the nullification of the entire program.
No. EO 228 categorically stated that all qualified farmer-beneficiaries were deemed full owners of the land they acquired
under PP 27, after proof of full payment of just compensation. The CARP Law, for its part, conditions the transfer of
possession and ownership of the land to the government on the receipt by the landowner of the corresponding payment or
the deposit of DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with
the landowner.

[G.R. No. 128557. December 29, 1999]

LAND BANK OF THE PHILIPPINES, petitioner vs. COURT OF APPEALS and JOSE PASCUAL, respondents.
The lofty effort of the Government to implement an effective agrarian reform program has resulted in the massive
distribution of huge tracks of land to tenant farmers. But it divested many landowners of their property, and although the
Constitution assures them of just compensation its determination may involve a tedious litigation in the end. More often,
land appraisal becomes a prolonged legal battle among the contending parties - the landowner, the tenant and the
Government. At times the confrontation is confounded by the numerous laws on agrarian reform which although intended
to ensure the effective implementation of the program have only given rise to needless confusion which we are called
upon to resolve, as the case before us.
Private respondent Jose Pascual owned three (3) parcels of land located in Guttaran, Cagayan. Parcel 1 covered
by TCT No. 16655 contains an area of 149,852 square meters as surveyed by the DAR but the actual land area
transferred is estimated at 102,229 square meters and classified as unirrigated lowland rice; Parcel 2 covered by TCT No.
16654 contains an area of 123,043 square meters as surveyed by the DAR but the actual land area transferred is
estimated at 85,381 square meters and classified as cornland; and, Parcel 3 covered by TCT No. 16653 contains an area
of 192,590 square meters but the actual land area transferred is estimated at 161,338 square meters and classified as
irrigated lowland rice.[if ! Pursuant to the Land Reform Program of the Government under PD 27 and EO 228 the
Department of Agrarian Reform (DAR) placed these lands under its Operation Land Transfer (OLT).
Under EO 228 the value of rice and corn lands is determined thus Sec. 2. Henceforth, the valuation of rice and corn lands covered by P.D. 27 shall be based on the average gross
production determined by the Barangay Committee on Land Production in accordance with Department Memorandum
Circular No. 26, series of 1973 and related issuances and regulations of the Department of Agrarian Reform. The
average gross production shall be multiplied by two and a half (2.5), the product of which shall be multiplied by ThirtyFive Pesos (P35), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty-One
Pesos (P31), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount
arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the
farmer and compensation to the landowner (emphasis supplied).
Hence, the formula for computing the Land Value (LV) or Price Per Hectare (PPH) of rice and corn lands is 2.5 x
AGP x GSP = LV or PPH.
In compliance with EO 228, the Provincial Agrarian Reform Officer (PARO) of the DAR in an "Accomplished OLT
Valuation Form No. 1" dated 2 December 1989 recommended that the "Average Gross Productivity" (AGP) based on "[3]
Normal Crop Year" for Parcels 1 and 2 should be 25 cavans per hectare for unirrigated lowland rice and 10 cavans per
hectare for corn land.
Meanwhile, the Office of the Secretary of Agrarian Reform (SAR) also conducted its own valuation proceedings
apart from the PARO. On 10 October 1990 Secretary Benjamin T. Leong of the DAR using the AGP of 25.66 cavans for
unirrigated rice landsissued an order valuing Parcel 1 at P22,952.97 and requiring herein petitioner Land Bank of the
Philippines (LBP) to pay the amount. On 1 February 1991 petitioner LBP approved the valuation.
In 1991 private respondent Jose Pascual, opposing the recommended AGP of the PARO, filed a petition for the
annulment of the recommendation on the productivity and valuation of the land covered by OLT, subject matter hereof,
with the Department of Agrarian Reform Adjudication Board (DARAB). Oscar Dimacali, Provincial Agrarian Reform
Adjudicator (PARAD) of Cagayan heard the case. Despite due notice however Francisco Baculi, the PARO who issued
the assailed recommendation, failed to appear at the trial. Only private respondent Jose Pascual and Atty. Eduard Javier
of petitioner LBP were presentThereafter private respondent was allowed to present evidence ex-parte.
At the hearings conducted by the PARAD private respondent presented as evidence another "Accomplished OLT
Valuation Form No. 1," for Parcel 3 dated 22 June 1976 to support his claim that the "OLT Valuation Form" issued by
PARO Francisco Baculi extremely undervalued the AGP of his lands. In the "1976 OLT Valuation Form" the AGP based on
"(3) Normal Crop Year" was 80 cavans per hectare for lowland rice unirrigated, 28 cavans per hectare for corn lands and
100 cavans per hectare for lowland rice irrigated.
Private respondent also presented Tax Declarations for Parcels 1 and 2 stating that the AGP was 80 cavans for
unirrigated rice lands and 28 cavans for corn lands.
On 11 June 1992 the PARAD ruled in favor of private respondent nullifying the 2 December 1989 AGP
recommended by the PAROInstead, the PARAD applied the 22 June 1976 AGP and the AGP stated in private
respondents Tax Declarations to determine the correct compensation. The PARAD also used the "Government Support
Price" (GSP) of P300 for each cavan of palay and P250 for each cavan of corn. He then ordered petitioner LBP to pay
private respondent P613,200.00 for Parcel 1, P148,750.00 for Parcel 2, and P1,200,000.00 for Parcel 3, or a total amount
of P1,961,950.00
After receiving notice of the decision of the PARAD, private respondent accepted the valuation. However, when the
judgment became final and executory, petitioner LBP as the financing arm in the operation of PD 27 and EO 228 refused
to pay thus forcing private respondent to apply for a Writ of Execution with the PARAD which the latter issued on 24
December 1992.[ Still, petitioner LBP declined to comply with the order.
On 29 June 1994 Secretary Ernesto Garilao Jr. of the DAR wrote a letter to petitioner LBP requiring the latter to pay

the amount stated in the judgment of the PARAD. Again, petitioner LBP rejected the directive of Secretary Garilao.
Petitioners Executive Vice President, Jesus Diaz, then sent a letter to Secretary Garilao arguing that (a) the valuation of
just compensation should be determined by the courts; (b) PARAD could not reverse a previous order of the Secretary of
the DAR and, (c) the valuation of lands under EO 228 falls within the exclusive jurisdiction of the Secretary of the DAR
and not of the DARAB.
On 23 January 1995 the Secretary of Agrarian Reform replied to petitioner We agree with your contention that the matter of valuation of lands covered by P.D. 27 is a matter within the
administrative implementation of agrarian reform, hence, cognizable exclusively by the Secretary.
However, in this particular case, there is another operative principle which is the finality of decisions of the Adjudication
Board. Since the matter has been properly threshed out in the quasi-judicial proceeding and the decision has already
become final and executory, we cannot make an exception in this case and allow the non-payment of the valuation unless
we are enjoined by a higher authority like the courts.
Therefore at the risk of occasional error, we maintain that payment should be made in this case. However we believe
situations like this would be lessened tremendously through the issuance of the attached memorandum circular [if !
supportFootnotes][17][endif]
to the Field Offices.[if !supportFootnotes][18][endif]
Despite the letter of Secretary G. Garilao, petitioner LBP remained adamant in its refusal to pay private respondent.
It reiterated its stand that the PARAD had no jurisdiction to value lands covered by PD 27. [if !supportFootnotes][19][endif]
On 17 June 1995 counsel for private respondent also wrote petitioner LBP demanding payment. On 20 June 1995
petitioner replied x x x x Although we disagree with the foregoing view that the PARAD decision on the land valuation of a PD 27
landholding has become final for numerous legal reasons, in deference to the DAR Secretary, we informed him that
we will pay the amount decided by the PARAD of Cagayan provided the tenant beneficiaries of Mr. Pascual be
consulted first and the land transfer claim be redocumented to the effect that said beneficiaries re-execute the
Landowner Tenant Production Agreement-Farmers Undertaking to show their willingness to the PARAD valuation
and to amortize the same to this bank. This is in consonance with the legal mandate of this bank as the financing arm
of PD 27/EO 228 landholdings. In other words, the beneficiaries must agree to the amount being financed,
otherwise, financing may not be possible pursuant to this banks legal mandate (emphasis supplied).[if !supportFootnotes][20]
[endif]

Petitioner LBP having consistently refused to comply with its obligation despite the directive of the Secretary of the
DAR and the various demand letters of private respondent Jose Pascual, the latter finally filed an action for Mandamus in
the Court of Appeals to compel petitioner to pay the valuation determined by the PARAD. On 15 July 1996 the appellate
court granted the Writ now being assailed. The appellate court also required petitioner LBP to pay a compounded interest
of 6% per annum in compliance with DAR Administrative Order No. 13, series of 1994. [if !supportFootnotes][21][endif] On 11 March
1997 petitioner's Motion for Reconsideration was denied; [if !supportFootnotes][22][endif] hence, this petition.
Petitioner LBP avers that the Court of Appeals erred in issuing the Writ of Mandamus in favor of private respondent
and argues that the appellate court cannot impose a 6% compounded interest on the value of Jose Pascual's land since
Administrative Order No. 13 does not apply to his case. Three (3) reasons are given by petitioner why the Court of
Appeals cannot issue the writ:
First, it cannot enforce PARADs valuation since it cannot make such determination for want of jurisdiction hence
void. Section 12, par. (b), of PD 946 [if !supportFootnotes][23][endif] provides that the valuation of lands covered by PD 27 is under the
exclusive jurisdiction of the Secretary of Agrarian Reform. Petitioner asserts that Sec. 17 of EO 229 [if !supportFootnotes][24][endif] and
Sec. 50 of RA No. 6657,[if !supportFootnotes][25][endif] which granted DAR the exclusive jurisdiction over all agrarian reform matters
thereby divesting the Court of Agrarian Relations of such power, did not repeal Sec. 12, par. (b), of PD 946. Petitioner now
attempts to reconcile the pertinent laws by saying that only the Secretary of Agrarian Reform can determine the value of
rice and corn lands under Operation Land Transfer of PD 27, while on the other hand, all other lands covered by RA 6657
(CARL) shall be valued by the DARAB, hence, the DARAB of the DAR has no jurisdiction to determine the value of the
lands covered by OLT under PD 27.
To bolster its contention that Sec. 12, par. (b), of PD 946 was not repealed, petitioner LBP cites Sec. 76 of RA 6657.
[if !supportFootnotes][26][endif]
It argues that since Sec. 76 of RA 6657 only repealed the last two (2) paragraphs of Sec. 12 of PD 946,
it is obvious that Congress had no intention of repealing par. (b). Thus, it remains valid and effective. As a matter of fact,
even the Secretary of Agrarian Reform agreed that Sec. 12, par. (b), of PD 946 still holds. Based on this assumption, the
Secretary of the DAR has opined that the valuation of rice and corn lands is under his exclusive jurisdiction and has
directed all DARAB officials to refrain from valuing lands covered by PD 27. [if !supportFootnotes][27][endif] Petitioner maintains that the
Secretary of the DAR should conduct his own proceedings to determine the value of Parcels 2 and 3 and that his
valuation of Parcel 1[if !supportFootnotes][28][endif]should be upheld.
We do not agree. In Machete v. Court of Appeals [if !supportFootnotes][29][endif] this Court discussed the effects on PD 946 of
Sec. 17 of EO 229 and Sec. 50 of RA 6657 when it held The above quoted provision (Sec. 17) should be deemed to have repealed Sec. 12 (a) and (b) of Presidential Decree
No. 946 which invested the then courts of agrarian relations with original exclusive jurisdiction over cases and questions
involving rights granted and obligations imposed by presidential issuances promulgated in relation to the agrarian reform
program (emphasis supplied).
Thus, petitioners contention that Sec. 12, par. (b), of PD 946 is still in effect cannot be sustained. It seems that the

Secretary of Agrarian Reform erred in issuing Memorandum Circular No. I, Series of 1995, directing the DARAB to refrain
from hearing valuation cases involving PD 27 lands. For on the contrary, it is the DARAB which has the authority to
determine the initial valuation of lands involving agrarian reform [if !supportFootnotes][30][endif] although such valuation may only be
considered preliminary as the final determination of just compensation is vested in the courts. [if !supportFootnotes][31][endif]
Second, petitioner LBP contends that the Court of Appeals cannot issue the Writ of Mandamus because it cannot
be compelled to perform an act which is beyond its legal duty. [if !supportFootnotes][32][endif] Petitioner cites Sec. 2 of PD 251, [if !
supportFootnotes][33][endif]
which amended Sec. 75 of RA 3844,[if !supportFootnotes][34][endif] which provides that it is the duty of petitioner
bank "(t)o finance and/or guarantee the acquisition, under Presidential Decree No. 85 dated December 25, 1972, of farm
lands transferred to the tenant farmers pursuant to Presidential Decree No. 27 (P.D. 27) dated October 21, 1972." Section
7 of PD 251 also provides that "(w)henever the Bank pays the whole or a portion of the total costs of farm lots, the Bank
shall be subrogated by reason thereof, to the right of the landowner to collect and receive the yearly
amortizations on farm lots or the amount paid including interest thereon, from tenant-farmers in whose favor said
farm lot has been transferred pursuant to Presidential Decree No. 27, dated October 21, 1972" (emphasis supplied).
Petitioner further argues that for a financing or guarantee agreement to exist there must be at least three (3)
parties: the creditor, the debtor and the financier or the guarantor. Since petitioner merely guarantees or finances the
payment of the value of the land, the farmer-beneficiarys consent, being the principal debtor, is indispensable and that the
only time petitioner becomes legally bound to finance the transaction is when the farmer-beneficiary approves the
appraised land value. Petitioner fears that if it is forced to pay the value as determined by the DARAB, the government will
suffer losses as the farmer-beneficiary, who does not agree to the appraised land value, will surely refuse to reimburse the
amounts that petitioner had disbursed. Thus, it asserts, that the landowner, the DAR, the Land Bank and the farmerbeneficiary must all agree to the value of the land as determined by them.
A perusal of the law however shows that the consent of the farmer-beneficiary is not required in establishing the
vinculum juris for the proper compensation of the landowner. Section 18 of RA 6657 states 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 (emphasis supplied).
As may be gleaned from the aforementioned section, the landowner, the DAR and the Land Bank are the only
parties involved. The law does not mention the participation of the farmer-beneficiary. However, petitioner insists that Sec.
18 of RA 6657[if !supportFootnotes][35][endif] does not apply in this case as it involves lands covered by PD 27. It argues that in
appraising PD 27 lands the consent of the farmer-beneficiary is necessary to arrive at a final valuation. Without such
concurrence, the financing scheme under PD 251 cannot be satisfied. [if !supportFootnotes][36][endif]
We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under PD 27. Section 75 of RA
6657[if !supportFootnotes][37][endif] clearly states that the provisions of PD 27 and EO 228 shall only have a suppletory effect. Section
7 of the Act also provides Sec. 7. Priorities.- The DAR, in coordination with the PARC shall plan and program the acquisition and distribution of all
agricultural lands through a period of (10) years from the effectivity of this Act. Lands shall be acquired and distributed as
follows:
Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all private lands voluntarily offered by the
owners for agrarian reform;xxx and all other lands owned by the government devoted to or suitable for agriculture, which
shall be acquired and distributed immediately upon the effectivity of this Act, with the implementation to be completed
within a period of not more than four (4) years (emphasis supplied).
This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties which the DAR shall
acquire and distribute to the landless. And to facilitate the acquisition and distribution thereof, Secs. 16, 17 and 18 of the
Act should be adhered to. In Association of Small Landowners of the Philippines v. Secretary of Agrarian Reform [if !
supportFootnotes][38][endif]
this Court of Appeals applied the provisions RA 6657 to rice and corn lands when it upheld the
constitutionality of the payment of just compensation for PD 27 lands through the different modes stated in Sec. 18.
Having established that under Sec. 18 of RA 6657 the consent of the farmer-beneficiary is unnecessary in the
appraisal of land value, it must now be determined if petitioner had agreed to the amount of compensation declared by the
PARAD. If it did, then we can now apply the doctrine in Sharp International Marketing v. Court of Appeals. [if !supportFootnotes][39]
[endif]
In that case, the Land Bank refused to comply with the Writ of Mandamus issued by the Court of Appeals on the
ground that it was not obliged to follow the order of the Secretary of Agrarian Reform to pay the landowner. This Court
concurred with the Land Bank saying that the latter could not be compelled to obey the Secretary of Agrarian Reform
since the bank did not merely exercise a ministerial function. Instead, it had an independent discretionary role in land
valuation and that the only time a writ of mandamus could be issued against the Land Bank was when it agreed to the
amount of compensation determined by the DAR It needs no exceptional intelligence to understand the implication of this transmittal. It simply means that if LBP agrees on
the amount stated in the DAS,[if !supportFootnotes][40][endif] after its review and evaluation, it becomes its duty to sign the deed.
But not until then. For, it is only in that event that the amount to be compensated shall have been established according
to law.
Although the case at bar pertains to an involuntary sale of land, the same principle should apply. Once the Land
Bank agrees with the appraisal of the DAR, which bears the approval of the landowner, it becomes its legal duty to finance

the transaction. In the instant case, petitioner participated in the valuation proceedings held in the office of the PARAD
through its counsel, Atty. Eduard Javier.[if !supportFootnotes][41][endif] It did not appeal the decision of PARAD which became final and
executory.[if !supportFootnotes][42][endif] As a matter of fact, petitioner even stated in its Petition that "it is willing to pay the value
determined by the PARAD PROVIDED that the farmer beneficiaries concur thereto." [if !supportFootnotes][43][endif] These facts
sufficiently prove that petitioner LBP agreed with the valuation of the land. The only thing that hindered it from paying the
amount was the non-concurrence of the farmer-beneficiary. But as we have already stated, there is no need for such
concurrence. Without such obstacle, petitioner can now be compelled to perform its legal duty through the issuance of a
writ of mandamus.
Anent petitioners argument that the government will lose money should the farmer-beneficiary be unwilling to pay,
we believe such apprehension is baseless. In the event that the farmer-beneficiary refuses to pay the amount disbursed
by petitioner, the latter can foreclose on the land as provided for in Secs. 8 to 11 of EO 228. Petitioner LBP would then be
reimbursed of the amount it paid to the landowner.
Third, petitioner LBP asserts that a writ of mandamus cannot be issued where there is another plain, adequate and
complete remedy in the ordinary course of law. Petitioner claims that private respondent had three (3) remedies. The first
remedy was to ask the sheriff of the DARAB to execute the ruling of PARAD by levying against the Agrarian Reform Fund
for so much of the amount as would satisfy the judgment. Another remedy was to file a motion with the DAR asking for a
final resolution with regard to the financing of the land valuation. Lastly, private respondent could have filed a case in the
Special Agrarian Court for the final determination of just compensation. [if !supportFootnotes][44][endif]
We hold that as to private respondent the suggested remedies are far from plain, adequate and complete. After the
judgment of PARAD became final and executory, private respondent applied for a writ of execution which was eventually
granted. However, the sheriff was unable to implement it since petitioner LBP was unwilling to pay. The PARAD even
issued an order requiring petitioners manager to explain why he should not be held in contempt. [if !supportFootnotes][45][endif] Two (2)
years elapsed from the time of the PARAD ruling but private respondents claim has remained unsatisfied. This shows that
petitioner has no intention to comply with the judgment of PARAD. How then can petitioner still expect private respondent
to ask the DARABs sheriff to levy on the Agrarian Reform Fund when petitioner bank which had control of the fund [if !
supportFootnotes][46][endif]
firmly reiterated its stand that the DARAB had no jurisdiction?
Petitioners contention that private respondent should have asked for a final resolution from the DAR as an
alternative remedy does not impress us either. When private respondent sensed that petitioner would not satisfy the writ
of execution issued by the PARAD, he sought the assistance of the Secretary of Agrarian Reform who then wrote to
petitioner to pay the amount in accordance with the decision of PARAD. [if !supportFootnotes][47][endif] Still, petitioner refused. The
Secretary then sent another letter to petitioner telling the latter to pay private respondent. [if !supportFootnotes][48][endif] Obviously, the
stand of the Secretary was that petitioner should pay private respondent in accordance with the PARAD valuation which
had already become final. It would have been redundant for private respondent to still ask for a final resolution from the
DAR.
The allegation of petitioner that private respondent should have filed a case with the Special Agrarian Court is also
without merit. Although it is true that Sec. 57 of RA 6657 provides that the Special Agrarian Courts shall have jurisdiction
over the final determination of just compensation cases, it must be noted that petitioner never contested the valuation of
the PARAD.[if !supportFootnotes][49][endif] Thus, the land valuation stated in its decision became final and executory.[if !supportFootnotes][50]
[endif]
There was therefore no need for private respondent Pascual to file a case in the Special Agrarian Court.
With regard to the decision of the Court of Appeals imposing an interest based on Administrative Order No. 13,
Series of 1994, the Order should be examined to ascertain if private respondent can avail of the 6% compounded interest
prescribed for unpaid landowners. As to its coverage, the Order states: These rules and regulations shall apply to
landowners: (1) whose lands are actually tenanted as of 21 October 1972 or thereafter and covered by OLT; (2) who opted
for government financing through Land Bank of the Philippines as mode of compensation; and, (3) who have not yet been
paid for the value of their land.
At first glance it would seem that private respondents lands are indeed covered by AO No. 13. However, Part IV
shows that AO No. 13 provides a fixed formula for determining the Land Value (LV) and the additional interests it would
have earned. The formula utilizes the Government Support Price (GSP) of 1972, which is P35.00/cavan of palay and
P31.00/cavan of corn. For its Increment Formula AO No. 13 states: The following formula shall apply For palay: LV= (2.5 x AGP x P35) x (1.06)n
For corn: LV= (2.5 x AGP x P31) x (1.06)n.[if !supportFootnotes][51][endif]
In the decision of PARAD, however, the Land Value (LV) of private respondents property was computed by using
the GSP for 1992, which is P300.00 per cavan of palay and P250.00 per cavan of corn.[if !supportFootnotes][52][endif] PARAD
Dimacali used the following equations:
For palay: LV = (2.5 x AGP x 300 )
For corn: LV = (2.5 x AGP x 250)
Hence, the formula in AO No. 13 could no longer be applied since the PARAD already used a higher GSP.
The purpose of AO No. 13 is to compensate the landowners for unearned interests. [if !supportFootnotes][53][endif] Had they
been paid in 1972 when the GSP for rice and corn was valued at P35.00 and P31.00, respectively, and such amounts
were deposited in a bank, they would have earned a compounded interest of 6% per annum. Thus, if the PARAD used the
1972 GSP, then the product of (2.5 x AGP x P35 or P31) could be multiplied by (1.06)n to determine the value of the land
plus the additional 6% compounded interest it would have earned from 1972. However, since the PARAD already

increased the GSP from P35.00 to P300.00/cavan of palay and from P31.00 to P250.00/cavan of corn, there is no more
need to add any interest thereon, muchless compound it. To the extent that it granted 6% compounded interest to private
respondent Jose Pascual, the Court of Appeals erred.
WHEREFORE, the assailed Decision of the Court of Appeals granting the Writ of Mandamus directing petitioner Land
Bank of the Philippines to pay private respondent Jose Pascual the total amount of P1,961,950.00 stated in the Decision
dated 11 June 1992 of the Provincial Agrarian Reform Adjudicator (PARAD) of Cagayan is AFFIRMED, with the
modification that the 6% compounded interest per annum provided under DAR Administrative Order No. 13, Series of
1994 is DELETED, the same being no longer applicable.
SO ORDERED.
LAND BANK OF THE PHILIPPINES, Petitioner, v. HEIRS OF JESUS ALSUA, REPRESENTED BY BIBIANO
C. SABINO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated October 31, 2013 and the Resolution 3
dated February 18, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 127483, fixing the just compensation
for respondents 47.4535-hectare (ha.) land at P2,465,423.02, less the initial valuation already paid in the
amount of P1,369,708.02, with legal interest at the rate of 12% per annum (p.a.) from November 13, 2001 to
June 30, 2013, and 6% p.a. from July 1, 2013 until full satisfaction, using the formula stated in Department of
Agrarian Reform (DAR) Administrative Order (AO) No. 5, series of 1998. 4chanroblesvirtuallawlibrary
The Facts
Jesus Alsua (Jesus) owned a 62.1108 has. parcel of unregistered agricultural land known as Lot No. 8882,
Cad-201, situated in Malidong, Pioduran, Albay, covered by Tax Declaration No. 99-13-001-0067 5 in his
name.6chanroblesvirtuallawlibrary
On March 6, 1994, respondents Heirs of Jesus Alsua and their representative Bibiano C. Sabino (respondents)
voluntarily offered to sell7 the entire parcel of land to the government under Republic Act No. (RA) 6657, 8 as
amended, otherwise known as the Comprehensive Agrarian Reform Law of 1988, but only 47.4535 has.
thereof, consisting of 43.7158 has. of cocoland and 3.7377 has. of unirrigated riceland (subject lands),
were acquired.9chanroblesvirtuallawlibrary
Upon receipt from the DAR of the Claim Folder (CF) on April 20, 2001, albeit containing incomplete documents,
petitioner Land Bank of the Philippines (LBP) valued the subject lands at P1,369,708.0210 (LBPs valuation)
using the formula11 stated in DAR AO No. 5, series of 1998, as follows:cha
nRoblesvirtualLawlibrary
43.7158
ha.
x
Cocoland
P1,268,565.19
P29,018.46
Unirrigated
3.7377
ha.
x
101,142.83
Riceland
27,060.18
P1,369,708.0212
The necessary documents were completed only in September 2001, 13 hence, the CF was considered to have
been received only on the latter date, 14 and the LBPs valuation approved on September 25,
2001.15chanroblesvirtuallawlibrary
The DAR then offered to respondents the LBPs valuation as just compensation for the lands, but the latter
rejected the valuation.16 Thus, the LBP was prompted to deposit the said amount in cash and in Agrarian
Reform Bonds in respondents name.17chanroblesvirtuallawlibrary
After summary administrative proceedings for the determination of just compensation, docketed as DARAB
Case No. 05-01-0059-A-2001, the Provincial Agrarian Reform Adjudicator (PARAD), in a Decision 18 dated
January 29, 2004, fixed the value of the subject lands at P5,479,744.15. The LBP moved for reconsideration
but was denied in a Resolution19 dated March 11, 2004.
Dissatisfied with the PARADs valuation, the LBP filed a petition 20 for determination of just compensation before
the Regional Trial Court of Legazpi City, Branch 3 (RTC), docketed as Agrarian Case No. 04-02, averring that
the PARADs valuation was excessively high and is contrary to the legally prescribed factors in determining just
compensation.21chanroblesvirtuallawlibrary

On the other hand, respondents maintained the correctness of the PARADs valuation, insisting that it
considered all the factors that may be used as basis in order to arrive at a just and equitable valuation of the
subject lands, including their potential use and corresponding increase in value. 22chanroblesvirtuallawlibrary
In the interim, or on November 29, 2001, the Register of Deeds of Albay issued Original Certificates of Title
(OCT) Nos. C-2772123and 2772224in the names of the agrarian reform beneficiaries.
During the pendency of the proceedings, the RTC appointed the Agrarian Operations Center of the LBP to
conduct a reinvestigation of the gross production and selling price data within the 12-month period preceding
June 30, 2009.25 On July 4, 2011, the Commissioner submitted his Report 26 dated July 1, 2011, finding that the
subject cocoland has a density of 80 trees per hectare with more than 35 years of age. 27 Considering the lack
of data from the landowners who were absent during the ocular inspection, and after ascertaining that the
coconut production for the 12-month period prior to June 30, 2009 based on the industry data (PCA data) was
unattainable in the area since the coconut trees were still recovering from the impact of typhoons Milenyo and
Reming which hit the country in September and November 2006, respectively, 28 he merely attached the
production and selling price data from the Philippine Coconut Authority (PCA) for the concerned period.
The RTC Ruling
In a Decision29 dated August 17, 2012, the RTC rejected the valuation of both the LBP and the PARAD and
fixed the just compensation for the subject lands at P4,245,820.5330 as follows:
cha
nRoblesvirtualLawlibrary
LV for Cocoland = P3,654,285.91
LV for Riceland = 350,072.98
LV for Trees
= 241, 461.64
P4,245,820.5331
The RTC used the formula under DAR AO No. 5, series of 1998, as amended, i.e., LV = (CNI x 0.9) + (MV x
0.1),32 utilizing production data or values within the 12-month period preceding the presumptive date of taking
on June 30, 2009 pursuant to DAR AO No. 1, series of 2010,33 which currentizes the bases for the
production data and values and does away with the payment of interest that will compensate for the loss of
purchasing power due to inflation.34 It explained that to reckon the taking from November 29, 2001, 35 or the
date the OCTs were issued in favor of the beneficiaries, pursuant to the ruling in LBP v. Dumlao,36 will be unjust
to the landowners, considering the diminution in the purchasing power of the peso. On the other hand, while
interests may be imposed for the delay in the payment of the compensation, such imposition will be unjust to
the State which would be unduly penalized for the steadfastness of the implementors of the agrarian reform
program in their administrative determination of compensation that the landowners had
repudiated.37chanroblesvirtuallawlibrary
The LBP moved for reconsideration38 which was, however, denied by the RTC in an Order 39 dated October 25,
2012, prompting it to elevate its case to the CA.
The CA Ruling
In a Decision40 dated October 31, 2013, the CA fixed the just compensation of the subject lands at
P2,465,423.02, less the initial valuation already paid in the amount of P1,369,708.02, plus legal interest at the
rate of 12% p.a. from November 13, 2001 to June 30, 2013, and at 6% p.a. from July 1, 2013 until full
satisfaction.41chanroblesvirtuallawlibrary
The CA affirmed the applicability of the provisions of DAR AO No. 5, series of 1998 in the computation of the
just compensation for the subject lands but declared that the RTC erred in fixing the date of taking on June 30,
2009 (i.e., the presumptive date of taking pursuant to DAR AO No. 1, series of 2010). 42 It pointed out that the
taking of lands under the agrarian reform program partakes of the nature of an expropriation proceeding; thus,
just compensation should be pegged at the price or value of the property at the time it was taken from
the owner and not its value at the time of rendition of judgment or the filing of the complaint if the
government takes possession of the land before the institution of expropriation
proceedings.43chanroblesvirtuallawlibrary
Separately, however, the CA used different values from that employed by the LBP in computing the capitalized
net income (CNI) for purposes of arriving at the land value (LV) of the 43.7158 has. cocoland as the same
purportedly did not reflect the true income generating capacity of the property. 44 Instead, the CA based the

selling price on the average farm gate prices of copra for the four-year period from 2000 to 2003. On the other
hand, while it found that the RTC correctly used the one-factor formula in computing the LV of the unirrigated
riceland, i.e., MV x 2, considering the lack of available information on Comparable Sales, it used the market
value (MV) per tax declaration 45 and grossed it up with the location adjustment factor and the applicable
Regional Consumer Price Index in accordance with Item II (A.9) of DAR AO No. 5, series of 1998. Accordingly,
it valued the subject lands as follows:chanRoblesvirtualLawlibrary
LV for Cocoland
= P1,936,892.34
LV for Unirrigated
= 287,069.04
Riceland
LV for Trees
= 241,461.64
P2,465,423.0246
Aggrieved, the LBP filed a motion for reconsideration 47 which was, however, denied in a Resolution 48 dated
February 18, 2014, hence, the instant petition.
The Issue Before the Court
The essential issue for the Courts resolution is whether or not the CA committed any reversible error in fixing
the just compensation for the subject lands.
The Courts Ruling
Settled is the rule that when the agrarian reform process is still incomplete, such as in this case where the just
compensation due the landowner has yet to be settled, just compensation should be determined and the
process be concluded under RA 6657.49chanroblesvirtuallawlibrary
For purposes of determining just compensation, the fair market value of an expropriated property is determined
by its character and its price at the time of taking,50 or the time when the landowner was deprived of the use
and benefit of his property,51 such as when title is transferred in the name of the beneficiaries, as in this case.
In addition, the factors enumerated under Section 17 of RA 6657, i.e., (a) the acquisition cost of the land, (b)
the current value of like properties, (c) the nature and actual use of the property and the income therefrom, (d)
the owners sworn valuation, (e) the tax declarations, (f) the assessment made by government assessors, (g)
the social and economic benefits contributed by the farmers and the farmworkers, and by the government to
the property, and (h) the non-payment of taxes or loans secured from any government financing institution on
the said land, if any, must be equally considered.52chanroblesvirtuallawlibrary
In this case, both the RTC and the CA applied the provisions of DAR AO No. 5, series of 1998 in computing the
just compensation for the subject lands. Under the said AO, there shall be one basic formula for the valuation
of lands, i.e., LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), where:chanRoblesvirtualLawlibrary
LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above-stated formula shall be used only if all the three factors i.e., CNI, CS, and MV, are present, relevant,
and applicable. In case one or two factors are not present, the said AO provides for alternate
formulas.53chanroblesvirtuallawlibrary
Records show that the comparable sales (CS) were found to be unavailable 54 so the alternative formula, i.e.,
LV = (CNI x 0.9) + (MV x 0.1), was used by the LBP, the RTC, and the CA in fixing the just compensation for
the subject cocoland. On the other hand, they used the one-factor formula under the said AO, i.e., LV = MV x 2,
in valuing the subject riceland considering the lack of comparable sales (CS) and production data to arrive at
the capitalized net income (CNI). It appears, however, that both the RTC and the CA made variations from the
formula under the said AO.
A. RTC and CA Valuation of the Subject Cocoland.
For its part, the RTC used production data or values within the 12-month period preceding the presumptive
date of taking of the subject cocoland on June 30, 2009,55 in accordance with DAR AO No. 1, series of 2010. 56
It is significant to point out, however, that the said AO only applies to tenanted rice and corn lands acquired
under Presidential Decree No. 27 57and Executive Order No. (EO) 228,58 which scenario does not obtain in this

case. Besides, the long-standing rule is that an expropriated property must be valued at the time of taking,59 in
this case, upon the issuance of the OCTs in the name of the beneficiaries on November 29, 2001. 60 Hence, the
said AO cannot be made to obtain and the RTCs valuation cannot be sustained.
On the other hand, while the CA correctly held that just compensation shall be the price or value of the property
at the time it was taken from the owner and appropriated by the government, 61 or on November 29, 2001, it,
departed from the parameters prescribed under DAR AO No. 5, series of 1998 in computing the capitalized net
income (CNI) in order to arrive at the land value (LV) for the subject lands. Particularly, under the foregoing AO,
the selling price (SP) for purposes of computing the capitalized net income (CNI) shall be the average of the
latest available 12-months' selling prices prior to the date of receipt of the CF by LBP for processing , such
prices to be secured from the Department of Agriculture (DA) and other appropriate regulatory bodies or, in
their absence, from the Bureau of Agricultural Statistics. x x x.
In rejecting the LBPs proposed valuation which used the prices of copra from July 2000 to June 2001 per
certification from the PCA, the CA opined that the data and values used therein did not reflect the true income
generating capacity of the property.62 Instead, it used the data for the four-year period from 2000 to 2003, thus,
including data or values beyond the time of taking. Consequently, the Court similarly cannot adopt the CAs
computation.
B. RTC and CA Valuation of the Subject Riceland.
The RTC used the one-factor formula under DAR AO No. 5, series of 1998, utilizing unit market value (UMV)
taken from the Schedule of Base Unit Market Value 63 as of 2002, pursuant to the pertinent ordinance of the
Sangguniang Panlalawigan of Albay.64 Having been based on data or values beyond the time of taking on
November 29, 2001, the Court cannot accept the RTCs valuation. To reiterate, just compensation is the fair
market value of an expropriated property at the time of taking,65 in this case, the value of the subject lands upon
the issuance of the OCTs in the name of the beneficiaries on November 29, 2001.
For its part, the CA used the same formula but utilized the unit market value (UMV) from the Schedule of Unit
Market Value for Albay effective 2000 in the amount of P34,690.00, 66 and then grossed it up with the location
adjustment factor and the applicable Regional Consumer Price Index in accordance with Item II (A.9) 67 of DAR
AO No. 5, series of 1998. Considering that the taking took place on November 29, 2001, the UMV should be
that corresponding for the year 2001. However, records are bereft of showing that the UMV for the year 2000 is
the same UMV obtaining for the year 2001. Thus, on this score, the CAs computation must equally be rejected.
C. RTC and CA Valuation of the Trees Included in the Just Compensation.
It is relevant to point out that the RTCs valuation of the standing trees in the amount of P241,461.64, 68 as
affirmed by the CA,69 appears to have been pegged according to the prevailing values within the 12-month
period preceding June 30, 2009. As mentioned, such date was long after the subject lands taking on
November 29, 2001 and, hence, can neither be countenanced.
D. The Proper Valuation and Remand Guidelines.
In view of the foregoing disquisitions, the just compensation for the subject lands should be computed based
on the factors stated in Section 17 of RA 6657, as amended. However, the Court has pored over the records
and observed that the only factors considered by both courts in determining the just compensation were
(a) the nature and actual use of the property, and the income therefrom, as well as (b) the market value
of the subject lands,70without a showing that the other factors under the said section were even taken into
account or, otherwise, found to be inapplicable, contrary to what the law requires.
Similarly, the Court has gone over the LBPs findings and computation, as contained in the Claims and
Valuation and Processing Form,71 and is likewise unable to adopt the same since it was partly based on the
field investigation report72 which admittedly did not consider (a) the economic and social benefits of the
subject lands,73and (b) the current value of like properties within the vicinity.74 To reiterate, the factors
enumerated under Section 17 of RA 6657 must be considered in computing just compensation. Accordingly, the
Court finds a need to remand Agrarian Case No. 04-02 to the RTC for the determination of just compensation
in accordance with these factors. Relative thereto, the RTC is further directed to observe the following
guidelines in the remand of the case:chanRoblesvirtualLawlibrary
1. Just compensation must be valued at the time of taking, or the time when the landowner was deprived
of the use and benefit of his property,75 in this case, upon the issuance of OCT Nos. C-27721 and 27722 in the

names of the agrarian reform beneficiaries on November 29, 2001. 76 Hence, the evidence to be presented by
the parties before the trial court for the valuation of the subject lands must be based on the values prevalent on
such time of taking for like agricultural lands.77chanroblesvirtuallawlibrary
2. The evidence must conform to Section 17 of RA 6657, as amended, prior to its amendment by RA
9700.78 It bears pointing out that while Congress passed RA 9700 on July 1, 2009, amending certain provisions
of RA 6657, as amended, among them, Section 17, and declaring [t]hat all previously acquired lands wherein
valuation is subject to challenge by landowners shall be completed and finally resolved pursuant to Section 17
of [RA 6657], as amended,79 the law should not be retroactively applied to pending claims/cases. In fact, DAR
AO No. 2, series of 200980 implementing RA 9700 expressly excepted from the application of the amended
Section 17 all claim folders received by LBP prior to July 1, 2009, which shall be valued in accordance with
Section 17 of RA 6657, as amended, prior to its further amendment by RA No.
9700.81chanroblesvirtuallawlibrary
Records show that the CF from the DAR was actually received by the LBP on April 20, 2001, but the latter
considered the same as received only later in September 2001 with the completion of the necessary
documents.82 Hence, Section 17 of RA 6657, as amended, prior to its further amendment by RA 9700, should
be the basis for the valuation of the subject lands. In the event that the respondents had already withdrawn the
amount deposited by the LBP, the withdrawn amount should be deducted from the final land valuation to be
paid by LBP.83chanroblesvirtuallawlibrary
3. The RTC may impose interest on the just compensation as may be warranted by the circumstances
of the case.84 In previous cases, the Court has allowed the grant of legal interest in expropriation cases where
there is delay in the payment since the just compensation due to the landowners was deemed to be an
effective forbearance on the part of the State. 85 Legal interest shall be pegged at the rate of 12% interest p.a.
from the time of taking until June 30, 2013 only. Thereafter, or beginning July 1, 2013, until fully paid, interest
shall be at 6% p.a. in line with the amendment introduced by BSP-MB Circular No. 799, 86 series of
2013.87chanroblesvirtuallawlibrary
4. Finally, the RTC is advised that while it should be mindful of the different formulae created by the DAR in
arriving at just compensation, it is not strictly bound to adhere thereto if the situations before it do not
warrant their application. As held in LBP v. Heirs of Maximo Puyat:88
[T]he determination of just compensation is a judicial function; hence, courts cannot be unduly restricted in their
determination thereof. To do so would deprive the courts of their judicial prerogatives and reduce them to the
bureaucratic function of inputting data and arriving at the valuation. While the courts should be mindful of the
different formulae created by the DAR in arriving at just compensation, they are not strictly bound to adhere
thereto if the situations before them do not warrant it. Apo Fruits Corporation v. Court of Appeals [(565 Phil. 418
(2007)] thoroughly discusses this issue, to wit:chanRoblesvirtualLawlibrary
[T]he basic formula and its alternativesadministratively determined (as it is not found in Republic Act No.
6657, but merely set forth in DAR AO No. 5, Series of 1998)although referred to and even applied by the
courts in certain instances, does not and cannot strictly bind the courts. To insist that the formula must be
applied with utmost rigidity whereby the valuation is drawn following a strict mathematical computation goes
beyond the intent and spirit of the law. The suggested interpretation is strained and would render the law inutile.
Statutory construction should not kill but give life to the law. As we have established in earlier jurisprudence, the
valuation of property in eminent domain is essentially a judicial function which is vested in the regional trial
court acting as a SAC, and not in administrative agencies. The SAC, therefore, must still be able to reasonably
exercise its judicial discretion in the evaluation of the factors for just compensation, which cannot be arbitrarily
restricted by a formula dictated by the DAR, an administrative agency. Surely, DAR AO No. 5 did not intend to
straightjacket the hands of the court in the computation of the land valuation. While it provides a formula, it
could not have been its intention to shackle the courts into applying the formula in every instance. The court
shall apply the formula after an evaluation of the three factors, or it may proceed to make its own computation
based on the extended list in Section 17 of Republic Act No. 6657, which includes other factors[.] x x
x.cralawred
WHEREFORE, the petition is DENIED insofar as it seeks to sustain the valuation of the subject lands made by
petitioner Land Bank of the Philippines. The Decision dated October 31, 2013 and the Resolution dated
February 18, 2014 rendered by the Court of Appeals in CA-G.R. SP No. 127483, fixing the just compensation
for respondents 47.4535 hectares of land at P2,465,423.02, less the initial valuation already paid in the amount
of P1,369,708.02, plus legal interest as afore-discussed, which did not fully consider the factors enumerated
under Section 17 of Republic Act No. 6657, as amended, are hereby SET ASIDE. Accordingly, Agrarian Case
No. 04-02 is REMANDED to the Regional Trial Court of Legazpi City, Branch 3 for the proper determination of
just compensation in accordance with the guidelines set in this Decision. The trial court is directed to conduct
the proceedings in said case with reasonable dispatch and to submit to the Court a report on its findings and

recommended conclusions within sixty (60) days from notice of this Decision.

Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al.,
G.R. No. 171101, July 5, 2011
I.

THE FACTS

In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas (Tabacalera) sold Hacienda Luisita and the
Central Azucarera de Tarlac, the sugar mill of the hacienda, to the Tarlac Development Corporation (Tadeco), then owned
and controlled by the Jose Cojuangco Sr. Group. The Central Bank of the Philippines assisted Tadeco in obtaining a dollar
loan from a US bank. Also, the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the peso price
component of the sale, with the condition that the lots comprising the Hacienda Luisita be subdivided by the applicantcorporation and sold at cost to the tenants, should there be any, and whenever conditions should exist warranting such
action under the provisions of the Land Tenure Act. Tadeco however did not comply with this condition.
On May 7, 1980, the martial law administration filed a suit before the Manila RTC against Tadeco, et al., for them to
surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR) so that the land can be distributed to farmers at
cost. Responding, Tadeco alleged that Hacienda Luisita does not have tenants, besides which sugar lands of which the
hacienda consisted are not covered by existing agrarian reform legislations. The Manila RTC rendered judgment
ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the CA.
On March 17, 1988, during the administration of President Corazon Cojuangco Aquino, the Office of the Solicitor General
moved to withdraw the governments case against Tadeco, et al. The CA dismissed the case, subject to the PARCs
approval of Tadecos proposed stock distribution plan (SDP) in favor of its farmworkers. [Under EO 229 and later RA
6657, Tadeco had the option of availing stock distribution as an alternative modality to actual land transfer to the
farmworkers.] On August 23, 1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as vehicle to facilitate
stock acquisition by the farmworkers. For this purpose, Tadeco conveyed to HLI the agricultural land portion (4,915.75
hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a
referendum their acceptance of the proposed HLIs Stock Distribution Option Plan (SODP). On May 11, 1989, the SDOA
was formally entered into by Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip
Juico. The SDOA embodied the basis and mechanics of HLIs SDP, which was eventually approved by the PARC after a
follow-up referendum conducted by the DAR on October 14, 1989, in which 5,117 FWBs, out of 5,315 who participated,
opted to receive shares in HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial
use, pursuant to Sec. 65 of RA 6657. The DAR approved the application on August 14, 1996, subject to payment of three
percent (3%) of the gross selling price to the FWBs and to HLIs continued compliance with its undertakings under the
SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc.
(Centennary), ceded 300 hectares of the converted area to the latter. Subsequently, Centennary sold the entire 300
hectares for PhP750 million to Luisita Industrial Park Corporation (LIPCO), which used it in developing an industrial
complex. From this area was carved out 2 parcels, for which 2 separate titles were issued in the name of LIPCO. Later,
LIPCO transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in payment of LIPCOs
PhP431,695,732.10 loan obligations to RCBC. LIPCOs titles were cancelled and new ones were issued to RCBC. Apart
from the 500 hectares, another 80.51 hectares were later detached from Hacienda Luisita and acquired by the
government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus, 4,335.75 hectares remained of the
original 4,915 hectares Tadeco ceded to HLI.
Such, was the state of things when two separate petitions reached the DAR in the latter part of 2003. The first was filed by
the Supervisory Group of HLI (Supervisory Group), praying for a renegotiation of the SDOA, or, in the alternative, its
revocation. The second petition, praying for the revocation and nullification of the SDOA and the distribution of the lands in
the hacienda, was filed by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA). The DAR then
constituted a Special Task Force (STF) to attend to issues relating to the SDP of HLI. After investigation and evaluation,
the STF found that HLI has not complied with its obligations under RA 6657 despite the implementation of the SDP. On
December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, recalling/revoking the SDO plan of
Tadeco/HLI. It further resolved that the subject lands be forthwith placed under the compulsory coverage or mandated

land acquisition scheme of the CARP.

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

THE ISSUES

(1) Does the PARC possess jurisdiction to recall or revoke HLIs SDP?
(2) [Issue raised by intervenor FARM (group of farmworkers)] Is Sec. 31 of RA 6657, which allows stock transfer in lieu of
outright land transfer, unconstitutional?
(3) Is the revocation of the HLIs SDP valid? [Did PARC gravely abuse its discretion in revoking the subject SDP and
placing the hacienda under CARPs compulsory acquisition and distribution scheme?]
(4) Should those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired by purchase be
excluded from the coverage of the assailed PARC resolution? [Did the PARC gravely abuse its discretion when it
included LIPCOs and RCBCs respective properties that once formed part of Hacienda Luisita under the CARP
compulsory acquisition scheme via the assailed Notice of Coverage?]
III. THE RULING
[The Court DENIED the petition of HLI and AFFIRMED the PARC resolution placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition scheme of the CARP, with the MODIFICATION that the original 6,296
qualified FWBs were given the option to remain as stockholders of HLI. It also excluded from the mandatory CARP
coverage that part of Hacienda Luisita that had been acquired by RCBC and LIPCO.]
(1) YES, the PARC has jurisdiction to revoke HLIs SDP under the doctrine of necessary implication.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the
corporate landowner belongs to PARC. Contrary to petitioner HLIs posture, PARC also has the power to revoke the
SDP which it previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do
not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is
deemed possessed by PARC under the principle of necessary implication, a basic postulate that what is implied in a
statute is as much a part of it as that which is expressed.
Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan
for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the
approval of the plan. To deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the
very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without
authority to impose sanctions for non-compliance with it.
(2) NO, Sec. 31 of RA 6657 is not unconstitutional. [The Court actually refused to pass upon the constitutional
question because it was not raised at the earliest opportunity and because the resolution thereof is not the lis mota of
the case. Moreover, the issue has been rendered moot and academic since SDO is no longer one of the modes of
acquisition under RA 9700.]
When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of
the executive or legislative departments, it does so only when the following essential requirements are first met, to wit: (1)
there is an actual case or controversy; (2) that the constitutional question is raised at the earliest possible opportunity by a
proper party or one with locus standi; and (3) the issue of constitutionality must be the very lis mota of the case.
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has
yet to explain its failure to challenge the constitutionality of Sec. 31 of RA 6657 as early as November 21, 1989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter, and why its members

received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval
of the SDP that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31
of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the
other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May
3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from
November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The
FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged
unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a
constitutional issue that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous
events and activities which resulted from the application of an alleged unconstitutional legal provision.
The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not
likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of
the case. 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.
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members
previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to
support a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse of
discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and
implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be resolved
without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of
AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged application of the said provision in
the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has all but superseded Sec.
31 of RA 6657 vis--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.
(3) YES, the revocation of the HLIs SDP valid. [NO, the PARC did NOT gravely abuse its discretion in
revoking the subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution
scheme.]
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLIs stock distribution violate DAO
10 because the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use
of man days and the hiring of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is
contrary to what Sec. 11 of DAO 10 prescribes.
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that
it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY
[TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost
to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently
owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been
completely acquired and distributed to the THIRD PARTY.
[I]t 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.
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.
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 [because of violations of]
DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and
regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law
and must be duly complied with. The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution
No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided.
(4) YES, those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired by
purchase should be excluded from the coverage of the assailed PARC resolution.
[T]here are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser
buys the property of another without notice that some other person has a right to or interest in such property; and (2) that
the purchaser pays a full and fair price for the property at the time of such purchase or before he or she has notice of the
claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above requirements and with respect to the
adverted transactions of the converted land in questionpurchasers in good faith for value entitled to the benefits arising
from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any
supposed defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property.
In fact, at the time LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name
of Centennary: the Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in favor of Shintaro Murai,
and the conversion of the property from agricultural to industrial and residential use.
The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general
annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the
Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to
guarantee the payment of PhP 300 million.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a
stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial
purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and,
hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and
disposition of agricultural lands previously covered by CARP land acquisition after the lapse of five (5) years from its
award when the land ceases to be economically feasible and sound for agricultural purposes or the locality has become
urbanized and the land will have a greater economic value for residential, commercial or industrial purposes. Moreover,
DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of
Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian

reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian reform. The
DAR conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this factual
setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous
registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo,
RCBC and LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300
hectares of land from Centennary for the amount of PhP750 million pursuant to a Deed of Sale dated July 30, 1998. On
the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda
Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP431,695,732.10.
In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be
considered at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus,
outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed
LIPCOs and RCBCs property which once formed part of Hacienda Luisita under the CARP compulsory
acquisition scheme via the assailed Notice of Coverage.
[The Court went on to apply the operative fact doctrine to determine what should be done in the aftermath of its
disposition of the above-enumerated issues:
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 200634-01, the Court cannot close its eyes to certain operative facts that had occurred in the interim. Pertinently, the
operative fact doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no longer
without force and effect, undue harshness and resulting unfairness must be avoided. This is as it should realistically be,
since rights might have accrued in favor of natural or juridical persons and obligations justly incurred in the meantime. The
actual existence of a statute or executive act is, prior to such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot always be erased by a new judicial declaration.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by
application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989,
93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI
salaries and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from
agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare lot sold to
SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005. On August 6, 20l0, HLI and private
respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of
agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as
stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to
continue as HLI shareholders. A matter best left to their own discretion.]
[WHEREFORE, the instant petition is DENIED.

THE HON. SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, Petitioner, v. NEMESIO

DUMAGPI, REPRESENTED BY VICENTE DUMAGPI, Respondent.
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari1 by the Secretary of the Department of Agrarian Reform
(DAR) from the Decision2 dated October 7, 2010 of the Court of Appeals (CA), in CA-G.R. CV No. 01724-MIN,
which affirmed the Decision3 dated December 16, 2005 of the Regional Trial Court (RTC) of Pagadian City,
Branch 22, in Civil Case No. 3985, the fallo of which reads:chanRoblesvirtualLawlibrary
WHEREFORE, judgment is hereby rendered:
1. Ordering all the private defendants and their privies to restore the possession on the property in question in
favor of the plaintiff and his heirs;
2. Ordering the cancellation of Land Ownership Award No. 00014318 over Lot 684, CSD-09-001830, containing
an area of 15,304 square meters issued on December 8, 1990, awarded to Juan Aguilar, Sr. with the
corresponding Original Certificate of Title, as well as the Certificate of Land Ownership Award No. 00614859
over Lot 686, CSD-09-001830 containing an area of 16,474 square meters issued on December 8, 1990,
awarded to Juan Aguilar, Sr. with the corresponding Original Certificate of Title;
3. Ordering the cancellation of Certificate of Land Ownership Award No. 00014832 over Lot 682, CSD-09001830, containing an area of 32,428 square meters issued on November 20, 1990, awarded to Dionito V.
Custodio with the corresponding Original Certificate of Title as well as the Certificate of Land Ownership Award
No. 014833 over Lot 683, CSD-09-001830 containing an area of 25,616 square meters issued on November
20, 1990 with the corresponding Original Certificate of Title.
4. Sentencing all the private defendants jointly and severally to pay plaintiff the sum of P100,000[.00] or plus an
appearance fee of P2,000.00 as per appearance in court as attorneys fees, moral damages in the amount of
P50,000.00. All with interests at the rate of 6% per annum until fully paid; and
With costs against private defendants.
SO ORDERED.4
The Facts
On August 12, 1997, Nemesio Dumagpi (Nemesio), filed a complaint denominated Accion Reivindicatoria,
Quieting of Title, and Damages before the RTC against Juan Aguilar, Sr. (Aguilar), Rosalino C. Valencia
(Valencia), Dionito B. Custodio (Custodio) and the Secretary of DAR (defendants), wherein he alleged that he
is the owner of land in Siay, Zamboanga del Sur designated as Lot No. F-18-5483-D, containing 211,967
square meters and covered by Tax Declaration No. 1203 issued in 1957; that due to his open, notorious,
adverse and exclusive possession, occupation and cultivation of the said land in the concept of owner since
July 4, 1945, during which he introduced improvements thereon such as a residential house of light materials,
canals, dikes, and rice paddies and planted coconut and fruit trees and exclusively enjoyed the produce, the
said lot has long been converted into his private property by operation of law.
In 1964, Nemesio applied for a free patent over the subject lot under Application No. 18-5483, which he said
was approved in 1966, but the patent was never released due to opposition from the defendants; that
sometime in 1973, defendant Aguilar forcibly entered and occupied the northwest portion of Lot No. F-18-5483D; in 1986, Aguilar intervened as claimant/protestant and appeared at a hearing conducted by the Bureau of
Lands at Buug, Zamboanga del Sur on September 10, 1996; another claimant, Wenceslao Dominguez,
occupant of the property at the southeast boundary, also opposed his free patent application; sometime in
1989, defendants Custodio and Valencia, by means of force, allegedly dispossessed Nemesio of a total of two
hectares at the mid-northern portion of his lot; in March 1997, the above-named free patent oppositors, all
allegedly distant relatives of Nemesio, threatened to physically oust him from his lot, and it was then that he
learned for the first time that titles had been issued by the DAR to the private defendants through deceit, fraud
and misrepresentation, along a much-reduced portion was also issued in his name. These titles are:
Aguilar was awarded (a) Certificate of Land Ownership Award (CLOA) No. 00014318 over Lot 684, CSD-09001830, containing 15,304 sq m, and was issued Original Certificate of Title (OCT) No. E-10590 on December
8, 1990; and (b) CLOA No. 00014859 over Lot 686, CSD-09-001830, with an area of 16,474 sq m for which he
was issued OCT No. E-10591 on December 8, 1990;

Custodio was awarded CLOA No. 00014832 over Lot 682, CSD-09-001830, containing 32,428 sq m for which
he was issued OCT No. E-10375 on November 20, 1990;
Valencia was awarded CLOA No. 00014833 over Lot 683, CSD-09-001830, containing 25,616 sq m, and was
issued OCT No. E-10376 on November 20, 1990;
Nemesio was issued OCT No. E-9704 containing 11,440 sq m, although he never applied for Certificate of
Land Ownership from the DAR;5
The private defendants moved to dismiss the complaint on September 19, 1997 on the ground that the
controversy involved the implementation of the agrarian reform law, which is outside the courts jurisdiction.
DAR in its answer sought the dismissal of the complaint, arguing that Nemesio did not own or possess the
subject lot and thus has no cause of action to recover title and possession, much less seek the removal of a
cloud over his alleged title, even as the titles issued by DAR can only be attacked directly and not collaterally.
The private defendants did not file an answer, and on January 9, 1998, Nemesio moved to declare them in
default. On February 6, 1998, the RTC denied Nemesios motion, along with the private defendants motion to
dismiss the complaint, and ordered them to file their answer immediately. On February 12, 1998, the private
defendants asked for extension to file their answer, which the court granted on February 18, 1998. But instead
of an answer, on March 3, 1998 they filed a motion for reconsideration of the denial of their motion to dismiss.
On March 20, 1998, the RTC directed the parties to submit their position papers. On March 27, 1998, Nemesio
moved anew to declare the private defendants in default, and this time the RTC conceded. On December 3,
1998, he began the presentation of his evidence before the Clerk of Court.
In his testimony, Nelson S. Dumagpi, son of Nemesio, identified the 22-ha lot claimed by Nemesio (who died on
November 1, 1998) and the survey plan, blue print and tracing cloth approved by Director of Lands Nicanor
Jorge in 1966 in support of Nemesios application for free patent in 1964; he further testified that his father had
been cultivating the land since World War II, introducing improvements and planting crops and trees; that his
uncle Vicente also settled in the land whereas the private defendants were intruders who tried unsuccessfully
to oust them from the land.6cralawlawlibrary
Rodolfo G. Salvador, Jr., an employee of Land Management Services Office under the Bureau of Lands of the
Department of Environment and Natural Resources (DENR) Region 9, confirmed the free patent application of
Nemesio and identified the pertinent documents kept in a vault in his office; that while it appears that the free
patent was approved on September 5, 1966, he did not know if it was released; that the private defendants
were subsequently granted titles to portions of the lot by the DAR. 7cralawlawlibrary
Florentino Dumagpi, first cousin of Nemesio, testified that upon invitation of Nemesio he and his brothers came
to farm the land in 1955 for a share of the crops; that by 1955, portions thereof had already been cultivated and
some trees had been cut to build a camarin; that they left in 1965 to be near the school of their children; that in
1972, he visited the land and saw his cousin Nemesio still occupying a portion thereof but none of the private
defendants except some squatters.8cralawlawlibrary
DAR presented Ariston Labrador (Labrador), a retired Municipal Agrarian Reform Officer for Diplahan,
Zamboanga del Sur, which then included the subject DAR resettlement site, now part of the Municipality of
Siay. He testified that the resettlement site contains 2,598 has and used to be part of a coal mine reservation;
that the area was reclassified and declared as a resettlement site under Proclamation No. 2342 dated March
14, 1984, to be administered and disposed of by DAR pursuant to the Comprehensive Agrarian Reform
Program; that following DAR guidelines, he verified a list of qualified beneficiaries, which included the private
defendants who had been personally cultivating portions which were eventually titled to them; that Nemesio
cultivated a small part of the lot he claimed but during his visit he had stopped doing so due to advanced age;
that he did not know that the surveyor was a brother of defendant Aguilar.9cralawlawlibrary
The RTC rendered its Decision10 on December 16, 2005 in favor of Nemesio, excerpts of which are quoted
below as follows:chanRoblesvirtualLawlibrary
Based on the evidence presented and offered, testimonial and documentary, the following facts preponderate
for the plaintiff, viz:
That since July 4, 1945 or prior thereto, plaintiff possessed, occupied and cultivated a parcel of agricultural land
situated at Paradise, Diplahan, Zamboanga del Sur, and which possession, occupation and cultivation had

been continuous, open, notorious, adverse and exclusive in the concept of owner; and which land is particularly
described as Lot No. F-18-5483-D, situated in Municipality of Siay, Zamboanga del Sur, bounded on the North,
along lines 7-8-9 by property of Pablo Paderes; along lines 9-1-2 by property of Martin Bacatan; on the East,
along line 2-3 by Sibuguey River; on the South, along lines 3-4-5 by property of Wenceslao Dominguez; along
line 5-6 by property of Teodorico Buendia; on the West along line 6-7 by public land. x x x Containing an area of
TWO HUNDRED ELEVEN THOUSAND NINE HUNDRED EIGHTY[-]SEVEN (211,987) SQUARE METERS,
more or less, covered by Tax Declaration No. 1203 for the year 1957 and having an assessed value of more
than P20,000.00 at present, that plaintiff had introduced improvements therein such as coconut trees, fruit
trees, a residential house made of light materials, canals, dikes and rice paddies where he had exclusively
enjoyed the produce thereon; that to perfect his title, plaintiff had applied for a free patent per his Application
No. 18-5483 with the Bureau of Lands on the said parcel of land in 1964; that sometime in 1973, defendant
Juan Aguilar, Sr. forcibly entered and occupied a portion of the afore-described property consisting of more or
less 18 hectares at the north southwestern portion thereof; that plaintiff followed up his Free Patent Application
where he found out that his Free Patent Application with the Bureau of Lands and the patent thereto should
have been granted were it not for the protest filed by a certain Wenceslao Dominguez, an occupant of a land
situated at the southeastern boundary of the land of the plaintiff, that sometime in 1986 defendant Juan Aguilar
intervened in the Free Patent Application of the plaintiff as claimant/protestant, and in the hearing conducted by
the Bureau of Lands at Buug, Zamboanga del Sur, on September 10, 1996, plaintiff and defendant Juan Aguilar
agreed to have a relocation o[f] the actual boundaries claimed by each of them. No relocation survey, however,
was conducted thereon; that sometime in the year 1989, defendant Dionito B. Custodio, who was then residing
at Gaulan, Diplahan, Zamboanga del Sur, by means of force, dispossessed plaintiff from a portion of the land in
question consisting of two (2) hectares at the mid-northern portion thereof; that also in the same year of 1989,
defendant Rosalino C. Valencia, who was then residing at Lindang, Diplahan, Zamboanga del Sur, by means of
force, dispossessed plaintiff from a portion of the land in question consisting of two (2) hectares at the
northeastern portion thereof; that plaintiff, thereafter, waited for the title of his land above-described; that
sometime in the month of March, 1997, all the private defendants threatened plaintiff to physically move out
from the land in question and telling him that they have acquired titles thereto, thereby sowing fear on the
person of the plaintiff who is now a helpless, weak old man; that, thereafter, plaintiff made verifications on the
status of his Free Patent Application and on April, 1997, he found out that thru deceit, fraud and gross
misrepresentation of facts, all private defendants have partitioned the land in question and were able to acquire
titles thereto to the damage and prejudice of the plaintiff and that public respondent, in violation of the due
process clause of the constitution of rights, awarded unto the private defendants certificates of land ownership
awards in the following manner:
cralawred
a) Defendant Juan Aguilar, Sr. was awarded Certificate of Land Ownership Award No.
00014318 over Lot 684, CSD-09-001830 containing an area of 15,304 square meters for
which Original Certificate of Title No. E-10,590 was issued on December 8, 1990 and
Certificate of Land Ownership Award No. 00014859 over Lot 686, CSD-09-001830
containing an area of 16,474 square meters for which Original Certificate of Title No. E10,591 wa [sic] issued on December 8, 1990;
b) Defendant Dionito V. Custodio was awarded Certificate of Land Ownership Award No.
00014832 over Lot 682, CSD-09-001830 containing an area of 32,428 square meters for
which Original Certificate of Title No. E-10,375 was issued on November 20, 1990;
(c) Defendant Rosalino C. Valencia was awarded Certificate of Land Ownership Award No.
00014833 over Lot 683, CSD-09-001830 containing an area of 25,616 square meters for
which Original Certificate of Title No. E-10,376 was issued on November 20, 1990; and
(d) Plaintiff Nemesio Dumagpi was awarded Original Certificate of Title No. E-9,704 containing
an area of 11,440 square meters despite the fact that plaintiff did not file for any CLO
award as the land covered thereby is already covered by the aforementioned free patent
application.
That the continuous, open, notorious and exclusive occupation and cultivation of the herein plaintiff over the
land in question for more than thirty (30) years prior to the issuance of the assailed Certificate of Land
Ownership Awards (CLOAs) and the certificates of title issued therefor has already attained the character and
duration equivalent to a title and an express grant from the government unto the plaintiff and the same cannot
be taken from him without violating his constitutional right; 11
On appeal, the DAR interposed the following issues:chanRoblesvirtualLawlibrary
I
THE TRIAL COURT GRAVELY ERRED IN ASSUMING JURISDICTION OVER THE INSTANT CASE[;]

II
THE TRIAL COURT GRAVELY ERRED IN ITS FINDING THAT THE SUBJECT PARCEL OF LAND IS
ALIENABLE AND DISPOSABLE LAND OF THE PUBLIC DOMAIN MADE AS THE BASIS FOR APPLYING
THE RULES ON CONFIRMATION OF IMPERFECT TITLES[;]
III
THE TRIAL COURT COMMITTED GRAVE ABUSE OF JUDICIAL DISCRETION AND SERIOUSLY ERRED IN
DECIDING THE INSTANT CASE WITHOUT RESOLVING PRIVATE DEFENDANTS MOTION TO LIFT ORDER
OF DEFAULT[.]12
Ruling of the CA
In dismissing the appeal of DAR, the CA noted, first, that between Nemesio and the private defendants there
was no tenurial, leasehold, or any agrarian relationship whatsoever that could bring the controversy within the
jurisdiction of DAR Adjudication Board (DARAB). Under Section 3(d) of Republic Act (R.A.) No. 6657, 13 an
agrarian dispute refers to any controversy relating to tenurial arrangements, whether leasehold, tenancy,
stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farmworkers
associations or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange
terms or conditions of such tenurial arrangements. It includes any controversy relating to terms and conditions
of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries,
whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant,
or lessor and lessee. The CA invoked Morta, Sr. v. Occidental14 where this Court held as
follows:chanRoblesvirtualLawlibrary
For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the parties. In
order for a tenancy agreement to take hold over a dispute, it would be essential to establish all its
indispensable elements, to wit: 1) that the parties are the landowner and the tenant or agricultural lessee; 2)
that the subject matter of the relationship is an agricultural land; 3) that there is consent between the parties to
the relationship; 4) that the purpose of the relationship is to bring about agricultural production; 5) that there is
personal cultivation on the part of the tenant or agricultural lessee; and 6) that the harvest is shared between
the landowner and the tenant or agricultural lessee. In Vda. de Tangub v. Court of Appeals, we held that the
jurisdiction of the Department of Agrarian Reforms is limited to the following:
a)
b)
c)

adjudication of all matters involving implementation of agrarian reform;

resolution of agrarian conflicts and land-tenure related problems; and
approval and disapproval of the conversion, restructuring or readjustment of agricultural lands into
residential, commercial, industrial, and other non-agricultural uses. 15 (Citations omitted)

Second, according to the CA, the private defendants did not appeal from the RTC decision, and instead it
appears that the DAR has taken up the cudgels for them through its appeal, whereas its only participation in
the case pertains only to the issue of jurisdiction. On the other hand, the complaint below concerns merely
Nemesios right to recover ownership and possession over the subject property, a purely in personam civil
action. DAR thus acted inappropriately by raising the issue of the RTCs failure to resolve the DARs motion to
lift its order of default. Besides, having filed its answer, DAR cannot now question the jurisdiction of the RTC.
Petition for Review to the Supreme Court
In this petition for review, DAR raises the following issues:
THE HONORABLE [CA], WITH ALL DUE RESPECT, ERRED WHEN IT AFFIRMED THE DECISION OF THE
COURT A QUO AND IN RULING THAT THE PRESENT CONTROVERSY IS A CIVIL ACTION IN
COMPLEXION AND NOT AN AGRARIAN REFORM MATTER WITHIN THE EXCLUSIVE ORIGINAL
JURISDICTION OF THE DAR;
THE HONORABLE [CA], WITH ALL DUE RESPECT, ERRED WHEN IT AFFIRMED THE DECISION OF THE
TRIAL COURT BELOW DESPITE THE FACT THAT NEMESIO DUMAGPI LACKS LEGAL PERSONALITY TO
ASK FOR RECOVERY OF OWNERSHIP AND/OR PETITION THE COURT TO REMOVE CLOUD COVERING
A TRACT OF LAND HE DOES NOT OWN OR POSSESS.16
Ruling of the Court

The Court finds merit in the petition.

The RTC held, invoking Republic of the Philippines v. Court of Appeals,17 that the entire 22-ha lot claimed by
Nemesio had ipso jure attained the character of private property on account of his continuous, open, notorious
and exclusive occupation and cultivation for 30 years prior to the issuance of the CLOAs and OCTs to the
private defendants, who were mere intruders; that the OCTs issued to them are invalid, ineffective, voidable or
unenforceable, and are clouds of title prejudicial to the title of the plaintiff. 18 Thus, Nemesios action to recover
title to or possession is not an action in rem, like a land registration proceeding or the probate of a will, but an
action in personam in which the judgment is binding only upon the parties properly impleaded and duly given
an opportunity to be heard.19cralawlawlibrary
The Court disagrees.
Article XII, Section 2 of the 1987 Constitution provides that [a]ll lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora
and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all
other natural resources shall not be alienated. Under Section 3 of Article XII, lands of the public domain are
classified into agricultural, forest or timber, mineral lands and national parks, and alienable lands of the public
domain, which shall be limited to agricultural lands. Pursuant to Section 48(b) of Commonwealth Act No. 141,
or the Public Land Act, only citizens of the Philippines may be granted title to alienable public agricultural land,
to wit:chanRoblesvirtualLawlibrary
Section 48. x x x
xxxx
(b) Those who by themselves or through their predecessors in interest have been in open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona
fide claim of acquisition or ownership, for at least thirty years immediately preceding the filing of the application
for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed
to have performed all the conditions essential to a government grant and shall be entitled to a certificate of title
under the provisions of this chapter.
As asserted by the DAR and testified to by Labrador, from 1938 to 1984 the subject lot was part of a coal mine
reservation, established under Proclamation No. 234, Series of 1938, as amended by Proclamation No. 402,
Series of 1953. On March 14, 1984, a portion of the reservation containing 2,598 has was reclassified under
Presidential Proclamation No. 2342 as agricultural land reserved for resettlement. On June 10, 1988, R.A. No.
6657, or the Comprehensive Agrarian Reform Law (CARL), placed the said reclassified area under the
administration and disposition of the DAR, pursuant to Section 2 thereof.
Concerning Nemesios claim of entitlement to a free patent, Section 44 of Commonwealth Act No. 141
provides:chanRoblesvirtualLawlibrary
Sec. 44. Any natural-born citizen of the Philippines who is not the owner of more than twenty-four hectares and
who since July fourth, nineteen hundred and twenty-six or prior thereto, has continuously occupied and
cultivated, either by himself or through his predecessors-in-interest, a tract or tracts of agricultural public lands
subject to disposition, or who shall have paid the real estate tax thereon while the same has not been occupied
by any person shall be entitled, under the provisions of this chapter, to have a free patent issued to him for
such tract or tracts of such land not to exceed twenty-four hectares.cralawred
xxxx
There is no dispute that the land Nemesio is claiming was not alienable public agricultural land but in truth was
classified and reserved as a coal mine from 1938 to 1984, a period which overlapped with his claimed
acquisitive possession. Clearly, he cannot invoke Section 48(b) of Commonwealth Act No. 141 and assert an
acquisitive title thereto by reason of open, continuous, exclusive, and notorious possession for 30 years.
Then, even granting arguendo that his application for free patent was approved by DENR, it is not denied that
the same was never released. In fact, DAR claimed that it was never approved precisely because the land was
not alienable. Even Nemesio admitted that his free patent application was not approved due to opposition by
several other claimants. And even if the same was approved and released, it would still have been void under

the Constitution, for as held in Heirs of Santiago v. Heirs of Santiago,20 free patent applications under the Public
Land Act, as amended, apply only to disposable lands of the public domain.
Importantly, the CLOAs and OCTs issued over the subject lot were pursuant to the implementation of the
agrarian law under the exclusive jurisdiction of the DAR Secretary. Section 2 of R.A. No. 6657 provides that
[t]he State may resettle landless farmers and farmworkers in its own agricultural estates, which shall be
distributed to them in the manner provided by law. Nemesio has questioned the participation of the DAR in the
action below and its right to bring the present petition, yet it was he who, attacking the validity of the CLOAs
and OCTs issued by the DAR Secretary pursuant to R.A. No. 6657, has impleaded the said public official as a
party-defendant along with the private defendants.
As the lead agency in the governments Agrarian Reform Program, DAR issued Administrative Order No. 0989, Series of 1989, on May 5, 1989, containing the Rules and Procedures Governing Titling and Distribution of
Lots in DAR Settlement Projects, intended to accelerate the issuance of CLOAs to qualified beneficiaries in
settlement projects administered by the DAR; it covers the titling and distribution of agricultural lands within
proclaimed settlement projects under the administration of the DAR, as provided for by existing laws.
Even DARABs New Rules of Procedure issued on May 30, 1994 expressly recognized, under Section 1(g),
Rule II thereof, that matters involving strictly the administrative implementation of R.A. No. 6657, otherwise
known as the CARL of 1988 and other agrarian laws as enunciated by pertinent rules, shall be the exclusive
prerogative of and cognizable by the Secretary of the DAR.
Nemesio has doubtful standing to petition for quieting of title, which is clearly a collateral attack against the
CLOAs and titles the DAR Secretary issued to the private defendants. He has no title, records, or instruments
to uphold, and moreover, under Section 23 of R.A. No. 6657 as agrarian reform beneficiary he is allowed only
three has, not 22 has. Even granting that his complaint may be treated as one for reconveyance, there is no
ownership or title to reconvey to him because he never had one, not even through acquisitive prescription.
Moreover, as the lead agency mandated to implement the governments agrarian reform program, the DAR is
the real party in interest, since at issue is the validity of its actions comprising the determination of the qualified
agrarian reform beneficiaries and the issuance of CLOAs and titles to them. Since, therefore, the
implementation of agrarian law is within the exclusive jurisdiction of the DAR Secretary, and issues concerning
the issuance of the subject titles can only be raised to the DAR Secretary, the RTC has no jurisdiction to decide
Civil Case No. 3985, and its judgment therein is of necessity void and can never become final. As the Court
held in Leonor v. CA:21cralawlawlibrary
A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator
of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence,
it can never become final and any writ of execution based on it is void; x x x it may be said to be a lawless
thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its
head.22 (Citation omitted)
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated October 7, 2010 of the
Court of Appeals in CA-G.R. CV No. 01724-MIN, which affirmed the Decision dated December 16, 2005 of the
Regional Trial Court of Pagadian City, Branch 22, in Civil Case No. 3985, is REVERSED and SET ASIDE, and
a new judgment is entered DISMISSING the complaint in Civil Case No. 3985 for lack of jurisdiction.
SO ORDERED.