Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 127876 December 17, 1999

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

PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the validity of the
acquisition of these haciendas by the government under Republic Act No. 6657, the Comprehensive
Agrarian Reform Law of 1988.
Petitioner Roxas& Co. is a domestic corporation and is the registered owner of three haciendas, namely,
Haciendas Palico, Banilad and Caylaway, all located in the Municipality of Nasugbu, Batangas. Hacienda
Palico is 1,024 hectares in area and is registered under Transfer Certificate of Title (TCT) No. 985. This land
is covered by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050
hectares in area, registered under TCT No. 924 and covered by Tax Declaration Nos. 0236, 0237 and 0390.
Hacienda Caylaway is 867.4571 hectares in area and is registered under TCT Nos. T-44662, T-44663, T44664 and T-44665.
The events of this case occurred during the incumbency of then President Corazon C. Aquino. In February
1986, President Aquino issued Proclamation No. 3 promulgating a Provisional Constitution. As head of the
provisional government, the President exercised legislative power "until a legislature is elected and
convened under a new Constitution." 1 In the exercise of this legislative power, the President signed on July
22, 1987, Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and Executive Order
No. 229 providing the mechanisms necessary to initially implement the program.
On July 27, 1987, the Congress of the Philippines formally convened and took over legislative power from
the President. 2 This Congress passed Republic Act No. 6657, the Comprehensive Agrarian Reform Law
(CARL) of 1988. The Act was signed by the President on June 10, 1988 and took effect on June 15, 1988.
Before the law's effectivity, on May 6, 1988, petitioner filed with respondent DAR a voluntary offer to sell
Hacienda Caylaway pursuant to the provisions of E.O. No. 229. Haciendas Palico and Banilad were later
placed under compulsory acquisition by respondent DAR in accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal Agrarian Reform Officer (MARO)
of Nasugbu, Batangas, sent a notice entitled "Invitation to Parties" to petitioner. The Invitation was
addressed to "Jaime Pimentel, Hda. Administrator, Hda. Palico." 3 Therein, the MARO invited petitioner to a
conference on October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR investigation
of Hacienda Palico, which was "scheduled for compulsory acquisition this year under the Comprehensive
Agrarian Reform Program." 4

On October 25, 1989, the MARO completed three (3) Investigation Reports after investigation and ocular
inspection of the Hacienda. In the first Report, the MARO found that 270 hectares under Tax Declaration
Nos. 465, 466, 468 and 470 were "flat to undulating (0-8% slope)" and actually occupied and cultivated by
34 tillers of sugarcane. 5 In the second Report, the MARO identified as "flat to undulating" approximately
339 hectares under Tax Declaration No. 0234 which also had several actual occupants and tillers of
sugarcane; 6 while in the third Report, the MARO found approximately 75 hectare under Tax Declaration No.
0354 as "flat to undulating" with 33 actual occupants and tillers also of sugarcane. 7
On October 27, 1989, a "Summary Investigation Report" was submitted and signed jointly by the MARO,
representatives of the Barangay Agrarian Reform Committee (BARC) and Land Bank of the Philippines
(LBP), and by the Provincial Agrarian Reform Officer (PARO). The Report recommended that 333.0800
hectares of Hacienda Palico be subject to compulsory acquisition at a value of P6,807,622.20. 8 The
following day, October 28, 1989, two (2) more Summary Investigation Reports were submitted by the same
officers and representatives. They recommended that 270.0876 hectares and 75.3800 hectares be placed
under compulsory acquisition at a compensation of P8,109,739.00 and P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary Miriam D. Santiago sent a
"Notice of Acquisition" to petitioner. The Notice was addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila.

10

Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were subject to immediate
acquisition and distribution by the government under the CARL; that based on the DAR's valuation criteria,
the government was offering compensation of P3.4 million for 333.0800 hectares; that whether this offer
was to be accepted or rejected, petitioner was to inform the Bureau of Land Acquisition and Distribution
(BLAD) of the DAR; that in case of petitioner's rejection or failure to reply within thirty days, respondent
DAR shall conduct summary administrative proceedings with notice to petitioner to determine just
compensation for the land; that if petitioner accepts respondent DAR's offer, or upon deposit of the
compensation with an accessible bank if it rejects the same, the DAR shall take immediate possession of
the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager three (3) separate Memoranda entitled "Request to Open Trust Account." Each Memoranda
requested that a trust account representing the valuation of three portions of Hacienda Palico be opened in
favor of the petitioner in view of the latter's rejection of its offered value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of Haciendas
Palico and Banilad from agricultural to non-agricultural lands under the provisions of the CARL. 13 On July
14, 1993, petitioner sent a letter to the DAR Regional Director reiterating its request for conversion of the
two haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded with the acquisition of the two
Haciendas. The LBP trust accounts as compensation for Hacienda Palico were replaced by respondent DAR
with cash and LBP bonds. 15 On October 22, 1993, from the mother title of TCT No. 985 of the Hacienda,
respondent DAR registered Certificate of Land Ownership Award (CLOA) No. 6654. On October 30, 1993,
CLOA's were distributed to farmer beneficiaries. 16
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu, Batangas, sent a notice to
petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator

Hacienda Banilad
Nasugbu, Batangas

17

The MARO informed Pimentel that Hacienda Banilad was subject to compulsory acquisition under
the CARL; that should petitioner wish to avail of the other schemes such as Voluntary Offer to Sell
or Voluntary Land Transfer, respondent DAR was willing to provide assistance thereto. 18
On September 18, 1989, the MARO sent an "Invitation to Parties" again to Pimentel inviting the latter to
attend a conference on September 21, 1989 at the MARO Office in Nasugbu to discuss the results of the
MARO's investigation over Hacienda Banilad. 19
On September 21, 1989, the same day the conference was held, the MARO submitted two (2) Reports. In
his first Report, he found that approximately 709 hectares of land under Tax Declaration Nos. 0237 and
0236 were "flat to undulating (0-8% slope)." On this area were discovered 162 actual occupants and tillers
of sugarcane. 20 In the second Report, it was found that approximately 235 hectares under Tax Declaration
No. 0390 were "flat to undulating," on which were 92 actual occupants and tillers of sugarcane. 21
The results of these Reports were discussed at the conference. Present in the conference were
representatives of the prospective farmer beneficiaries, the BARC, the LBP, and Jaime Pimentel on behalf of
the landowner. 22 After the meeting, on the same day, September 21, 1989, a Summary Investigation
Report was submitted jointly by the MARO, representatives of the BARC, LBP, and the PARO. They
recommended that after ocular inspection of the property, 234.6498 hectares under Tax Declaration No.
0390 be subject to compulsory acquisition and distribution by CLOA. 23 The following day, September 22,
1989, a second Summary Investigation was submitted by the same officers. They recommended that
737.2590 hectares under Tax Declaration Nos. 0236 and 0237 be likewise placed under compulsory
acquisition for distribution. 24
On December 12, 1989, respondent DAR, through the Department Secretary, sent to petitioner two (2)
separate "Notices of Acquisition" over Hacienda Banilad. These Notices were sent on the same day as the
Notice of Acquisition over Hacienda Palico. Unlike the Notice over Hacienda Palico, however, the Notices
over Hacienda Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila.

25

Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190 hectares and
P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation Manager a "Request to
Open Trust Account" in petitioner's name as compensation for 234.6493 hectares of Hacienda Banilad. 27 A
second "Request to Open Trust Account" was sent on November 18, 1991 over 723.4130 hectares of said
Hacienda. 28
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and P21,234,468.78 in cash
and LBP bonds had been earmarked as compensation for petitioner's land in Hacienda Banilad. 29
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988 before the
effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares and is covered by four (4) titles
TCT Nos. T-44662, T-44663, T-44664 and T-44665. On January 12, 1989, respondent DAR, through the
Regional Director for Region IV, sent to petitioner two (2) separate Resolutions accepting petitioner's

voluntary offer to sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663.
were addressed to:

30

The Resolutions

Roxas& Company, Inc.

7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M

31

On September 4, 1990, the DAR Regional Director issued two separate Memoranda to the LBP Regional
Manager requesting for the valuation of the land under TCT Nos. T-44664 and T-44663. 32 On the same day,
respondent DAR, through the Regional Director, sent to petitioner a "Notice of Acquisition" over 241.6777
hectares under TCT No. T-44664 and 533.8180 hectares under TCT No. T-44663. 33 Like the Resolutions of
Acceptance, the Notice of Acquisition was addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent a letter to the
Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway. The Sangguniang Bayan of
Nasugbu, Batangas allegedly authorized the reclassification of Hacienda Caylaway from agricultural to
non-agricultural. As a result, petitioner informed respondent DAR that it was applying for conversion of
Hacienda Caylaway from agricultural to other
uses. 34
In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that a reclassification
of the land would not exempt it from agrarian reform. Respondent Secretary also denied petitioner's
withdrawal of the VOS on the ground that withdrawal could only be based on specific grounds such as
unsuitability of the soil for agriculture, or if the slope of the land is over 18 degrees and that the land is
undeveloped. 35
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993, petitioner filed its
application for conversion of both Haciendas Palico and Banilad. 36 On July 14, 1993, petitioner, through its
President, Eduardo Roxas, reiterated its request to withdraw the VOS over Hacienda Caylaway in light of
the following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of Agriculture,
Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated March 1, 1993 stating that
the lands subject of referenced titles "are not feasible and economically sound for further
agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the Zoning
Ordinance reclassifying areas covered by the referenced titles to non-agricultural which was
enacted after extensive consultation with government agencies, including [the Department
of Agrarian Reform], and the requisite public hearings.
3) Resolution No. 106 of the SangguniangPanlalawigan of Batangas dated March 8, 1993
approving the Zoning Ordinance enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal Planning &
Development, Coordinator and Deputized Zoning Administrator addressed to Mrs. Alicia P.
Logarta advising that the Municipality of Nasugbu, Batangas has no objection to the
conversion of the lands subject of referenced titles to non-agricultural. 37
On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with respondent DAR Adjudication
Board (DARAB) praying for the cancellation of the CLOA's issued by respondent DAR in the name of several
persons. Petitioner alleged that the Municipality of Nasugbu, where the haciendas are located, had been
declared a tourist zone, that the land is not suitable for agricultural production, and that the Sangguniang
Bayan of Nasugbu had reclassified the land to non-agricultural.

In a Resolution dated October 14, 1993, respondent DARAB held that the case involved the prejudicial
question of whether the property was subject to agrarian reform, hence, this question should be submitted
to the Office of the Secretary of Agrarian Reform for determination. 38
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484. It questioned the
expropriation of its properties under the CARL and the denial of due process in the acquisition of its
landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by the MARO on November 8,
1993.
Petitioner's petition was dismissed by the Court of Appeals on April 28, 1994. 39 Petitioner moved for
reconsideration but the motion was denied on January 17, 1997 by respondent court. 40
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S
CAUSE OF ACTION IS PREMATURE FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES IN
VIEW OF THE PATENT ILLEGALITY OF THE RESPONDENTS' ACTS, THE IRREPARABLE DAMAGE
CAUSED BY SAID ILLEGAL ACTS, AND THE ABSENCE OF A PLAIN, SPEEDY AND ADEQUATE
REMEDY IN THE ORDINARY COURSE OF LAW ALL OF WHICH ARE EXCEPTIONS TO THE SAID
DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S
LANDHOLDINGS ARE SUBJECT TO COVERAGE UNDER THE COMPREHENSIVE AGRARIAN
REFORM LAW, IN VIEW OF THE UNDISPUTED FACT THAT PETITIONER'S LANDHOLDINGS HAVE
BEEN CONVERTED TO NON-AGRICULTURAL USES BY PRESIDENTIAL PROCLAMATION NO. 1520
WHICH DECLARED THE MUNICIPALITY NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE
ZONING ORDINANCE OF THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING CERTAIN
PORTIONS OF PETITIONER'S LANDHOLDINGS AS NON-AGRICULTURAL, BOTH OF WHICH
PLACE SAID LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR AT THE VERY
LEAST ENTITLE PETITIONER TO APPLY FOR CONVERSION AS CONCEDED BY RESPONDENT
DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO DECLARE THE
PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR FAILURE TO OBSERVE DUE PROCESS,
CONSIDERING THAT RESPONDENTS BLATANTLY DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE PARTICULARLY, IN FAILING TO GIVE
DUE NOTICE TO THE PETITIONER AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT
TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO RECOGNIZE THAT
PETITIONER WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS PROPERTY WITHOUT JUST
COMPENSATION, CONSIDERING THAT PETITIONER WAS NOT PAID JUST COMPENSATION
BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF ITS LANDHOLDINGS THROUGH THE
ISSUANCE OF CLOA'S TO ALLEGED FARMER BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1) whether this Court can take cognizance of this
petition despite petitioner's failure to exhaust administrative remedies; (2) whether the acquisition
proceedings over the three haciendas were valid and in accordance with law; and (3) assuming the
haciendas may be reclassified from agricultural to non-agricultural, whether this court has the power to
rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals gravely erred in finding that
petitioner failed to exhaust administrative remedies. As a general rule, before a party may be allowed to
invoke the jurisdiction of the courts of justice, he is expected to have exhausted all means of
administrative redress. This is not absolute, however. There are instances when judicial action may be

resorted to immediately. Among these exceptions are: (1) when the question raised is purely legal; (2)
when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when
there is urgent need for judicial intervention; (5) when the respondent acted in disregard of due process;
(6) when the respondent is a department secretary whose acts, as an alter ego of the President, bear the
implied or assumed approval of the latter; (7) when irreparable damage will be suffered; (8) when there is
no other plain, speedy and adequate remedy; (9) when strong public interest is involved; (10) when the
subject of the controversy is private land; and (11) in quo warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation of its rights and to require
it to exhaust administrative remedies before the DAR itself was not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to farmer beneficiaries over
portions of petitioner's land without just compensation to petitioner. A Certificate of Land Ownership Award
(CLOA) is evidence of ownership of land by a beneficiary under R.A. 6657, the Comprehensive Agrarian
Reform Law of 1988. 43 Before this may be awarded to a farmer beneficiary, the land must first be acquired
by the State from the landowner and ownership transferred to the former. The transfer of possession and
ownership of the land to the government are conditioned upon thereceipt by the landowner of the
corresponding payment or deposit by the DAR of the compensation with an accessible bank. Until then,
title remains with the landowner. 44 There was no receipt by petitioner of any compensation for any of the
lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law provides that the deposit must
be made only in "cash" or "LBP bonds." 45 Respondent DAR's opening of trust account deposits in
petitioner' s name with the Land Bank of the Philippines does not constitute payment under the law. Trust
account deposits are not cash or LBP bonds. The replacement of the trust account with cash or LBP bonds
did not ipso facto cure the lack of compensation; for essentially, the determination of this compensation
was marred by lack of due process. In fact, in the entire acquisition proceedings, respondent DAR
disregarded the basic requirements of administrative due process. Under these circumstances, the
issuance of the CLOA's to farmer beneficiaries necessitated immediate judicial action on the part of the
petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the acquisition proceedings
themselves. Before we rule on this matter, however, there is need to lay down the procedure in the
acquisition of private lands under the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL), provides for two (2)
modes of acquisition of private land: compulsory and voluntary. The procedure for the compulsory
acquisition of private lands is set forth in Section 16 of R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private
lands, the following procedures shall be followed:
a). After having identified the land, the landowners and the beneficiaries, the
DAR shall send its notice to acquire the land to the owners thereof, by
personal delivery or registered mail, and post the same in a conspicuous
place in the municipal building and barangay hall of the place where the
property is located. Said notice shall contain the offer of the DAR to pay a
corresponding value in accordance with the valuation set forth in Sections 17,
18, and other pertinent provisions hereof.
b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative
shall inform the DAR of his acceptance or rejection of the offer.

c) If the landowner accepts the offer of the DAR, the LBP shall pay the
landowner the purchase price of the land within thirty (30) days after he
executes and delivers a deed of transfer in favor of the Government and
surrenders the Certificate of Title and other muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land
requiring the landowner, the LBP and other interested parties to submit
evidence as to the just compensation for the land, within fifteen (15) days
from receipt of the notice. After the expiration of the above period, the matter
is deemed submitted for decision. The DAR shall decide the case within thirty
(30) days after it is submitted for decision.
e) Upon receipt by the landowner of the corresponding payment, or, in case of
rejection or no response from the landowner, upon the deposit with an
accessible bank designated by the DAR of the compensation in cash or in LBP
bonds in accordance with this Act, the DAR shall take immediate possession of
the land and shall request the proper Register of Deeds to issue a Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. The
DAR shall thereafter proceed with the redistribution of the land to the qualified
beneficiaries.
f) Any party who disagrees with the decision may bring the matter to the court
of proper jurisdiction for final determination of just compensation.
In the compulsory acquisition of private lands, the landholding, the landowners and the farmer
beneficiaries must first be identified. After identification, the DAR shall send a Notice of Acquisition to the
landowner, by personal delivery or registered mail, and post it in a conspicuous place in the municipal
building and barangay hall of the place where the property is located. Within thirty days from receipt of the
Notice of Acquisition, the landowner, his administrator or representative shall inform the DAR of his
acceptance or rejection of the offer. If the landowner accepts, he executes and delivers a deed of transfer
in favor of the government and surrenders the certificate of title. Within thirty days from the execution of
the deed of transfer, the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the
landowner rejects the DAR's offer or fails to make a reply, the DAR conducts summary administrative
proceedings to determine just compensation for the land. The landowner, the LBP representative and other
interested parties may submit evidence on just compensation within fifteen days from notice. Within thirty
days from submission, the DAR shall decide the case and inform the owner of its decision and the amount
of just compensation. Upon receipt by the owner of the corresponding payment, or, in case of rejection or
lack of response from the latter, the DAR shall deposit the compensation in cash or in LBP bonds with an
accessible bank. The DAR shall immediately take possession of the land and cause the issuance of a
transfer certificate of title in the name of the Republic of the Philippines. The land shall then be
redistributed to the farmer beneficiaries. Any party may question the decision of the DAR in the regular
courts for final determination of just compensation.
The DAR has made compulsory acquisition the priority mode of the land acquisition to hasten the
implementation of the Comprehensive Agrarian Reform Program (CARP). 46 Under Section 16 of the CARL,
the first step in compulsory acquisition is the identification of the land, the landowners and the
beneficiaries. However, the law is silent on how the identification process must be made. To fill in this
gap, the DAR issued on July 26, 1989 Administrative Order No. 12, Series or 1989, which set the operating
procedure in the identification of such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A.The Municipal Agrarian Reform Officer, with the assistance of the pertinent Barangay
Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the CARP in his
area of responsibility. The masterlist shall include such information as required
under the attached CARP Masterlist Form which shall include the name of the
landowner, landholding area, TCT/OCT number, and tax declaration number.

2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title

(OCT/TCT) or landholding covered under Phase I and II of the CARP except
those for which the landowners have already filed applications to avail of
other modes of land acquisition. A case folder shall contain the following duly
accomplished forms:
a) CARP CA Form 1 MARO Investigation Report
b) CARP CA Form 2 Summary Investigation Report of Findings
and Evaluation
c) CARP CA Form 3 Applicant's Information Sheet
d) CARP CA Form 4 Beneficiaries Undertaking
e) CARP CA Form 5 Transmittal Report to the PARO
The MARO/BARC shall certify that all information contained in the abovementioned forms have been examined and verified by him and that the same
are true and correct.
3. Send a Notice of Coverage and a letter of invitation to a
conference/meeting to the landowner covered by the Compulsory Case
Acquisition Folder. Invitations to the said conference/meeting shall also be
sent to the prospective farmer-beneficiaries, the BARC representative(s), the
Land Bank of the Philippines (LBP) representative, and other interested
parties to discuss the inputs to the valuation of the property. He shall discuss
the MARO/BARC investigation report and solicit the
views, objection, agreements or suggestions of the participants thereon. The
landowner shall also be asked to indicate his retention area. The minutes of
the meeting shall be signed by all participants in the conference and shall
form an integral part of the CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform Officer
(PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to him by his MAROs.
2. Immediately upon receipt of a case folder, compute the valuation of the
land in accordance with A.O. No. 6, Series of 1988. 47 The valuation worksheet
and the related CACF valuation forms shall be duly certified correct by the
PARO and all the personnel who participated in the accomplishment of these
forms.
3. In all cases, the PARO may validate the report of the MARO through ocular
inspection and verification of the property. This ocular inspection and
verification shall be mandatory when the computed value exceeds = 500,000
per estate.
4. Upon determination of the valuation, forward the case folder, together with
the duly accomplished valuation forms and his recommendations, to the
Central Office. The LBP representative and the MARO concerned shall be
furnished a copy each of his report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:

1. Within three days from receipt of the case folder from the PARO, review,
evaluate and determine the final land valuation of the property covered by the
case folder. A summary review and evaluation report shall be prepared and
duly certified by the BLAD Director and the personnel directly participating in
the review and final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized
representative, a Notice of Acquisition (CARP CA Form 8) for the subject
property. Serve the Notice to the landowner personally or through registered
mail within three days from its approval. The Notice shall include, among
others, the area subject of compulsory acquisition, and the amount of just
compensation offered by DAR.
3. Should the landowner accept the DAR's offered value, the BLAD shall
prepare and submit to the Secretary for approval the Order of Acquisition.
However, in case of rejection or non-reply, the DAR Adjudication Board
(DARAB) shall conduct a summary administrative hearing to determine just
compensation, in accordance with the procedures provided under
Administrative Order No. 13, Series of 1989. Immediately upon receipt of the
DARAB's decision on just compensation, the BLAD shall prepare and submit to
the Secretary for approval the required Order of Acquisition.
4. Upon the landowner's receipt of payment, in case of acceptance, or upon
deposit of payment in the designated bank, in case of rejection or nonresponse, the Secretary shall immediately direct the pertinent Register of
Deeds to issue the corresponding Transfer Certificate of Title (TCT) in the
name of the Republic of the Philippines. Once the property is transferred, the
DAR, through the PARO, shall take possession of the land for redistribution to
qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform Officer (MARO)
keep an updated master list of all agricultural lands under the CARP in his area of responsibility containing
all the required information. The MARO prepares a Compulsory Acquisition Case Folder (CACF) for each title
covered by CARP. The MARO then sends the landowner a "Notice of Coverage" and a "letter of invitation"
to a "conference/meeting" over the land covered by the CACF. He also sends invitations to the prospective
farmer-beneficiaries the representatives of the Barangay Agrarian Reform Committee (BARC), the Land
Bank of the Philippines (LBP) and other interested parties to discuss the inputs to the valuation of the
property and solicit views, suggestions, objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO) who shall
complete the valuation of the land. Ocular inspection and verification of the property by the PARO shall be
mandatory when the computed value of the estate exceeds P500,000.00. Upon determination of the
valuation, the PARO shall forward all papers together with his recommendation to the Central Office of the
DAR. The DAR Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD), shall
review, evaluate and determine the final land valuation of the property. The BLAD shall prepare, on the
signature of the Secretary or his duly authorized representative, a Notice of Acquisition for the subject
property. 48 From this point, the provisions of Section 16 of R.A. 6657 then apply. 49
For a valid implementation of the CAR program, two notices are required: (1) the Notice of Coverage and
letter of invitation to a preliminary conference sent to the landowner, the representatives of the BARC, LBP,
farmer beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series of 1989; and (2) the
Notice of Acquisition sent to the landowner under Section 16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to the
conference, and its actual conduct cannot be understated. They are steps designed to comply with the
requirements of administrative due process. The implementation of the CARL is an exercise of the State's
police power and the power of eminent domain. To the extent that the CARL prescribes retention limits to
the landowners, there is an exercise of police power for the regulation of private property in accordance
with the Constitution. 50 But where, to carry out such regulation, the owners are deprived of lands they own

in excess of the maximum area allowed, there is also a taking under the power of eminent domain. The
taking contemplated is not a mere limitation of the use of the land. What is required is the surrender of the
title to and physical possession of the said excess and all beneficial rights accruing to the owner in favor of
the farmer beneficiary. 51 The Bill of Rights provides that "[n]o person shall be deprived of life, liberty or
property without due process of law." 52 The CARL was not intended to take away property without due
process of law. 53 The exercise of the power of eminent domain requires that due process be observed in
the taking of private property.
DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was amended in 1990
by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1, Series of 1993. The Notice of Coverage
and letter of invitation to the conference meeting were expanded and amplified in said amendments.
DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the Acquisition of Agricultural Lands
Subject of Voluntary Offer to Sell and Compulsory Acquisition Pursuant to R.A. 6657," requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1
including supporting documents.
2. Gathers basic ownership documents listed under 1.a or 1.b
above and prepares corresponding VOCF/CACF by
landowner/landholding.
3. Notifies/invites the landowner and representatives of the LBP,
DENR, BARC and prospective beneficiaries of the schedule of
ocular inspection of the property at least one week in advance.
4. MARO/LAND BANK FIELD OFFICE/BARC
a) Identify the land and landowner, and
determine the suitability for agriculture and
productivity of the land and jointly prepare Field
Investigation Report (CARP Form No. 2), including
the Land Use Map of the property.
b) Interview applicants and assist them in the
preparation of the Application For Potential CARP
Beneficiary (CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for
those found qualified, cause the signing of the
respective Application to Purchase and Farmer's
Undertaking (CARP Form No. 4).
d) Complete the Field Investigation Report based
on the result of the ocular
inspection/investigation of the property and
documents submitted. See to it that Field
Investigation Report is duly accomplished and
signed by all concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct
of a boundary/ subdivision survey delineating
areas covered by OLT, retention, subject of VOS,
CA (by phases, if possible), infrastructures, etc.,
whichever is applicable.

b) Sends Notice of Coverage (CARP Form No. 5) to

landowner concerned or his duly authorized
representative inviting him for a conference.
c) Sends Invitation Letter (CARP Form No. 6) for a
conference/public hearing to prospective farmerbeneficiaries, landowner, representatives of
BARC, LBP, DENR, DA, NGO's, farmers'
organizations and other interested parties to
discuss the following matters:
Result of Field Investigation
Inputs to valuation
Issues raised
Comments/recommendations by all
parties concerned.
d) Prepares Summary of Minutes of the
conference/public hearing to be guided by CARP
Form No. 7.
e) Forwards the completed VOCF/CACF to the
Provincial Agrarian Reform Office (PARO) using
CARP Form No. 8 (Transmittal Memo to PARO).
xxxxxxxxx
DAR A.O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell (VOS) and Compulsory
Acquisition (CA) transactions involving lands enumerated under Section 7 of the CARL. 54 In both VOS and
CA. transactions, the MARO prepares the Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory
Acquisition Case Folder (CACF), as the case may be, over a particular landholding. The MARO notifies the
landowner as well as representatives of the LBP, BARC and prospective beneficiaries of the date of the
ocular inspection of the property at least one week before the scheduled date and invites them to attend
the same. The MARO, LBP or BARC conducts the ocular inspection and investigation by identifying the land
and landowner, determining the suitability of the land for agriculture and productivity, interviewing and
screening prospective farmer beneficiaries. Based on its investigation, the MARO, LBP or BARC prepares
the Field Investigation Report which shall be signed by all parties concerned. In addition to the field
investigation, a boundary or subdivision survey of the land may also be conducted by a Survey Party of the
Department of Environment and Natural Resources (DENR) to be assisted by the MARO. 55 This survey shall
delineate the areas covered by Operation Land Transfer (OLT), areas retained by the landowner, areas with
infrastructure, and the areas subject to VOS and CA. After the survey and field investigation, the MARO
sends a "Notice of Coverage" to the landowner or his duly authorized representative inviting him to a
conference or public hearing with the farmer beneficiaries, representatives of the BARC, LBP, DENR,
Department of Agriculture (DA), non-government organizations, farmer's organizations and other
interested parties. At the public hearing, the parties shall discuss the results of the field investigation,
issues that may be raised in relation thereto, inputs to the valuation of the subject landholding, and other
comments and recommendations by all parties concerned. The Minutes of the conference/public hearing
shall form part of the VOCF or CACF which files shall be forwarded by the MARO to the PARO. The PARO
reviews, evaluates and validates the Field Investigation Report and other documents in the VOCF/CACF. He
then forwards the records to the RARO for another review.
DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of 1993. DAR A.O. No. 1, Series of
1993 provided, among others, that:
IV. OPERATING PROCEDURES:

Steps Responsible Activity Forms/

Agency/Unit Document
(requirements)
A. Identification and
Documentation
xxxxxxxxx
5 DARMO Issue Notice of Coverage CARP
to LO by personal delivery Form No. 2
with proof of service, or
registered mail with return
card, informing him that his
property is now under CARP
coverage and for LO to select
his retention area, if he desires
to avail of his right of retention;
and at the same time invites him
to join the field investigation to
be conducted on his property
which should be scheduled at
least two weeks in advance of
said notice.
A copy of said Notice shall CARP
be posted for at least one Form No. 17
week on the bulletin board of
the municipal and barangay
halls where the property is
located. LGU office concerned
notifies DAR about compliance

with posting requirements thru

returnindorsement on CARP
Form No. 17.
6 DARMO Send notice to the LBP, CARP
BARC, DENR representatives Form No. 3
and prospective ARBs of the schedule of the field investigation
to be conducted on the subject
property.
7 DARMO With the participation of CARP
BARC the LO, representatives of Form No. 4
LBP the LBP, BARC, DENR Land Use
DENR and prospective ARBs, Map
Local Office conducts the investigation on
subject property to identify
the landholding, determines
its suitability and productivity;
and jointly prepares the Field
Investigation Report (FIR)
and Land Use Map. However,
the field investigation shall
proceed even if the LO, the
representatives of the DENR and
prospective ARBs are not available
provided, they were given due
notice of the time and date of
investigation to be conducted.
Similarly, if the LBP representative
is not available or could not come

on the scheduled date, the field

investigation shall also be conducted,
after which the duly accomplished
Part I of CARP Form No. 4 shall
be forwarded to the LBP
representative for validation. If he agrees
to the ocular inspection report of DAR,
he signs the FIR (Part I) and
accomplishes Part II thereof.
In the event that there is a
difference or variance between
the findings of the DAR and the
LBP as to the propriety of
covering the land under CARP,
whether in whole or in part, on
the issue of suitability to agriculture,
degree of development or slope,
and on issues affecting idle lands,
the conflict shall be resolved by
a composite team of DAR, LBP,
DENR and DA which shall jointly
conduct further investigation
thereon. The team shall submit its
report of findings which shall be
binding to both DAR and LBP,
pursuant to Joint Memorandum
Circular of the DAR, LBP, DENR
and DA dated 27 January 1992.

8 DARMO Screen prospective ARBs

BARC and causes the signing of CARP
the Application of Purchase Form No. 5
and Farmer's Undertaking
(APFU).
9 DARMO Furnishes a copy of the CARP
duly accomplished FIR to Form No. 4
the landowner by personal
delivery with proof of
service or registered mail
will return card and posts
a copy thereof for at least
one week on the bulletin
board of the municipal
and barangay halls where
the property is located.
LGU office concerned CARP
notifies DAR about Form No. 17
compliance with posting
requirement thru return
endorsement on CARP
Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter
And/or segregation survey or
DENR delineating areas covered Segregation
Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope

and above, unproductive/

unsuitable to agriculture,
retention, infrastructure.
In case of segregation or
subdivision survey, the
plan shall be approved
by DENR-LMS.
C. Review and Completion
of Documents
11. DARMO Forward VOCF/CACF CARP
to DARPO. Form No. 6
xxxxxxxxx.
DAR A.O. No. 1, Series of 1993, modified the identification process and increased the number of
government agencies involved in the identification and delineation of the land subject to
acquisition. 56 This time, the Notice of Coverage is sent to the landowner before the conduct of the field
investigation and the sending must comply with specific requirements. Representatives of the DAR
Municipal Office (DARMO) must send the Notice of Coverage to the landowner by "personal delivery with
proof of service, or by registered mail with return card," informing him that his property is under CARP
coverage and that if he desires to avail of his right of retention, he may choose which area he shall retain.
The Notice of Coverage shall also invite the landowner to attend the field investigation to be scheduled at
least two weeks from notice. The field investigation is for the purpose of identifying the landholding and
determining its suitability for agriculture and its productivity. A copy of the Notice of Coverage shall be
posted for at least one week on the bulletin board of the municipal and barangay halls where the property
is located. The date of the field investigation shall also be sent by the DAR Municipal Office to
representatives of the LBP, BARC, DENR and prospective farmer beneficiaries. The field investigation shall
be conducted on the date set with the participation of the landowner and the various representatives. If
the landowner and other representatives are absent, the field investigation shall proceed, provided they
were duly notified thereof. Should there be a variance between the findings of the DAR and the LBP as to
whether the land be placed under agrarian reform, the land's suitability to agriculture, the degree or
development of the slope, etc., the conflict shall be resolved by a composite team of the DAR, LBP, DENR
and DA which shall jointly conduct further investigation. The team's findings shall be binding on both DAR
and LBP. After the field investigation, the DAR Municipal Office shall prepare the Field Investigation Report
and Land Use Map, a copy of which shall be furnished the landowner "by personal delivery with proof of
service or registered mail with return card." Another copy of the Report and Map shall likewise be posted
for at least one week in the municipal or barangay halls where the property is located.
Clearly then, the notice requirements under the CARL are not confined to the Notice of Acquisition set forth
in Section 16 of the law. They also include the Notice of Coverage first laid down in DAR A.O. No. 12, Series
of 1989 and subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993.
This Notice of Coverage does not merely notify the landowner that his property shall be placed under CARP
and that he is entitled to exercise his retention right; it also notifies him, pursuant to DAR A.O. No. 9, Series
of 1990, that a public hearing, shall be conducted where he and representatives of the concerned sectors
of society may attend to discuss the results of the field investigation, the land valuation and other
pertinent matters. Under DAR A.O. No. 1, Series of 1993, the Notice of Coverage also informs the
landowner that a field investigation of his landholding shall be conducted where he and the other
representatives may be present.

B. The Compulsory Acquisition of Haciendas Palico and Banilad

In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano, sent a letter of
invitation entitled "Invitation to Parties" dated September 29, 1989 to petitioner corporation, through Jaime
Pimentel, the administrator of Hacienda Palico. 57 The invitation was received on the same day it was sent
as indicated by a signature and the date received at the bottom left corner of said invitation. With regard
to Hacienda Banilad, respondent DAR claims that Jaime Pimentel, administrator also of Hacienda Banilad,
was notified and sent an invitation to the conference. Pimentel actually attended the conference on
September 21, 1989 and signed the Minutes of the meeting on behalf of petitioner corporation. 58 The
Minutes was also signed by the representatives of the BARC, the LBP and farmer beneficiaries. 59 No letter
of invitation was sent or conference meeting held with respect to Hacienda Caylaway because it was
subject to a Voluntary Offer to Sell to respondent DAR. 60
When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent to the various parties
the Notice of Coverage and invitation to the conference, DAR A.O. No. 12, Series of 1989 was already in
effect more than a month earlier. The Operating Procedure in DAR Administrative Order No. 12 does not
specify how notices or letters of invitation shall be sent to the landowner, the representatives of the BARC,
the LBP, the farmer beneficiaries and other interested parties. The procedure in the sending of these
notices is important to comply with the requisites of due process especially when the owner, as in this
case, is a juridical entity. Petitioner is a domestic
corporation, 61 and therefore, has a personality separate and distinct from its shareholders, officers and
employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the landowner by "personal
delivery or registered mail." Whether the landowner be a natural or juridical person to whose address the
Notice may be sent by personal delivery or registered mail, the law does not distinguish. The DAR
Administrative Orders also do not distinguish. In the proceedings before the DAR, the distinction between
natural and juridical persons in the sending of notices may be found in the Revised Rules of Procedure of
the DAR Adjudication Board (DARAB). Service of pleadings before the DARAB is governed by Section 6, Rule
V of the DARAB Revised Rules of Procedure. Notices and pleadings are served on private domestic
corporations or partnerships in the following manner:
Sec. 6. Service upon Private Domestic Corporation or Partnership. If the defendant is a
corporation organized under the laws of the Philippines or a partnership duly registered,
service may be made on the president, manager, secretary, cashier, agent, or any of its
directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14 provides:
Sec. 13. Service upon private domestic corporation or partnership. If the defendant is a
corporation organized under the laws of the Philippines or a partnership duly registered,
service may be made on the president, manager, secretary, cashier, agent, or any of its
directors.
Summonses, pleadings and notices in cases against a private domestic corporation before the DARAB and
the regular courts are served on the president, manager, secretary, cashier, agent or any of its directors.
These persons are those through whom the private domestic corporation or partnership is capable of
action. 62
Jaime Pimentel is not the president, manager, secretary, cashier or director of petitioner corporation. Is
he, as administrator of the two Haciendas, considered an agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it reasonably certain that the
corporation will receive prompt and proper notice in an action against it. 63 Service must be made on a
representative so integrated with the corporation as to make it a priori supposable that he will realize his
responsibilities and know what he should do with any legal papers served on him, 64 and bring home to the
corporation notice of the filing of the action. 65 Petitioner's evidence does not show the official duties of
Jaime Pimentel as administrator of petitioner's haciendas. The evidence does not indicate whether
Pimentel's duties is so integrated with the corporation that he would immediately realize his

responsibilities and know what he should do with any legal papers served on him. At the time the notices
were sent and the preliminary conference conducted, petitioner's principal place of business was listed in
respondent DAR's records as "Soriano Bldg., Plaza Cervantes, Manila," 66 and "7th Flr. Cacho-Gonzales
Bldg., 101 Aguirre St., Makati, Metro Manila." 67Pimentel did not hold office at the principal place of
business of petitioner. Neither did he exercise his functions in Plaza Cervantes, Manila nor in CachoGonzales Bldg., Makati, Metro Manila. He performed his official functions and actually resided in the
haciendas in Nasugbu, Batangas, a place over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of petitioner's principal place of business. The
Notices of Acquisition over Haciendas Palico and Banilad were addressed to petitioner at its offices in
Manila and Makati. These Notices were sent barely three to four months after Pimentel was notified of the
preliminary conference. 68Why respondent DAR chose to notify Pimentel instead of the officers of the
corporation was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the notices and letters
of invitation were validly served on petitioner through him, there is no showing that Pimentel himself was
duly authorized to attend the conference meeting with the MARO, BARC and LBP representatives and
farmer beneficiaries for purposes of compulsory acquisition of petitioner's landholdings. Even respondent
DAR's evidence does not indicate this authority. On the contrary, petitioner claims that it had no
knowledge of the letter-invitation, hence, could not have given Pimentel the authority to bind it to
whatever matters were discussed or agreed upon by the parties at the preliminary conference or public
hearing. Notably, one year after Pimentel was informed of the preliminary conference, DAR A.O. No. 9,
Series of 1990 was issued and this required that the Notice of Coverage must be sent "to the landowner
concerned or his duly authorized representative." 69
Assuming further that petitioner was duly notified of the CARP coverage of its haciendas, the areas found
actually subject to CARP were not properly identified before they were taken over by respondent DAR.
Respondents insist that the lands were identified because they are all registered property and the technical
description in their respective titles specifies their metes and bounds. Respondents admit at the same
time, however, that not all areas in the haciendas were placed under the comprehensive agrarian reform
program invariably by reason of elevation or character or use of the land. 70
The acquisition of the landholdings did not cover the entire expanse of the two haciendas, but only
portions thereof. Hacienda Palico has an area of 1,024 hectares and only 688.7576 hectares were targetted
for acquisition. Hacienda Banilad has an area of 1,050 hectares but only 964.0688 hectares were subject to
CARP. The haciendas are not entirely agricultural lands. In fact, the various tax declarations over the
haciendas describe the landholdings as "sugarland," and "forest, sugarland, pasture land, horticulture and
woodland." 71
Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically requires that the land
subject to land reform be first identified. The two haciendas in the instant case cover vast tracts of land.
Before Notices of Acquisition were sent to petitioner, however, the exact areas of the landholdings were
not properly segregated and delineated. Upon receipt of this notice, therefore, petitioner corporation had
no idea which portions of its estate were subject to compulsory acquisition, which portions it could
rightfully retain, whether these retained portions were compact or contiguous, and which portions were
excluded from CARP coverage. Even respondent DAR's evidence does not show that petitioner, through its
duly authorized representative, was notified of any ocular inspection and investigation that was to be
conducted by respondent DAR. Neither is there proof that petitioner was given the opportunity to at least
choose and identify its retention area in those portions to be acquired compulsorily. The right of retention
and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:
Sec. 6. Retention Limits. . . . .
The right to choose the area to be retained, which shall be compact or contiguous, shall
pertain to the landowner; Provided, however, That in case the area selected for retention by
the landowner is tenanted, the tenant shall have the option to choose whether to remain
therein or be a beneficiary in the same or another agricultural land with similar or
comparable features. In case the tenant chooses to remain in the retained area, he shall be
considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case
the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a

leaseholder to the land retained by the landowner. The tenant must exercise this option
within a period of one (1) year from the time the landowner manifests his choice of the area
for retention.
Under the law, a landowner may retain not more than five hectares out of the total area of his agricultural
land subject to CARP. The right to choose the area to be retained, which shall be compact or contiguous,
pertains to the landowner. If the area chosen for retention is tenanted, the tenant shall have the option to
choose whether to remain on the portion or be a beneficiary in the same or another agricultural land with
similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the subject of a
Voluntary Offer to Sell (VOS). The VOS in the instant case was made on May 6, 1988, 72 before the
effectivity of R.A. 6657 on June 15, 1988. VOS transactions were first governed by DAR Administrative
Order No. 19, series of 1989, 73 and under this order, all VOS filed before June 15, 1988 shall be heard and
processed in accordance with the procedure provided for in Executive Order No. 229, thus:
III. All VOS transactions which are now pending before the DAR and for which no payment
has been made shall be subject to the notice and hearing requirements provided in
Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section II, Subsection A,
paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard and
processed in accordance with the procedure provided for in Executive Order No. 229.
xxxxxxxxx.
Sec. 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural lands it
deems productive and suitable to farmer cultivation voluntarily offered for sale to it at a
valuation determined in accordance with Section 6. Such transaction shall be exempt from
the payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of private land as set forth in
DAR A.O. No. 12, Series of 1989. Section 5 of E.O. 229 merely reiterates the procedure of acquisition in
Section 16, R.A. 6657. In other words, the E.O. is silent as to the procedure for the identification of the
land, the notice of coverage and the preliminary conference with the landowner, representatives of the
BARC, the LBP and farmer beneficiaries. Does this mean that these requirements may be dispensed with
regard to VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land, landowner and
beneficiaries of the land subject to agrarian reform be identified before the notice of acquisition should be
issued. 74 Hacienda Caylaway was voluntarily offered for sale in 1989. The Hacienda has a total area of
867.4571 hectares and is covered by four (4) titles. In two separate Resolutions both dated January 12,
1989, respondent DAR, through the Regional Director, formally accepted the VOS over the two of these
four
titles. 75 The land covered by two titles has an area of 855.5257 hectares, but only 648.8544 hectares
thereof fell within the coverage of R.A. 6657. 76 Petitioner claims it does not know where these portions are
located.
Respondent DAR, on the other hand, avers that surveys on the land covered by the four titles were
conducted in 1989, and that petitioner, as landowner, was not denied participation therein, The results of
the survey and the land valuation summary report, however, do not indicate whether notices to attend the
same were actually sent to and received by petitioner or its duly authorized representative. 77 To reiterate,
Executive Order No. 229 does not lay down the operating procedure, much less the notice requirements,
before the VOS is accepted by respondent DAR. Notice to the landowner, however, cannot be dispensed

with. It is part of administrative due process and is an essential requisite to enable the landowner himself
to exercise, at the very least, his right of retention guaranteed under the CARL.
III. The Conversion of the three Haciendas.
It is petitioner's claim that the three haciendas are not subject to agrarian reform because they have been
declared for tourism, not agricultural
purposes. 78 In 1975, then President Marcos issued Proclamation No. 1520 declaring the municipality of
Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the subject haciendas, were allegedly
reclassified as non-agricultural 13 years before the effectivity of R. A. No. 6657. 79 In 1993, the Regional
Director for Region IV of the Department of Agriculture certified that the haciendas are not feasible and
sound for agricultural development. 80 On March 20, 1992, pursuant to Proclamation No. 1520, the
Sangguniang Bayan of Nasugbu, Batangas adopted Resolution No. 19 reclassifying certain areas of
Nasugbu as non-agricultural. 81 This Resolution approved Municipal Ordinance No. 19, Series of 1992, the
Revised Zoning Ordinance of Nasugbu 82 which zoning ordinance was based on a Land Use Plan for
Planning Areas for New Development allegedly prepared by the University of the Philippines. 83 Resolution
No. 19 of the Sangguniang Bayan was approved by the SangguniangPanlalawigan of Batangas on March 8,
1993. 84
Petitioner claims that proclamation No. 1520 was also upheld by respondent DAR in 1991 when it approved
conversion of 1,827 hectares in Nasugbu into a tourist area known as the Batulao Resort Complex, and
13.52 hectares in Barangay Caylaway as within the potential tourist belt. 85 Petitioner present evidence
before us that these areas are adjacent to the haciendas subject of this petition, hence, the haciendas
should likewise be converted. Petitioner urges this Court to take cognizance of the conversion proceedings
and rule accordingly. 6
We do not agree. Respondent DAR's failure to observe due process in the acquisition of petitioner's
landholdings does not ipso facto give this Court the power to adjudicate over petitioner's application for
conversion of its haciendas from agricultural to non-agricultural. The agency charged with the mandate of
approving or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure governing the processing
and approval of applications for land use conversion was the DAR A.O. No. 2, Series of 1990. Under this
A.O., the application for conversion is filed with the MARO where the property is located. The MARO
reviews the application and its supporting documents and conducts field investigation and ocular
inspection of the property. The findings of the MARO are subject to review and evaluation by the Provincial
Agrarian Reform Officer (PARO). The PARO may conduct further field investigation and submit a
supplemental report together with his recommendation to the Regional Agrarian Reform Officer (RARO)
who shall review the same. For lands less than five hectares, the RARO shall approve or disapprove
applications for conversion. For lands exceeding five hectares, the RARO shall evaluate the PARO Report
and forward the records and his report to the Undersecretary for Legal Affairs. Applications over areas
exceeding fifty hectares are approved or disapproved by the Secretary of Agrarian Reform.
The DAR's mandate over applications for conversion was first laid down in Section 4 (j) and Section 5 (l) of
Executive Order No. 129-A, Series of 1987 and reiterated in the CARL and Memorandum Circular No. 54,
Series of 1993 of the Office of the President. The DAR's jurisdiction over applications for conversion is
provided as follows:
A. The Department of Agrarian Reform (DAR) is mandated to "approve or
disapprove applications for conversion, restructuring or readjustment of
agricultural lands into non-agricultural uses," pursuant to Section 4 (j) of
Executive Order No. 129-A, Series of 1987.
B. Sec. 5 (l) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority
to approve or disapprove applications for conversion of agricultural lands for
residential, commercial, industrial and other land uses.

C. Sec. 65 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian

Reform Law of 1988, likewise empowers the DAR to authorize under certain
conditions, the conversion of agricultural lands.
D. Sec. 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the
President, provides that "action on applications for land use conversion on
individual landholdings shall remain as the responsibility of the DAR, which
shall utilize as its primary reference, documents on the comprehensive land
use plans and accompanying ordinances passed upon and approved by the
local government units concerned, together with the National Land Use Policy,
pursuant to R.A. No. 6657 and E.O. No. 129-A. 87
Applications for conversion were initially governed by DAR A.O. No. 1, Series of 1990 entitled "Revised
Rules and Regulations Governing Conversion of Private Agricultural Lands and Non-Agricultural Uses," and
DAR A.O. No. 2, Series of 1990 entitled "Rules of Procedure Governing the Processing and Approval of
Applications for Land Use Conversion." These A.O.'s and other implementing guidelines, including
Presidential issuances and national policies related to land use conversion have been consolidated in DAR
A.O. No. 07, Series of 1997. Under this recent issuance, the guiding principle in land use conversion is:
to preserve prime agricultural lands for food production while, at the same time, recognizing
the need of the other sectors of society (housing, industry and commerce) for land, when
coinciding with the objectives of the Comprehensive Agrarian Reform Law to promote social
justice, industrialization and the optimum use of land as a national resource for public
welfare. 88
"Land Use" refers to the manner of utilization of land, including its allocation, development and
management. "Land Use Conversion" refers to the act or process of changing the current use of a piece of
agricultural land into some other use as approved by the DAR. 89 The conversion of agricultural land to
uses other than agricultural requires field investigation and conferences with the occupants of the land.
They involve factual findings and highly technical matters within the special training and expertise of the
DAR. DAR A.O. No. 7, Series of 1997 lays down with specificity how the DAR must go about its task. This
time, the field investigation is not conducted by the MARO but by a special task force, known as the Center
for Land Use Policy Planning and Implementation (CLUPPI-DAR Central Office). The procedure is that once
an application for conversion is filed, the CLUPPI prepares the Notice of Posting. The MARO only posts the
notice and thereafter issues a certificate to the fact of posting. The CLUPPI conducts the field investigation
and dialogues with the applicants and the farmer beneficiaries to ascertain the information necessary for
the processing of the application. The Chairman of the CLUPPI deliberates on the merits of the
investigation report and recommends the appropriate action. This recommendation is transmitted to the
Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform. Applications involving more
than fifty hectares are approved or disapproved by the Secretary. The procedure does not end with the
Secretary, however. The Order provides that the decision of the Secretary may be appealed to the Office of
the President or the Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made to the Secretary, and from the
Secretary to the Office of the President or the Court of Appeals as the case may be. The
mode of appeal/motion for reconsideration, and the appeal fee, from Undersecretary to the
Office of the Secretary shall be the same as that of the Regional Director to the Office of the
Secretary. 90
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to
resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special
competence. 91Respondent DAR is in a better position to resolve petitioner's application for conversion,
being primarily the agency possessing the necessary expertise on the matter. The power to determine
whether Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of
the CARL lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of due process in the
acquisition proceedings does not give this Court the power to nullify the CLOA's already issued to the
farmer beneficiaries. To assume the power is to short-circuit the administrative process, which has yet to
run its regular course. Respondent DAR must be given the chance to correct its procedural lapses in the

acquisition proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in
1993. 92 Since then until the present, these farmers have been cultivating their lands. 93 It goes against the
basic precepts of justice, fairness and equity to deprive these people, through no fault of their own, of the
land they till. Anyhow, the farmer beneficiaries hold the property in trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over the three haciendas
are nullified for respondent DAR's failure to observe due process therein. In accordance with the guidelines
set forth in this decision and the applicable administrative procedure, the case is hereby remanded to
respondent DAR for proper acquisition proceedings and determination of petitioner's application for
conversion.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena, Gonzaga-Reyes and De Leon, Jr.,
JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Ynares-Santiago, J., concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of Justice C. Y. Santiago.
Quisumbing, J., I join the in the concurring and dissenting opinion of J. Santiago.
Pardo, J., I join the concurring and dissenting opinion of J. Santiago.
Separate Opinions
MELO, J., concurring and dissenting opinion;
I concur in the ponencia of Justice Ynares-Santiago, broad and exhaustive as it is in its treatment of the
issues. However, I would like to call attention to two or three points which I believe are deserving of special
emphasis.
The apparent incongruity or shortcoming in the petition is DAR's disregard of a law which settled the nonagricultural nature of the property as early as 1975. Related to this are the inexplicable contradictions
between DAR's own official issuances and its challenged actuations in this particular case.
Presidential Proclamation No. 1520 has the force and effect of law unless repealed. This law declared
Nasugbu, Batangas as a tourist zone.
Considering the new and pioneering stage of the tourist industry in 1975, it can safely be assumed that
Proclamation 1520 was the result of empirical study and careful determination, not political or extraneous
pressures. It cannot be disregarded by DAR or any other department of Government.
In Province of Camarines Sur, et al. vs. Court of Appeals, et al. (222 SCRA 173, 182 [1993]), we ruled that
local governments need not obtain the approval of DAR to reclassify lands from agricultural to nonagricultural use. In the present case, more than the exercise of that power, the local governments were
merely putting into effect a law when they enacted the zoning ordinances in question.
Any doubts as to the factual correctness of the zoning reclassifications are answered by the February 2,
1993 certification of the Department of Agriculture that the subject landed estates are not feasible and
economically viable for agriculture, based on the examination of their slope, terrain, depth, irrigability,
fertility, acidity, and erosion considerations.
I agree with the ponencia's rejection of respondent's argument that agriculture is not incompatible and
may be enforced in an area declared by law as a tourist zone. Agriculture may contribute to the scenic
views and variety of countryside profiles but the issue in this case is not the beauty of ricefields, cornfields,

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

were the subject of pending cases still undecided by DAR. There should be no question over the CLOAs
having been improperly issued, for which reason, their cancellation is warranted.

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

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

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

The records also contain a certification dated March 1, 1993 from the Director of Region IV of the
Department of Agriculture that the disputed lands are no longer economically feasible and sound for
agricultural purposes (Rollo, p. 213).
DAR itself impliedly accepted and determined that the municipality of Nasugbu is non-agricultural when it
affirmed the force and effect of Presidential Proclamation 1520. In an Order dated January 22, 1991, DAR
granted the conversion of the adjoining and contiguous landholdings owned by Group Developer and
Financiers, Inc. in Nasugbu pursuant to the Presidential Proclamation. The property alongside the disputed
properties is now known as "Batulao Resort Complex". As will be shown later, the conversion of various
other properties in Nasugbu has been ordered by DAR, including a property disputed in this petition,
Hacienda Caylaway.
Inspite of all the above, the Court of Appeals concluded that the lands comprising petitioner's haciendas
are agricultural, citing, among other things, petitioner's acts of voluntarily offering Hacienda Caylaway for
sale and applying for conversion its lands from agricultural to non-agricultural.
Respondents, on the other hand, did not only ignore the administrative and executive decisions. It also
contended that the subject land should be deemed agricultural because it is neither residential,
commercial, industrial or timber. The character of a parcel of land, however, is not determined merely by a
process of elimination. The actual use which the land is capable of should be the primordial factor.
RA 6657 explicitly limits its coverage thus:
The Comprehensive Agrarian Reform Law of 1998 shall cover, regardless of tenurial
arrangement and commodity produced, all public and private agricultural lands as provided
in Proclamation No. 131 and Executive Order No. 229, including other lands of the public
domain suitable for agriculture.
More specifically, the following lands are covered by the Comprehensive Agrarian Reform
Program:
(a) All alienable and disposable lands of the public domain devoted to or suitable for
agriculture. No reclassification of forest or mineral lands to agricultural lands shall be
undertaken after the approval of this Act until Congress, taking into account, ecological,
developmental and equity considerations, shall have determined by law, the specific limits
of the public domain;
(b) All lands of the public domain in excess of the specific limits as determined by Congress
in the preceding paragraph;
(c) All other lands owned by the Government devoted to or suitable for agriculture; and
(d) All private lands devoted to or suitable for a agriculture regardless of the agricultural
products raised or that can be raised thereon." (RA 6657, Sec. 4; emphasis provided)
In Luz Farms v. Secretary of the Department of Agrarian Reform and Natalia Realty, Inc. v. Department of
Agrarian Reform, this Court had occasion to rule that agricultural lands are only those which are arable and
suitable.
It is at once noticeable that the common factor that classifies land use as agricultural, whether it be public
or private land, is its suitability for agriculture. In this connection, RA 6657 defines "agriculture" as follows:
Agriculture, Agricultural Enterprises or Agricultural Activity means the cultivation of the soil,
planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the
harvesting of such farm products, and other farm activities, and practices performed by a
farmer in conjunction with such farming operations done by persons whether natural or
juridical. (RA 6657, sec. 3[b])

In the case at bar, petitioner has presented certifications issued by the Department of Agriculture to the
effect that Haciendas Palico, Banilad and Caylaway are not feasible and economically viable for agricultural
development due to marginal productivity of the soil, based on an examination of their slope, terrain,
depth, irrigability, fertility, acidity, and erosion factors (Petition, Annex "L", Rollo, p. 213; Annex "U", Rollo,
p. 228). This finding should be accorded respect considering that it came from competent authority, said
Department being the agency possessed with the necessary expertise to determine suitability of lands to
agriculture. The DAR Order dated January 22, 1991 issued by respondent itself stated that the adjacent
land now known as the Batulao Resort Complex is hilly, mountainous, and with long and narrow ridges and
deep gorges. No permanent sites are planted. Cultivation is by kaingin method. This confirms the findings
of the Department of Agriculture.
Parenthetically, the foregoing finding of the Department of Agriculture also explains the validity of the
reclassification of petitioner's lands by the Sangguniang Bayan of Nasugbu, Batangas, pursuant to Section
20 of the Local Government Code of 1991. It shows that the condition imposed by respondent Secretary of
Agrarian Reform on petitioner for withdrawing its voluntary offer to sell Hacienda Caylaway, i.e., that the
soil be unsuitable for agriculture, has been adequately met. In fact, the DAR in its Order in Case No. A9999-050-97, involving a piece of land also owned by petitioner and likewise located in Caylaway,
exempted it from the coverage of CARL (Order dated May 17, 1999; Annex "D" of Petitioner's
Manifestation), on these grounds.
Furthermore, and perhaps more importantly, the subject lands are within an area declared in 1975 by
Presidential Proclamation No. 1520 to be part of a tourist zone. This determination was made when the
tourism prospects of the area were still for the future. The studies which led to the land classification were
relatively freer from pressures and, therefore, more objective and open-minded. Respondent, however,
contends that agriculture is not incompatible with the lands' being part of a tourist zone since "agricultural
production, by itself, is a natural asset and, if properly set, can command tremendous aesthetic value in
the form of scenic views and variety of countryside profiles." (Comment, Rollo, 579).
The contention is untenable. Tourist attractions are not limited to scenic landscapes and lush greeneries.
Verily, tourism is enhanced by structures and facilities such as hotels, resorts, rest houses, sports clubs
and golf courses, all of which bind the land and render it unavailable for cultivation. As aptly described by
petitioner:
The development of resorts, golf courses, and commercial centers is inconsistent with
agricultural development. True, there can be limited agricultural production within the
context of tourism development. However, such small scale farming activities will be
dictated by, and subordinate to the needs or tourism development. In fact, agricultural use
of land within Nasugbu may cease entirely if deemed necessary by the Department of
Tourism (Reply, Rollo, p. 400).
The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary offer to sell Hacienda
Caylaway should not be deemed an admission that the land is agricultural. Rather, the offer was made by
petitioner in good faith, believing at the time that the land could still be developed for agricultural
production. Notably, the offer to sell was made as early as May 6, 1988, before the soil thereon was found
by the Department of Agriculture to be unsuitable for agricultural development (the Certifications were
issued on 2 February 1993 and 1 March 1993). Petitioner's withdrawal of its voluntary offer to sell,
therefore, was not borne out of a whimsical or capricious change of heart. Quite simply, the land turned
out to be outside of the coverage of the CARL, which by express provision of RA 6657, Section 4, affects
only public and private agricultural lands. As earlier stated, only on May 17, 1999, DAR Secretary Horacio
Morales, Jr. approved the application for a lot in Caylaway, also owned by petitioner, and confirmed the
seven (7) documentary evidences proving the Caylaway area to be non-agricultural (DAR Order dated 17
May 1999, in Case No. A-9999-050-97, Annex "D" Manifestation).
The DAR itself has issued administrative circulars governing lands which are outside of CARP and may not
be subjected to land reform. Administrative Order No. 3, Series of 1996 declares in its policy statement
what landholdings are outside the coverage of CARP. The AO is explicit in providing that such non-covered
properties shall be reconveyed to the original transferors or owners.
These non-covered lands are:

a. Land, or portions thereof, found to be no longer suitable for agriculture and,

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

authoritative declaration that said lands are outside of the coverage of the CARL and can not be subjected
to agrarian reform.
Petitioner assails respondent's refusal to convert its lands to non-agricultural use and to recognize
Presidential Proclamation No. 1520, stating that respondent DAR has not been consistent in its treatment
of applications of this nature. It points out that in the other case involving adjoining lands in Nasugbu,
Batangas, respondent DAR ordered the conversion of the lands upon application of Group Developers and
Financiers, Inc. Respondent DAR, in that case, issued an Order dated January 22, 1991 denying the motion
for reconsideration filed by the farmers thereon and finding that:
In fine, on November 27, 1975, or before the movants filed their instant motion for
reconsideration, then President Ferdinand E. Marcos issued Proclamation No. 1520, declaring
the municipalities of Maragondon and Ternate in the province of Cavite and the municipality
of Nasugbu in the province of Batangas as tourist zone. Precisely, the landholdings in
question are included in such proclamation. Up to now, this office is not aware that said
issuance has been repealed or amended (Petition, Annex "W";Rollo, p. 238).
The DAR Orders submitted by petitioner, and admitted by DAR in its Rejoinder (Rejoinder of DAR dated
August 20, 1999), show that DAR has been inconsistent to the extent of being arbitrary.
Apart from the DAR Orders approving the conversion of the adjoining property now called Batulao Resort
Complex and the DAR Order declaring parcels of the Caylaway property as not covered by CARL, a major
Administrative Order of DAR may also be mentioned.
The Department of Justice in DOJ Opinion No. 44 dated March 16, 1990 (Annex "A" of Petitioner's
Manifestation) stated that DAR was given authority to approve land conversions only after June 15, 1988
when RA 6657, the CARP Law, became effective. Following the DOJ Opinion, DAR issued its AO No. 06,
Series of 1994 providing for the Guidelines on Exemption Orders (Annex "B", Id.). The DAR Guidelines state
that lands already classified as non-agricultural before the enactment of CARL are exempt from its
coverage. Significantly, the disputed properties in this case were classified as tourist zone by no less than
a Presidential Proclamation as early as 1975, long before 1988.
The above, petitioner maintains, constitute unequal protection of the laws. Indeed, the Constitution
guarantees that "(n)o person shall be deprived of life, liberty or property without due process of law, nor
shall any person be denied the equal protection of the laws" (Constitution, Art. III, Sec. 1). Respondent
DAR, therefore, has no alternative but to abide by the declaration in Presidential Proclamation 1520, just as
it did in the case of Group Developers and Financiers, Inc., and to treat petitioners' properties in the same
way it did the lands of Group Developers, i.e., as part of a tourist zone not suitable for agriculture.
On the issue of non-payment of just compensation which results in a taking of property in violation of the
Constitution, petitioner argues that the opening of a trust account in its favor did not operate as payment
of the compensation within the meaning of Section 16 (e) of RA 6657. In Land Bank of the Philippines
v. Court of Appeals(249 SCRA 149, at 157 [1995]), this Court struck down as null and void DAR
Administrative Circular No. 9, Series of 1990, which provides for the opening of trust accounts in lieu of the
deposit in cash or in bonds contemplated in Section 16 (e) of RA 6657.
It is very explicit therefrom (Section 16 [e]) that the deposit must be made only in "cash" or
in "LBP bonds." Nowhere does it appear nor can it be inferred that the deposit can be made
in any other form. If it were the intention to include a "trust account" among the valid modes
of deposit, that should have been made express, or at least, qualifying words ought to have
appeared from which it can be fairly deduced that a "trust account" is allowed. In sum, there
is no ambiguity in Section 16(e) of RA 6657 to warrant an expanded construction of the term
"deposit."
xxxxxxxxx
In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and
regulations when it issued Administrative Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the landowner as compensation for his property

because, as heretofore discussed, section 16(e) of RA 6657 is very specific that the deposit
must be made only in "cash" or in "LBP bonds." In the same vein, petitioners cannot invoke
LRA Circular Nos. 29, 29-A and 54 because these implementing regulations cannot outweigh
the clear provision of the law. Respondent court therefore did not commit any error in
striking down Administrative Circular No. 9 for being null and void.
There being no valid payment of just compensation, title to petitioner's landholdings cannot be validly
transferred to the Government. A close scrutiny of the procedure laid down in Section 16 of RA 6657 shows
the clear legislative intent that there must first be payment of the fair value of the land subject to agrarian
reform, either directly to the affected landowner or by deposit of cash or LBP bonds in the DAR-designated
bank, before the DAR can take possession of the land and request the register of deeds to issue a transfer
certificate of title in the name of the Republic of the Philippines. This is only proper inasmuch as title to
private property can only be acquired by the government after payment of just compensation
In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform (175 SCRA 343, 391
[1989]), this Court held:
The CARP Law, for its part, conditions the transfer of possession and ownership of the land
to the government on receipt of the landowner of the corresponding payment or the deposit
by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then,
title also remains with the landowner. No outright change of ownership is contemplated
either.
Necessarily, the issuance of the CLOAs by respondent DAR on October 30, 1993 and their distribution to
farmer-beneficiaries were illegal inasmuch as no valid payment of compensation for the lands was as yet
effected. By law, Certificates of Land Ownership Award are issued only to the beneficiaries after the DAR
takes actual possession of the land (RA 6657, Sec. 24), which in turn should only be after the receipt by the
landowner of payment or, in case of rejection or no response from the landowner, after the deposit of the
compensation for the land in cash or in LBP bonds (RA 6657, Sec. 16[e]).
Respondents argue that the Land Bank ruling should not be made to apply to the compulsory acquisition of
petitioner's landholdings in 1993, because it occurred prior to the promulgation of the said decision
(October 6, 1995). This is untenable. Laws may be given retroactive effect on constitutional considerations,
where the prospective application would result in a violation of a constitutional right. In the case at bar, the
expropriation of petitioner's lands was effected without a valid payment of just compensation, thus
violating the Constitutional mandate that "(p)rivate property shall not be taken for public use without just
compensation" (Constitution, Art. III, Sec. 9). Hence, to deprive petitioner of the benefit of the Land
Bank ruling on the mere expedient that it came later than the actual expropriation would be repugnant to
petitioner's fundamental rights.
The controlling last two (2) pages of the ponencia state:
Finally, we stress that the failure of respondent DAR to comply with the requisites of due
process in the acquisition proceedings does not give this Court the power to nullify the
CLOA's already issued to the farmer beneficiaries. To assume the power is to short-circuit the
administrative process, which has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the acquisition proceedings. In Hacienda
Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993. Since then until the
present, these farmers have been cultivating their lands. It goes against the basic precepts
of justice, fairness and equity to deprive these people, through no fault of their own, of the
land they till. Anyhow, the farmer beneficiaries hold the property in trust for the rightful
owner of the land.
I disagree with the view that this Court cannot nullify illegally issued CLOA's but must ask the DAR to first
reverse and correct itself.
Given the established facts, there was no valid transfer of petitioner's title to the Government. This being
so, there was also no valid title to transfer to third persons; no basis for the issuance of CLOAs.

Equally important, CLOAs do not have the nature of Torrens Title. Administrative cancellation of title is
sufficient to invalidate them.
The Court of Appeals said so in its Resolution in this case. It stated:
Contrary to the petitioner's argument that issuance of CLOAs to the beneficiaries prior to the
deposit of the offered price constitutes violation of due process, it must be stressed that the
mere issuance of the CLOAs does not vest in the farmer/grantee ownership of the land
described therein.
At most the certificate merely evidences the government's recognition of the grantee as the
party qualified to avail of the statutory mechanisms for the acquisition of ownership of the
land. Thus failure on the part of the farmer/grantee to comply with his obligations is a
ground for forfeiture of his certificate of transfer. Moreover, where there is a finding that the
property is indeed not covered by CARP, then reversion to the landowner shall consequently
be made, despite issuance of CLOAs to the beneficiaries. (Resolution dated January 17,
1997, p. 6)
DAR Administrative Order 03, Series of 1996 (issued on August 8, 1996; Annex "F" of Petitioner's
Manifestation) outlines the procedure for the reconveyance to landowners of properties found to be outside
the coverage of CARP. DAR itself acknowledges that they can administratively cancel CLOAs if found to be
erroneous. From the detailed provisions of the Administrative Order, it is apparent that there are no
impediments to the administrative cancellation of CLOAs improperly issued over exempt properties. The
procedure is followed all over the country. The DAR Order spells out that CLOAs are not Torrens Titles. More
so if they affect land which is not covered by the law under which they were issued. In its Rejoinder,
respondent DAR states:
3.2. And, finally, on the authority of DAR/DARAB to cancel erroneously issued Emancipation
Patents (EPs) or Certificate of Landownership Awards (CLOAs), same is enshrined, it is
respectfully submitted, in Section 50 of Republic Act No. 6657.
In its Supplemental Manifestation, petitioner points out, and this has not been disputed by respondents,
that DAR has also administratively cancelled twenty five (25) CLOAs covering Nasugbu properties owned
by the Manila Southcoast Development Corporation near subject Roxas landholdings. These lands were
found not suitable for agricultural purposes because of soil and topographical characteristics similar to
those of the disputed properties in this case.
The former DAR Secretary, Benjamin T. Leong, issued DAR Order dated January 22, 1991 approving the
development of property adjacent and contiguous to the subject properties of this case into the Batulao
Tourist Resort. Petitioner points out that Secretary Leong, in this Order, has decided that the land
1. Is, as contended by the petitioner GDFI "hilly, mountainous, and characterized by poor soil
condition and nomadic method of cultivation, hence not suitable to agriculture."
2. Has as contiguous properties two haciendas of Roxas y Cia and found by Agrarian Reform
Team Leader Benito Viray to be "generally rolling, hilly and mountainous and strudded (sic)
with long and narrow ridges and deep gorges. Ravines are steep grade ending in low dry
creeks."
3. Is found in an. area where "it is quite difficult to provide statistics on rice and corn yields
because there are no permanent sites planted. Cultivation is by Kaingin Method."
4. Is contiguous to Roxas Properties in the same area where "the people entered the
property surreptitiously and were difficult to stop because of the wide area of the two
haciendas and that the principal crop of the area is sugar . . .." (emphasis supplied).
I agree with petitioner that under DAR AO No. 03, Series of 1996, and unlike lands covered by Torrens
Titles, the properties falling under improperly issued CLOAs are cancelled by mere administrative
procedure which the Supreme Court can declare in cases properly and adversariallysubmitted for its

decision. If CLOAs can under the DAR's own order be cancelled administratively, with more reason can the
courts, especially the Supreme Court, do so when the matter is clearly in issue.
With due respect, there is no factual basis for the allegation in the motion for intervention that farmers
have been cultivating the disputed property.
The property has been officially certified as not fit for agriculture based on slope, terrain, depth, irrigability,
fertility, acidity, and erosion. DAR, in its Order dated January 22, 1991, stated that "it is quite difficult to
provide statistics on rice and corn yields (in the adjacent property) because there are no permanent sites
planted. Cultivation is by kaingin method." Any allegations of cultivation, feasible and viable, are therefore
falsehoods.
The DAR Order on the adjacent and contiguous GDFI property states that "(T)he people entered the
property surreptitiously and were difficult to stop . . .."
The observations of Court of Appeals Justices Verzola and Magtolis in this regard, found in their dissenting
opinion (Rollo, p. 116), are relevant:
2.9 The enhanced value of land in Nasugbu, Batangas, has attracted unscrupulous
individuals who distort the spirit of the Agrarian Reform Program in order to turn out quick
profits. Petitioner has submitted copies of CLOAs that have been issued to persons other
than those who were identified in the Emancipation Patent Survey Profile as legitimate
Agrarian Reform beneficiaries for particular portions of petitioner's lands. These persons to
whom the CLOAs were awarded, according to petitioner, are not and have never been
workers in petitioner's lands. Petitioners say they are not even from Batangas but come all
the way from Tarlac. DAR itself is not unaware of the mischief in the implementation of the
CARL in some areas of the country, including Nasugbu. In fact, DAR published a "WARNING
TO THE PUBLIC" which appeared in the Philippine Daily Inquirer of April 15, 1994 regarding
this malpractice.
2.10 Agrarian Reform does not mean taking the agricultural property of one and giving it to
another and for the latter to unduly benefit therefrom by subsequently "converting" the
same property into non-agricultural purposes.
2.11 The law should not be interpreted to grant power to the State, thru the DAR, to choose
who should benefit from multi-million peso deals involving lands awarded to supposed
agrarian reform beneficiaries who then apply for conversion, and thereafter sell the lands as
non-agricultural land.
Respondents, in trying to make light of this problem, merely emphasize that CLOAs are not titles. They
state that "rampant selling of rights", should this occur, could be remedied by the cancellation or recall by
DAR.
In the recent case of "Hon. Carlos O. Fortich, et. al. vs. Hon. Renato C. Corona, et. al." (G.R. No. 131457,
April 24, 1998), this Court found the CLOAs given to the respondent farmers to be improperly issued and
declared them invalid. Herein petitioner Roxas and Co., Inc. has presented a stronger case than petitioners
in the aforementioned case. The procedural problems especially the need for referral to the Court of
Appeals are not present. The instant petition questions the Court of Appeals decision which acted on the
administrative decisions. The disputed properties in the present case have been declared non-agricultural
not so much because of local government action but by Presidential Proclamation. They were found to be
non-agricultural by the Department of Agriculture, and through unmistakable implication, by DAR itself.
The zonification by the municipal government, approved by the provincial government, is not the only
basis.
On a final note, it may not be amiss to stress that laws which have for their object the preservation and
maintenance of social justice are not only meant to favor the poor and underprivileged. They apply with
equal force to those who, notwithstanding their more comfortable position in life, are equally deserving of
protection from the courts. Social justice is not a license to trample on the rights of the rich in the guise of

defending the poor, where no act of injustice or abuse is being committed against them. As we held
in Land Bank (supra.):
It has been declared that the duty of the court to protect the weak and the underprivileged
should not be carried out to such an extent as to deny justice to the landowner whenever
truth and justice happen to be on his side. As eloquently stated by Justice Isaga

Republic of the Philippines

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

CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life on his
way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules flung his
adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their struggle. This
happened several times to Hercules' increasing amazement. Finally, as they continued grappling, it
dawned on Hercules that Antaeus was the son of Gaea and could never die as long as any part of his body
was touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air, beyond the
reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful
Antaeus weakened and died.

The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces of
life and death, of men and women who, like Antaeus need the sustaining strength of the precious earth to
stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this precious
resource among our people. But it is more than a slogan. Through the brooding centuries, it has become a
battle-cry dramatizing the increasingly urgent demand of the dispossessed among us for a plot of earth as
their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the wellbeing and economic security of all the people," 1 especially the less privileged. In 1973, the new
Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition, ownership,
use, enjoyment and disposition of private property and equitably diffuse property ownership and
profits." 2 Significantly, there was also the specific injunction to "formulate and implement an agrarian
reform program aimed at emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted one
whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but undoubtedly
sincere provisions for the uplift of the common people. These include a call in the following words for the
adoption by the State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the right
of farmers and regular farmworkers, who are landless, to own directly or collectively the
lands they till or, in the case of other farmworkers, to receive a just share of the fruits
thereof. To this end, the State shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological, developmental, or equity considerations and
subject to the payment of just compensation. In determining retention limits, the State shall
respect the right of small landowners. The State shall further provide incentives for
voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already been
enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated principles. This
was substantially superseded almost a decade later by P.D. No. 27, which was promulgated on October 21,
1972, along with martial law, to provide for the compulsory acquisition of private lands for distribution
among tenant-farmers and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian
reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued lands
covered by the decree as well as the manner of their payment. This was followed on July 22, 1987 by
Presidential Proclamation No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O.
No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took over legislative
power from the President and started its own deliberations, including extensive public hearings, on the
improvement of the interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the earlier mentioned
enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent with its
provisions. 4
The above-captioned cases have been consolidated because they involve common legal questions,
including serious challenges to the constitutionality of the several measures mentioned above. They will be
the subject of one common discussion and resolution, The different antecedents of each case will require
separate treatment, however, and will first be explained hereunder.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A. No.
6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner
Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by petitioner
Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No. 228 as qualified
farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of separation of
powers, due process, equal protection and the constitutional limitation that no private property shall be
taken for public use without just compensation.
They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228. The
said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure to provide
for retention limits for small landowners. Moreover, it does not conform to Article VI, Section 25(4) and the
other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue that the same may be
made only by a court of justice and not by the President of the Philippines. They invoke the recent cases
of EPZA v. Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just compensation contemplated
by the Bill of Rights is payable in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order also deprives the
petitioners of their property rights as protected by due process. The equal protection clause is also violated
because the order places the burden of solving the agrarian problems on the owners only of agricultural
lands. No similar obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of the
lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due process. Worse, the
measure would not solve the agrarian problem because even the small farmers are deprived of their lands
and the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier cases
ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn Producers of the Philippines,
Inc. v. The National Land Reform Council. 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is at best initial or
preliminary only. It does not foreclose judicial intervention whenever sought or warranted. At any rate, the
challenge to the order is premature because no valuation of their property has as yet been made by the
Department of Agrarian Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for retention
limits on tenanted lands and that in any event their petition is a class suit brought in behalf of landowners
with landholdings below 24 hectares. They maintain that the determination of just compensation by the
administrative authorities is a final ascertainment. As for the cases invoked by the public respondent, the
constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was decided in Gonzales was
the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228 and 229
(except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless, this statute
should itself also be declared unconstitutional because it suffers from substantially the same infirmities as
the earlier measures.

A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1. 83hectare land, who complained that the DAR was insisting on the implementation of P.D. No. 27 and E.O. No.
228 despite a compromise agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic amended petition that the
above- mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros
Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400 planter-members.
This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as decreed
by the Constitution belongs to Congress and not the President. Although they agree that the President
could exercise legislative power until the Congress was convened, she could do so only to enact
emergency measures during the transition period. At that, even assuming that the interim legislative
power of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still have to be
annulled for violating the constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform Fund,
an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost of the
Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the receipts of
the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten wealth received
through the Presidential Commission on Good Government and such other sources as government may
deem appropriate. The amounts collected and accruing to this special fund shall be considered
automatically appropriated for the purpose authorized in this Proclamation the amount appropriated is in
futuro, not in esse. The money needed to cover the cost of the contemplated expropriation has yet to be
raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just compensation as it is
traditionally understood, i.e., with money and in full, but no such payment is contemplated in Section 5 of
the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the Philippines "shall
compensate the landowner in an amount to be established by the government, which shall be based on
the owner's declaration of current fair market value as provided in Section 4 hereof, but subject to certain
controls to be defined and promulgated by the Presidential Agrarian Reform Council." This compensation
may not be paid fully in money but in any of several modes that may consist of part cash and part bond,
with interest, maturing periodically, or direct payment in cash or bond as may be mutually agreed upon by
the beneficiary and the landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was made to make a careful
study of the sugar planters' situation. There is no tenancy problem in the sugar areas that can justify the
application of the CARP to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with problems exclusively their own,
their right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane Planters
(NASP) which claims a membership of at least 20,000 individual sugar planters all over the country. On
September 10, 1987, another motion for intervention was filed, this time by Manuel Barcelona, et al.,
representing coconut and riceland owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that, in any
event, the appropriation is invalid because of uncertainty in the amount appropriated. Section 2 of Proc.
No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty billion pesos and

thus specifies the minimum rather than the maximum authorized amount. This is not allowed.
Furthermore, the stated initial amount has not been certified to by the National Treasurer as actually
available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and convincing
evidence the necessity for the exercise of the powers of eminent domain, and the violation of the
fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of the
said land for an amount equal to the government assessor's valuation of the land for tax purposes. On the
other hand, if the landowner declares his own valuation he is unjustly required to immediately pay the
corresponding taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in
favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as explained in
the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's contention, a pilot
project to determine the feasibility of CARP and a general survey on the people's opinion thereon are not
indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed to show that they
belong to a different class and should be differently treated. The Comment also suggests the possibility of
Congress first distributing public agricultural lands and scheduling the expropriation of private agricultural
lands later. From this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against the payment of public
money without the corresponding appropriation. There is no rule that only money already in existence can
be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian Reform
Fund, although denominated as an initial amount, is actually the maximum sum appropriated. The word
"initial" simply means that additional amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing the
constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends that the
measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;
(3) The power of the President to legislate was terminated on July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the National Treasury did not
originate from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due
process and the requirement for just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private respondents,
who then refused payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under
Operation Land transfer and asked for the recall and cancellation of the Certificates of Land Transfer in the
name of the private respondents. He claims that on December 24, 1986, his petition was denied without
hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been acted upon when

E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and academic because they
directly effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.
(2) The said executive orders are violative of the constitutional provision that no private
property shall be taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention provided for under the 1987
Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress convened is
anomalous and arbitrary, besides violating the doctrine of separation of powers. The legislative power
granted to the President under the Transitory Provisions refers only to emergency measures that may be
promulgated in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due process of law and to
the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of the
Constitution. He likewise argues that, besides denying him just compensation for his land, the provisions of
E.O. No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972 shall
be considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of even
small landowners in the program along with other landowners with lands consisting of seven hectares or
more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article XVIII of
the Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October 21.
1972, the tenant-farmer of agricultural land was deemed the owner of the land he was tilling. The
leasehold rentals paid after that date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved on
December 14, 1987. An appeal to the Office of the President would be useless with the promulgation of
E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and corn
lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the same. Their
respective lands do not exceed the statutory limit but are occupied by tenants who are actually cultivating
such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be ejected or
removed from his farmholding until such time as the respective rights of the tenant- farmers
and the landowner shall have been determined in accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention
because the Department of Agrarian Reform has so far not issued the implementing rules required under
the above-quoted decree. They therefore ask the Court for a writ of mandamus to compel the respondent
to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474 removing
any right of retention from persons who own other agricultural lands of more than 7 hectares in aggregate
area or lands used for residential, commercial, industrial or other purposes from which they derive
adequate income for their family. And even assuming that the petitioners do not fall under its terms, the
regulations implementing P.D. No. 27 have already been issued, to wit, the Memorandum dated July 10,
1975 (Interim Guidelines on Retention by Small Landowners, with an accompanying Retention Guide
Table), Memorandum Circular No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No.
27 and Retention by Small Landowners), and DAR Administrative Order No. 1, series of 1985 (Providing for
a Cut-off Date for Landowners to Apply for Retention and/or to Protest the Coverage of their Landholdings
under Operation Land Transfer pursuant to P.D. No. 27). For failure to file the corresponding applications for
retention under these measures, the petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the issuance of
the implementing rules, assuming this has not yet been done, involves the exercise of discretion which
cannot be controlled through the writ of mandamus. This is especially true if this function is entrusted, as
in this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not applicable to them because they
do not own more than seven hectares of agricultural land. Moreover, assuming arguendo that the rules
were intended to cover them also, the said measures are nevertheless not in force because they have not
been published as required by law and the ruling of this Court in Tanada v. Tuvera. 10 As for LOI 474, the
same is ineffective for the additional reason that a mere letter of instruction could not have repealed the
presidential decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the three departments of the
government, the judiciary is nonetheless vested with the power to annul the acts of either the legislative or
the executive or of both when not conformable to the fundamental law. This is the reason for what some
quarters call the doctrine of judicial supremacy. Even so, this power is not lightly assumed or readily
exercised. The doctrine of separation of powers imposes upon the courts a proper restraint, born of the
nature of their functions and of their respect for the other departments, in striking down the acts of the
legislative and the executive as unconstitutional. The policy, indeed, is a blend of courtesy and caution. To
doubt is to sustain. The theory is that before the act was done or the law was enacted, earnest studies
were made by Congress or the President, or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality,
requiring therefor the concurrence of a majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc. 11 And as established by judge made
doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that the
essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of judicial determination, the
constitutional question must have been opportunely raised by the proper party, and the resolution of the
question is unavoidably necessary to the decision of the case itself. 12

With particular regard to the requirement of proper party as applied in the cases before us, we hold that
the same is satisfied by the petitioners and intervenors because each of them has sustained or is in danger
of sustaining an immediate injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion of the Court to waive
the requirement and so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking only
an indirect and general interest shared in common with the public. The Court dismissed the objection that
they were not proper parties and ruled that "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure." We have since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when confronted with
constitutional issues like the ones now before it, it will not hesitate to declare a law or act invalid when it is
convinced that this must be done. In arriving at this conclusion, its only criterion will be the Constitution as
God and its conscience give it the light to probe its meaning and discover its purpose. Personal motives
and political considerations are irrelevancies that cannot influence its decision. Blandishment is as
ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make the
hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these departments, or
of any public official, betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional boundaries, it does not assert any
superiority over the other departments; it does not in reality nullify or invalidate an act of
the Legislature, but only asserts the solemn and sacred obligation assigned to it by the
Constitution to determine conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights which that instrument secures
and guarantees to them. This is in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must categorically resolve.
And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the more serious challenges
to the constitutionality of the several measures involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law has
already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on that issue.
As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was
authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the Congress of the
Philippines was formally convened and took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987, and
the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it
correct to say that these measures ceased to be valid when she lost her legislative power for, like any
statute, they continue to be in force unless modified or repealed by subsequent law or declared invalid by

the courts. A statute does not ipso facto become inoperative simply because of the dissolution of the
legislature that enacted it. By the same token, President Aquino's loss of legislative power did not have the
effect of invalidating all the measures enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially
affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A. No.
6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said measures, like the
creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have
been incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No. 131 is not
an appropriation measure even if it does provide for the creation of said fund, for that is not its principal
purpose. An appropriation law is one the primary and specific purpose of which is to authorize the release
of public funds from the treasury. 19 The creation of the fund is only incidental to the main objective of the
proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section 25(4) of
Article VI, are not applicable. With particular reference to Section 24, this obviously could not have been
complied with for the simple reason that the House of Representatives, which now has the exclusive power
to initiate appropriation measures, had not yet been convened when the proclamation was issued. The
legislative power was then solely vested in the President of the Philippines, who embodied, as it were, both
houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated because
they do not provide for retention limits as required by Article XIII, Section 4 of the Constitution is no longer
tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law, which in fact is one of its
most controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no person may own or retain,
directly or indirectly, any public or private agricultural land, the size of which shall vary
according to factors governing a viable family-sized farm, such as commodity produced,
terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall retention by the landowner exceed
five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject
to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he
is actually tilling the land or directly managing the farm; Provided, That landowners whose
lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one
subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill does
not have to be a catalogue of its contents and will suffice if the matters embodied in the text are relevant
to each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name
it was called, had the force and effect of law because it came from President Marcos. Such are the ways of
despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have
repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was
issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had to comply with the
requirement for publication as this Court held in Tanada v. Tuvera. 21 Hence, unless published in the Official
Gazette in accordance with Article 2 of the Civil Code, they could not have any force and effect if they were

among those enactments successfully challenged in that case. LOI 474 was published, though, in the
Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus
cannot issue to compel the performance of a discretionary act, especially by a specific department of the
government. That is true as a general proposition but is subject to one important qualification. Correctly
and categorically stated, the rule is that mandamus will lie to compel the discharge of the discretionary
duty itself but not to control the discretion to be exercised. In other words, mandamus can issue to require
action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary and unreasonable
delay in the exercise of such duty occurs, if it is a clear duty imposed by law, the courts will
intervene by the extraordinary legal remedy of mandamus to compel action. If the duty is
purely ministerial, the courts will require specific action. If the duty is purely discretionary,
the courts by mandamus will require action only. For example, if an inferior court, public
official, or board should, for an unreasonable length of time, fail to decide a particular
question to the great detriment of all parties concerned, or a court should refuse to take
jurisdiction of a cause when the law clearly gave it jurisdiction mandamus will issue, in the
first case to require a decision, and in the second to require that jurisdiction be taken of the
cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy and
adequate remedy available from the administrative authorities, resort to the courts may still be permitted
if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of eminent domain that logically
preclude the application of both powers at the same time on the same subject. In the case of City of
Baguio v. NAWASA, 24for example, where a law required the transfer of all municipal waterworks systems to
the NAWASA in exchange for its assets of equivalent value, the Court held that the power being exercised
was eminent domain because the property involved was wholesome and intended for a public use.
Property condemned under the police power is noxious or intended for a noxious purpose, such as a
building on the verge of collapse, which should be demolished for the public safety, or obscene materials,
which should be destroyed in the interest of public morals. The confiscation of such property is not
compensable, unlike the taking of property under the power of expropriation, which requires the payment
of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police power in
a famous aphorism: "The general rule at least is that while property may be regulated to a certain extent,
if regulation goes too far it will be recognized as a taking." The regulation that went "too far" was a law
prohibiting mining which might cause the subsidence of structures for human habitation constructed on
the land surface. This was resisted by a coal company which had earlier granted a deed to the land over its
mine but reserved all mining rights thereunder, with the grantee assuming all risks and waiving any
damage claim. The Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of the police power. He
said:
Every restriction upon the use of property imposed in the exercise of the police power
deprives the owner of some right theretofore enjoyed, and is, in that sense, an abridgment
by the State of rights in property without making compensation. But restriction imposed to
protect the public health, safety or morals from dangers threatened is not a taking. The
restriction here in question is merely the prohibition of a noxious use. The property so
restricted remains in the possession of its owner. The state does not appropriate it or make
any use of it. The state merely prevents the owner from making a use which interferes with
paramount rights of the public. Whenever the use prohibited ceases to be noxious as it

may because of further changes in local or social conditions the restriction will have to be
removed and the owner will again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the police power and the power
of eminent domain, with the latter being used as an implement of the former like the power of taxation.
The employment of the taxing power to achieve a police purpose has long been accepted. 26 As for the
power of expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring to the
earlier case of Euclid v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the police
power) makes the following significant remarks:
Euclid, moreover, was decided in an era when judges located the Police and eminent domain
powers on different planets. Generally speaking, they viewed eminent domain as
encompassing public acquisition of private property for improvements that would be
available for public use," literally construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful externalities a point reflected in the
Euclid opinion's reliance on an analogy to nuisance law to bolster its support of zoning. So
long as suppression of a privately authored harm bore a plausible relation to some legitimate
"public purpose," the pertinent measure need have afforded no compensation whatever.
With the progressive growth of government's involvement in land use, the distance between
the two powers has contracted considerably. Today government often employs eminent
domain interchangeably with or as a useful complement to the police power-- a trend
expressly approved in the Supreme Court's 1954 decision in Berman v. Parker, which
broadened the reach of eminent domain's "public use" test to match that of the police
power's standard of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of blighted areas in the District
of Columbia as a proper exercise of the police power. On the role of eminent domain in the attainment of
this purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that the Nation's Capital should be
beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to realize it through the
exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end.

28

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S Supreme
Court sustained the respondent's Landmarks Preservation Law under which the owners of the Grand
Central Terminal had not been allowed to construct a multi-story office building over the Terminal, which
had been designated a historic landmark. Preservation of the landmark was held to be a valid objective of
the police power. The problem, however, was that the owners of the Terminal would be deprived of the
right to use the airspace above it although other landowners in the area could do so over their respective
properties. While insisting that there was here no taking, the Court nonetheless recognized certain
compensatory rights accruing to Grand Central Terminal which it said would "undoubtedly mitigate" the
loss caused by the regulation. This "fair compensation," as he called it, was explained by Prof.Costonis in
this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized to
transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on neighboring
sites were proportionately relaxed, theoretically enabling Penn Central to recoup its losses at the Terminal
site by constructing or selling to others the right to construct larger, hence more profitable buildings on the
transferee sites. 30

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

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

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

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

A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that
rendered the challenged decrees constitutionally objectionable. Although the proceedings are described as
summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit
evidence on the real value of the property. But more importantly, the determination of the just
compensation by the DAR is not by any means final and conclusive upon the landowner or any other
interested party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all parties concerned.
Otherwise, the courts of justice will still have the right to review with finality the said determination in the
exercise of what is admittedly a judicial function.
The second and more serious objection to the provisions on just compensation is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the landowner
in such amount as may be agreed upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16 and 17, and other pertinent
provisions hereof, or as may be finally determined by the court, as the just compensation for
the land.
The compensation shall be paid in one of the following modes, at the option of the
landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50) hectares, insofar as the excess
hectarage is concerned Twenty-five percent (25%) cash, the
balance to be paid in government financial instruments
negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to fifty
(50) hectares Thirty percent (30%) cash, the balance to be
paid in government financial instruments negotiable at any
time.
(c) For lands twenty-four (24) hectares and below Thirty-five
percent (35%) cash, the balance to be paid in government
financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled corporations, LBP preferred shares,
physical assets or other qualified investments in accordance with guidelines set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates.
Ten percent (10%) of the face value of the bonds shall mature
every year from the date of issuance until the tenth (10th) year:
Provided, That should the landowner choose to forego the cash

portion, whether in full or in part, he shall be paid

correspondingly in LBP bonds;
(b) Transferability and negotiability. Such LBP bonds may be
used by the landowner, his successors-in- interest or his
assigns, up to the amount of their face value, for any of the
following:
(i) Acquisition of land or other real properties of the
government, including assets under the Asset Privatization
Program and other assets foreclosed by government financial
institutions in the same province or region where the lands for
which the bonds were paid are situated;
(ii) Acquisition of shares of stock of government-owned or
controlled corporations or shares of stock owned by the
government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional
release of accused persons, or for performance bonds;
(iv) Security for loans with any government financial institution,
provided the proceeds of the loans shall be invested in an
economic enterprise, preferably in a small and medium- scale
industry, in the same province or region as the land for which
the bonds are paid;
(v) Payment for various taxes and fees to government:
Provided, That the use of these bonds for these purposes will be
limited to a certain percentage of the outstanding balance of
the financial instruments; Provided, further, That the PARC shall
determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the
original bondholder in government universities, colleges, trade
schools, and other institutions;
(vii) Payment for fees of the immediate family of the original
bondholder in government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional insofar as
it requires the owners of the expropriated properties to accept just compensation therefor in less than
money, which is the only medium of payment allowed. In support of this contention, they cite
jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the property expropriated
is entitled to a just compensation, which should be neither more nor less, whenever it is
possible to make the assessment, than the money equivalent of said property. Just
compensation has always been understood to be the just and complete equivalent of the
loss which the owner of the thing expropriated has to suffer by reason of the
expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration,

46

this Court held:

It is well-settled that just compensation means the equivalent for the value of the property
at the time of its taking. Anything beyond that is more, and anything short of that is less,
than just compensation. It means a fair and full equivalent for the loss sustained, which is
the measure of the indemnity, not whatever gain would accrue to the expropriating entity.
The market value of the land taken is the just compensation to which the owner of
condemned property is entitled, the market value being that sum of money which a person
desirous, but not compelled to buy, and an owner, willing, but not compelled to sell, would
agree on as a price to be given and received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been derived, the weight of
authority is also to the effect that just compensation for property expropriated is payable only in money
and not otherwise. Thus
The medium of payment of compensation is ready money or cash. The condemnor cannot
compel the owner to accept anything but money, nor can the owner compel or require the
condemnor to pay him on any other basis than the value of the property in money at the
time and in the manner prescribed by the Constitution and the statutes. When the power of
eminent domain is resorted to, there must be a standard medium of payment, binding upon
both parties, and the law has fixed that standard as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the nature of things, be regarded as
a reliable and constant standard of compensation. 48
"Just compensation" for property taken by condemnation means a fair equivalent in money,
which must be paid at least within a reasonable time after the taking, and it is not within the
power of the Legislature to substitute for such payment future obligations, bonds, or other
valuable advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment of just compensation is
money and no other. And so, conformably, has just compensation been paid in the past solely in that
medium. However, we do not deal here with the traditional excercise of the power of eminent domain. This
is not an ordinary expropriation where only a specific property of relatively limited area is sought to be
taken by the State from its owner for a specific and perhaps local purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and of whatever kind as
long as they are in excess of the maximum retention limits allowed their owners. This kind of expropriation
is intended for the benefit not only of a particular community or of a small segment of the population but
of the entire Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted
owner. Its purpose does not cover only the whole territory of this country but goes beyond in time to the
foreseeable future, which it hopes to secure and edify with the vision and the sacrifice of the present
generation of Filipinos. Generations yet to come are as involved in this program as we are today, although
hopefully only as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow
through our thoughtfulness today. And, finally, let it not be forgotten that it is no less than the Constitution
itself that has ordained this revolution in the farms, calling for "a just distribution" among the farmers of
lands that have heretofore been the prison of their dreams but can now become the key at least to their
deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the vast
areas of land subject to expropriation under the laws before us, we estimate that hundreds of billions of
pesos will be needed, far more indeed than the amount of P50 billion initially appropriated, which is
already staggering as it is by our present standards. Such amount is in fact not even fully available at this
time.

We assume that the framers of the Constitution were aware of this difficulty when they called for agrarian
reform as a top priority project of the government. It is a part of this assumption that when they envisioned
the expropriation that would be needed, they also intended that the just compensation would have to be
paid not in the orthodox way but a less conventional if more practical method. There can be no doubt that
they were aware of the financial limitations of the government and had no illusions that there would be
enough money to pay in cash and in full for the lands they wanted to be distributed among the farmers.
We may therefore assume that their intention was to allow such manner of payment as is now provided for
by the CARP Law, particularly the payment of the balance (if the owner cannot be paid fully with money),
or indeed of the entire amount of the just compensation, with other things of value. We may also suppose
that what they had in mind was a similar scheme of payment as that prescribed in P.D. No. 27, which was
the law in force at the time they deliberated on the new Charter and with which they presumably agreed in
principle.
The Court has not found in the records of the Constitutional Commission any categorical agreement among
the members regarding the meaning to be given the concept of just compensation as applied to the
comprehensive agrarian reform program being contemplated. There was the suggestion to "fine tune" the
requirement to suit the demands of the project even as it was also felt that they should "leave it to
Congress" to determine how payment should be made to the landowner and reimbursement required from
the farmer-beneficiaries. Such innovations as "progressive compensation" and "State-subsidized
compensation" were also proposed. In the end, however, no special definition of the just compensation for
the lands to be expropriated was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates against the assumptions we are
making of the general sentiments and intention of the members on the content and manner of the
payment to be made to the landowner in the light of the magnitude of the expenditure and the limitations
of the expropriator.
With these assumptions, the Court hereby declares that the content and manner of the just compensation
provided for in the afore- quoted Section 18 of the CARP Law is not violative of the Constitution. We do not
mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all
this Court is not a cloistered institution removed from the realities and demands of society or oblivious to
the need for its enhancement. The Court is as acutely anxious as the rest of our people to see the goal of
agrarian reform achieved at last after the frustrations and deprivations of our peasant masses during all
these disappointing decades. We are aware that invalidation of the said section will result in the
nullification of the entire program, killing the farmer's hopes even as they approach realization and
resurrecting the spectre of discontent and dissent in the restless countryside. That is not in our view the
intention of the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always required to be made fully in
money, we find further that the proportion of cash payment to the other things of value constituting the
total payment, as determined on the basis of the areas of the lands expropriated, is not unduly oppressive
upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the big landowners, who can afford a bigger
balance in bonds and other things of value. No less importantly, the government financial instruments
making up the balance of the payment are "negotiable at any time." The other modes, which are likewise
available to the landowner at his option, are also not unreasonable because payment is made in shares of
stock, LBP bonds, other properties or assets, tax credits, and other things of value equivalent to the
amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little
inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their forebearance and even sacrifice,
will not begrudge us their indispensable share in the attainment of the ideal of agrarian reform. Otherwise,
our pursuit of this elusive goal will be like the quest for the Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be
viable any more as it appears that Section 4 of the said Order has been superseded by Section 14 of the
CARP Law. This repeats the requisites of registration as embodied in the earlier measure but does not
provide, as the latter did, that in case of failure or refusal to register the land, the valuation thereof shall be
that given by the provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the
just compensation shall be ascertained on the basis of the factors mentioned in its Section 17 and in the
manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his property even before actual
payment to him in full of just compensation, in contravention of a well- accepted principle of eminent
domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the condemnor until the
judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date
on which the petition under the Eminent Domain Act, or the commissioner's report under the Local
Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a canal is complete at the time of entry, title to
the property taken remains in the owner until payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property does
not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear
to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was held that "actual payment
to the owner of the condemned property was a condition precedent to the investment of the title to the
property in the State" albeit "not to the appropriation of it to public use." In Rexford v. Knight, 55 the Court
of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the
State until the payment of the compensation although the authority to enter upon and appropriate the
land was complete prior to the payment. Kennedy further said that "both on principle and authority the
rule is ... that the right to enter on and use the property is complete, as soon as the property is actually
appropriated under the authority of law for a public use, but that the title does not pass from the owner
without his consent, until just compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,

56

that:

If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction is
such as to afford absolute reassurance that no piece of land can be finally and irrevocably
taken from an unwilling owner until compensation is paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972 and
declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized farm except
that "no title to the land owned by him was to be actually issued to him unless and until he had become a
full-fledged member of a duly recognized farmers' cooperative." It was understood, however, that full
payment of the just compensation also had to be made first, conformably to the constitutional
requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972 of the
land they acquired by virtue of Presidential Decree No. 27. (Emphasis supplied.)

it was obviously referring to lands already validly acquired under the said decree, after proof of full-fledged
membership in the farmers' cooperatives and full payment of just compensation. Hence, it was also
perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to the landowner
by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after full payment of just
compensation), shall be considered as advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt by the landowner of the corresponding payment or the deposit by the DAR of the
compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily transferring title before
the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as
recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should counterbalance the express provision in Section 6 of the said law that "the landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct compulsory heirs who still own the original
homestead at the time of the approval of this Act shall retain the same areas as long as they continue to
cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by the
petitioners with the Office of the President has already been resolved. Although we have said that the
doctrine of exhaustion of administrative remedies need not preclude immediate resort to judicial action,
there are factual issues that have yet to be examined on the administrative level, especially the claim that
the petitioners are not covered by LOI 474 because they do not own other agricultural lands than the
subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have not yet
exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are entitled to the new
retention rights provided for by R.A. No. 6657, which in fact are on the whole more liberal than those
granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have been the subject of bitter
attack from those who point to the shortcomings of these measures and ask that they be scrapped entirely.
To be sure, these enactments are less than perfect; indeed, they should be continuously re-examined and
rehoned, that they may be sharper instruments for the better protection of the farmer's rights. But we
have to start somewhere. In the pursuit of agrarian reform, we do not tread on familiar ground but grope
on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP Law is not a tried and
tested project. On the contrary, to use Justice Holmes's words, "it is an experiment, as all life is an
experiment," and so we learn as we venture forward, and, if necessary, by our own mistakes. We cannot
expect perfection although we should strive for it by all means. Meantime, we struggle as best we can in
freeing the farmer from the iron shackles that have unconscionably, and for so long, fettered his soul to the
soil.
By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform program
are removed, to clear the way for the true freedom of the farmer. We may now glimpse the day he will be
released not only from want but also from the exploitation and disdain of the past and from his own
feelings of inadequacy and helplessness. At last his servitude will be ended forever. At last the farm on
which he toils will be his farm. It will be his portion of the Mother Earth that will give him not only the staff
of life but also the joy of living. And where once it bred for him only deep despair, now can he see in it the
fruition of his hopes for a more fulfilling future. Now at last can he banish from his small plot of earth his
insecurities and dark resentments and "rebuild in it the music and the dream."

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED
against all the constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State only upon full payment
of compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are retained and
recognized.
4. Landowners who were unable to exercise their rights of retention under P.D. No. 27 shall
enjoy the retention rights granted by R.A. No. 6657 under the conditions therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.
SO ORDERED.
Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF
THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not
resistance, even if only the number of agrarian suits filed serves to be the norm. Through the years, this
battle cry and root of discord continues to reflect the seemingly ceaseless discourse on, and great disparity
in, the distribution of land among the people, "dramatizing the increasingly urgent demand of the
dispossessed x xx for a plot of earth as their place in the sun."2 As administrations and political alignments
change, policies advanced, and agrarian reform laws enacted, the latest being what is considered a
comprehensive piece, the face of land reform varies and is masked in myriads of ways. The stated goal,
however, remains the same: clear the way for the true freedom of the farmer. 3
Land reform, or the broader term "agrarian reform," has been a government policy even before the
Commonwealth era. In fact, at the onset of the American regime, initial steps toward land reform were
already taken to address social unrest.4 Then, under the 1935 Constitution, specific provisions on social

justice and expropriation of landed estates for distribution to tenants as a solution to land ownership and
tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation
of all tenanted estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, 6 abolishing share tenancy
and converting all instances of share tenancy into leasehold tenancy. 7 RA 3844 created the Land Bank of
the Philippines (LBP) to provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly
to be accomplished by expropriating lands in excess of 75 hectares for their eventual resale to tenants.
The law, however, had this restricting feature: its operations were confined mainly to areas in Central
Luzon, and its implementation at any level of intensity limited to the pilot project in Nueva Ecija. 8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land
reform area, and providing for the automatic conversion of tenancy to leasehold tenancy in all areas. From
75 hectares, the retention limit was cut down to seven hectares. 9
Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued
Presidential Decree No. 27 (PD 27) for the "emancipation of the tiller from the bondage of the soil." 10 Based
on this issuance, tenant-farmers, depending on the size of the landholding worked on, can either purchase
the land they tilled or shift from share to fixed-rent leasehold tenancy. 11 While touted as "revolutionary,"
the scope of the agrarian reform program PD 27 enunciated covered only tenanted, privately-owned rice
and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino and the drafting and
eventual ratification of the 1987 Constitution. Its provisions foreshadowed the establishment of a legal
framework for the formulation of an expansive approach to land reform, affecting all agricultural lands and
covering both tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian
reform program (CARP) to cover all agricultural lands, regardless of tenurial arrangement and commodity
produced, as provided in the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title 14 indicates, the
mechanisms for CARP implementation. It created the Presidential Agrarian Reform Council (PARC) as the
highest policy-making body that formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the
CARP Law, took effect, ushering in a new process of land classification, acquisition, and distribution. As to
be expected, RA 6657 met stiff opposition, its validity or some of its provisions challenged at every
possible turn.Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform 15 stated the observation that the assault was inevitable, the CARP being an untried and untested
project, "an experiment [even], as all life is an experiment," the Court said, borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief,
petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-32-01 16 and
Resolution No. 2006-34-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as the
implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage). 18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed
agricultural-industrial-residential expanse straddling several municipalities of Tarlac and owned by
Compaia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered

to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the hacienda, the
Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development Corporation
(Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed
upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for the
controlling interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central
Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US bank. 20 Also, the Government
Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million
loan in favor of Tadeco to pay the peso price component of the sale. One of the conditions contained in the
approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as
follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation 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;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and
Tabacaleras interest in CAT.22
The details of the events that happened next involving the hacienda and the political color some of the
parties embossed are of minimal significance to this narration and need no belaboring. Suffice it to state
that on May 7, 1980, the martial law administration filed a suit before the Manila Regional Trial Court (RTC)
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR,
now the Department of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost.
Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which
sugar landsof which the hacienda consistedare not covered by existing agrarian reform legislations. As
perceived then, the government commenced the case against Tadeco as a political message to the family
of the late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR.
Therefrom, Tadeco appealed to the Court of Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the governments case
against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government
initially instituted and won against Tadeco, et al. The dismissal action was, however, made subject to the
obtention by Tadeco of the PARCs approval of a stock distribution plan (SDP) that must initially be
implemented after such approval shall have been secured.24 The appellate court wrote:
The defendants-appellants x xx filed a motion on April 13, 1988 joining the x xx governmental agencies
concerned in moving for the dismissal of the case subject, however, to the following conditions embodied
in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all
the requirements for corporate landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.
x xxx
WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if
any of the conditions as above set forth is not duly complied with by the TADECO. 25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land transfer
scheme of CARP, to give qualified beneficiaries the right to purchase shares of stocks of the corporation
under a stock ownership arrangement and/or land-to-share ratio.

Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2) alternative modalities, i.e., land or
stock transfer, pursuant to either of which the corporate landowner can comply with CARP, but subject to
well-defined conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their
agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified
beneficiaries x xx.
Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets, under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks are distributed be
reduced. x xx
Corporations or associations which voluntarily divest a proportion of their capital stock, equity or
participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to
have complied with the provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other
financial benefits, the books of the corporation or association shall be subject to periodic audit by
certified public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall
be assured of at least one (1) representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features
as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said
transaction is in favor of a qualified and registered beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above
is not made or realized or the plan for such stock distribution approved by the PARC within the same
period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10,
Series of 1988 (DAO 10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail
Themselves of the Stock Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos preferred option, for, on August 23,
1988,28 it organized a spin-off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers.
For this purpose, Tadeco assigned and 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. 29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the
incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange
Commissions (SECs) approval, increased its capital stock on May 10, 1989 from PhP 1,500,000 divided
into 1,500,000 shares with a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares
also with par value of PhP 1/share, 150,000,000 of which were to be issued only to qualified and registered
beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the corporation. 31
As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of
HLI, as appraised and approved by the SEC, have an aggregate value of PhP 590,554,220, or after

deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP 355,531,462.
This translated to 355,531,462 shares with a par value of PhP 1/share. 32
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. On May 11,
1989, the Stock Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement
(MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs 34 and attested to by then DAR
Secretary Philip Juico. The SDOA embodied the basis and mechanics of the SDP, which would eventually be
submitted to the PARC for approval. In the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in
relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI]
is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND
PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that
has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said
33.296% thereof being P118,391,976.85 or118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in
the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or
periodically employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with
the FIRST PARTY [Tadeco] the acquisition and distribution to the THIRD PARTY 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.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year
they will receive on top of their regular compensation, an amount that approximates the equivalent
of three (3%) of the total gross sales from the production of the agricultural land, whether it be in
the form of cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired
from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the
beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of
the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will
empower the THIRD PARTY or their representative to vote in stockholders and board of directors
meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding
capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number
of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares
subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and
without charge among the qualified family-beneficiaries residing in the place where the agricultural
land is situated, residential or homelots of not more than 240 sq.m. each, with each familybeneficiary being assured of receiving and owning a homelot in the barangay where it actually
resides on the date of the execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and
with the supervision of the [DAR], with the end in view of improving the lot of the qualified
beneficiaries of the [SDP] and obtaining for them greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing
equivalent to three percent (3%) of gross sales from the production of the agricultural land payable to the
FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of not more than 240
square meters each to family-beneficiaries. The production-sharing, as the SDP indicated, is payable
"irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the nature of
dividends, as the term is ordinarily understood under corporation law.

While a little bit hard to follow, given that, during the period material, the assigned value of the
agricultural land in the hacienda was PhP 196.63 million, while the total assets of HLI was PhP 590.55
million with net assets of PhP 355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of
stock corresponds to 33.3% of the outstanding capital stock of the HLI equivalent to 118,391,976.85
shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under
C.A.R.P.,"35which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who
participated, opted to receive shares in HLI.36 One hundred thirty-two (132) chose actual land distribution. 37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago)
addressed a letter dated November 6, 198938 to Pedro S. Cojuangco (Cojuangco), then Tadeco president,
proposing that the SDP be revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no
dilution in the shares of stocks of individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage
shareholdings of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at
any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between
the [Tadeco], HLI and its [FWBs] prior to the implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for determining the actual
number of seats to be allocated for the [FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs];
and
6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed
revisions of the SDP are already embodied in both the SDP and MOA. 39 Following that exchange, the PARC,
under then Sec. Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989, approved
the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed
of permanent, seasonal and casual master list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted
agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos
(P80,000,000) for the SCTEX;

(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity
services, old age/death benefits and no interest bearing salary/educational loans and rice sugar
accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from
agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657, providing:
SEC. 65. Conversion of Lands.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, the DAR, upon
application of the beneficiary or the landowner, with due notice to the affected parties, and subject to
existing laws, may authorize the reclassification, or conversion of the land and its disposition: Provided,
That the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang,
and Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and which was submitted to
the DAR.44After the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the application on
August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series of 1996, 45 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. 46 Consequently, HLIs
Transfer Certificate of Title (TCT) No. 28791047 was canceled and TCT No. 29209148 was issued in the name
of Centennary. HLI transferred the remaining 200 hectares covered by TCT No. 287909 to Luisita Realty
Corporation (LRC)49 in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares
for PhP 250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000
shares and wholly-owned by HLI, had the following incorporators: Pedro Cojuangco, Josephine C. Reyes,
Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for
PhP 750 million. The latter acquired it for the purpose of developing an industrial complex. 52 As a result,
Centennarys TCT No. 292091 was canceled to be replaced by TCT No. 310986 53 in the name of LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles
were issued in the name of LIPCO, specifically: (a) TCT No. 365800 54 and (b) TCT No. 365801,55 covering
180 and four hectares, respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels
covered by its TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way
of dacion en pagoin payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled
and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area
coverage of Hacienda Luisita which had been acquired by the government as part of the Subic-Clark-Tarlac
Expressway (SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the
latter part of 2003. In the first, denominated as Petition/Protest, 57 respondents Jose Julio Suniga and
Windsor Andaya, identifying themselves as head of the Supervisory Group of HLI (Supervisory Group), and
60 other supervisors sought to revoke the SDOA, alleging that HLI had failed to give them their dividends
and the one percent (1%) share in gross sales, as well as the thirty-three percent (33%) share in the
proceeds of the sale of the converted 500 hectares of land. They further claimed that their lives have not
improved contrary to the promise and rationale for the adoption of the SDOA. They also cited violations by

HLI of the SDOAs terms.58 They prayed for a renegotiation of the SDOA, or, in the alternative, its
revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in
the second petition, styled as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003
by AlyansangmgaManggagawangBukidng Hacienda Luisita (AMBALA), where the handwritten name of
respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA" 60 appeared. As
alleged, the petition was filed on behalf of AMBALAs members purportedly composing about 80% of the
5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand, HLIs
answer62 to the AMBALA petition was contained in its letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among
other duties, the Special Task Force was mandated to review the terms and conditions of the SDOA and
PARC Resolution No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance reports; evaluate the merits
of the petitions for the revocation of the SDP; conduct ocular inspections or field investigations; and
recommend appropriate remedial measures for approval of the Secretary. 63
After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita,
Incorporated (HLI) Stock Distribution Plan (SDP) Conflict" 64 dated September 22, 2005 (Terminal Report),
finding that HLI has not complied with its obligations under RA 6657 despite the implementation of the
SDP.65 The Terminal Report and the Special Task Forces recommendations were adopted by then DAR Sec.
Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the
recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989 approving HLIs SDP; and (b)
the acquisition of Hacienda Luisita through the compulsory acquisition scheme. Following review, the PARC
Validation Committee favorably endorsed the DAR Secretarys recommendation afore-stated. 67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and
confirm the recommendation of the PARC Executive Committee adopting in toto the report of the PARC
ExCom Validation Committee affirming the recommendation of the DAR to recall/revoke the SDO plan of
Tarlac Development Corporation/Hacienda Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed
under the compulsory coverage or mandated land acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy
of the documents adverted to in the resolution attached. A letter-request dated December 28, 2005 69 for
certified copies of said documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration. 70 On the same day, the DAR Tarlac provincial
office issued the Notice of Coverage71 which HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse 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.72 As HLI later rued, it "can not know from the above-quoted resolution the facts and the
law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01 dated May 3,
2006.

By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a temporary restraining
order,75enjoining the implementation of Resolution No. 2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment 76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA,"
filed his Manifestation and Motion with Comment Attached dated December 4, 2006 (Manifestation and
Motion).77 In it, Mallari stated that he has broken away from AMBALA with other AMBALA ex-members and
formed Farmworkers Agrarian Reform Movement, Inc. (FARM).78 Should this shift in alliance deny him
standing, Mallari also prayed that FARM be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other FARM members, particularly wouldbe intervenors Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold, creating the
AMBALA-Noel Mallari faction and leaving Renato Lalic, et al. as the remaining members of FARM who
sought to intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted their
Comment/Opposition dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-InIntervention dated October 18, 2007.81 LIPCO later followed with a similar motion.82 In both motions, RCBC
and LIPCO contended that the assailed resolution effectively nullified the TCTs under their respective
names as the properties covered in the TCTs were veritably included in the January 2, 2006 notice of
coverage. In the main, they claimed that the revocation of the SDP cannot legally affect their rights as
innocent purchasers for value. Both motions for leave to intervene were granted and the corresponding
petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other
hand, the Court, on August 24, 2010, heard public respondents as well as the respective counsels of the
AMBALA-Mallari-Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27 members 83 argue
their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group,
represented by Suniga and Andaya; and the United Luisita Workers Union, represented by EldifonsoPingol,
filed with the Court a joint submission and motion for approval of a Compromise Agreement (English and
Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a
Resolution84 creating a Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as
chairperson, and former CA Justices Hector Hofilea and TeresitaDy-Liacco Flores, as members. Meetings
on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted. Despite persevering
and painstaking efforts on the part of the panel, mediation had to be discontinued when no acceptable
agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE
JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.
II.
[IF SO], x xx CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS
TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS
IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE

CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND THE
IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL
GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x xx, ARTICLES 1380, 1381 AND 1382 x xx
ARTICLE 1390 x xx AND ARTICLE 1409 x xx THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE,
OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL
BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-ININTEREST TO FILE SAID PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE
NOW GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY
THE x xx [CARL] x xx.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF
THE CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS
AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02
JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE
NAME OF PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE
PREJUDICED BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY
2006 WERE ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE
PROCESS AS AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the
converted property, and, hence, would ascribe on PARC the commission of grave abuse of discretion when
it included those portions in the notice of coverage. And apart from raising issues identical with those of
HLI, such as but not limited to the absence of valid grounds to warrant the rescission and/or revocation of
the SDP, LIPCO would allege that the assailed resolution and the notice of coverage were issued without
affording it the right to due process as an innocent purchaser for value. The government, LIPCO also
argues, is estopped from recovering properties which have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main petition and to which all other
related questions must yield boil down to the following: (1) matters of standing; (2) the constitutionality of
Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity or propriety of
such recall or revocatory action; and (5) corollary to (4), the validity of the terms and conditions of the
SDP, as embodied in the SDOA.
Our Ruling
I.

We first proceed to the examination of the preliminary issues before delving on the more serious
challenges bearing on the validity of PARCs assailed issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and
AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene Galang, who filed the revocatory petitions before the
DAR. As HLI would have it, Galang, the self-styled head of AMBALA, gained HLI employment in June 1990
and, thus, could not have been a party to the SDOA executed a year earlier. 85 As regards the Supervisory
Group, HLI alleges that supervisors are not regular farmworkers, but the company nonetheless considered
them FWBs under the SDOA as a mere concession to enable them to enjoy the same benefits given
qualified regular farmworkers. However, if the SDOA would be canceled and land distribution effected, so
HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded from receiving lands as
farmworkers other than the regular farmworkers who are merely entitled to the "fruits of the land." 87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual
payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by
[HLI]."88 Galang, per HLIs own admission, is employed by HLI, and is, thus, a qualified beneficiary of the
SDP; he comes within the definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court,
meaning, one who stands to be benefited or injured by the judgment in the suit or is the party entitled to
the avails of the suit.
The same holds true with respect to the Supervisory Group whose members were admittedly employed by
HLI and whose names and signatures even appeared in the annex of the SDOA. Being qualified
beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly parties who would benefit or be
prejudiced by the judgment recalling the SDP or replacing it with some other modality to comply with RA
6657.
Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the
category of "other farmworkers" mentioned in Sec. 4, Article XIII of the Constitution, 89 thus only entitled to
a share of the fruits of the land, as indeed Fortich teaches, this does not detract from the fact that they are
still identified as being among the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring
an action upon the SDP.90 At any rate, the following admission made by Atty. Gener Asuncion, counsel of
HLI, during the oral arguments should put to rest any lingering doubt as to the status of protesters Galang,
Suniga, and Andaya:
Justice Bersamin: x xx I heard you a while ago that you were conceding the qualified farmer beneficiaries
of Hacienda Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of
protest initiated before the DAR and the real party in interest there be considered as possessed by the
farmer beneficiaries who initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent
themselves, their fellow farmers or their organizations in any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
x xxx
Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or
their organizations in any proceedings before the DAR: Provided, however, that when there are two
or more representatives for any individual or group, the representatives should choose only one among
themselves to represent such party or group before any DAR proceedings. (Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-ininterest allowed by law to file a petition before the DAR or PARC.

This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI
aptly noted,92 his "petisyon" filed with DAR did not carry the usual authorization of the individuals in whose
behalf it was supposed to have been instituted. To date, such authorization document, which would
logically include a list of the names of the authorizing FWBs, has yet to be submitted to be part of the
records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without
authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC with such authority.
While, as HLI argued, EO 229 empowers PARC to approve the plan for stock distribution in appropriate
cases, the empowerment only includes the power to disapprove, but not to recall its previous approval of
the SDP after it has been implemented by the parties.93 To HLI, it is the court which has jurisdiction and
authority to order the revocation or rescission of the PARC-approved SDP.
We disagree.
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. However, 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.94
We have explained that "every statute is understood, by implication, to contain all such provisions as may
be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or
jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and
logically inferred from its terms."95 Further, "every statutory grant of power, right or privilege is deemed to
include all incidental power, right or privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly granted, the power to revoke
it. By extension, the power to revoke is limited by the authority to grant the license, from which it is
derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug store
has complied with the requirements of the general laws and the implementing administrative rules and
regulations, it is only for their violation that the FDA may revoke the said license. By the same token,
having granted the permit upon his ascertainment that the conditions thereof as applied x xx have been
complied with, it is only for the violation of such conditions that the mayor may revoke the said
permit.97 (Emphasis supplied.)
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.
As public respondents aptly observe, 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. 98 With
the view We take of the case, only PARC can effect such revocation. The DAR Secretary, by his own
authority as such, cannot plausibly do so, as the acceptance and/or approval of the SDP sought to be taken
back or undone is the act of PARC whose official composition includes, no less, the President as chair, the
DAR Secretary as vice-chair, and at least eleven (11) other department heads. 99
On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to
compulsory distribution after its approved SDP has been implemented would impair the contractual
obligations created under the SDOA.

The broad sweep of HLIs argument ignores certain established legal precepts and must, therefore, be
rejected.
A law authorizing interference, when appropriate, in the contractual relations between or among parties is
deemed read into the contract and its implementation cannot successfully be resisted by force of the nonimpairment guarantee. There is, in that instance, no impingement of the impairment clause, the nonimpairment protection being applicable only to laws that derogate prior acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties. Impairment, in fine, obtains if a
subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses
with those agreed upon or withdraws existing remedies for the enforcement of the rights of the
parties.100 Necessarily, the constitutional proscription would not apply to laws already in effect at the time
of contract execution, as in the case of RA 6657, in relation to DAO 10, vis--vis HLIs SDOA. As held in
Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that
laws newly enacted have only a prospective operation, and cannot affect acts or contracts already
perfected; however, as to laws already in existence, their provisions are read into contracts and deemed a
part thereof. Thus, the non-impairment clause under Section 10, Article II [of the Constitution] is limited in
application to laws about to be enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties thereto. 101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of
Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the obligation of contracts shall be
passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and
conditions is not a PARC administrative matter, but one that gives rise to a cause of action cognizable by
regular courts.102 This contention has little to commend itself. The SDOA is a special contract imbued with
public interest, entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP, which
requires for its validity, or at least its enforceability, PARCs approval. And the fact that the certificate of
compliance103to be issued by agrarian authorities upon completion of the distribution of stocksis
revocable by the same issuing authority supports the idea that everything about the implementation of the
SDP is, at the first instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead
of to RA 6657, in determining their rights, obligations and remedies. The Code, it adds, should be the
applicable law on the disposition of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the
SDP are primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created
in order to comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the
SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive
applicability of the Corporation Code under the guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also
stockholders, its applicability is limited as the rights of the parties arising from the SDP should not be made
to supplant or circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the formation, organization and
regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As
between a general and special law, the latter shall prevailgeneraliaspecialibus non derogant. 105 Besides,
the present impasse between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents questioned before the DAR
is the proper implementation of the SDP and HLIs compliance with RA 6657. Evidently, RA 6657 should be
the applicable law to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of
CARP and the eventual distribution of the land to the FWBs would amount to a disposition of all or

practically all of the corporate assets of HLI. HLI would add that this contingency, if ever it comes to pass,
requires the applicability of the Corporation Code provisions on corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding
up of HLIs affairs or liquidation of the assets is concerned. However, the mere inclusion of the agricultural
land of Hacienda Luisita under the coverage of CARP and the lands eventual distribution to the FWBs will
not, without more, automatically trigger the dissolution of HLI. As stated in the SDOA itself, the percentage
of the value of the agricultural land of Hacienda Luisita in relation to the total assets transferred and
conveyed by Tadeco to HLI comprises only 33.296%, following this equation: value of the agricultural lands
divided by total corporate assets. By no stretch of imagination would said percentage amount to a
disposition of all or practically all of HLIs corporate assets should compulsory land acquisition and
distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its
execution pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal Report of the Special
Task Force, as endorsed by PARC Excom. But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of
CARP compliance, to resort to stock distribution, an arrangement which, to FARM, impairs the fundamental
right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution. 106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of
outright agricultural land transfer; in fine, there is stock certificate ownership of the farmers or
farmworkers instead of them owning the land, as envisaged in the Constitution. For FARM, this modality of
distribution is an anomaly to be annulled for being inconsistent with the basic concept of agrarian reform
ingrained in Sec. 4, Art. XIII of the Constitution.107
Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other
qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of
the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart
provision in EO 229 must fail as explained below.
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 lismota of the case. 108
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. 3l of RA 6657, since as early
as November 21, l989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable
time thereafter and why its members received benefits from the SDP without so much of a protest. It was
only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated
November 21, 1989 that said plan and approving resolution were sought to be revoked, but not, to stress,

by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT
question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in
the subsequent implementation of the SDP. Even the public respondents, as represented by the Solicitor
General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27
members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it
filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from
November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late
in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court
cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a
long period of time and the occurrence of numerous events and activities which resulted from the
application of an alleged unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality will not be passed upon
by the Court unless it is properly raised and presented in an appropriate case at the first
opportunity.109 FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be raised at the earliest possible
opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be the very lismota of the case
does not likewise obtain. The lismota 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.110 If some other grounds exist by which
judgment can be made without touching the constitutionality of a law, such recourse is favored. 111 Garcia v.
Executive Secretary explains why:
LisMota the fourth requirement to satisfy before this Court will undertake judicial review means that
the Court will not pass upon a question of unconstitutionality, although properly presented, if the case can
be disposed of on some other ground, such as the application of the statute or the general law. The
petitioner must be able to show that the case cannot be legally resolved unless the constitutional question
raised is determined. This requirement is based on the rule that every law has in its favor the presumption
of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the
Constitution, and not one that is doubtful, speculative, or argumentative. 112 (Italics in the original.)
The lismota 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 lismota is whether
or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such noncompliance 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, 113 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.
It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already
moot and academic114 provided the following requisites are present:
x xx first, there is a grave violation of the Constitution; second, the exceptional character of the situation
and the paramount public interest is involved; third, when the constitutional issue raised requires
formulation of controlling principles to guide the bench, the bar, and the public; fourth, the case is capable
of repetition yet evading review.
These requisites do not obtain in the case at bar.

For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and
regular farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the
case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental,
or equity considerations, and subject to the payment of just compensation. In determining retention limits,
the State shall respect the right of small landowners. The State shall further provide incentives for
voluntary land-sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular farmworkers have a right TO OWN
DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distribution
direct and indirect ownership. Direct transfer to individual farmers is the most commonly used method
by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land is the
alternative to direct ownership of agricultural land by individual farmers. The aforequoted Sec. 4
EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987 Constitution
that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. The word "collective" is defined as "indicating a number of
persons or things considered as constituting one group or aggregate,"115 while "collectively" is defined as
"in a collective sense or manner; in a mass or body." 116 By using the word "collectively," the Constitution
allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of
the fact that land reform may become successful even if it is done through the medium of juridical entities
composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers cooperatives
or associations to collectively own the land, while the second paragraph of Sec. 31 allows corporations or
associations to own agricultural land with the farmers becoming stockholders or members. Said provisions
read:
SEC. 29. Farms owned or operated by corporations or other business associations.In the case of farms
owned or operated by corporations or other business associations, the following rules shall be observed by
the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by
the worker beneficiaries who shall form a workers cooperative or association which will deal with the
corporation or business association. x xx (Emphasis supplied.)
SEC. 31. Corporate Landowners. x xx
x xxx
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries
the right to purchase such proportion of the capital stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in relation to the companys total assets, under such terms
and conditions as may be agreed upon by them. In no case shall the compensation received by the
workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to
associations, with respect to their equity or participation. x xx (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations
under the succeeding Sec. 31, as differentiated from individual farmers, are authorized vehicles for the
collective ownership of agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while corporations are juridical persons
under the Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the
Constitution that land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution
are in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmers
DIRECT and COLLECTIVE, thus:

MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership
by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State
ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers cooperatives owning the land, not
the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers cooperatives, do the farmers own
specific areas of land where they only unite in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of
agriculture and the "kibbutz." So are both contemplated in the report?
MR. TADEO. Angdalawakasingpamamaraanngpagpapatupadngtunaynarepormasalupa ay angpagmamayaringlupanahahatiinsa individual napagmamay-ari directly at angtinatawagnasamasamanggagawinngmgamagbubukid. Tuladsa Negros, ang gusto ngmgamagbubukid ay gawinnilaitong
"cooperative or collective farm." Angibigsabihin ay sama-samanilangsasakahin.
x xxx
MR. TINGSON. x xx When we speak here of "to own directly or collectively the lands they till," is this land
for the tillers rather than land for the landless? Before, we used to hear "land for the landless," but now the
slogan is "land for the tillers." Is that right?
MR. TADEO. Angprinsipyongumiiraldito ay iyong land for the tillers. Angibigsabihinng "directly" ay
tuladsaimplementasyonsa rice and corn lands kung
saaninaarinangmgamagsasakaanglupangbinubungkalnila. Angibigsabihinnamanng "collectively" ay samasamangpaggawasaisanglupain o isangbukid, katuladngsitwasyonsa Negros. 117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or
collectively. Thus, the main requisite for collective ownership of land is collective or group work by farmers
of the agricultural land. Irrespective of whether the landowner is a cooperative, association or corporation
composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls
within the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to
pursue, by law, an agrarian reform program founded on the policy of land for the landless, but subject to
such priorities as Congress may prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress necessarily implies that the above
constitutional provision is not self-executoryand that legislation is needed to implement the urgently
needed program of agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a
mechanism to carry out the constitutional directives. This piece of legislation, in fact, restates 118 the
agrarian reform policy established in the aforementioned provision of the Constitution of promoting the
welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution
of lands to farmers and regular farmworkers who are landless to lift the economic status of the
beneficiaries and all other arrangements alternative to the physical redistribution of lands, such
as production or profit sharing, labor administration and the distribution of shares of stock which will
allow beneficiaries to receive a just share of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews
with the agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the
Constitution. Albeit land ownership for the landless appears to be the dominant theme of that policy, We
emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to passing

an agrarian reform law planted on direct land transfer to and ownership by farmers and no other, or else
the enactment suffers from the vice of unconstitutionality. If the intention were otherwise, the framers of
the Constitution would have worded said section in a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the
States commitment to farmers and farmworkers to advance their interests under the policy of social
justice. The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective ownership by which
the imperatives of social justice may, in its estimation, be approximated, if not achieved. The Court should
be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural
land but are merely given stock certificates. Thus, the farmers lose control over the land to the board of
directors and executive officials of the corporation who actually manage the land. They conclude that such
arrangement runs counter to the mandate of the Constitution that any agrarian reform must preserve the
control over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly own the land, still, the
Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in the
assets of the corporation, which include the agricultural lands. It was explained that the "equitable interest
of the shareholder in the property of the corporation is represented by the term stock, and the extent of his
interest is described by the term shares. The expression shares of stock when qualified by words indicating
number and ownership expresses the extent of the owners interest in the corporate property." 119 A share
of stock typifies an aliquot part of the corporations property, or the right to share in its proceeds to that
extent when distributed according to law and equity and that its holder is not the owner of any part of the
capital of the corporation.120 However, the FWBs will ultimately own the agricultural lands owned by the
corporation when the corporation is eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the
corporation, a reading of the second paragraph of Sec. 31 shows otherwise. Said provision provides that
qualified beneficiaries have "the right to purchase such proportion of the capital stock of the corporation
that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys
total assets." The wording of the formula in the computation of the number of shares that can be bought
by the farmers does not mean loss of control on the part of the farmers. It must be remembered that the
determination of the percentage of the capital stock that can be bought by the farmers depends on the
value of the agricultural land and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian
reform is that control over the agricultural land must always be in the hands of the farmers. Then it falls on
the shoulders of DAR and PARC to see to it the farmers should always own majority of the common shares
entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority
in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken
by the DAR and PARC, such that the value of the agricultural land contributed to the corporation must
always be more than 50% of the total assets of the corporation to ensure that the majority of the members
of the board of directors are composed of the farmers. The PARC composed of the President of the
Philippines and cabinet secretaries must see to it that control over the board of directors rests with the
farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of
directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the
formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision
constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of
RA 6657 does not trench on the constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is land distribution and that
actual land distribution is the essential characteristic of a constitutional agrarian reform program. On the
contrary, there have been so many instances where, despite actual land distribution, the implementation
of agrarian reform was still unsuccessful. As a matter of fact, this Court may take judicial notice of cases
where FWBs sold the awarded land even to non-qualified persons and in violation of the prohibition period
provided under the law. This only proves to show that the mere fact that there is land distribution does not
guarantee a successful implementation of agrarian reform.

As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where nonhuman juridical persons, such as corporations, were prohibited from owning agricultural lands are no
longer realistic under existing conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a collective manner through a
cooperative or corporation. The former is too often left to his own devices when faced with failing crops
and bad weather, or compelled to obtain usurious loans in order to purchase costly fertilizers or farming
equipment. The experiences learned from failed land reform activities in various parts of the country are
lack of financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of
farm-to-market roads, among others. Thus, at the end of the day, there is still no successful
implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure
funding and competently maintain the agri-business than the individual farmer. While direct singular
ownership over farmland does offer advantages, such as the ability to make quick decisions unhampered
by interference from others, yet at best, these advantages only but offset the disadvantages that are often
associated with such ownership arrangement. Thus, government must be flexible and creative in its mode
of implementation to better its chances of success. One such option is collective ownership through
juridical persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution, the requirement that the
instant case be capable of repetition yet evading review is also wanting. It would be speculative for this
Court to assume that the legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its
official functions, the heavy presumption being that a law is the product of earnest studies by Congress to
ensure that no constitutional prescription or concept is infringed. 121 Corollarily, courts will not pass upon
questions of wisdom, expediency and justice of legislation or its provisions. Towards this end, all
reasonable doubts should be resolved in favor of the constitutionality of a law and the validity of the acts
and processes taken pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a
clear conflict with the Constitution, not merely a doubtful or argumentative one, must be demonstrated in
such a manner as to leave no doubt in the mind of the Court. In other words, the grounds for nullity must
be beyond reasonable doubt.123 FARM has not presented compelling arguments to overcome the
presumption of constitutionality of Sec. 31 of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing
agrarian reform is not for judicial determination. Established jurisprudence tells us that it is not within the
province of the Court to inquire into the wisdom of the law, for, indeed, We are bound by words of the
statute.124
II.
The stage is now set for the determination of the propriety under the premises of the revocation or recall
of HLIs SDP. Or to be more precise, the inquiry should be: whether or not PARC gravely abused its
discretion in revoking or recalling the subject SDP and placing the hacienda under CARPs compulsory
acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force contained and summarized in
its Terminal Report provided the bases for the assailed PARC revocatory/recalling Resolution. The findings
may be grouped into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31 of RA
6657, or DAO 10; and (2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular
terms, the following are essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives of the FWBs have hardly
improved and the promised increased income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;

(3) The issuance of HLI shares of stock on the basis of number of hours workedor the so-called
"man days"is grossly onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny
work to anyone. In elaboration of this ground, PARCs Resolution No. 2006-34-01, denying HLIs
motion for reconsideration of Resolution No. 2005-32-01, stated that the man days criterion worked
to dilute the entitlement of the original share beneficiaries; 125
(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as
production-sharing benefit on top of the workers salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as
approved by PARC itself, and tags the reasons given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in
the Terminal Report, a position shared by AMBALA, which, in some pleadings, is represented by the same
counsel as that appearing for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not
conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the resulting dilution of the equity of
the FWBs appearing in HLIs masterlist, FARM would state that the SDP, as couched and implemented,
spawned disparity when there should be none; parity when there should have been differentiation. 126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under
Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the
FWBs through greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to pursue a Comprehensive
Agrarian Reform Program (CARP). The welfare of the landless farmers and farm workers will receive the
highest consideration to promote social justice and to move the nation towards sound rural development
and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis
of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard to the rights of
landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their
lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm workers, who are
landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a
share of the fruits thereof. To this end, the State shall encourage the just distribution of all agricultural
lands, subject to the priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment of just compensation.
The State shall respect the right of small landowners and shall provide incentives for voluntary landsharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and
ownership of land x xx shall be undertaken to provide farmers and farm workers with the opportunity to
enhance their dignity and improve the quality of their lives through greater productivity of agricultural
lands." Of note is the term "opportunity" which is defined as a favorable chance or opening offered by
circumstances.127 Considering this, by no stretch of imagination can said provision be construed as a
guarantee in improving the lives of the FWBs. At best, it merely provides for a possibility or favorable
chance of uplifting the economic status of the FWBs, which may or may not be attained.

Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under
the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding
the stock distribution option. Nothing in that option agreement, law or department order indicates
otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP
(1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and
medical benefits to their immediate family. And attached as Annex "G" to HLIs Memorandum is the
certified true report of the finance manager of Jose Cojuangco& Sons Organizations-Tarlac Operations,
captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since
the Stock Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005.
The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out
(Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) =
PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150
million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing
3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI
manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by
the SCTEX.128 On top of these, it is worth remembering that the shares of stocks were given by HLI to the
FWBs for free. Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned
profits through the years, it cannot be over-emphasized that, as a matter of common business sense, no
corporation could guarantee a profitable run all the time. As has been suggested, one of the key features
of an SDP of a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still,
losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of
approving a stock distribution plan is the likelihood that the plan "would result in increased income and
greater benefits to [qualified beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
actually exact assurance of success on something that is subject to the will of man, the forces of nature or
the inherent risky nature of business.131 Just like in actual land distribution, an SDP cannot guarantee, as
indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of
the fact that there were many instances wherein after a farmworker beneficiary has been awarded with an
agricultural land, he just subsequently sells it and is eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship, if that really be the
case, can hardly be attributed to HLI and its SDP and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit
public respondents erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the
propriety of the assailed order revoking HLIs SDP, for the paragraph deals with the transfer of agricultural
lands to the government, as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their
agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified
beneficiaries under such terms and conditions, consistent with this Act, as they may agree, subject to
confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets, under such terms and conditions as may be agreed upon by them. In no case
shall the compensation received by the workers at the time the shares of stocks are distributed be
reduced. x xx

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or
participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to
have complied with the provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other
financial benefits, the books of the corporation or association shall be subject to periodic audit by
certified public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall
be assured of at least one (1) representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features
as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said
transaction is in favor of a qualified and registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to
qualified beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the capital
stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The
stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to
the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under
the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00
or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY
under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs other assets is PhP
393,924,220. The total value of HLIs assets is, therefore, PhP 590,554,220. 132 The percentage of the value
of the agricultural lands (PhP 196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%,
which represents the stockholdings of the 6,296 original qualified farmworker-beneficiaries (FWBs) in HLI.
The total number of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was
arrived at by getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with
a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each
FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to
the formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least
one (1) representative in the board of directors or in a management or executive committee irrespective of
the value of the equity of the FWBs in HLI, the Court finds that the SDOA contained provisions making
certain the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the
FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal
year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as
shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their
representative to vote in stockholders and board of directors meetings of the SECOND PARTY convened
during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for
distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY
that the whole 33.296% of the shares subject to distribution will be entitled to.

Also, no allegations have been made against HLI restricting the inspection of its books by accountants
chosen by the FWBs; hence, the assumption may be made that there has been no violation of the statutory
prescription under sub-paragraph (a) on the auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-toshares of stock, referring to the 118,391,976.85 shares with par value of PhP 1 each, should have been
made in full within two (2) years from the approval of RA 6657, in line with the last paragraph of Sec. 31 of
said law.133
Public respondents submission is palpably erroneous. We have closely examined the last paragraph
alluded to, with particular focus on the two-year period mentioned, and nothing in it remotely supports the
public respondents posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x xx
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above
is not made or realized or the plan for such stock distribution approved by the PARC within the same
period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate
landowner, to avoid land transfer as a mode of CARP coverage under RA 6657, is to avail of the stock
distribution option or to have the SDP approved. The HLI secured approval of its SDP in November 1989,
well within the two-year period reckoned from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the
statutory issues, We shall now delve into what PARC and respondents deem to be other instances of
violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisitaunfragmented is also
not among the imperative impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively
assured the intended stock beneficiaries that the physical integrity of the farm shall remain inviolate.
Accordingly, the Terminal Report and the PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many
words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which
reads: "a. that the continued operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater
benefits to qualified beneficiariesis but one of the stated criteria to guide PARC in deciding on whether or
not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the
undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs stated
observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is
thus required is not the agricultural land remaining intact x xx but the viability of the corporate operations
with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the
corporate agricultural land does not remain intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance,
let alone undermining the viability of Hacienda Luisitas operation, as the DAR Secretary approved the land
conversion applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec.
65 of RA 6657 which reads:

Sec. 65. Conversion of Lands.After the lapse of five years from its award when the land ceases to be
economically feasible and sound for agricultural purposes, or the locality has become urbanized and the
land will have a greater economic value for residential, commercial or industrial purposes, the DAR upon
application of the beneficiary or landowner with due notice to the affected parties, and subject to existing
laws, may authorize the x xx conversion of the land and its dispositions. x xx
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of
the hacienda and pay dividends from profit, the entries in its financial books tend to indicate compliance
by HLI of the profit-sharing equivalent to 3% of the gross sales from the production of the agricultural land
on top of (a) the salaries and wages due FWBs as employees of the company and (b) the 3% of the gross
selling price of the converted land and that portion used for the SCTEX. A plausible evidence of compliance
or non-compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of some
groups of not having received their share from the gross production sales has not adequately been
validated on the ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence
and are accorded due respect and weight, especially when they are affirmed by the CA. 135 However, such
rule is not absolute. One such exception is when the findings of an administrative agency are conclusions
without citation of specific evidence on which they are based, 136 such as in this particular instance. As
culled from its Terminal Report, it would appear that the Special Task Force rejected HLIs claim of
compliance on the basis of this ratiocination:

The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production
share and that others alleged that they received 30 million pesos still others maintain that they
have not received anything yet. Item No. 4 of the MOA is clear and must be followed. There is a
distinction between the total gross sales from the production of the land and the proceeds from the
sale of the land. The former refers to the fruits/yield of the agricultural land while the latter is the
land itself. The phrase "the beneficiaries are entitled every year to an amount approximately
equivalent to 3% would only be feasible if the subject is the produce since there is at least one
harvest per year, while such is not the case in the sale of the agricultural land. This negates then
the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the purchase price of
the converted land.

Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the
like, presently received by the FWBs shall not in any way be reduced or adversely affected. Three
percent of the gross selling price of the sale of the converted land shall be awarded to the
beneficiaries of the SDO." The 3% gross production share then is different from the 3% proceeds of
the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs as
part owners of the Hacienda, should have been given the FWBs, as stockholders, and to which they
could have been entitled if only the land were acquired and redistributed to them under the CARP.
x xxx

The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares
of stocks (partial), 3% gross production sale (not all) and homelots (not all)].

Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to
comply with the 3% production-sharing obligation or the 3% of the gross selling price of the converted land
and the SCTEX lot. In fact, it admits that the FWBs, though not all, have received their share of the gross
production sales and in the sale of the lot to SCTEX. At most, then, HLI had complied substantially with this
SDP undertaking and the conversion order. To be sure, this slight breach would not justify the setting to
naught by PARC of the approval action of the earlier PARC. Even in contract law, rescission, predicated on
violation of reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be
had only for such breaches that are substantial and fundamental as to defeat the object of the parties in
making the agreement.137

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown
below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or business associations
owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual members of the
cooperatives or corporations mentioned in the preceding section shall be provided with homelots and small
farmlots for their family use, to be taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.In the case of farms
owned or operated by corporations or other business associations, the following rules shall be observed by
the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by
the worker-beneficiaries who shall form a workers cooperative or association which will deal with the
corporation or business association. Until a new agreement is entered into by and between the workers
cooperative or association and the corporation or business association, any agreement existing at the time
this Act takes effect between the former and the previous landowner shall be respected by both the
workers cooperative or association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations which opted for stock
distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it
except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified
family-beneficiaries x xx residential or homelots of not more than 240 sq. m. each, with each family
beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually
resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still
the contention of the FWBs that not all was given the 240-square meter homelots and, of those who were
already given, some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting
proof that the FWBs were already given the said homelots:
Justice Velasco: x xx There is also an allegation that the farmer beneficiaries, the qualified family
beneficiaries were not given the 240 square meters each. So, can you also [prove] that the qualified family
beneficiaries were already provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing that all the qualified
beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that
HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We
find that itviolates two (2) provisions of DAO 10. Par. 3 of the SDOA states:

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the
FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of
days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of
the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire
block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not
entailing a cash out from them, is contingent on the number of "man days," that is, the number of days
that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for
purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-applicant shall
provide for the distribution of an equal number of shares of the same class and value, with the same rights
and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases,
shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate
landowner-applicant may adopt additional stock distribution schemes taking into account factors such as
rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of
sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can
acquire from the corporation under the SDP. The first pertains, as earlier explained, to the mandatory
minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This
minimum ratio contemplates of that "proportion of the capital stock of the corporation that the agricultural
land, actually devoted to agricultural activities, bears in relation to the companys total assets." 139 It is this
set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution
of an equal number of shares of stock of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that
this set or category constitutes an augmentation share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account such variables as rank, seniority, salary, position
and like factors which the management, in the exercise of its sound discretion, may deem desirable. 140
Before anything else, it should be stressed that, at the time PARC approved HLIs SDP, HLI
recognized 6,296individuals as qualified FWBs. And under the 30-year stock distribution program
envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as
they appear to have in fact been accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number
of "man days," HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs
of equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically
had given up their rights to the land that could have been distributed to them, suffered a dilution of their
due share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to water down the shares of the original 6,296
FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would
be CARP?
Atty. Dela Merced: Yes, YourHonor.
Justice Abad: Thats the only point I want to know x xx. Now, but they chose to enter SDOA instead of
placing the land under CARP. And for that reason those who would have gotten their shares of the land
actually gave up their rights to this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.

Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way
the government takes own [sic] the land and distribute it to the farmers and pay for the land, is that
correct?
Atty. Dela Merced: Yes, YourHonor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time
that numbered x xx those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that
correct?
Atty. Dela Merced: Yes, YourHonor.
Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990,
1991, 1992 and the rest of the years that you gave additional shares who were not in the original list of
owners?
Atty. Dela Merced: Yes, YourHonor.
Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the
land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become
workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the
company has chosen to use the shares as reward system for new workers who come in? It is not that the
new workers, in effect, become just workers of the corporation whose stockholders were already fixed. The
TADECO who has shares there about sixty six percent (66%) and the five thousand four hundred ninety
eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x xx what right or where
did you get that right to use this shares, to water down the shares of those who should have been
benefited, and to use it as a reward system decided by the company? 142
From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries
at the time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each
original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32
HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on "man
days" or "number of days worked" by the FWB in a years time. As explained by HLI, a beneficiary needs to
work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37
days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed
varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired
farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the Compliance dated August
2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at
10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the
118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly,
the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the
use of "man days" and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for
HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11
provides for the implementation of the approved stock distribution plan within three (3) months from

receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said
provision, the transfer of the shares of stock in the names of the qualified FWBs should be recorded in the
stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. As
stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan shall
be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval
thereof by the PARC, and the transfer of the shares of stocks in the names of the qualified beneficiaries
shall be recorded in stock and transfer books and submitted to the Securities and Exchange Commission
(SEC) within sixty (60) days from the said implementation of the stock distribution plan. (Emphasis
supplied.)
It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of
stock to the FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock
distribution plan by PARC. While neither of the clashing parties has made a compelling case of the thrust of
this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to
complete, not merely initiate, the transfer process of shares within that three-month timeframe.
Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned
from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month
threshold. Remove this timeline and the corporate landowner can veritably evade compliance with
agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec.
26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30)
annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock distribution
program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision
clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid for by the
beneficiaries to the LBP in thirty (30) annual amortizations x xx.
Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other
hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the corporate
landowner who has the obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land
thus awarded them to make it less cumbersome for them to pay the government. To be sure, the reason
underpinning the 30-year accommodation does not apply to corporate landowners in distributing shares of
stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating
DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue
rules and regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has
the force and effect of law and must be duly complied with. 143 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.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the
coverage of the assailed PARC resolution those portions of the converted land within Hacienda Luisita
which RCBC and LIPCO acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus,
their plea for the exclusion of that portion from PARC Resolution 2005-32-01, as implemented by a DAR-

issued Notice of Coverage dated January 2, 2006, which called for mandatory CARP acquisition coverage of
lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI
transferred the 300 hectares to Centennary, while ceding the remaining 200-hectare portion to LRC.
Subsequently, LIPCO purchased the entire three hundred (300) hectares of land from Centennary for the
purpose of developing the land into an industrial complex.144 Accordingly, the TCT in Centennarys name
was canceled and a new one issued in LIPCOs name. Thereafter, said land was subdivided into two (2)
more parcels of land. Later on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by
virtue of which TCTs in the name of RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a
certificate of title in pursuance of a decree of registration and every subsequent purchaser of registered
land taking a certificate of title for value and in good faith shall hold the same free from all encumbrances
except those noted on the certificate and enumerated therein." 145
It is settled doctrine that one who deals with property registered under the Torrens system need not go
beyond the four corners of, but can rely on what appears on, the title. He is charged with notice only of
such burdens and claims as are annotated on the title. This principle admits of certain exceptions, such as
when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious
man to make such inquiry, or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.146 A higher level of care and diligence is of course expected from banks, their
business being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x xx A purchaser in good faith is one who buys property of another, without notice that some other person
has a right to, or interest in, such property at the time of such purchase, or before he has notice of the
claim or interest of some other persons in the property. Good faith, or the lack of it, is in the final analysis a
question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we
are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward
motive may, with safety, be determined. Truly, good faith is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judged by actual or fancied tokens or
signs. Otherwise stated, good faith x xx refers to the state of mind which is manifested by the acts of the
individual concerned.148 (Emphasis supplied.)
In fine, there 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
TeresitaLopa, the Secretarys Certificate in favor of ShintaroMurai, and the conversion of the property from
agricultural to industrial and residential use.149
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.

It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously
covered by the SDP. Good faith "consists in the possessors belief that the person from whom he received it
was the owner of the same and could convey his title. Good faith requires a well-founded belief that the
person from whom title was received was himself the owner of the land, with the right to convey it. There
is good faith where there is an honest intention to abstain from taking any unconscientious advantage
from another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by
means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of
the lots they acquired. However, they are of the honest belief that the subject lots were validly converted
to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject
of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65
of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP
land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically
feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial purposes." Moreover, DAR notified all the
affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the
proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500
hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and
adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and executory after none of
the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in
question on their honest and well-founded belief that the previous registered owners could legally sell and
convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in
good faith in acquiring the subject lots.
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 PhP 750 million pursuant to a Deed of
Sale dated July 30, 1998.151 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 PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be
disregarded by DAR, PARC or even by this Court. As held in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of purchasers in good faith, it is now of
no moment that some irregularity attended the issuance of the SPA, consistent with our pronouncement in
Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x xx the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this
case as it will directly contravene the Torrens system of registration. Where innocent third persons,
relying on the correctness of the certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the cancellation of the
certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of
title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property
registered under the system will have to inquire in every instance as to whether the title had been
regularly or irregularly issued, contrary to the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the property. A
purchaser in good faith holds an indefeasible title to the property and he is entitled to the
protection of the law.152 x xx (Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC
and LIPCO. After all, the Court, to borrow from Association of Small Landowners in the Philippines, Inc.,153 is
not a "cloistered institution removed" from the realities on the ground. To note, the approval and issuances
of both the national and local governments showing that certain portions of Hacienda Luisita have
effectively ceased, legally and physically, to be agricultural and, therefore, no longer CARPable are a
matter of fact which cannot just be ignored by the Court and the DAR. Among the approving/endorsing
issuances:154

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlacfavorably
endorsing the 300-hectare industrial estate project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with
the Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCOs
application for a mixed ecozone and proclaiming the three hundred (300) hectares of the industrial
land as a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the
Final Development Permit for the Luisita Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project
issued by the Office of the Sangguniang Bayan of Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed
project of building an industrial complex on three hundred (300) hectares of industrial land; 156
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the
project of Luisita Industrial Park II with an area of three million (3,000,000) square meters; 157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of
lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in
Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone
pursuant to Republic Act No. 7916," designating the Luisita Industrial Park II consisting of three
hundred hectares (300 has.) of industrial land as a Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that
pursuant to Presidential Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916,
LIPCO has been registered as an Ecozone Developer/Operator of Luisita Industrial Park II located in
San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not
automatically allow the corporate or individual landowner to change its use, 158 the reclassification process
is a prima facie indicium that the land has ceased to be economically feasible and sound for agricultural
uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued in 1996 by then DAR
Secretary Garilao had effectively converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.
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.
As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should
also be excluded from the compulsory agrarian reform coverage considering that the transfer was
consistent with the governments exercise of the power of eminent domain159 and none of the parties
actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01
and 2006-34-01, 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. 160 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. 161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a legislative or
executive act subsequently declared invalid:
x xx It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary, in
an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted
under it and may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the government organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then,
if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination of [unconstitutionality], is an operative fact and may have consequences which cannot
justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects,with respect to particular
relations, individual and corporate, and particular conduct, private and official." x xx
Given the above perspective and considering that more than two decades had passed since the PARCs
approval of the HLIs SDP, in conjunction with numerous activities performed in good faith by HLI, and the
reliance by the FWBs on the legality and validity of the PARC-approved SDP, perforce, certain rights of the
parties, more particularly the FWBs, have to be respected pursuant to the application in a general way of
the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without
relevance to the instant case as it applies only in considering the effects of a declaration of
unconstitutionality of a statute, and not of a declaration of nullity of a contract. This is incorrect, for this
view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the instant
case. Rather, it is PARCs approval of the HLIs Proposal for Stock Distribution under CARP which embodied
the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs
executed the SDOA. This agreement provided the basis and mechanics of the SDP that was subsequently
proposed and submitted to DAR for approval. It was only after its review that the PARC, through then Sec.
Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably, it is not
the SDOA which gave legal force and effect to the stock distribution scheme but instead, it is the approval
of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans recommendation to the PARC
Excom, what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 approving HLIs SDP, and
not the revocation of the SDOA. Sec. Pangandamans recommendation was favorably endorsed by the
PARC Validation Committee to the PARC Excom, and these recommendations were referred to in the
assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the basis for the
implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this case, the approval by PARC of
the HLI proposal for stock distributionis well-settled in our jurisprudence. In Chavez v. National Housing
Authority,163 We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an
equitable doctrine which could not be used to countenance an inequitable result that is contrary to its
proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements
implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing
Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a
legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must
be complied with, thus:
x xx

x xx

x xx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein
we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to
do so, much less retroactively apply such nullification to deprive private respondent of a compelling and
valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap
of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof.
Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative
fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private
respondent from relying upon the order of suspension in lieu of a formal leave application. (Citations
omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further explicated by this Court in
Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was
invalid, as the law upon which it was predicated General Order No. 60, issued by then President
Ferdinand E. Marcos was subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force
and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of
various presidential issuances. Discussing therein how such a declaration might affect acts done on a
presumption of their validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in
Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and
hence affording no basis for the challenged decree. . . . It is quite clear, however, that such broad
statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The
actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may
have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects with respect to particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of
public policy in the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.
x xx

x xx

x xx

"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official
Gazette is an operative fact which may have consequences which cannot be justly ignored. The past
cannot always be erased by a new judicial declaration . . . that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified."

The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an
imperative necessity of taking into account its actual existence as an operative fact negating the
acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative or
the executive act was in operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 long before our Decision in Taada and the
arrest of petitioner is an operative fact that can no longer be disturbed or simply ignored. (Citations
omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what
it actually revoked or recalled was the PARCs approval of the SDP embodied in Resolution No. 89-12-2.
Consequently, what was actually declared null and void was an executive act, PARC Resolution No. 89-122,165and not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in
the instant case. Evidently, the operative fact doctrine is applicable.
IV.
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. 166 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.
With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989
when the SDP was approved, they are not accorded the right to acquire land but shall, however, continue
as HLI stockholders. All the benefits and homelots167 received by the 10,502 FWBs (6,296 original FWBs
and 4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with no
obligation to refund or return them since the benefits (except the homelots) were received by the FWBs as
farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to
the existing collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the
original FWBs who opt to remain as HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI
shares per FWB, the HLI shall assign additional shares to said FWBs to complete said minimum number of
shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same
to HLI or pay for its value since this is a benefit granted under the SDP. The homelots do not form part of
the 4,915.75 hectares covered by the SDP but were taken from the 120.9234 hectare residential lot owned
by Tadeco. Those who did not receive the homelots as of the revocation of the SDP on December 22, 2005
when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the
determination of the ultimate agricultural land that will be subjected to land distribution, the aggregate
area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996
Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the
FWBs should have their corresponding share of the lands value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will
automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the
500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired
by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable
to the FWBs for the price received for said lots. HLI shall be liable for the value received for the sale of the
200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value of the 12,000,000
shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP

750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and
80.51-hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses
relating to the transfer of the land and HLIs statement that most, if not all, of the proceeds were used for
legitimate corporate purposes. In order to determine once and for all whether or not all the proceeds were
properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable
accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the
sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion Order. The cost of the
audit will be shouldered by HLI. If after such audit, it is determined that there remains a balance from the
proceeds of the sale, then the balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We
disagree. It should not be forgotten that the FWBs are also stockholders of HLI, and the benefits acquired
by the corporation from its possession and use of the land ultimately redounded to the FWBs benefit
based on its business operations in the form of salaries, and other fringe benefits under the CBA. To still
require HLI to pay rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer
be operating under the SDP, but pursuant to the Corporation Code as a private stock corporation. The nonagricultural assets amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands valued
at PhP 196,630,000 with an original area of 4,915.75 hectares shall be turned over to DAR for distribution
to the FWBs. To be deducted from said area are the 500-hectare lot subject of the August 14, 1996
Conversion Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual
lots that should have been distributed to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for
land distribution to the FWBs. We find that the date of the "taking" is November 21, 1989, when PARC
approved HLIs SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination
of just compensation. We cannot use May 11, 1989 when the SDOA was executed, since it was the SDP,
not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005
and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the
MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as stockholders of
HLI. DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which the FWBs will be asked to
manifest, in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks,
as the case may be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI
shares, and, in case the HLI shares already given to him or her is less than 18,804.32 shares, the HLI is
ordered to issue or distribute additional shares to complete said prescribed number of shares at no cost to
the FWB within thirty (30) days from finality of this Decision. Other FWBs who do not belong to the original
6,296 qualified beneficiaries are not entitled to land distribution and shall remain as HLI shareholders. All
salaries, benefits, 3% production share and 3% share in the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs,
composed of 6,296 original FWBs and 4,206 non-qualified FWBs, shall be respected with no obligation to
refund or return them.
Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR
shall segregate from the HLI agricultural land with an area of 4,915.75 hectares subject of PARCs SDPapproving Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the August 14, l996
Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX
complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that each FWB is entitled

to under the CARP had he or she not opted to stay in HLI as a stockholder. After the segregation process,
as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the
original qualified FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the
corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita
Realty, Inc. for the sale to the latter of 200 hectares out of the 500 hectares covered by the August 14,
1996 Conversion Order, the consideration of PhP 750,000,000 received by its owned subsidiary,
Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-hectare lot
to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government through the
Bases Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of
the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP
750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the total gross sales
from the production of the agricultural land and the 3% of the proceeds of said transfers that were paid to
the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the expenditures
incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is
ordered to engage the services of a reputable accounting firm approved by the parties to audit the books
of HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the
three (3) aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or
unused balance as determined by the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned
from November 21, 1989 per PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also
submit, after submission of the compliance report, quarterly reports on the execution of this judgment to
be submitted within the first 15 days at the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

(On official leave)

DIOSDADO M. PERALTA*
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE PORTUGAL PEREZ

JOSE CATRAL MENDOZA

Associate Justice

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court.
RENATO C. CORONA
Chief Justice

ni Cruz:
. . . social justice or any justice for that matter is for the deserving,
whether he be a millionaire in his mansion or a pauper in his hovel. It is true
that, in case of reasonable doubt, we are called upon to tilt the balance in
favor of the poor simply because they are poor, to whom the Constitution
fittingly extends its sympathy and compassion. But never is it justified to
prefer the poor simply because they are poor, or to eject the rich simply
because they are rich, for justice must always be served, for poor and rich
alike, according to the mandate of the law.
IN THE LIGHT OF THE FOREGOING, I vote to grant the petition for certiorari; and to declare Haciendas
Palico, Banilad and Caylaway, all situated in Nasugbu, Batangas, to be non-agricultural and outside the
scope of Republic Act No. 6657. I further vote to declare the Certificates of Land Ownership Award issued
by respondent Department of Agrarian Reform null and void and to enjoin respondents from proceeding
with the compulsory acquisition of the lands within the subject properties. I finally vote to DENY the motion
for intervention.