Association of Small Landowners in the Philippines, Inc.

vs Secretary of Agrarian Reform

These are four consolidated cases questioning the constitutionality of the Comprehensive Agrarian
Reform Act (R.A. No. 6657 and related laws i.e., Agrarian Land Reform Code or R.A. No. 3844).
Brief background: Article XIII of the Constitution on Social Justice and Human Rights includes a call
for the adoption by the State of an agrarian reform program. 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. RA 3844 was enacted in 1963. P.D. No. 27 was promulgated in 1972 to
provide for the compulsory acquisition of private lands for distribution among tenant -farmers and to
specify maximum retention limits for landowners. In 1987, President Corazon Aquino issued E.O. No.
228, declaring full land ownership in favor of the beneficiaries of PD 27 and providing for the valuation
of still unvalued lands covered by the decree as well as the manner of their payment. In 1987, P.P.
No. 131, instituting a comprehensive agrarian reform program (CARP) was enacted; later, E.O. No.
229, providing the mechanics for its (PP131’s) implementation, was also enacted. Afterwhich is the
enactment of R.A. No. 6657, Comprehensive Agrarian Reform Law in 1988. This law, while
considerably changing the earlier mentioned enactments, never theless gives them suppletory effect
insofar as they are not inconsistent with its provisions.
[Two of the consolidated cases are discussed below]
G.R. No. 78742: (Association of Small Landowners vs Secretary)
The Association of Small Landowners in the Philippines, Inc. sought exception from the land
distribution scheme provided for in R.A. 6657. The Association is comprised of landowners of ricelands
and cornlands whose landholdings do not exceed 7 hectares. They invoke that since their landholdings
are less than 7 hectares, they should not be forced to distribute their land to their tenants under R.A.
6657 for they themselves have shown willingness to till their own land. In short, they want to be
exempted from agrarian reform program because they claim to belong to a different class.
G.R. No. 79777: (Manaay vs Juico)
Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228, and 229) on the
ground that these laws already valuated their lands for the agrarian reform program and that the
specific amount must be determined by the Department of Agrarian Reform (DAR). Manaay averred
that this violated the principle in eminent domain which provides that only courts can determine just
compensation. This, for Manaay, also violated due process for under the constitution, no property shall
be taken for public use without just compensation.
Manaay also questioned the provision which states that landowners may be paid for their land in bonds
and not necessarily in cash. Manaay averred that just compensation has always been in the form of
money and not in bonds.
ISSUE:
1. Whether or not there was a violation of the equal protection clause.
2. Whether or not there is a violation of due process.
3. Whether or not just compensation, under the agrarian reform program, must be in terms of cash.
HELD:
1. No. The Association had not shown any proof that they belong to a different class exempt from the
agrarian reform program. Under the law, 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. 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.
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. The Association 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. In the contrary, it appears that Congress is right in classifying small
landowners as part of the agrarian reform program.
2. No. It is true that the determination of just compensation is a power lodged in the courts. However,
there is no law which prohibits administrative bodies like the DAR from determining just compensation.
In fact, just compensation can be that amount agreed upon by the landowner and the government –
even without judicial intervention so long as both parties agree. The DAR can determine just
compensation through appraisers and if the landowner agrees, then judicial intervention is not needed.
What is contemplated by law however that, the just compensation determined by an administrative
body is is merely preliminary. If the landowner does not agree with the finding of just compensation by
an administrative body, then it can go to court and the determination of the latter shall be the final
determination. This is even so provided by RA 6657:
Section 16 (f): Any party who disagrees with the decision may bring the matter to the court of pr oper
jurisdiction for final determination of just compensation.

3. No. Money as [sole] payment for just compensation is merely a concept in traditional exercise of
eminent domain. The agrarian reform program is a revolutionary exercise of eminent domain. T he
program will require billions of pesos in funds if all compensation have to be made in cash – if
everything is in cash, then the government will not have sufficient money hence, bonds, and other
securities, i.e., shares of stocks, may be used for just compensation.
CASE TITLE:

Hacienda Luisita, Inc. (HLI), petitioner,

Luisita Industrial Park Corp. (LIPCO) and Rizal Commercial Banking Corporation (RCBC), petitioners-in-
intervention,

-versus-

Presidential Agrarian Reform Council (PARC); Secretary Nasser Pangandaman of the Department of
Agrarian Reform (DAR); Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), Rene
Galang, Noel Mallari, and Julio Suniga and his Supervisory Group of the HLI and Windsor Andaya,
respondents.

G.R. No. 171101. July 5, 2011

CASE:

This case is a SPECIAL CIVIL ACTION in the Supreme Court. This involves a Petition for Certiorari
and Prohibition under Rule 65 with prayer for preliminary injunctive relief, HLI seeking to question and
reverse the PARC Resolutions issued on December 22, 2005 and May 3, 2006, and the implementing
Notice of Coverage dated January 2, 2006.

FACTS:

In 1955, Land Reform Act [RA 1400] was passed which set the expropriation of all tenanted
estates.

In 1957, the Spanish owners of the Compañia General de Tabacos de Filipinas (Tabacalera) sold
to Tarlac Development Corporation (TADECO) Hacienda Luisita and their controlling interest in the sugar
mill within the hacienda, the Central Azucarera de Tarlac (CAT), to be paid in Philippine pesos and in US
dollars.

The Philippine Government, through the Central Bank of the Philippines, aided the buyer to
obtain a dollar loan from a US bank. The GSIS Board of Trustees extended on November 27, 1957 a PhP
5.911M loan in favour of TADECO to pay the peso price with a condition under GSIS Resolution No.
3203, later amended by Resolution No. 356, Series of 1958, which states:

“…the lots comprising 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.”

On March 31, 1958, TADECO had fully paid the purchase price for the acquisition of Hacienda
Luisita.

On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, abolishing share
tenancy and converting it to leasehold tenancy. It also created the Land Band of the Philippines (LBP).
However, the law’s application was found to be limited to specific areas in the Central Luzon.
 Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire
country a land reform area and automatically converting tenancy to leasehold tenancy in all areas and
reducing the retention limit from 75 Ha to 7 Ha.

A month after the declaration of Martial Law in September of 1972, President Marcos issued
Presidential Decree No. 27 which allows tenant-farmers to purchase the land they tilled or to change
from shared-tenancy to fixed-rent leasehold tenancy, as a way to go about the “emancipation of the
tillers from the bondage of the soil”.

On May 7, 1980, the Martial Law Administration filed a suit before the RTC of Manila against
TADECO to surrender Hacienda Luisita to the Ministry of Agrarian Reform (now the DAR) for its
distribution to farmers. The RTC ordered TADECO to surrender the hacienda to the MAR.

Then during the time of President Corazon C. Aquino, after Marcos was ousted, Proclamation
No. 131, Series of 1987, was issued instituting a CARP.

On July 22, 1987, EO 229 was issued to provide for mechanisms for CARP implementation. It also
created the PARC as its policy-making body.

On March 17, 1988, the OSG moved to withdraw the government’s case against TADECO, et al.

On May 18, 1988, the CA dismissed the case the Marcos administration initially instituted and
won against TADECO, et al. However, the dismissal was conditioned that there be an approval of a stock
distribution plan (SDP) to be submitted, approved by PARC, and implemented as an alternative mode of
land distribution, and failure to comply will cause the revival of previous decision.

On June 15, 1988, the Comprehensive Agrarian Reform Law of 1988 (RA 6657) took effect,
providing a new process of land classification, acquisition, and distribution. This tested the application of
the law in the current case of Hacienda Luisita.

On August 23, 1988, HLI was formed as a spin-off corporation to facilitate the SDP.

On March 22, 1989, a TADECO, via a Deed of Assignment and Conveyance, transferred and
conveyed to HLI the titles over the lot in question, valued at PhP 196.630,000.00 (33.296% of the total
asset of PhP 590,554,220.00). In line with accommodating such transfer, the HLI increased its capital
share to PhP 400,000,000 at PhP1/share, PhP 150,000,000 of which were to be issued only to qualified
and registered beneficiaries of the CARP, and the remaining PhP250,000,000 to any stockholder of the
corporation. (Obviously, the controlling shares of FWBs are lower in this case.) HLI guaranteed to the
qualified beneficiaries of the SDP production-sharing that “every year they will receive, on top of their
regular compensation, an amount that approximates 3% of the total gross sale from the production of
the agricultural land, whether it is in the form of cash dividends or incentive bonuses or both.” The
production sharing is payable irrespective of whether HLI makes money or not. HLI also assured each
family beneficiary to be guaranteed a homelot of not more than 240 sq. m. in the barrio or barangay
where they reside.

On May 9, 1989, about 93% of the FWBs accepted and signed the proposed SDOP.

On May 11, 1989, SDOA was entered into by TADECO/HLI and 5,848 qualified FWBs.
 On October 14, 1989, the referendum conducted by DAR showed that 5,177 FWBs out of 5,315
participants opted to receive shares in the HLI (that’s about 97.403575% of the participants), and only
132 chose actual land distribution.

On November 6, 1989, the DAR Secretary Mirriam Defensor-Santiago (now deceased) proposed
the revision of the SDP. On November 14, 1989, TADECO told DAR Sec. MDS that the proposed revision
were already in place in the SDP and MOA. Hence, On November 21, 1989, a Resolution No. 89-12-2
approved the SDP of TADECO/HLI.

From 1989 to 2005, HLI claimed to have extended the following benefits to FWBs:

(a) PhP 3 Billion worth of salaries, wages and fringe benefits;

(b) 59 Million shares of stock distribution for free to FWBs;
(c) PhP 150M, PhP 37.5M, PhP 2.4M, all representing 3% of the gross produce,
the sale of 500 Ha of converted agricultural land of Hacienda Luisita, and the
sale of 80 Ha at PhP 80M for SCTEX, respectively.
(d) 240 sq.m. homelots distributed for free;
(e) Social service benefits
On August 15, 1995, HLI applied for conversion of the 500 Ha land from agricultural to industrial,
which was approved by DAR Secretary Ernesto Garilao a year later, or on August 14, 1996, conditioned
on the payment of 3% of gross selling price to FWBs and HLI’s continued compliance with its
undertakings under the SDP.

On December 13, 1996, HLI ceded 200 Ha to Luisita Realty Corp. (LRC) at PhP 250 Million each in
1997 and 1998, and 300 Ha of its converted areas to Centennary Holdings, Inc. (Centennary), who later
sold the same to LIPCO for PhP 750 Million, the latter acquiring it for purpose of developing an indust rial
complex.

On November 25, 2004, LIPCO transferred portion of the lands acquired to RCBC by way of
dation en pago in payment of LIPCO’s PhP 431,634,732.10 loan.

Another 80.51 Ha was later detached from Hacienda Luisita and acquired by the government as
part of the SCTEX complex. About 4,335.75 Ha out of the 4,915 Ha remained of the original area ceded
by TADECO to HLI.

With the prevailing situation, earlier in 2003, DAR received two petitions seeking to
renegotiate, and/or revoke the SDOA for violation by the HLI of the SDOA’s terms.

In the first petition, Jose Julio Suniga and Windsor Andaya (Supervisory Group of HLI) and 60
other supervisors alleged that HLI failed to give their dividends, and their share in the gross sales and
proceeds of the sales of the converted area 500 Ha area. They claimed that their lives have not
improved contrary to the guarantees of the SDOA.

In the second petition (Petisyon), they call for the revocation and nullification of the SDOA and
the distribution of the lands. The Petisyon was filed by the AMBALA (composing about 80% of the 5,339
FWBs of Hacienda Luisita).
 DAR constituted a Special Task Force to attend to the issues relating to the SDP of HLI and the
latter found that HLI failed to comply with their undertakings.

On December 22, 2005, PARC affirmed the recommendation of DAR to recall/revoke the SDOP
of TADECO/HLI and the land be placed under compulsory coverage or mandated land acquisition.

On January 2, 2006, HLI sought reconsideration. On the same day, DAR issued a Notice of
Coverage, which HLI received 2 days after.

On May 3, 2006, PARC’s Resolution denied MR by HLI.

But on June 14, 2006, the Court, acting on HLI’s motion, issued a TRO, enjoining the
implementation of PARC’s Resolution and the notice of cove rage.

On December 2, 2006, Mallari filed a manisfestation and motion, alleging that he broke up with
AMBALA and formed FARM with Renato Lalic, and thus prayed to be allowed to intervene. In this
moment, two factions were created due to shirt and re-shift of allegiance, as Mallari would later return
to create an AMBALA-Noel Mallari faction, leaving Renato Lalic with the rest of the members in FARM.

On October 30, 2007, RCBC and LIPCO intervened and alleged that the assailed resolution
effectively nullified the TCTs under their respective names as the properties covered in the TCTs were
included in the January 2, 2006 Notice of Coverage. They claim that the revocation of SDP cannot legally
affect their rights as innocent purchasers for value. They both asserted to have acquired vested and
indefeasible rights over certain portions of the covered properties.

On August 31, 2010, the Court created a Mediation Panel in a bid to resolve the dispute but no
acceptable agreement was reached.

ISSUES:

(1) Whether or not petitioners for the revocation/nullification of SDOA (herein

respondents) are real party-in-interests;
(2) Whether or not PARC has jurisdiction to recall or revoke HLI’s SDP;
(3) Whether or not Section 31 of RA 6657 is constitutional;
(4) Whether or not such recall or revocation is a valid or proper action; and
(5) Whether or not the terms and conditions of the SDP, as embodied in the SDOA
is valid.
RULINGS:

FIRST ISSUE:

YES. The Supreme Court held that Supervisory Group, AMBALA and their respective leaders
are real parties-in-interest.

The SDOA identifies the “SDP qualified beneficiaries” as “the farmworkers who appears in
the annual payroll, inclusive of the permanent and seasonal employees, who are regularlyor
periodically employed by HLI.” Galang and the Supervisory group who were admittedly employed
by HLI comes within the definition of real party-in-interest under Section 2, Rule 3 of the Rules of
Court, as one benefited or injured by the judgment in a suit, and thus, entitled to sue.

Assuming arguendo that they are not regular farmworkers, Article XIII of the Constitution
categorized them as “other farmworkers” entitled to “receive a just share of the fruits” of the land.

SECOND ISSUE:

YES. Although E0 229 expressly vested PARC with such authority to approve plan for stock
distribution, without explicitly vesting it to revoke/recall an approved SDP, 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. To simply state it, every statutory grant of power, right or privilege is
deemed to include all incidental power, right, or privilege. Following the said doctrine, it may be stated
that the conferment of express power to approve SDP of agricultural land of corporate owners
necessarily includes the power to revoke or recall the approval of the plan, for to deny PARC of such
revocation power, as in this case, would reduce it into a toothless agency of CARP.

On a related issue, HLI claimed that subjecting the landholding to co mpulsory distribution after
the approval of its SDP results in the impairment of obligation and 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. The Supreme Court stressed that SDOA is a special contract
imbued with public interest, entered into pursuant to RA 6657 and subject to the approval and
administrative adjudication of its issuing authority—PARC.

Contrary to the view of HLI, the rights, obligations, and remedies of the parties to the SDOA
embodying the SDP are governed by RA 6657 and not by the Corporation Code. HLI, as pointed by
the Court was made to comply with RA 6657, and not to shield itself from the coverage of CARP and
supplant or circumvent the agrarian reform program. Also as between the Corporation Code, a general
law and RA 6657, a special law, the latter prevails –generalia specialibus non derogant. What private
respondents questioned before the Dar was the proper implementation of SDP and HLI’s compliance
with RA 6657. Evidently, RA 6657 was the applicable law in this case.

Also, contrary to the view of HLI that the inclusion of the agricultural land of Hacienda Luisita
under CARP coverage and the eventual distribution of the land to FWBs amounts to the dissolution of
all corporate assets of HLI, and thus the Corporation Code apply, the Court was not persuaded. The
Court said that such inclusion and eventual distribution will not automatically trigger the dissoluti on of
HLI since the value of agricultural lands in relation to the total assets transferred and conveyed by
TADECO to HLI comprises only 33.296% (meaning it does not hold the majority assets of the
corporation to trigger such dissolution).

THIRD ISSUE:

In this issue on constitutionality of Section 31 of RA 6657, FARM seeks to invalidate the said
provision of the law because it allows corporations to use stock distribution as its mode of distribution
or transfer instead of an outright agricultural land transfer, which they believe impairs the fundamental
right of farmers and farmworkers envisioned under Section 4, Article XIII of the Constitution. HLI
counters this matter by saying that agrarian reform is not only about transfer of land ownership to
farmers and other qualified beneficiaries.

Accordingly, the challenge on the constitutionality of Section 31 of RA 6657 and its counterpart
provision in EO 229 failed.

The essential requisites for the exercise of its power of judicial review include the follo wing:

(1) There is an actual case or controversy

(2) That the constitutional question is raised at the earliest possible opportunity by the proper party
or one with locus standi; and
(3) The issue of constitutionality must be the very lis mota of the case. [Garcia vs. Executive
Secretary, 415 SCRA 44 (2009)]

The Supreme Court reasoned that the reason it failed was because of failure of the intervenors
to question its constitutionality in the earliest opportunity, and instead, slept on their rights and received
benefits derived from the same. As early as November 21, 1989 when PARC approved the SDP of
Hacienda Luisita or at least within a reasonable time thereafter, its members received benefits from
the SDP without so much 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 was sought to be revoked. Furthermore, AMBALA did NOT question the constitutionality of
said provision but focused on the flaws and gaps in the subsequent implementation of the SDP. Even
the public respondent Sol. Gen. did not question it, and such question was only raised on May 3, 2007
when it filed its Supplemental Comment with the Court.

It has been stressed by the Supreme Court that the question on constitutionality will not passed
upon by the Court unless it is raised at the first or earliest possible opportunity by the proper party.

In terms of the lis mota of the case, the invalidity of the provision was not alleged, but rather it
is the alleged application in the SDP that is flawed was raised.

The Supreme Court also noted that Section 5 of RA 9700 superseded Section 31 of RA 6657
vis-à-vis the stock distribution component of said provision, where Section 5 of RA 9700 provides:
“That after June 30, 2009, the mode of acquisition shall be limited to voluntary offer to sell and
compulsory acquisition.” Thus, stock distribution is no longer an available option under existing law.
The issue has become moot and academic.

The Supreme Court ruled that there appeared to have been no breach of the fundamental law.
Section 4, Article XIII of the 1987 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.”
 The law is clear – farmers and regular farmworkers have a right to OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law allows two modes of land distribution—direct
and indirect ownership. No language is 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 term “collectively” is said to allow 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.

Even in the definition of agrarian reform itself in RA 6657 allows stock distribution — “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 physical redistribution of
land, such as production or profit sharing, labour management and the distribution of shares of
stock which allow beneficiaries to receive a just share of the fruits of the land they work .”

The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with the State’s commitment to
farmers and farmworkers to advance their interests under the policy of social justice. This is believed
to be the modality of the legislature for collective ownership by which the imperatives of social justice
may be approximated, if not achieved.

Also as contended by FARM that stock certificates do not equate to land ownership, still, the
Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in
the assets of the corporation, which includes the agricultural lands. A share of stock typifies an aliquot
part of the corporation’s property, or right to share in its proceeds to the 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. However, the FWBs will ultimately own the agricultural lands owned by the corporation
when the latter is eventually dissolved and liquidated.

The policy of agrarian reform is that control over the agricultural land must always be in the
hands of the farmers. The Court also reasoned that there can be no guarantee of a successful
implementation of agrarian reform, whether there is actual distribution or not. Accordingl y, the principle
of “land to the tiller and the old pastoral model of ownership were non -human juridical persons were
prohibited from owning agricultural lands are no longer realistic under existing conditions.

FOURTH ISSUE:

On the determination of the propriety of such revocation or recall of HLI’s SDP by PARC for
violating the agrarian reform policy under Sec. 2 of RA 6657, as said plan fail to enhance the dignity
and improve the quality of lives of the FWBs through greater productivity of agricultural lands, the SC
disagreed.

The SC reasoned that Section 2 of RA 6657 states that improving the economic status of
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.

Also SC said that it’s a matter of common business sense that no corporation could guarantee
a profitable run all the time. As such being the case, SDP cannot also guarantee, as indeed the SDOA
does not guarantee, a comfortable life for the FWBs.

The onerous condition of the FWBs’ economic status and hardships can hardly be attributed
to HLI and its SDP and provide a valid ground for the plan’s revocation.
On the Conversion of Lands

In this issue of the conversion of 500 Ha to non-agricultural uses as an infringement of Sec. 5

(a) of DAO 10, which reads: “a. that the continued operation of the corporation with its agricultura l land
intact and unfragmented is viable with potential for growth and increased profitability”, the SC said
that the PARC is wrong.

Said Sec. 5 (a) of DAO 10 does not exact from the corporate landowner -applicant the
undertaking to keep the farm intact and unfragmented ad infinitum (forever). What is required is
viability of the corporate operations with or without its corporate land remaining intact or
unfragmented.”

On the 3% Production Share

On the matter of whether HLI complied with its undertaking to give 3% shares of the gross
production sales of the land, the SC ruled that the Special Task Force was silent as to 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, since some FWBs admits to have received their share in the
gross production of the sales and in the sale of SCTEX lot while the others claimed otherwise. The
Court found this as a slight breach that would not justify rescission of the contrac t.

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations or other business
associations owning or operating farms which opted for land distribution, and not for corporations
which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporation are not
obliged to provide it, EXCEPT by stipulation, as in this case.

Under the SDP, HLI subdivided and allocated for free to qualified family-beneficiaries 240 sq.
m. homelots in the barrio or barangay where they actually reside. The Court opined that 16 years have
elapse from the time the SDP was approved by PARC, and yet FWBs alleged that not all were afforded
homelots. Hence, SC ruled that HLI has not yet fully complied with its undertaking t o distribute
homelots to FWBs under the SDP.

On “Man Days” and the Mechanics of Stock Distribution

The SC found that the SDOA violated two provisions of DAO 10.

In Par. 3 of the SDOA, the distribution of the shares of stock to the FWBs is contigent on t he number
of days FWBs have worked during the year. This deviates from Sec. 4, 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 Section 21 of RA 6657.

Accordingly, Section 4 of DAO 10 gives two sets of shares of stocks which a qualified
beneficiary can acquire from the corporation under the SDP. The first one is the mandatory ratio of
equal number of shares of stocks to be distributed to the FWBs which cont emplates “proportion of
the capital stock of the corporation that the agricultural land, actually devoted to agricultural
activities, bears in relation to the company’s total asset.”

The second partakes a gratuitous extra grant or an augmentation share/s that the corporate
landowner may give under an additional stock distribution scheme, taking into account the rank,
seniority, salary, position, and like factors which the management, in the exercise of its sound
discretion, may deem desirable.

However, the Court found that by providing that number of shares of the original 1989 FWBs
to depend on the number of “man days”, HLI violated the rule on stock distribution and effectively
deprived the FWBs of equal shares of stock in the corporation notwithstandi ng the fact that these
FWBs have given up their right to the land that could have been distributed to them instead of suffering
such dilution regarding their due share entitlement.

Each of the 6,296 original FWBs 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 share per beneficiary needs to work at least 37 days in a fiscal year before the
latter becomes entitled to HLI shares. If it falls below 37 days, the FWB gets no 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. Worst is they even hired additional farmworkers which reached a number of
10,502 which eventually diluted the 18,804.32 shares as a result of the use of “man days” and hiring
additional farmworkers (as ‘kahati’ in the share obviously).

Another sub-issue pointed is the reliance of HLI to Section 26 of RA 6657 which suggests that
land awarded “shall be paid to by the beneficiaries to the LBP in 30 annual amortizations.” To simply
put it, the beneficiaries are the ones obliged to pay the LBP (which would really make it impossible for
them to own it) and it is the HLI who is obliged to distribute the shares of stocks among FWBs.

Exclusion from the coverage of land purchased by RCBC and LIPCO (III)

On resolving the issue of whether the converted farm land (allegedly) innocently purchased
for value by RCBC and LIPCO should be excluded from the PARC Resolution 2005-32-01, as
implemented by the DAR-issued Notice of Coverage dated January 2, 2006, which called for a
mandatory CARP acquisition of the lands subject of the SDP, the SC opined that although Section 44
of PD 1529 gives the principle that one need not look at the four corners of the title and may rely on
what appears on it, the rule admits to some exceptions, as when the party had knowledge of the facts
and circumstances that would impel a reasonably cautious man to make inquiry, o r when the
purchaser has knowledge of the defect of lack of title, or sufficient facts to make inquiry into the status
of the title of the property in litigation. Obviously, a higher level of care and diligence is expected from
banks, their business being impressed with public interest.

But the Court ruled that facts prove that RCBC and LIPCO cannot be claimed to have acted
in bad faith to have acquired the lots that were previously covered by SDP. The Court said that RCBC
and LIPCO honestly believed that the subject lots were validly converted to commercial or industrial
purposes and for which said lots were taken out of the CARP coverage of PARC Resolution No. 89 -
12-2 and hence, can be legally and validly acquired by them, and since Section 65 of RA 6657 allows
conversion and disposition of agricultural lands previously covered by CARP. Also DAR notified all
affected parties, especially the FWBs but the order became final and executory after failure to
interpose an appeal. Since RCBC and LIPCO believed in good faith that the previous registered
owners could legally sell and convey the lot though these were previously subject of CARP coverage.
Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. This fact cannot be
disregarded by DAR, PARC, or even the SC.
 As regards to the 80.51 ha land transferred to the government for use as part of SCTEX, this
is excluded from the compulsory coverage considering that the transfer was made via the
government’s power of eminent domain.

As to 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.

In this case, it is not the SDOA dated May 11, 1989 which was revoked, but rather, it is the
PARC’s approval of the HLI’s Proposal for Stock Distribution under CARP which embodied the SDP
that was nullified. It is the SDP that gave legal force an effect to the stock distribution scheme under
PARC Resolution No. 89-12-2 that gave it its validity, and not the SDOA which merely gave its basis
and mechanics.

On PARC’s Resolutions effectively nullifying the Hacienda Luisita’s SDP (IV)

The Court upheld the revocation of the questioned PARC resolutions. T he Court also
recognized the rights of the original 6,296 qualified FWBs to choose whether they want to remain as
HLI stockholders or not. The Court reasoned that it cannot turn a blind eye to the fact that the FWBs
were said to have received benefits from the said agreement. Also on August 6, 2010, HLI and private
respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring
a piece of agricultural lands or remain as HLI stockholders, and which most FWBs chose the latter.

With regards to the homelots already awarded, the FWBs are not obliged to return it to HLI or
pay for its value since it is part of the SDP’s benefit granted to them. However, for those who did not
receive the homelot 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. In case of distribution, the homelots
would then not be deducted.

In terms of the 3% proceeds of the 500-ha land and 80.51 ha SCTEX lot to FWBs, DAR will
move for the auditing of HLI’s books to determine if the proceeds where utilized fof legitimate corporate
purpose and the remaining balance from the proceeds of the sale shall be distributed to the qualified
beneficiaries.

In view of HLI’s payment of rent to FWBs for the use of the land from 1989, the Court said that
this cannot be done as the FWBs are also stockholders of HLI (a seemingly elite title), and the benefits
acquired by the corporation from its possession and use of the land ultimately redo unded to the FWBs
benefit based on its business operations in the form of salaries, and other fringe benefits under the
CBA. To allow payment of rent would tantamount to double compensation.

HLI will continue to exist, not functioning under the SDP, as the same was revoked already,
but pursuant to the Corporation Code as a private stock corporation.

HLI shall also be paid just compensation for the remaining agricultural lands that will be
transferred to DAR for land distribution to the FWBs. The date of taking considered by the SC is
November 21, 1989, when PARC approved the HLI’s SDP per PARC Resolution No. 89-12-2. DAR
shall coordinate with LBP for the determination of just compensation, and NOT May 11, 1989, when
the SDOA was approved by PARC.

The petition is treated as pro hac vice (means for this case only) in view of the peculiar facts
and circumstances of the case.
 THE INSTANT PETITION IS DENIED.

PARC Resolution No. 2005-32-01 dated December 22, 2005 (wherein PARC affirmed the
recommendation of DAR to recall/revoke the SDOP of TADECO/HLI and the land be placed under
compulsory coverage or mandated land acquisition) and May 3, 2006 (wherein PARC denied MR by
HLI) are AFFIRMED with MODIFICATION that the original 6,296 qualified FWBs shall have the optio n
to remain as stockholders of HLI. Other FWBs who do not belong to the said original qualified
beneficiaries are NOT entitled to land distribution and shall remain as HLI stockholders. HLI is directed
to pay the FWBs the cconsiderations received from the 500 Ha converted land sale and 80.51 ha
SCTEX lot, wherein the 3% gross sales from the production of agricultural land, including expenditures
for legitimate corporate purpose, such as taxes and title transfer payments, shall be deducted from
the total amount of PhP 1,330,511,500 (3 comas!). Any unspent or unused balance will be distributed
to the 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 and LBP are ordered to determine the compensation due to
HLI.

DAR’s compliance report is ordered to be submitted six months from finality of judgment. TRO
is lifted.

DISSENTING OPINION

Corona, C.J.:

One of the nice points given by the late CJ Corona (ousted in the PNoy Administration) states,
to wit:

“Agrarian reform is an essential element of social justice under the 1987 Constitution. It
mandates that farmers and farmworkers have the right to own the land they till, individually and
collectively, through cooperative or similar organizations. It aims to liberate farmers and farmworkers
from bondage to the soil, to ensure that they do not remain slaves of the land but stewards thereof.”

He also opined that “unless there is land distribution, there can be no agrarian r eform. Any
program that gives farmers or farmworkers anything less than ownership of land fails to conform to
the mandate of the Constitution. In other words, a program that gives qualified beneficiaries stock
certificates instead of land is not agrarian reform.”

He believed that “actual land distribution is the essential characteristic of a constitutional

agrarian reform program.” Accordingly, the “polar star” in land reform is that ‘the farmer has a right
to the land he tills”.

In the APRIL 24, 2012 RESOLUTION involving the same Hacienda Luisita Case

On November 22, 2011, the Court recalled and set aside the option to remain as stockholders
of HLI, while maintaining that all benefits received shall be respected with no obligation to refund or
return them.

On December 9, 2011, a Motion for Reconsideration/Clarification by private respondents

Mallari, Suniga, Supervisory Group of HLI, and Andaya (Mallari, et al.
 On December 16, 2011, a Motion to Clarify and Reconsider Resolution of November 22, 2011
was filed by HLI.

HLI and Mallari, et al., invokes the following grounds:

A. WON SC erred in determining just compensation by considering the date of taking as

November 21, 1989 when PARC approved the SDP (already revoked) since the Notice of
Coverage of January 2, 2006 may be considered as time FWBs owned and possess the
agricultural lands of Hacienda Luisita because it was the only time when the latter was
placed under Compulsory Acquisition in view of failure to perform their obligations under
the SDP, or SDOA, when the owner is ACTUALLY deprived or dispossessed of his
property, and considering taking from November 21, 1989 is a deprivation of landowner’s
property WITHOUT due process of law; and HLI is entitled to be paid interest on the just
compensation.
B. WON SC erred in reversing the decision of giving the FWBs option to remain as
stockholders or not since (1) it has been decided; (2) that neither the Constitution nor the
CARL requires that FWBs should have control over the agricultural lands; and (3) that the
option is not shown to be detrimental to FWBs, but rather found beneficial by the SC.
C. The proprietary of distributing the proceeds from the sale of the 500ha and 80.51 SCTEX
lot cannot be retained by HLI but returned to the FWBs and that HLI is using the
Corporation Code to avoid liability to the FWBs because: (1) the proceeds belongs to the
corporation and not to either the HLI/TADECO or FWBs; and (2) to allow return or proceeds
to FWBs.
D. Just Compensation for the Homelots given to FWBs as it does not form part of the 4,915.75
hectares covered by the SDP, and hence, the value of these homelots should, with the
revocation of the SDP, be paid to Tadeco as the landowner.

ON JUST COMPENSATION:

The Court stressed that “just compensation has been defined as the full and fair equivalent of
the property taken from its owner by the expropriator. The measure is not the takers gain, but the
owner’s loss. Hence, in determining just compensation, the price or value of the property at the time it
was taken from the owner and appropriated by the government shall be the basis. If the government
takes possession of the land before the institution of expropriation proceedings, the value should be
fixed as of the time of the taking of said possession, not of the filing of the comp laint.”

The SC, citing Land Bank of the Philippines v. Livioc, said that taking is when the landowner
was deprived of the use and benefit of his property, such as when the title is transferred to the
Republic. It also noted that taking also occurs when agricultural lands are voluntarily offered by a
landowner and approved by PARC for CARP coverage through the stock distribution scheme, as in
the case of HLI earlier decided. Thus, HLI submitting its SDP for approval is an acknowledgment on
its part that the agricultural lands of Hacienda Luisita are covered by CARP. However, the PARC
approval should be considered as the effective date of taking because it was only during that time that
the government officially confirmed the CARP coverage of these lands.

Accordingly, Stock distribution and compulsory acquisition are two modalities sharing the
same end goal of having a more equitable distribution of land ownership, without ignoring such right
to just compensation. Also, since it is only upon the approval of the SDP that the agricultural lands
actually came under CARP coverage, such approval operates and takes the place of a notice of
coverage ordinarily issued under compulsory acquisition.

What the SC found notable, however, is that the divestment by Tadeco of the agricultural lands
of Hacienda Luisita and the giving of the shares of stock for free is nothing but an enticement or
incentive for the FWBs to agree with the stock distribution option scheme and not further push for land
distribution. And the stubborn fact is that the “man days” scheme of HLI impelled the FWBs to work in
the hacienda in exchange for such shares of stock.

The Court ruled that taking only when the landowner is deprived of the use and benefit of his
property is not incompatible with the earlier conclusion that taking took place on November 21, 1989,
and since even from the start, TADECO seemed to already favour Stock Distribution Scheme when
complying with the CARP when it organized the HLI as its spin-off corporation which
facilitated stock acquisition of FWBs. Tadeco assigned and conveyed 4,915.75 has to HLI the
agricultural lands of Hacienda Luisita. These agricultural lands constituted as the capital contribution
of the FWBs in HLI. This, in effect, deprived TADECO itself of the ownership over these lands when it
transferred the same to HLI.

When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI in order to
comply with CARP through the stock distribution option scheme under PARC Resolution No. 89 -12-2
dated November 21, 1989, Tadeco was consequently dispossessed of the ownership of the same.

Furthermore, adherence to the suggestion of HLI that the Notice of Coverage issued on
January 2, 2006 should be considered as date of taking would in effect penalize the qualified FWBs
twice for acceding to the Stock Distribution Scheme, (1) depriving them of the agricultural lands they
should have gotten earlier, if it were not for this SDP and (2) making them pay higher amortization for
the agricultural lands that should have been given to them decades ago.

The SC maintained that, as it has in fact already ruled on its reckoning date, that is, November
21, 1989, the date of issuance of PARC Resolution No. 89-12-2, based on the above-mentioned
disquisitions.

On side note, the SC added that “even though the compensation due to HLI will still be
preliminarily determined by DAR and LBP, subject to review by the RTC acting as a SAC, the fact that
the reckoning point of taking is already fixed at a certain date should a lready hasten the proceedings
and not further cause undue hardship on the parties, especially the qualified FWBs.”
Option will not ensure control over agricultural lands

The Court agreed that the option given to the qualified FWBs whether to remain as
stockholders of HLI or opt for land distribution is neither iniquitous nor prejudicial to the FWBs.
However, the Court is noted the policy on agrarian reform that control over the agricultural land must
always be in the hands of the farmers. Contrary to the stance of HLI, both the Constitution and RA
6657 intended the farmers, individually or collectively, to have control over the agricultural lands of
HLI; otherwise, all these rhetoric about agrarian reform will be rendered for naught.

Sec. 4, Art. XIII of the 1987 Constitution provides:

Section 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. (Emphasis supplied.)

Sec. 2 of RA 6657 also 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.

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.
As discussed by the SC, there is collective ownership as long as there is a concerted group work
by the farmers on the land, regardless of whether the landowner is a cooperative, association or
corporation composed of farmers. However, the definition of collective ownership should be read in
light of the clear policy of the law on agrarian reform, which is to emancipate the tiller from the
bondage of the soil and empower the common people.

“HLI’s insistent view that control need not be in the hands of the farmers translates to allowing
it to run roughshod against the very reason for the enactment of agrarian reform laws and leave the
farmers in their shackles with sheer lip service to look forward to.” (quotable phrase)
FWBs Entitled to Proceeds of Sale

The proceeds realized from the sale should accrue for the benefit of the FWBs, minus
deductions of 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 in curred by HLI and
Centennary Holdings, Inc. for legitimate corporate purposes, as prescribed in our November 22, 2011
Resolution.

HOMELOTS
The SC agreed to DISAGREE.

As reiterated in the earlier decision, the distribution of homelots is required under RA 6657 only for
corporations or business associations owning or operating farms which opted for land distribution.
Corporations are not obliged to provide for homelots. Nonetheless, HLI undertook to subdivide and
allocate for free and without charge among the qualified family-beneficiaries 240 sq. m. of homelots to
some, if not all of the qualified beneficiaries.

The Supreme Court, by a unanimous vote, resolved to maintain its ruling that the FWBs shall
retain ownership of the homelots given to them with no obligation to pay for the value of said lots. Also,
since the SDP was already revoked with finality in th earlier discussion of the decision, the Court directs
the government through the DAR to pay HLI the just compensation for said homelots in consonance
with Sec. 4, Article XIII of the 1987 Constitution that the taking of land for use in the agrarian reform
program is subject to the payment of just compensation.

The Motions of both parties were DENIED with qualification. The July 5, 2011, Decision was
modified by the November 21, 2011 Resolution which ordered the government, through the DAR, to pay
just compensation for the 240 sq. m. homelots distributed to FWBs. This RESOLUTION is now declared
FINAL and EXECUTORY.
Alita v. CA

-petition seeking the reversal Court of Appeals decision: 1) Declaring Presidential Decree No. 27
inapplicable to lands obtained thru the homestead law; 2) Declaring that the 4 registered co -owners
will cultivate and operate the farmholding themselves as owners; & 3) Ejecting te nants, namely;
Gabino Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando
Salamar, as the owners would want to cultivate the farmholding themselves.
-2 parcels of land at Guilinan, Tungawan, Zamboanga del Sur acquired by respondents Reyes through
homestead patent under Commonwealth Act No. 141
- Reyes wants to personally cultivate these lands, but Alita refuse to vacate, relying on the provisions
of P.D. 27 and P.D. 316 and regulations of MAR/DAR
-June 18, 1981: Respondents Reyes (Plaintiff) instituted a complaint against Minister of Agrarian
Reform Estrella, Regional Director of MAR Region IX P.D. Macarambon, and Alita et.al for the
declaration of P.D. 27 and all other Decrees, Letters of Instructions and General Orders i napplicable
to homestead lands. Defendants Alita filed their answer with special and affirmative defenses.
-July 19, 1982: Reyes filed urgent motion to enjoin the defendants from declaring the lands in litigation
under Operation Land Transfer and from being issued land transfer certificates
-November 5, 1982: Court of Agrarian Relations 16th Regional District, Branch IV, Pagadian City
(Regional Trial Court, 9th Judicial Region, Branch XVIII) rendered its decision dismissing complaint
and the motion to enjoin
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which defendants filed
their opposition on January 10, 1983.
RTC: issued decision prompting defendants Alita et al to move for reconsideration but was denied
CA: the same was sustained

ISSUE: whether or not lands obtained through homestead patent are covered by the Agrarian Reform
under P.D. 27.--NO
We agree with the petitioners Alita et.al in saying that P.D. 27 decreeing the emancipation of tenants
from the bondage of the soil and transferring to them ownership of the land they till is a sweeping
social legislation, a remedial measure promulgated pursuant to the social justice precepts of the
Constitution. However, such contention cannot be invoked to defeat the purpose of the enactment of
the Public Land Act or Commonwealth Act No. 141 to protect one’s right to life itself by give a needy
citizen a land wherein they could build a house and plant for necessary subsistence.

Art XIII, Sec 6 of the Constitution likewise respects the superiority of the homesteaders' rights over the
rights of the tenants guaranteed by the Agrarian Reform statute .
Section 6. The State shall apply the principles of agrarian reform or stewardship…in the
disposition or utilization of other natural resources, including lands of public domain under
lease or concession suitable to agriculture, subject to prior rights, homestead rights of small
settlers, and the rights of indigenous communities to their ancestral lands.

Comprehensive Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise supports the
inapplicability of P.D. 27 to lands covered by homestead patents like those of the property in question,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or the ir 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.
WHEREFORE, premises considered, the decision of the respondent Court o f Appeals
sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 103302 August 12, 1993

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners,
vs.
DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO
LEANO, DAR REGION IV, respondents.

Lino M. Patajo for petitioners.

The Solicitor General for respondents.

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the Housing
and Land Use Regulatory Board and its precursor agencies 1 prior to 15 June 1988, 2 covered by R.A.
6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988? This is the pivotal issue
in this petition for certiorari assailing the Notice of Coverage 3 of the Department of Agrarian Reform
over parcels of land already reserved as townsite areas before the enactment of the law.

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous parcels of
land located in Banaba, Antipolo, Rizal, with areas of 120.9793 hectares, 1.3205 hectares and 2.7080
hectares, or a total of 125.0078 hectares, and embraced in Transfer Certificate of Title No. 31527 of
the Register of Deeds of the Province of Rizal.

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located in the
Municipalities of Antipolo, San Mateo and Montalban as townsite areas to absorb the population
overspill in the metropolis which were designated as the Lungsod Silangan Townsite. The NATALIA
properties are situated within the areas proclaimed as townsite reservation.

Since private landowners were allowed to develop their properties into low-cost housing subdivisions
within the reservation, petitioner Estate Developers and Investors Corporation (EDIC, for brevity), as
developer of NATALIA properties, applied for and was granted preliminary approval and locational
clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of
the subdivision project, which consisted of 13.2371 hectares, was issued sometime in 1982; 4 for Phase
II, with an area of 80,000 hectares, on 13 October 1983; 5 and for Phase III, which consisted of the
remaining 31.7707 hectares, on 25 April 1986. 6 Petitioner were likewise issued development
permits7 after complying with the requirements. Thus the NATALIA properties later became the
Antipolo Hills Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988"
(CARL, for brevity), went into effect. Conformably therewith, respondent Department of Agrarian
Reform (DAR, for brevity), through its Municipal Agrarian Reform Officer, issued on 22 November
1990 a Notice of Coverage on the undeveloped portions of the Antipolo Hills Subdivision which
consisted of roughly 90.3307 hectares. NATALIA immediately registered its objection to the notice of
Coverage.

EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and twice
wrote him requesting the cancellation of the Notice of Coverage.

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA, for
the brevity), filed a complaint against NATALIA and EDIC before the DAR Regional Adjudicator to
restrain petitioners from developing areas under cultivation by SAMBA members. 8 The Regional
Adjudicator temporarily restrained petitioners from proceeding with the development of the
subdivision. Petitioners then moved to dismiss the complaint; it was denied. Instea d, the Regional
Adjudicator issued on 5 March 1991 a Writ of Preliminary Injunction.

Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication Board (DARAB);
however, on 16 December 1991 the DARAB merely remanded the case to the Regional Ad judicator
for further proceedings. 9

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set
aside the Notice of Coverage. Neither respondent Secretary nor respondent Director took action on
the protest-letters, thus compelling petitioners to institute this proceeding more than a year thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR f or including
undedeveloped portions of the Antipolo Hills Subdivision within the coverage of the CARL. They argue
that NATALIA properties already ceased to be agricultural lands when they were included in the areas
reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain
that the permits granted petitioners were not valid and binding because they did not comply with the
implementing Standards, Rules and Regulations of P.D. 957, otherwise known as "The Subdivision
and Condominium Buyers Protective Decree," in that no application for conversion of the NATALIA
lands from agricultural residential was ever filed with the DAR. In other words, there was no valid
conversion. Moreover, public respondents allege that the instant petition was prematurely filed
because the case instituted by SAMBA against petitioners before the DAR Regional Adjudicator has
not yet terminated. Respondents conclude, as a consequence, th at petitioners failed to fully exhaust
administrative remedies available to them before coming to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational
Clearances as well as the Development Permits granted petitioners for Phases I, II and III of the
Antipolo Hills Subdivision reveals that contrary to the claim of public respondents, petitioners NATALIA
and EDIC did in fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development
Corporation, the agency tasked to oversee the implementation of the development of the townsite
reservation, before applying for the necessary permits from the Human Settlements Regulatory
Commission. 10 And, in all permits granted to petitioners, the Commission
stated invariably therein that the applications were in "conformance" 11 or "conformity" 12 or
"conforming" 13 with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the
argument of public respondents that not all of the requirements were complied with cannot be
sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval from
DAR. The NATALIA properties were within the areas set aside for the Lungsod Silangan Reservation.
Since Presidential Proclamation No. 1637 created the townsite reservation for the p urpose of providing
additional housing to the burgeoning population of Metro Manila, it in effect converted for residential
use what were erstwhile agricultural lands provided all requisites were met. And, in the case at bar,
there was compliance with all relevant rules and requirements. Even in their applications for the
development of the Antipolo Hills Subdivision, the predecessor agency of HLURB noted that
petitioners NATALIA and EDIC complied with all the requirements prescribed by P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and
condominiums in general. On the other hand, Presidential Proclamation No. 1637 referred only to the
Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory construction
that between a general law and a special law, the latter prevails. 14

Interestingly, the Office of the Solicitor General does not contest the conversion of portions of the
Antipolo Hills Subdivision which have already been developed. 15 Of course, this is contrary to its
earlier position that there was no valid conversion. The applications for the developed and
undeveloped portions of subject subdivision were similarly situated. Consequently, both did not need
prior DAR approval.

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides
that the CARL shall "cover, regardless of tenurial arrangement and commodity produced, all public
and private agricultural lands." As to what constitutes "agricultural land," it is referred to as "land
devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land." 16 The deliberations of the Constitutional Commission confirm this
limitation. "Agricultural lands" are only those lands which are "arable and suitable agricultural lands"
and "do not include commercial, industrial and residential lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision
cannot in any language be considered as "agricultural lands." These lots were intended for residential
use. They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan
Reservation. Even today, the areas in question continued to be developed as a low-cost housing
subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that SAMBA members
even instituted an action to restrain petitioners from continuing with such development. The enormity
of the resources needed for developing a subdivision may have delayed its completion but this does
not detract from the fact that these lands are still residential lands and outside the ambit of the CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include
lands previously converted to non-agricultural uses prior to the effectivity of CARL by government
agencies other than respondent DAR. In its Revised Rules and Regulations Governing Conversion of
Private Agricultural Lands to Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus —

. . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A.

6657 and not classified as mineral or forest by the Department of Environment and
Natural Resources (DENR) and its predecessor agencies, and not classified in town
plans and zoning ordinances as approved by the Housing and Land Use Regulatory
Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for
residential, commercial or industrial use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such
conversion. It was therefore error to include the undeveloped portions of the Antipolo Hills Subdivision
within the coverage of CARL.
Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform,
noted in an Opinion 19 that lands covered by Presidential Proclamation No. 1637, inter alia, of which
the NATALIA lands are part, having been reserved for townsite purposes "to be developed as human
settlements by the proper land and housing agency," are "not deemed 'agricultural lands' within the
meaning and intent of Section 3 (c) of R.A. No. 6657. " Not being deemed "agricultural lands," they
are outside the coverage of CARL.

Anent the argument that there was failure to exhaust administrative remedies in the instant petition,
suffice it to say that the issues raised in the case filed by SAMBA members differ from those of
petitioners. The former involve possession; the latter, the propriety of including under the operation of
CARL lands already converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter -protests,
this after sitting it out for almost a year. Given the official indifference, which under the circumstances
could have continued forever, petitioners had to act to assert and pr otect their interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in
issuing the assailed Notice of Coverage of 22 November 1990 by of lands over which they no longer
have jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November 1990
by virtue of which undeveloped portions of the Antipolo Hills Subdivision wer e placed under CARL
coverage is hereby SET ASIDE.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Melo, Quiason, Puno and Vitug, JJ., concur.
 EN BANC

[ G.R. No. 86889, December 04, 1990 ]

LUZ FARMS, PETITIONER, VS. THE HONORABLE SECRETARY OF THE DEPARTMENT OF

AGRARIAN REFORM, RESPONDENT.

DECISION

PARAS, J.:

This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent
injunction against the Honorable Secretary of the Department of Agrarian Reform for acting without
jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure
Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein
petitioner, and further from performing an act in violation of the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as follows:

On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising
of livestock, poultry and swine in its coverage (Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures
Implementing Production and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657
(Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations
implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81).

Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and
together with others in the same business allegedly stands to be adversely affected by the
enforcement of Section 3(b), Section 11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No.
6657 otherwise known as Comprehensive Agrarian Reform Law and of the Guidelines and Procedures
Implementing Production and Profit Sharing under R.A. No. 66 57 promulgated on January 2, 1989
and the Rules and Regulations Implementing Section 11 thereof as promulgated by the DAR on
January 9, 1989 (Rollo, pp. 2-36).
Hence, this petition praying that aforesaid laws, guidelines and rules be declared
unconstitutional. Meanwhile, it is also prayed that a writ of preliminary injunction or restraining order
be issued enjoining public respondents from enforcing the same, insofar as they are made to apply to
Luz Farms and other livestock and poultry raisers.

This Court in its Resolution dated July 4, 1989 resolved to deny, among others, Luz Farms' prayer the
issuance of a preliminary injunction in its Manifestation dated May 26 and 31, 1989. (Rollo, p. 98).

Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said Motion for
Reconsideration regarding the injunctive relief, after the filing and approval by this Court of an
injunction bond in the amount of P100,000.00. This Court also gave due course to the petition and
required the parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131 -168).
On December 22, 1989, the Solicitor General adopted his Comment to the petition as his
Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it:
(a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition of "Agricultural,
Agricultural Enterprise or Agricultural Activity."

(b) Section 11 which defines "commercial farms" as "private agricultural lands devoted to commercial,
livestock, poultry and swine raising x x x."
(c) Section 13 which calls upon petitioner to execute a production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to summarily
determine the just compensation to be paid for lands covered by the Comprehensive Agrarian Reform
Law.
(e) Section 32 which spells out the production-snaring plan mentioned in Section 13 -?

"x x x (W)hereby three percent (3%) of the gross sales from the production of such lands are distributed
within sixty (60) days of the end of the fiscal year as compensation to regular and other farmworkers in
such lands over and above the compensation they currently receive: Provided, That these individuals
or entities realize gross sales in excess of five million pesos per annum unless the DAR, upon proper
application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit after
tax shall be distributed to said regular and other farmworkers within ninety (90) days of the end of the
fiscal year. x x x."

The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657
(the Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes the raising of
livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines
promulgated in accordance therewith.
The Constitutional provision under consideration reads as follows:
ARTICLE XIII
xxx xxx xxx
AGRARIAN AND NATURAL RESOURCES REFORM

Section 4. The State shall, by law, undertake an agrarian reform program foun ded 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 rights of small landowners. The State shall
further provide incentives for voluntary land-sharing.
xxx xxx xxx."

Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it
acknowledges the correctness of the decision of this Court in the case of the Association of Small
Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989)
affirming the constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued that
Congress in enacting the said law has transcended the mandate of the Constitution, in including land
devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131). Livestock or
poultry raising is not similar to crop or tree farming. Land is not the primary resource in this
undertaking and represents no more than five percent (5%) of the total investment of commercial
livestock and poultry raisers. Indeed, there are many owners of residential lands all over the country
who use available space in their residences for commercial livestock and raising purposes, under
"contract-growing arrangements," whereby they supplement the r equirements of meat processing
corporations and other commercial livestock and poultry raisers (Rollo, p. 10). Lands support the
buildings and other amenities attendant to the raising of animals and birds. The use of land is
incidental to but not the principal factor or consideration in productivity in this industry. Excluding
backyard raisers, about 80% of those in commercial livestock and poultry production occupy five
hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11).

On the other hand, the public respondent argued that livestock and poultry raising is embraced in the
term "agriculture" and the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He
cited that Webster's International Dictionary, Second Edition (1954), defines the following words:

"Agriculture - the art or science of cultivating the ground and raising and harvesting crops, often,
including also, feeding, breeding and management of livestock, tillage, husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking x x x.
Livestock - domestic animals used or raised on a farm, especially for profit.
Farm - a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82 -83).
The petition is impressed with merit.

The question raised is one of constitutional construction. The primary task in

constitutional construction is to ascertain and thereafter assure the realization of the purpose of the
framers in the adoption of the Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31
SCRA 413 [1970]).

Ascertainment of the meaning of the provision of Constitution begins with the language
of the document itself. The words used in the Constitution are to be given their ordinary meaning
except where technical terms are employed in which case the significance thus attached to them
prevails (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).

It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful
meaning, the courts may consider the debates in the constitutional convention as throwing light on the
intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by
itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the
understanding of the convention as to what was meant by the terms of the constitutional
provision which was the subject of the deliberation, goes a long way toward explaining the
understanding of the people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).

The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the
word "agricultural," clearly show that it was never the intention of the framers of the Constitution to
include livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform
program of the Government.

The Committee adopted the definition of "agricultural land" as defined under Section 186 of R.A. 3844,
as land devoted to any growth. Including but not limited to crop lands, saltbeds, fishponds, idle and
abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).

The intention of the Committee is to limit the application of the word "agriculture."
Commissioner Jamir proposed to insert the word "ARABLE" to distinguish this kind of agricultural land
from such lands as commercial and industrial lands and residential properties because all of them fall
under the general classification of the word "agricultural". This proposal, however, was not considered
because the Committee contemplated that agricultural lands are limited to arable and suitable
agricultural lands and therefore, do not include commercial, industrial and residential lands (Record,
CONCOM, August 7, 1986, Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several
questions, among others, quoted as follows:
xxx xxx xxx
"Line 19 refers to genuine reform program founded on the primary right of farmers and farmworkers. I
wonder if it means that leasehold tenancy is thereby proscribed under this provision because it speaks
of the primary right of farmers and farmworkers to own directly or collectively the lands they till. As
also mentioned by Commissioner Tadeo, farmworkers include those who work in piggeries and poultry
projects.

I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a poultry
project and for that purpose hires farmworkers therein, these farmworkers will automatically have the
right to own eventually, directly or ultimately or collectively, the land on which the piggeries and poultry
projects were constructed. (Record, CONCOM, August 2, 1986, p. 618).
xxx xxx xxx."
The questions were answered and explained in the statement of then Commissioner Tadeo, quoted
as follows:
xxx xxx xxx

"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan. Ipinaaalam ko kay Co
mmissioner Regalado na hindinamin inilagay ang agricultural
worker sa kadahilanang kasama rito ang piggery, poultry at livestock
workers. Ang inilagay namindito ay farm worker kaya hindi kasama ang piggery, poultry at livestock
workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).

It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private
agricultural lands devoted to commercial livestock, poultry and swine raising" in the definition of
"commercial farms" is invalid, to the extent that the aforecited agro-industrial activities are made to be
covered by the agrarian reform program of the State. There is simply no reason to include livestock
and poultry lands in the coverage of agrarian reform (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of R.A. 6657
directing "corporate farms" which include livestock and poultry raisers to execute and implement
"production-sharing plans" (pending final redistribution of their landholdings) whereby they are called
upon to distribute from three percent (3%) of their gross sales and ten percent (10%) of their net profits
to their workers as additional compensation is unreasonable for being
confiscatory, and therefore violative of due process (Rollo, p. 21).
It has been established that this 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 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 (Association
of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v.
Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175
SCRA 343).

However, despite the inhibitions pressing upon the Court when confronted with constitutional issues,
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 and God as its conscience gives it in the
light to probe its meaning and discover its purpose. Personal motives and political considerations are
irrelevancies that cannot influence its decisions. Blandishment is as ineffectual as intimidation, for all
the awesome power of the Congress and Executive, the Court will not hesitate "to make the hammer
fall heavily," where the acts of these departments, or of any official, betray the people's will as
expressed in the Constitution (Association of Small Landowners of Philippines, Inc. v. Secretary of
Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R.
79744; Manaay v. Juico, G.R. 79777, 14 July 1989).

Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it
becomes the duty of the judiciary to declare what the other branches of the government had assumed
to do as void. This is the essence of judicial power conferred by the Constitution "(I)n one Supreme
Court and in such lower courts as may be established by law" (Art. VIII, Section 1 of the 1935
Constitution; Article X, Section I of the 1973 Constitution and which was adopted as part of the
Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution) and which power this
Court has exercised in many instances (Demetria v. Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of
R.A. No. 6657 insofar as the inclusion of the raising of livestock, poultry and swine in its coverage as
well as the Implementing Rules and Guidelines promulgated in accordance therewith, are hereby
DECLARED null and void for being unconstitutional and the writ of preliminary injunction issued is
hereby MADE permanent.
SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla, Bidin, Griño-
Aquino, Medialdea, and Regalado, JJ.,concur.
Feliciano, J., on leave.
Sarmiento, J., see separate opinion.
 EN BANC

DEPARTMENT OF AGRARIAN G.R. No. 162070

REFORM, represented by SECRETARY
JOSE MARI B. PONCE (OIC),
Present:
Petitioner, Davide, C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
Carpio,

- versus - Austria-Martinez,
Corona,
Carpio Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario and
Garcia, JJ.
DELIA T. SUTTON, ELLA T.
SUTTON-SOLIMAN and Promulgated:
HARRY T. SUTTON,
Respondents. October 19, 2005
x-----------------------------------x

DECISION

PUNO, J.:

This is a petition for review filed by the Department of Agrarian Reform (DAR) of the Decision and
Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively,
which declared DAR Administrative Order (A.O.) No. 9, series of 1993, null and void for being violative
of the Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been devoted
exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing agrarian
reform program of the government, respondents made a voluntary offer to sell (VOS) [1] their
landholdings to petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the
Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms
used for raising livestock, poultry and swine.

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of

DAR,[2] this Court ruled that lands devoted to livestock and poultry-raising are not included in the
definition of agricultural land. Hence, we declared as unconstitutional certain provisions of the CARL
insofar as they included livestock farms in the coverage of agrarian reform.
In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to
withdraw their VOS as their landholding was devoted exclusively to cattle -raising and thus exempted
from the coverage of the CARL. [3]

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected
respondents land and found that it was devoted solely to cattle -raising and breeding. He recommended
to the DAR Secretary that it be exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and
requested the return of the supporting papers they submitted in connection therewith. [4] Petitioner
ignored their request.

On December 27, 1993, DAR issued A.O. No. 9, series of 1993, [5] which provided that only
portions of private agricultural lands used for the raising of livestock, poultry and swine as of June 15,
1988 shall be excluded from the coverage of the CARL. In determining the area of land to be excluded,
the A.O. fixed the following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head
of animal shall be retained by the landowner), and a ratio of 1.7815 hectares for livestock infrastructure
for every 21 heads of cattle shall likewise be excluded from the operations of the CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final and
irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire landholding is
exempted from the CARL.[6]

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order [7] partially granting
the application of respondents for exemption from the coverage of CARL. Applying the retention limits
outlined in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents land for grazing
purposes, and a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of
respondents landholding to be segregated and placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be
exempted as it is devoted exclusively to cattle-raising. Their motion was denied. [8] They filed a notice
of appeal[9] with the Office of the President assailing: (1) the reasonableness and validity of DAR A.O.
No. 9, s. 1993, which provided for a ratio between land and livestock in determining the land area
qualified for exclusion from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view
of the Luz Farms case which declared cattle-raising lands excluded from the coverage of agrarian
reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR. [10] It
ruled that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O. provided
the guidelines to determine whether a certain parcel of land is being used for cattle -raising.
However, the issue on the constitutionality of the assailed A.O. was left for the determination
of the courts as the sole arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s.
1993, void for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock
farms from the land reform program of the government. The dispositive portion reads:
WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of
1993 is hereby DECLARED null and void. The assailed order of the Office of the
President dated 09 October 2001 in so far as it affirmed the Departme nt of Agrarian
Reforms ruling that petitioners landholding is covered by the agrarian reform program
of the government is REVERSED and SET ASIDE.
 SO ORDERED.[11]
Hence, this petition.
The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which
prescribes a maximum retention limit for owners of lands devoted to livestock raising.
Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR
A.O. No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its
mandate to place all public and private agricultural lands under the coverage of agrarian reform.
Petitioner also contends that the A.O. seeks to remedy reports that some unscrupulous landowners
have converted their agricultural farms to livestock farms in order to evade their coverage in the
agrarian reform program.

Petitioners arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make
rules and regulations. They have been granted by Congress with the authority to issue rules to regulate
the implementation of a law entrusted to them. Delegated rule-making has become a practical
necessity in modern governance due to the increasing complexity and variety of public functions.
However, while administrative rules and regulations have the force and effect of law, they are not
immune from judicial review.[12]They may be properly challenged before the courts to ensure that they
do not violate the Constitution and no grave abuse of administrative discr etion is committed by the
administrative body concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and
regulations must be issued by authority of a law and must not contravene the provisions of the
Constitution.[13] The rule-making power of an administrative agency may not be used to abridge the
authority given to it by Congress or by the Constitution. Nor can it be used to enlarge the power of
the administrative agency beyond the scope intended . Constitutional and statutoryprovisions
control with respect to what rules and regulations may be promulgated by administrative
agencies and the scope of their regulations. [14]

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution.
The A.O. sought to regulate livestock farms by including them in the coverage of agrarian reform and
prescribing a maximum retention limit for their ownership. However, the deliberations of the 1987
Constitutional Commission show a clear intent to exclude, inter alia, all lands exclusively
devoted to livestock, swine and poultry- raising. The Court clarified in the Luz Farms case that
livestock, swine and poultry-raising are industrial activities and do not fall within the definition of
agriculture or agricultural activity. The raising of livestock, swine an d poultry is different from crop or
tree farming. It is an industrial, not an agricultural, activity. A great portion of the investment in this
enterprise is in the form of industrial fixed assets, such as: animal housing structures and facilities,
drainage, waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators,
extensive warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas and
digester plants augmented by lagoons and concrete ponds, d eepwells, elevated water tanks,
pumphouses, sprayers, and other technological appurtenances. [15]

Clearly, petitioner DAR has no power to regulate livestock farms which have been
exempted by the Constitution from the coverage of agrarian reform. It has exceeded its power in
issuing the assailed A.O.

The subsequent case of Natalia Realty, Inc. v. DAR[16] reiterated our ruling in the Luz
Farms case. In Natalia Realty, the Court held that industrial, commercial and residential lands are
not covered by the CARL. [17] We stressed anew that while Section 4 of R.A. No. 6657 provides that
the CARL shall cover all public and private agricultural lands, the term agricultural land does
not include lands classified as mineral, forest, residential, commercial or industrial. Thus,
in Natalia Realty, even portions of the Antipolo Hills Subdivision, which are arable yet still
undeveloped, could not be considered as agricultural lands subject to agrarian reform as these lots
were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock,
poultry and swine have been classified as industrial, not agricultural, lands and thus exempt from
agrarian reform. Petitioner DAR argues that, in issuing the impugned A.O., it was seeking to address
the reports it has received that some unscrupulous landowners have been converting their agricultural
lands to livestock farms to avoid their coverage by the agrarian reform. Again, we find neither merit
nor logic in this contention. The undesirable scenario which petitioner seeks to prevent with the
issuance of the A.O. clearly does not apply in this case. Respondents family acquired their
landholdings as early as 1948. They have long been in the business of breeding cattle in Masbate
which is popularly known as the cattle-breeding capital of the Philippines. [18]Petitioner DAR does not
dispute this fact. Indeed, there is no evidence on record that respondents have just recently engaged
in or converted to the business of breeding cattle after the enactment of the CARL that may lead one
to suspect that respondents intended to evade its coverage. It must be stressed that what the CARL
prohibits is the conversion of agricultural lands for non-agricultural purposes after the effectivity
of the CARL. There has been no change of business interest in the case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute

by Congress without substantial change is an implied legislative approval and adoption of the previous
law. On the other hand, by making a new law, Congress seeks to supersede an earlier one. [19] In the
case at bar, after the passage of the 1988 CARL, Congress enacted R.A. No. 7881 [20] which amended
certain provisions of the CARL. Specifically, the new law changed the definition of the terms
agricultural activity and commercial farming by dropping from its coverage lands tha t are
devoted to commercial livestock, poultry and swine -raising.[21] With this significant
modification, Congress clearly sought to align the provisions of our agrarian laws with the
intent of the 1987 Constitutional Commission to exclude livestock farms from the coverage of
agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions
of the Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to
and be consistent with the Constitution. In case of conflict between an administrative order and the
provisions of the Constitution, the latter prevails. [22] The assailed A.O. of petitioner DAR was properly
stricken down as unconstitutional as it enlarges the coverage of agrarian reform beyond the scope
intended by the 1987 Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the
Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.