Republic of the Philippines

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

November 22, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL
BANKING CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA
NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG,
NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
RESOLUTION
VELASCO, JR., J.:
For resolution are the (1) Motion for Clarification and Partial Reconsideration dated
July 21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents Presidential
Agrarian Reform Council (PARC) and Department of Agrarian Reform (DAR); (3)
Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa
ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4) Motion for
Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July
21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group
of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively
referred to as "Mallari, et al."); and (6) Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA. 2
On July 5, 2011, this Court promulgated a Decision3 in the above-captioned case,
denying the petition filed by HLI and affirming Presidential Agrarian Reform Council
(PARC) Resolution No. 2005-32-01 dated December 22, 2005 and PARC Resolution
No. 2006-34-01 dated May 3, 2006 with the modification that the original 6,296
qualified farmworker-beneficiaries of Hacienda Luisita (FWBs) shall have the option
to remain as stockholders of HLI.
In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI
raises the following issues for Our consideration:
A
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE
ORIGINAL FWBs OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE

PROCEEDS OF THE SALE OF THE 500 HECTARES AND 80.51 HECTARES OF

THE HLI LAND, BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION,
HLI, AS CORPORATE CAPITAL AND ASSETS IN SUBSTITUTION FOR
THE PORTIONS OF ITS LAND ASSET WHICH WERE SOLD TO THIRD
PARTY;
(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS
OF THE LAND ASSET TO THE FWBs, WHO ARE STOCKHOLDERS OF
HLI, IS TO DISSOLVE THE CORPORATION AND DISTRIBUTE THE
PROCEEDS AS LIQUIDATING DIVIDENDS WITHOUT EVEN PAYING THE
CREDITORS OF THE CORPORATION;
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT
PROVISIONS OF THE CORPORATION CODE AND CORPORATE
PRACTICE.
B
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE
PAYMENT OF JUST COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE
PARC, THEN UNDER THE CHAIRMANSHIP OF DAR SECRETARY MIRIAM
DEFENSOR-SANTIAGO, APPROVED THE STOCK DISTRIBUTION PLAN (SDP)
PROPOSED BY TADECO/HLI, BECAUSE:
(1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989
WAS NOT THE "ACTUAL TAKING" OF THE TADECOs/HLIs
AGRICULTURAL LAND;
(2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01
OF THAT SDP BY THE NEW PARC UNDER THE CHAIRMANSHIP OF DAR
SECRETARY NASSER PANGANDAMAN ON DECEMBER 22, 2005 OR 16
YEARS EARLIER WHEN THE SDP WAS APPROVED DID NOT RESULT IN
"ACTUAL TAKING" ON NOVEMBER 21, 1989;
(3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR
22 YEARS BACK WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE,
CONSIDERING THE IMPROVEMENTS, EXPENSES IN THE
MAINTENANCE AND PRESERVATION OF THE LAND, AND RISE IN LAND
PRICES OR VALUE OF THE PROPERTY.
On the other hand, PARC and DAR, through the Office of the Solicitor General
(OSG), raise the following issues in their Motion for Partial Reconsideration dated
July 20, 2011:
THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR
THE FOLLOWING REASONS:
I

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

GROUND OF UNCONSTITUTIONALITY; AND
II
THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE
ABSENCE OF A LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH
MANDATES THE DISTRIBUTION OF THE LAND AS A RESULT OF THE
REVOCATION OF THE STOCK DISTRIBUTION PLAN (SDP).
For its part, AMBALA poses the following issues in its Motion for Reconsideration
dated July 19, 2011:
I
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657
(RA 6657) IS CONSTITUTIONAL.
II
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT ONLY THE [PARCS] APPROVAL OF HLIs
PROPOSAL FOR STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE
REVOKED AND NOT THE STOCK DISTRIBUTION OPTION AGREEMENT
(SDOA).
III
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN APPLYING THE DOCTRINE OF OPERATIVE FACTS AND
IN MAKING THE [FWBs] CHOOSE TO OPT FOR ACTUAL LAND DISTRIBUTION
OR TO REMAIN AS STOCKHOLDERS OF [HLI].
IV
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT IMPROVING THE ECONOMIC STATUS
OF FWBs IS NOT AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE SDP
AND AN IMPERATIVE IMPOSITION BY [RA 6657] AND DEPARTMENT OF
AGRARIAN REFORM ADMINISTRATIVE ORDER NO. 10 (DAO 10).
V
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT
THE CONVERSION OF THE AGRICULTURAL LANDS DID NOT VIOLATE THE
CONDITIONS OF RA 6657 AND DAO 10.
VI

THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT

PETITIONER IS ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD
THE HONORABLE COURT AFFIRM THE ENTITLEMENT OF THE PETITIONER
TO JUST COMPENSATION, THE SAME SHOULD BE PEGGED TO FORTY
THOUSAND PESOS (PhP 40,000.00) PER HECTARE.
VII
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT
LUISITA INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL COMMERCIAL
BANKING CORPORATION (RCBC) ARE INNOCENT PURCHASERS FOR VALUE.
In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the
following issues:
I
THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN
SECTION 31 OF [RA 6657] FOR BEING UNCONSTITUTIONAL. THE
CONSTITUTIONALITY ISSUE THAT WAS RAISED BY THE RESPONDENTSINTERVENORS IS THE LIS MOTA OF THE CASE.
II
THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE
DOCTRINE OF "OPERATIVE FACT" TO THE CASE. THE OPTION GIVEN TO THE
FARMERS TO REMAIN AS STOCKHOLDERS OF HACIENDA LUISITA IS
EQUIVALENT TO AN OPTION FOR HACIENDA LUISITA TO RETAIN LAND IN
DIRECT VIOLATION OF THE COMPREHENSIVE AGRARIAN REFORM LAW. THE
DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK DISTRIBUTION PLAN
CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE SUPREME COURT
HAS AFFIRMED ITS REVOCATION.
III
THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED
[LIPCO] AND [RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE
INSTANT CASE.
Mallari, et al., on the other hand, advance the following grounds in support of their
Motion for Reconsideration dated July 21, 2011:
(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN
DISTRIBUTED PURSUANT TO THE MEMORANDUM OF AGREEMENT.
WHAT REMAINS MERELY IS THE RELEASE OF TITLE FROM THE
REGISTER OF DEEDS.
(2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE
RECORDS WOULD SHOW THAT IF EVER NOT ALL OF THE 18,804.32
SHARES WERE GIVEN TO THE ACTUAL ORIGINAL FARMWORKER

BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE IS THE NEXT OF

KIN OR CHILDREN OF SAID ORIGINAL [FWBs]. HENCE, WE
RESPECTFULLY SUBMIT THAT SINCE THE SHARES WERE GIVEN TO
THE SAME "FAMILY BENEFICIARY", THIS SHOULD BE DEEMED AS
SUBSTANTIAL COMPLIANCE WITH THE PROVISIONS OF SECTION 4 OF
DAO 10.
(3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO
IMPLEMENT THE [SDP] AS PROVIDED FOR BY SECTION 11 OF DAO 10
AS THIS PROVISION MUST BE READ IN LIGHT OF SECTION 10 OF
EXECUTIVE ORDER NO. 229, THE PERTINENT PORTION OF WHICH
READS, "THE APPROVAL BY THE PARC OF A PLAN FOR SUCH STOCK
DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION, SHALL BE DEEMED
COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE
CARP."
(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF
NOVEMBER 21, 1989, THE DATE OF APPROVAL OF THE STOCK
DISTRIBUTION OPTION. INSTEAD, WE RESPECTFULLY SUBMIT THAT
THE "TIME OF TAKING" FOR VALUATION PURPOSES IS A FACTUAL
ISSUE BEST LEFT FOR THE TRIAL COURTS TO DECIDE.
(5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT
WAS GIVEN TO THEM UNDER THE SDP. IT WOULD BE UNFAIR IF THEY
ARE ALLOWED TO GET THE LAND AND AT THE SAME TIME HOLD ON
TO THE BENEFITS THEY RECEIVED PURSUANT TO THE SDP IN THE
SAME WAY AS THOSE WHO WILL CHOOSE TO STAY WITH THE SDO.
Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC),
submit the following grounds in support of their Motion for Reconsideration dated
July 22, 2011:
I
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN
ORDERING THE HOLDING OF A VOTING OPTION INSTEAD OF TOTALLY
REDISTRIBUTING THE SUBJECT LANDS TO [FWBs] in [HLI].
A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE
REVOCATION OF THE [SDP] CARRIES WITH IT THE REVOCATION OF
THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS
OF HLI WITHOUT MAKING THE NECESSARY CHANGES IN THE
CORPORATE STRUCTURE WOULD ONLY SUBJECT THEM TO FURTHER
MANIPULATION AND HARDSHIP.
C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND
PERTINENT LAWS JUSTIFY TOTAL LAND REDISTRIBUTION OF
HACIENDA LUISITA.

II
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN
HOLDING THAT THE [RCBC] AND [LIPCO] ARE INNOCENT PURCHASERS FOR
VALUE OF THE 300-HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS
SOLD TO THEM PRIOR TO THE INCEPTION OF THE PRESENT
CONTROVERSY.
Ultimately, the issues for Our consideration are the following: (1) applicability of the
operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or
the Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory
acquisition; (4) just compensation; (5) sale to third parties; (6) the violations of HLI;
and (7) control over agricultural lands.
We shall discuss these issues accordingly.
I. Applicability of the Operative Fact Doctrine
In their motion for partial reconsideration, DAR and PARC argue that the doctrine of
operative fact does not apply to the instant case since: (1) there is no law or rule
which has been invalidated on the ground of unconstitutionality; 4 (2) the doctrine of
operative fact is a rule of equity which may be applied only in the absence of a law,
and in this case, they maintain that there is a positive law which mandates the
distribution of the land as a result of the revocation of the stock distribution plan
(SDP).5
Echoing the stance of DAR and PARC, AMBALA submits that the operative fact
doctrine should only be made to apply in the extreme case in which equity demands
it, which allegedly is not in the instant case. 6 It further argues that there would be no
undue harshness or injury to HLI in case lands are actually distributed to the
farmworkers, and that the decision which orders the farmworkers to choose whether
to remain as stockholders of HLI or to opt for land distribution would result in inequity
and prejudice to the farmworkers.7 The foregoing views are also similarly shared by
Rene Galang and AMBALA, through the PILC.8 In addition, FARM posits that the
option given to the FWBs is equivalent to an option for HLI to retain land in direct
violation of RA 6657.9
(a) Operative Fact Doctrine Not Limited to
Invalid or Unconstitutional Laws
Contrary to the stance of respondents, the operative fact doctrine does not only
apply to laws subsequently declared unconstitutional or unlawful, as it also applies to
executive acts subsequently declared as invalid. As We have discussed in Our July
5, 2011 Decision:
That the operative fact doctrine squarely applies to executive actsin this case, the
approval by PARC of the HLI proposal for stock distributionis well-settled in our
jurisprudence. In Chavez v. National Housing Authority, We held:

Petitioner postulates that the "operative fact" doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no longer
be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
xxx

xxx

xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as
we have no reason to do so, much less retroactively apply such nullification to
deprive private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance thereof.
Consequently, the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. It
would indeed be ghastly unfair to prevent private respondent from relying upon the
order of suspension in lieu of a formal leave application.
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People, thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated General
Order No. 60, issued by then President Ferdinand E. Marcos was subsequently
declared by the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he
asserts, any evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein how
such a declaration might affect acts done on a presumption of their validity, the Court
said:
". . .. In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. . . . It is quite clear, however, that such broad statements as to the effect of a

determination of unconstitutionality must be taken with qualifications. The actual

existence of a statute, prior to [the determination of its invalidity], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects with respect to
particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal, and it
is manifest from numerous decisions that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.
xxx

xxx

xxx

"Similarly, the implementation/ enforcement of presidential decrees prior to their

publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased by
a new judicial declaration . . . that an all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence as
an operative fact negating the acceptance of "a principle of absolute retroactive
invalidity." Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 long before our
Decision in Taada and the arrest of petitioner is an operative fact that can no
longer be disturbed or simply ignored. (Citations omitted; emphasis in the original.)
Bearing in mind that PARC Resolution No. 89-12-210an executive actwas
declared invalid in the instant case, the operative fact doctrine is clearly applicable.
Nonetheless, the minority is of the persistent view that the applicability of the
operative fact doctrine should be limited to statutes and rules and regulations issued
by the executive department that are accorded the same status as that of a statute
or those which are quasi-legislative in nature. Thus, the minority concludes that the
phrase "executive act" used in the case of De Agbayani v. Philippine National
Bank11 refers only to acts, orders, and rules and regulations that have the force and
effect of law. The minority also made mention of the Concurring Opinion of Justice
Enrique Fernando in Municipality of Malabang v. Benito, 12 where it was supposedly
made explicit that the operative fact doctrine applies to executive acts, which are
ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of
Malabang case elaborates what "executive act" mean. Moreover, while orders, rules
and regulations issued by the President or the executive branch have fixed
definitions and meaning in the Administrative Code and jurisprudence, the phrase
"executive act" does not have such specific definition under existing laws. It should
be noted that in the cases cited by the minority, nowhere can it be found that the

term "executive act" is confined to the foregoing. Contrarily, the term "executive act"
is broad enough to encompass decisions of administrative bodies and agencies
under the executive department which are subsequently revoked by the agency in
question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as
Chairman of the Presidential Commission on Good Government (PCGG) and as
Chief Presidential Legal Counsel (CPLC) which was declared unconstitutional by this
Court in Public Interest Center, Inc. v. Elma.13 In said case, this Court ruled that the
concurrent appointment of Elma to these offices is in violation of Section 7, par. 2,
Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably,
the appointment of Elma as Chairman of the PCGG and as CPLC is, without a
question, an executive act. Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in good faith and in reliance of
the appointment of Elma which cannot just be set aside or invalidated by its
subsequent invalidation.
In Tan v. Barrios,14 this Court, in applying the operative fact doctrine, held that
despite the invalidity of the jurisdiction of the military courts over civilians, certain
operative facts must be acknowledged to have existed so as not to trample upon the
rights of the accused therein. Relevant thereto, in Olaguer v. Military Commission
No. 34,15 it was ruled that "military tribunals pertain to the Executive Department of
the Government and are simply instrumentalities of the executive power, provided by
the legislature for the President as Commander-in-Chief to aid him in properly
commanding the army and navy and enforcing discipline therein, and utilized under
his orders or those of his authorized military representatives."16
Evidently, the operative fact doctrine is not confined to statutes and rules and
regulations issued by the executive department that are accorded the same status
as that of a statute or those which are quasi-legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to
executive issuances like orders and rules and regulations, said principle can
nonetheless be applied, by analogy, to decisions made by the President or the
agencies under the executive department. This doctrine, in the interest of justice and
equity, can be applied liberally and in a broad sense to encompass said decisions of
the executive branch. In keeping with the demands of equity, the Court can apply the
operative fact doctrine to acts and consequences that resulted from the reliance not
only on a law or executive act which is quasi-legislative in nature but also on
decisions or orders of the executive branch which were later nullified. This Court is
not unmindful that such acts and consequences must be recognized in the higher
interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to
be complied with because it has the force and effect of law, springing from the
powers of the President under the Constitution and existing laws. Prior to the
nullification or recall of said decision, it may have produced acts and consequences
in conformity to and in reliance of said decision, which must be respected. It is on
this score that the operative fact doctrine should be applied to acts and

consequences that resulted from the implementation of the PARC Resolution

approving the SDP of HLI.
More importantly, respondents, and even the minority, failed to clearly explain how
the option to remain in HLI granted to individual farmers would result in inequity and
prejudice. We can only surmise that respondents misinterpreted the option as a
referendum where all the FWBs will be bound by a majority vote favoring the
retention of all the 6,296 FWBs as HLI stockholders. Respondents are definitely
mistaken. The fallo of Our July 5, 2011 Decision is unequivocal that only those
FWBs who signified their desire to remain as HLI stockholders are entitled to
18,804.32 shares each, while those who opted not to remain as HLI stockholders will
be given land by DAR. Thus, referendum was not required but only individual options
were granted to each FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the FWBs is not iniquitous and
prejudicial to their interests but is actually beneficial and fair to them. First, they are
granted the right to remain in HLI as stockholders and they acquired said shares
without paying their value to the corporation. On the other hand, the qualified FWBs
are required to pay the value of the land to the Land Bank of the Philippines (LBP) if
land is awarded to them by DAR pursuant to RA 6657. If the qualified FWBs really
want agricultural land, then they can simply say no to the option. And second, if the
operative fact doctrine is not applied to them, then the FWBs will be required to
return to HLI the 3% production share, the 3% share in the proceeds of the sale of
the 500-hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac
Expressway (SCTEX) lot, the homelots and other benefits received by the FWBs
from HLI. With the application of the operative fact doctrine, said benefits, homelots
and the 3% production share and 3% share from the sale of the 500-hectare and
SCTEX lots shall be respected with no obligation to refund or return them. The
receipt of these things is an operative fact "that can no longer be disturbed or simply
ignored."
(b) The Operative Fact Doctrine as Recourse in Equity
As mentioned above, respondents contend that the operative fact doctrine is a rule
of equity which may be applied only in the absence of a law, and that in the instant
case, there is a positive law which mandates the distribution of the land as a result of
the revocation of the SDP.
Undeniably, the operative fact doctrine is a rule of equity. 17 As a complement of legal
jurisdiction, equity "seeks to reach and complete justice where courts of law, through
the inflexibility of their rules and want of power to adapt their judgments to the
special circumstances of cases, are incompetent to do so. Equity regards the spirit
and not the letter, the intent and not the form, the substance rather than the
circumstance, as it is variously expressed by different courts."18 Remarkably, it is
applied only in the absence of statutory law and never in contravention of said law. 19
In the instant case, respondents argue that the operative fact doctrine should not be
applied since there is a positive law, particularly, Sec. 31 of RA 6657, which directs
the distribution of the land as a result of the revocation of the SDP. Pertinently, the
last paragraph of Sec. 31 of RA 6657 states:

If within two (2) years from the approval of this Act, the land or stock transfer
envisioned above is not made or realized or the plan for such stock distribution
approved by the PARC within the same period, the agricultural land of the corporate
owners or corporation shall be subject to the compulsory coverage of this Act.
(Emphasis supplied.)
Markedly, the use of the word "or" under the last paragraph of Sec. 31 of RA 6657
connotes that the law gives the corporate landowner an "option" to avail of the stock
distribution option or to have the SDP approved within two (2) years from the
approval of RA 6657. This interpretation is consistent with the well-established
principle in statutory construction that "[t]he word or is a disjunctive term signifying
disassociation and independence of one thing from the other things enumerated; it
should, as a rule, be construed in the sense in which it ordinarily implies, as a
disjunctive word."20 In PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging,
Inc.,21 this Court held:
Evidently, the letter did not make a demand for the payment of the P8,248,657.47
AND the return of the equipment; only either one of the two was required. The
demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably
petitioners counsel. As such, the use of "or" instead of "and" in the letter could
hardly be treated as a simple typographical error, bearing in mind the nature of the
demand, the amount involved, and the fact that it was made by a lawyer. Certainly
Atty. Gonzales would have known that a world of difference exists between "and"
and "or" in the manner that the word was employed in the letter.
A rule in statutory construction is that the word "or" is a disjunctive term signifying
dissociation and independence of one thing from other things enumerated unless the
context requires a different interpretation. 22
In its elementary sense, "or", as used in a statute, is a disjunctive article
indicating an alternative. It often connects a series of words or propositions
indicating a choice of either. When "or" is used, the various members of the
enumeration are to be taken separately.23
The word "or" is a disjunctive term signifying disassociation and independence of
one thing from each of the other things enumerated. 24 (Emphasis in the original.)
Given that HLI secured approval of its SDP in November 1989, well within the twoyear period reckoned from June 1988 when RA 6657 took effect, then HLI did not
violate the last paragraph of Sec. 31 of RA 6657. Pertinently, said provision does not
bar Us from applying the operative fact doctrine.
Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed
the revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of
the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP and
DAO 10. By applying the operative fact doctrine, this Court merely gave the qualified
FWBs the option to remain as stockholders of HLI and ruled that they will retain the
homelots and other benefits which they received from HLI by virtue of the SDP.

It bears stressing that the application of the operative fact doctrine by the Court in its
July 5, 2011 Decision is favorable to the FWBs because not only were the FWBs
allowed to retain the benefits and homelots they received under the stock distribution
scheme, they were also given the option to choose for themselves whether they
want to remain as stockholders of HLI or not. This is in recognition of the fact that
despite the claims of certain farmer groups that they represent the qualified FWBs in
Hacienda Luisita, none of them can show that they are duly authorized to speak on
their behalf. As We have mentioned, "To date, such authorization document, which
would logically include a list of the names of the authorizing FWBs, has yet to be
submitted to be part of the records."
II. Constitutionality of Sec. 31, RA 6657
FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota
of the case, raised at the earliest opportunity, and not to be considered as moot and
academic.25
This contention is unmeritorious. As We have succinctly discussed in Our July 5,
2011 Decision:
While there is indeed an actual case or controversy, intervenor FARM, composed of
a small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time
thereafter and why its members received benefits from the SDP without so much of a
protest. It was only on December 4, 2003 or 14 years after approval of the SDP via
PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and
approving resolution were sought to be revoked, but not, to stress, by FARM or any
of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did
NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the
purported flaws and gaps in the subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM
some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were
derived. The Court cannot now be goaded into resolving a constitutional issue that
FARM failed to assail after the lapse of a long period of time and the occurrence of
numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality
will not be passed upon by the Court unless it is properly raised and presented in an
appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly
questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that
the constitutional question should be raised at the earliest possible opportunity is
clearly wanting.

The last but the most important requisite that the constitutional issue must be the
very lis mota of the case does not likewise obtain. The lis mota aspect is not present,
the constitutional issue tendered not being critical to the resolution of the case. The
unyielding rule has been to avoid, whenever plausible, an issue assailing the
constitutionality of a statute or governmental act. If some other grounds exist by
which judgment can be made without touching the constitutionality of a law, such
recourse is favored. Garcia v. Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake judicial
review means that the Court will not pass upon a question of unconstitutionality,
although properly presented, if the case can be disposed of on some other ground,
such as the application of the statute or the general law. The petitioner must be able
to show that the case cannot be legally resolved unless the constitutional question
raised is determined. This requirement is based on the rule that every law has in its
favor the presumption of constitutionality; to justify its nullification, there must be a
clear and unequivocal breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.
The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the Supervisory
Group, is the alleged non-compliance by HLI with the conditions of the SDP to
support a plea for its revocation. And before the Court, the lis mota is whether or not
PARC acted in grave abuse of discretion when it ordered the recall of the SDP for
such non-compliance and the fact that the SDP, as couched and implemented,
offends certain constitutional and statutory provisions. To be sure, any of these key
issues may be resolved without plunging into the constitutionality of Sec. 31 of RA
6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is
not the said section per se that is invalid, but rather it is the alleged application of the
said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat
after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to
sell and compulsory acquisition." Thus, for all intents and purposes, the stock
distribution scheme under Sec. 31 of RA 6657 is no longer an available option under
existing law. The question of whether or not it is unconstitutional should be a moot
issue. (Citations omitted; emphasis in the original.)
Based on the foregoing disquisitions, We maintain that this Court is NOT compelled
to rule on the constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that
this Court, in its July 5, 2011 Decision, made no ruling in favor of the constitutionality
of Sec. 31 of RA 6657. There was, however, a determination of the existence of an
apparent grave violation of the Constitution that may justify the resolution of the
issue of constitutionality, to which this Court ruled in the negative. Having clarified
this matter, all other points raised by both FARM and AMBALA concerning the
constitutionality of RA 6657 deserve scant consideration.
III. Coverage of Compulsory Acquisition

FARM argues that this Court ignored certain material facts when it limited the
maximum area to be covered to 4,915.75 hectares, whereas the area that should, at
the least, be covered is 6,443 hectares,26 which is the agricultural land allegedly
covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco).27
We cannot subscribe to this view. Since what is put in issue before the Court is the
propriety of the revocation of the SDP, which only involves 4,915.75 has. of
agricultural land and not 6,443 has., then We are constrained to rule only as regards
the 4,915.75 has. of agricultural land.
Moreover, as admitted by FARM itself, this issue was raised for the first time by
FARM in its Memorandum dated September 24, 2010 filed before this Court.28 In this
regard, it should be noted that "[a]s a legal recourse, the special civil action of
certiorari is a limited form of review."29 The certiorari jurisdiction of this Court is
narrow in scope as it is restricted to resolving errors of jurisdiction and grave abuse
of discretion, and not errors of judgment.30 To allow additional issues at this stage of
the proceedings is violative of fair play, justice and due process. 31
Nonetheless, it should be taken into account that this should not prevent the DAR,
under its mandate under the agrarian reform law, from subsequently subjecting to
agrarian reform other agricultural lands originally held by Tadeco that were allegedly
not transferred to HLI but were supposedly covered by RA 6657.
DAR, however, contends that the declaration of the area32 to be awarded to each
FWB is too restrictive. It stresses that in agricultural landholdings like Hacienda
Luisita, there are roads, irrigation canals, and other portions of the land that are
considered commonly-owned by farmworkers, and this may necessarily result in the
decrease of the area size that may be awarded per FWB. 33 DAR also argues that the
July 5, 2011 Decision of this Court does not give it any leeway in adjusting the area
that may be awarded per FWB in case the number of actual qualified FWBs
decreases.34
The argument is meritorious. In order to ensure the proper distribution of the
agricultural lands of Hacienda Luisita per qualified FWB, and considering that
matters involving strictly the administrative implementation and enforcement of
agrarian reform laws are within the jurisdiction of the DAR,35 it is the latter which
shall determine the area with which each qualified FWB will be awarded.
(a) Conversion of Agricultural Lands
AMBALA insists that the conversion of the agricultural lands violated the conditions
of RA 6657 and DAO 10, stating that "keeping the land intact and unfragmented is
one of the essential conditions of [the] SD[P], RA 6657 and DAO 10." 36 It asserts that
"this provision or conditionality is not mere decoration and is intended to ensure that
the farmers can continue with the tillage of the soil especially since it is the only
occupation that majority of them knows."37
We disagree. As We amply discussed in Our July 5, 2011 Decision:

Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657,
and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to
the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many
words, the Report and the resolution view the conversion as an infringement of Sec.
5(a) of DAO 10 which reads: "a. that the continued operation of the corporation with
its agricultural land intact and unfragmented is viable with potential for growth and
increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of the
stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said
Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to
keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs stated
observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate
operations": "[w]hat is thus required is not the agricultural land remaining intact x x x
but the viability of the corporate operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable even if the corporate agricultural
land does not remain intact or [un]fragmented."38
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisitas
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of
RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the
land ceases to be economically feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the
beneficiary or landowner with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of the land and its dispositions. x x
x
Moreover, it is worth noting that the application for conversion had the backing of
5,000 or so FWBs, including respondents Rene Galang, and Jose Julio Suniga, then
leaders of the AMBALA and the Supervisory Group, respectively, as evidenced by
the Manifesto of Support they signed and which was submitted to the DAR. 39 If at all,
this means that AMBALA should be estopped from questioning the conversion of a
portion of Hacienda Luisita, which its leader has fully supported.
(b) LIPCO and RCBC as Innocent Purchasers for Value

The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial
Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not
innocent purchasers for value. The AMBALA, in particular, argues that LIPCO, being
a wholly-owned subsidiary of HLI, is conclusively presumed to have knowledge of
the agrarian dispute on the subject land and could not feign ignorance of this fact,
especially since they have the same directors and stockholders. 40 This is seconded
by Rene Galang and AMBALA, through the PILC, which intimate that a look at the
General Information Sheets of the companies involved in the transfers of the 300hectare portion of Hacienda Luisita, specifically, Centennary Holdings, Inc.
(Centennary), LIPCO and RCBC, would readily reveal that their directors are
interlocked and connected to Tadeco and HLI.41 Rene Galang and AMBALA, through
the PILC, also allege that "with the clear-cut involvement of the leadership of all the
corporations concerned, LIPCO and RCBC cannot feign ignorance that the parcels
of land they bought are under the coverage of the comprehensive agrarian reform
program [CARP] and that the conditions of the respective sales are imbued with
public interest where normal property relations in the Civil Law sense do not apply." 42
Avowing that the land subject of conversion still remains undeveloped, Rene Galang
and AMBALA, through the PILC, further insist that the condition that "[t]he
development of the land should be completed within the period of five [5] years from
the issuance of this Order" was not complied with. AMBALA also argues that since
RCBC and LIPCO merely stepped into the shoes of HLI, then they must comply with
the conditions imposed in the conversion order.43
In addition, FARM avers that among the conditions attached to the conversion order,
which RCBC and LIPCO necessarily have knowledge of, are (a) that its approval
shall in no way amend, diminish, or alter the undertaking and obligations of HLI as
contained in the [SDP] approved on November 21, 1989; and (b) that the benefits,
wages and the like, received by the FWBs shall not in any way be reduced or
adversely affected, among others.44
The contentions of respondents are wanting. In the first place, there is no denying
that RCBC and LIPCO knew that the converted lands they bought were under the
coverage of CARP. Nevertheless, as We have mentioned in Our July 5, 2011
Decision, this does not necessarily mean that both LIPCO and RCBC already acted
in bad faith in purchasing the converted lands. As this Court explained:
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots
that were previously covered by the SDP. Good faith "consists in the possessors
belief that the person from whom he received it was the owner of the same and
could convey his title. Good faith requires a well-founded belief that the person from
whom title was received was himself the owner of the land, with the right to convey it.
There is good faith where there is an honest intention to abstain from taking any
unconscientious advantage from another." It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they acquired.
However, they are of the honest belief that the subject lots were validly converted to
commercial or industrial purposes and for which said lots were taken out of the

CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally
and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands previously covered by CARP land
acquisition "after the lapse of five (5) years from its award when the land ceases to
be economically feasible and sound for agricultural purposes or the locality has
become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes." Moreover, DAR notified all the affected parties,
more particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes,
granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform
matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the CA. In this factual
setting, RCBC and LIPCO purchased the lots in question on their honest and wellfounded belief that the previous registered owners could legally sell and convey the
lots though these were previously subject of CARP coverage. Ergo, RCBC and
LIPCO acted in good faith in acquiring the subject lots. (Emphasis supplied.)
In the second place, the allegation that the converted lands remain undeveloped is
contradicted by the evidence on record, particularly, Annex "X" of LIPCOs
Memorandum dated September 23, 2010,45 which has photographs showing that the
land has been partly developed.46 Certainly, it is a general rule that the factual
findings of administrative agencies are conclusive and binding on the Court when
supported by substantial evidence.47However, this rule admits of certain exceptions,
one of which is when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record.48
In the third place, by arguing that the companies involved in the transfers of the 300hectare portion of Hacienda Luisita have interlocking directors and, thus, knowledge
of one may already be imputed upon all the other companies, AMBALA and Rene
Galang, in effect, want this Court to pierce the veil of corporate fiction. However,
piercing the veil of corporate fiction is warranted "only in cases when the separate
legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, such that in the case of two corporations, the law will regard the
corporations as merged into one."49 As succinctly discussed by the Court in Velarde
v. Lopez, Inc.:50
Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by
piercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted,
however, only in cases when the separate legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, such that in the case of
two corporations, the law will regard the corporations as merged into one. The
rationale behind piercing a corporations identity is to remove the barrier between the
corporation from the persons comprising it to thwart the fraudulent and illegal
schemes of those who use the corporate personality as a shield for undertaking
certain proscribed activities.
In applying the doctrine of piercing the veil of corporate fiction, the following
requisites must be established: (1) control, not merely majority or complete stock

control; (2) such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest acts in contravention of plaintiffs legal rights; and (3) the aforesaid control
and breach of duty must proximately cause the injury or unjust loss complained
of. (Citations omitted.)
Nowhere, however, in the pleadings and other records of the case can it be gathered
that respondent has complete control over Sky Vision, not only of finances but of
policy and business practice in respect to the transaction attacked, so that Sky
Vision had at the time of the transaction no separate mind, will or existence of its
own. The existence of interlocking directors, corporate officers and shareholders is
not enough justification to pierce the veil of corporate fiction in the absence of fraud
or other public policy considerations.
Absent any allegation or proof of fraud or other public policy considerations, the
existence of interlocking directors, officers and stockholders is not enough
justification to pierce the veil of corporate fiction as in the instant case.
And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered
the payment of the proceeds of the sale of the converted land, and even of the
80.51-hectare land sold to the government, through the Bases Conversion
Development Authority, to the qualified FWBs, effectively fulfils the conditions in the
conversion order, to wit: (1) that its approval shall in no way amend, diminish, or alter
the undertaking and obligations of HLI as contained in the SDP approved on
November 21, 1989; and (2) that the benefits, wages and the like, received by the
FWBs shall not in any way be reduced or adversely affected, among others.
A view has also been advanced that the 200-hectare lot transferred to Luisita Realty
Corporation (LRC) should be included in the compulsory coverage because the
corporation did not intervene.
We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by
PARC Resolution 2005-32-01, this Court is constrained to make a ruling on the
rights of LRC over the said lot. Moreover, the 500-hectare portion of Hacienda
Luisita, of which the 200-hectare portion sold to LRC and the 300-hectare portion
subsequently acquired by LIPCO and RCBC were part of, was already the subject of
the August 14, 1996 DAR Conversion Order. By virtue of the said conversion order,
the land was already reclassified as industrial/commercial land not subject to
compulsory coverage. Thus, if We place the 200-hectare lot sold to LRC under
compulsory coverage, this Court would, in effect, be disregarding the DAR
Conversion Order, which has long attained its finality. And as this Court held in
Berboso v. CA,51 "Once final and executory, the Conversion Order can no longer be
questioned." Besides, to disregard the Conversion Order through the revocation of
the approval of the SDP would create undue prejudice to LRC, which is not even a
party to the proceedings below, and would be tantamount to deprivation of property
without due process of law.
Nonethess, the minority is of the adamant view that since LRC failed to intervene in
the instant case and was, therefore, unable to present evidence supporting its good
faith purchase of the 200-hectare converted land, then LRC should be given full

opportunity to present its case before the DAR. This minority view is a contradiction
in itself. Given that LRC did not intervene and is, therefore, not a party to the instant
case, then it would be incongruous to order them to present evidence before the
DAR. Such an order, if issued by this Court, would not be binding upon the LRC.
Moreover, LRC may be considered to have waived its right to participate in the
instant petition since it did not intervene in the DAR proceedings for the nullification
of the PARC Resolution No. 89-12-2 which approved the SDP.
(c) Proceeds of the sale of the 500-hectare converted land
and of the 80.51-hectare land used for the SCTEX
As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and
the 80.51-hectare SCTEX lot acquired by the government from compulsory
coverage, then HLI and its subsidiary, Centennary, should be liable to the FWBs for
the price received for said lots. Thus:
There is a claim that, since the sale and transfer of the 500 hectares of land subject
of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came
after compulsory coverage has taken place, the FWBs should have their
corresponding share of the lands value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec.
31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August
14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary,
shall be liable to the FWBs for the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for
the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into
account the payment of taxes and expenses relating to the transfer of the land and
HLIs statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will
engage the services of a reputable accounting firm to be approved by the parties to
audit the books of HLI to determine if the proceeds of the sale of the 500-hectare
land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the
balance shall be distributed to the qualified FWBs.

HLI, however, takes exception to the above-mentioned ruling and contends that it is
not proper to distribute the unspent or unused balance of the proceeds of the sale of
the 500-hectare converted land and 80.51-hectare SCTEX lot to the qualified FWBs
for the following reasons: (1) the proceeds of the sale belong to the corporation, HLI,
as corporate capital and assets in substitution for the portions of its land asset which
were sold to third parties; (2) to distribute the cash sales proceeds of the portions of
the land asset to the FWBs, who are stockholders of HLI, is to dissolve the
corporation and distribute the proceeds as liquidating dividends without even paying
the creditors of the corporation; and (3) the doing of said acts would violate the
stringent provisions of the Corporation Code and corporate practice. 52
Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability
to the FWBs for the price received for the 500-hectare converted lot and the 80.51hectare SCTEX lot. However, as We have established in Our July 5, 2011 Decision,
the rights, obligations and remedies of the parties in the instant case are primarily
governed by RA 6657 and HLI cannot shield itself from the CARP coverage merely
under the convenience of being a corporate entity. In this regard, it should be
underscored that the agricultural lands held by HLI by virtue of the SDP are no
ordinary assets. These are special assets, because, originally, these should have
been distributed to the FWBs were it not for the approval of the SDP by PARC. Thus,
the government cannot renege on its responsibility over these assets. Likewise, HLI
is no ordinary corporation as it was formed and organized precisely to make use of
these agricultural lands actually intended for distribution to the FWBs. Thus, it cannot
shield itself from the coverage of CARP by invoking the Corporation Code. As
explained by the Court:
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply with RA
6657, which the OSG aptly described as the "mother law" of the SDOA and the
SDP.53It is, thus, paradoxical for HLI to shield itself from the coverage of CARP
by invoking exclusive applicability of the Corporation Code under the guise of
being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since
the FWBs of HLI are also stockholders, its applicability is limited as the rights
of the parties arising from the SDP should not be made to supplant or
circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is
the special law on agrarian reform. As between a general and special law, the latter
shall prevailgeneralia specialibus non derogant.54 Besides, the present impasse
between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents

questioned before the DAR is the proper implementation of the SDP and HLIs
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the
instant case. (Emphasis supplied.)
Considering that the 500-hectare converted land, as well as the 80.51-hectare
SCTEX lot, should have been included in the compulsory coverage were it not for
their conversion and valid transfers, then it is only but proper that the price received
for the sale of these lots should be given to the qualified FWBs. In effect, the
proceeds from the sale shall take the place of the lots.
The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the
payment of taxes and expenses relating to the transfer of the land, as well as HLIs
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. Accordingly, We ordered the deduction of the taxes and expenses relating
to the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary for legitimate corporate purposes, among others.
On this note, DAR claims that the "[l]egitimate corporate expenses should not be
deducted as there is no basis for it, especially since only the auditing to be
conducted on the financial records of HLI will reveal the amounts to be offset
between HLI and the FWBs."55
The contention is unmeritorious. The possibility of an offsetting should not prevent
Us from deducting the legitimate corporate expenses incurred by HLI and
Centennary. After all, the Court has ordered for a proper auditing "[i]n order to
determine once and for all whether or not all the proceeds were properly utilized by
HLI and its subsidiary, Centennary." In this regard, DAR is tasked to "engage the
services of a reputable accounting firm to be approved by the parties to audit the
books of HLI to determine if the proceeds of the sale of the 500-hectare land and the
80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling
expenses and in compliance with the August 14, 1996 Conversion Order." Also, it
should be noted that it is HLI which shall shoulder the cost of audit to reduce the
burden on the part of the FWBs. Concomitantly, the legitimate corporate expenses
incurred by HLI and Centennary, as will be determined by a reputable accounting
firm to be engaged by DAR, shall be among the allowable deductions from the
proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot.
We, however, find that the 3% production share should not be deducted from the
proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot. The 3% production share, like the homelots, was among the benefits
received by the FWBs as farmhands in the agricultural enterprise of HLI and, thus,
should not be taken away from the FWBs.
Contrarily, the minority is of the view that as a consequence of the revocation of the
SDP, the parties should be restored to their respective conditions prior to its
execution and approval, subject to the application of the principle of set-off or
compensation. Such view is patently misplaced.
The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To
reiterate, what was actually revoked by this Court, in its July 5, 2011 Decision, is

PARC Resolution No. 89-12-2 approving the SDP. To elucidate, it was the SDP, not
the SDOA, which was presented for approval by Tadeco to DAR. 56 The SDP
explained the mechanics of the stock distribution but did not make any reference nor
correlation to the SDOA. The pertinent portions of the proposal read:
MECHANICS OF STOCK DISTRIBUTION PLAN
Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land
may distribute among the qualified beneficiaries such proportion or percentage of its
capital stock that the value of the agricultural land actually devoted to agricultural
activities, bears in relation to the corporations total assets. Conformably with this
legal provision, Tarlac Development Corporation hereby submits for approval a stock
distribution plan that envisions the following:57 (Terms and conditions omitted;
emphasis supplied)
xxxx
The above stock distribution plan is hereby submitted on the basis of all these
benefits that the farmworker-beneficiaries of Hacienda Luisita will receive under its
provisions in addition to their regular compensation as farmhands in the agricultural
enterprise and the fringe benefits granted to them by their collective bargaining
agreement with management.58
Also, PARC Resolution No. 89-12-2 reads as follows:
RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF TARLAC
DEVELOPMENT COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)
NOW THEREFORE, on motion duly seconded,
RESOLVED, as it is hereby resolved, to approve the stock distribution plan of
TDC/HLI.
UNANIMOUSLY APPROVED.59 (Emphasis supplied)
Clearly, what was approved by PARC is the SDP and not the SDOA. There is,
therefore, no basis for this Court to apply the law on contracts to the revocation of
the said PARC Resolution.
IV. Just Compensation
In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation for
the remaining agricultural land that will be transferred to DAR for land distribution to
the FWBs." We also ruled that the date of the "taking" is November 21, 1989, when
PARC approved HLIs SDP per PARC Resolution No. 89-12-2.
In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the
foregoing ruling and contends that the "taking" should be reckoned from finality of
the Decision of this Court, or at the very least, the reckoning period may be tacked to
January 2, 2006, the date when the Notice of Coverage was issued by the DAR

pursuant to PARC Resolution No. 2006-34-01 recalling/revoking the approval of the

SDP.60
For their part, Mallari, et al. argue that the valuation of the land cannot be based on
November 21, 1989, the date of approval of the SDP. Instead, they aver that the
date of "taking" for valuation purposes is a factual issue best left to the determination
of the trial courts.61
At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid
just compensation for the agricultural land that will be distributed to the FWBs, since
the Manila Regional Trial Court (RTC) already rendered a decision ordering "the
Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian
Reform, which will distribute the land to small farmers after compensating the
landowners P3.988 million."62 In the event, however, that this Court will rule that HLI
is indeed entitled to compensation, AMBALA contends that it should be pegged at
forty thousand pesos (PhP 40,000) per hectare, since this was the same value that
Tadeco declared in 1989 to make sure that the farmers will not own the majority of
its stocks.63
Despite the above propositions, We maintain that the date of "taking" is November
21, 1989, the date when PARC approved HLIs SDP per PARC Resolution No. 8912-2, in view of the fact that this is the time that the FWBs were considered to own
and possess the agricultural lands in Hacienda Luisita. To be precise, these lands
became subject of the agrarian reform coverage through the stock distribution
scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such
approval is akin to a notice of coverage ordinarily issued under compulsory
acquisition. Further, any doubt should be resolved in favor of the FWBs. As this
Court held in Perez-Rosario v. CA:64
It is an established social and economic fact that the escalation of poverty is the
driving force behind the political disturbances that have in the past compromised the
peace and security of the people as well as the continuity of the national order. To
subdue these acute disturbances, the legislature over the course of the history of the
nation passed a series of laws calculated to accelerate agrarian reform, ultimately to
raise the material standards of living and eliminate discontent. Agrarian reform is a
perceived solution to social instability. The edicts of social justice found in the
Constitution and the public policies that underwrite them, the extraordinary national
experience, and the prevailing national consciousness, all command the great
departments of government to tilt the balance in favor of the poor and
underprivileged whenever reasonable doubt arises in the interpretation of the law.
But annexed to the great and sacred charge of protecting the weak is the diametric
function to put every effort to arrive at an equitable solution for all parties concerned:
the jural postulates of social justice cannot shield illegal acts, nor do they sanction
false sympathy towards a certain class, nor yet should they deny justice to the
landowner whenever truth and justice happen to be on her side. In the occupation of
the legal questions in all agrarian disputes whose outcomes can significantly affect
societal harmony, the considerations of social advantage must be weighed, an
inquiry into the prevailing social interests is necessary in the adjustment of conflicting
demands and expectations of the people, and the social interdependence of these
interests, recognized. (Emphasis supplied.)

The minority contends that it is the date of the notice of coverage, that is, January 2,
2006, which is determinative of the just compensation HLI is entitled to for its
expropriated lands. To support its contention, it cited numerous cases where the
time of the taking was reckoned on the date of the issuance of the notice of
coverage.
However, a perusal of the cases cited by the minority would reveal that none of them
involved the stock distribution scheme. Thus, said cases do not squarely apply to the
instant case. Moreover, it should be noted that it is precisely because the stock
distribution option is a distinctive mechanism under RA 6657 that it cannot be treated
similarly with that of compulsory land acquisition as these are two (2) different
modalities under the agrarian reform program. As We have stated in Our July 5,
2011 Decision, RA 6657 "provides two (2) alternative modalities, i.e., land or stock
transfer, pursuant to either of which the corporate landowner can comply with
CARP."
In this regard, it should be noted that when HLI submitted the SDP to DAR for
approval, it cannot be gainsaid that the stock distribution scheme is clearly HLIs
preferred modality in order to comply with CARP. And when the SDP was approved,
stocks were given to the FWBs in lieu of land distribution. As aptly observed by the
minority itself, "[i]nstead of expropriating lands, what the government took and
distributed to the FWBs were shares of stock of petitioner HLI in proportion to the
value of the agricultural lands that should have been expropriated and turned over to
the FWBs." It cannot, therefore, be denied that upon the approval of the SDP
submitted by HLI, the agricultural lands of Hacienda Luisita became subject of CARP
coverage. Evidently, the approval of the SDP took the place of a notice of coverage
issued under compulsory acquisition.
Also, it is surprising that while the minority opines that under the stock distribution
option, "title to the property remains with the corporate landowner, which should
presumably be dominated by farmers with majority stockholdings in the corporation,"
it still insists that the just compensation that should be given to HLI is to be reckoned
on January 2, 2006, the date of the issuance of the notice of coverage, even after it
found that the FWBs did not have the majority stockholdings in HLI contrary to the
supposed avowed policy of the law. In effect, what the minority wants is to prejudice
the FWBs twice. Given that the FWBs should have had majority stockholdings in HLI
but did not, the minority still wants the government to pay higher just compensation
to HLI. Even if it is the government which will pay the just compensation to HLI, this
will also affect the FWBs as they will be paying higher amortizations to the
government if the "taking" will be considered to have taken place only on January 2,
2006.
The foregoing notwithstanding, it bears stressing that the DAR's land valuation is
only preliminary and is not, by any means, final and conclusive upon the landowner.
The landowner can file an original action with the RTC acting as a special agrarian
court to determine just compensation. The court has the right to review with finality
the determination in the exercise of what is admittedly a judicial function. 65
A view has also been advanced that HLI should pay the qualified FWBs rental for the
use and possession of the land up to the time it surrenders possession and control

over these lands. What this view fails to consider is the fact that the FWBs are also
stockholders of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also,
the income earned by the corporation from its possession and use of the land
ultimately redounded to the benefit of the FWBs based on its business operations in
the form of salaries, benefits voluntarily granted by HLI and other fringe benefits
under their Collective Bargaining Agreement. That being so, there would be unjust
enrichment on the part of the FWBs if HLI will still be required to pay rent for the use
of the land in question.
V. Sale to Third Parties
There is a view that since the agricultural lands in Hacienda Luisita were placed
under CARP coverage through the SDOA scheme on May 11, 1989, then the 10year period prohibition on the transfer of awarded lands under RA 6657 lapsed on
May 10, 1999, and, consequently, the qualified FWBs should already be allowed to
sell these lands with respect to their land interests to third parties, including HLI,
regardless of whether they have fully paid for the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657 states:
SEC. 27. Transferability of Awarded Lands. - Lands acquired by beneficiaries under
this Act may not be sold, transferred or conveyed except through hereditary
succession, or to the government, or to the LBP, or to other qualified beneficiaries for
a period of ten (10) years: Provided, however, That the children or the spouse of the
transferor shall have a right to repurchase the land from the government or LBP
within a period of two (2) years. Due notice of the availability of the land shall be
given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the
barangay where the land is situated. The Provincial Agrarian Coordinating
Committee (PARCCOM), as herein provided, shall, in turn, be given due notice
thereof by the BARC.
If the land has not yet been fully paid by the beneficiary, the right to the land may be
transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary
or to any other beneficiary who, as a condition for such transfer or conveyance, shall
cultivate the land himself. Failing compliance herewith, the land shall be transferred
to the LBP which shall give due notice of the availability of the land in the manner
specified in the immediately preceding paragraph.
In the event of such transfer to the LBP, the latter shall compensate the beneficiary
in one lump sum for the amounts the latter has already paid, together with the value
of improvements he has made on the land. (Emphasis supplied.)
To implement the above-quoted provision, inter alia, DAR issued Administrative
Order No. 1, Series of 1989 (DAO 1) entitled Rules and Procedures Governing Land
Transactions. Said Rules set forth the rules on validity of land transactions, to wit:
II. RULES ON VALIDITY OF LAND TRANSACTIONS
A. The following transactions are valid:

1. Those executed by the original landowner in favor of the qualified

beneficiary from among those certified by DAR.
2. Those in favor of the government, DAR or the Land Bank of the Philippines.
3. Those covering lands retained by the landowner under Section 6 of R.A.
6657 duly certified by the designated DAR Provincial Agrarian Reform Officer
(PARO) as a retention area, executed in favor of transferees whose total
landholdings inclusive of the land to be acquired do not exceed five (5)
hectares; subject, however, to the right of pre-emption and/or redemption of
tenant/lessee under Section 11 and 12 of R.A. 3844, as amended.
xxxx
4. Those executed by beneficiaries covering lands acquired under any
agrarian reform law in favor of the government, DAR, LBP or other qualified
beneficiaries certified by DAR.
5. Those executed after ten (10) years from the issuance and registration of
the Emancipation Patent or Certificate of Land Ownership Award.
B. The following transactions are not valid:
1. Sale, disposition, lease management contract or transfer of possession of
private lands executed by the original landowner prior to June 15, 1988, which
are registered on or before September 13, 1988, or those executed after June
15, 1988, covering an area in excess of the five-hectare retention limit in
violation of R.A. 6657.
2. Those covering lands acquired by the beneficiary under R.A. 6657 and
executed within ten (10) years from the issuance and registration of an
Emancipation Patent or Certificate of Land Ownership Award.
3. Those executed in favor of a person or persons not qualified to acquire land
under R.A. 6657.
4. Sale, transfer, conveyance or change of nature of the land outside of urban
centers and city limits either in whole or in part as of June 15, 1988, when
R.A. 6657 took effect, except as provided for under DAR Administrative Order
No. 15, series of 1988.
5. Sale, transfer or conveyance by beneficiary of the right to use or any other
usufructuary right over the land he acquired by virtue of being a beneficiary, in
order to circumvent the law.
x x x x (Emphasis supplied.)
Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be
transferred or conveyed after ten (10) years from the issuance and registration of the
emancipation patent (EP) or certificate of land ownership award (CLOA).

Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs
in the instant case, the 10-year prohibitive period has not even started. Significantly,
the reckoning point is the issuance of the EP or CLOA, and not the placing of the
agricultural lands under CARP coverage.
Moreover, if We maintain the position that the qualified FWBs should be immediately
allowed the option to sell or convey the agricultural lands in Hacienda Luisita, then all
efforts at agrarian reform would be rendered nugatory by this Court, since, at the end
of the day, these lands will just be transferred to persons not entitled to land
distribution under CARP. As aptly noted by the late Senator Neptali Gonzales during
the Joint Congressional Conference Committee on the Comprehensive Agrarian
Reform Program Bills:
SEN. GONZALES. My point is, as much as possible let the said lands be distributed
under CARP remain with the beneficiaries and their heirs because that is the lesson
that we have to learn from PD No. 27. If you will talk with the Congressmen
representing Nueva Ecija, Pampanga and Central Luzon provinces, law or no law,
you will find out that more than one-third of the original, of the lands distributed under
PD 27 are no longer owned, possessed or being worked by the grantees or the
awardees of the same, something which we ought to avoid under the CARP bill that
we are going to enact.66 (Emphasis supplied.)
Worse, by raising that the qualified beneficiaries may sell their interest back to HLI,
this smacks of outright indifference to the provision on retention limits 67 under RA
6657, as this Court, in effect, would be allowing HLI, the previous landowner, to own
more than five (5) hectares of agricultural land, which We cannot countenance.
There is a big difference between the ownership of agricultural lands by HLI under
the stock distribution scheme and its eventual acquisition of the agricultural lands
from the qualified FWBs under the proposed buy-back scheme. The rule on retention
limits does not apply to the former but only to the latter in view of the fact that the
stock distribution scheme is sanctioned by Sec. 31 of RA 6657, which specifically
allows corporations to divest a proportion of their capital stock that "the agricultural
land, actually devoted to agricultural activities, bears in relation to the companys
total assets." On the other hand, no special rules exist under RA 6657 concerning
the proposed buy-back scheme; hence, the general rules on retention limits should
apply.
Further, the position that the qualified FWBs are now free to transact with third
parties concerning their land interests, regardless of whether they have fully paid for
the lands or not, also transgresses the second paragraph of Sec. 27 of RA 6657,
which plainly states that "[i]f the land has not yet been fully paid by the beneficiary,
the right to the land may be transferred or conveyed, with prior approval of the DAR,
to any heir of the beneficiary or to any other beneficiary who, as a condition for such
transfer or conveyance, shall cultivate the land himself. Failing compliance herewith,
the land shall be transferred to the LBP x x x." When the words and phrases in the
statute are clear and unequivocal, the law is applied according to its express
terms.68 Verba legis non est recedendum, or from the words of a statute there should
be no departure.69

The minority, however, posits that "[t]o insist that the FWBs rights sleep for a period
of ten years is unrealistic, and may seriously deprive them of real opportunities to
capitalize and maximize the victory of direct land distribution." By insisting that We
disregard the ten-year restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation, which is violative of the
principle of separation of powers.70 The discourse by Ruben E. Agpalo, in his book
on statutory construction, is enlightening:
Where the law is clear and unambiguous, it must be taken to mean exactly what it
says and the court has no choice but to see to it that its mandate is obeyed. Where
the law is clear and free from doubt or ambiguity, there is no room for construction or
interpretation. Thus, where what is not clearly provided in the law is read into the law
by construction because it is more logical and wise, it would be to encroach upon
legislative prerogative to define the wisdom of the law, which is judicial legislation.
For whether a statute is wise or expedient is not for the courts to determine. Courts
must administer the law, not as they think it ought to be but as they find it and
without regard to consequences.71 (Emphasis supplied.)
And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang
Ladlad LGBT Party v. COMELEC:72
Regardless of the personal beliefs and biases of its individual members, this Court
can only apply and interpret the Constitution and the laws. Its power is not to create
policy but to recognize, review or reverse the policy crafted by the political
departments if and when a proper case is brought before it. Otherwise, it will tread
on the dangerous grounds of judicial legislation.
Considerably, this Court is left with no other recourse but to respect and apply the
law.
VI. Grounds for Revocation of the SDP
AMBALA and FARM reiterate that improving the economic status of the FWBs is
among the legal obligations of HLI under the SDP and is an imperative imposition by
RA 6657 and DAO 10.73 FARM further asserts that "[i]f that minimum threshold is not
met, why allow [stock distribution option] at all, unless the purpose is not social
justice but a political accommodation to the powerful."74
Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657
and DAO 10 can it be inferred that improving the economic status of the FWBs is
among the legal obligations of HLI under the SDP or is an imperative imposition by
RA 6657 and DAO 10, a violation of which would justify discarding the stock
distribution option. As We have painstakingly explained in Our July 5, 2011 Decision:
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the FWBs through greater productivity
of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.It is the policy of the State to

pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the
landless farmers and farm workers will receive the highest consideration to promote
social justice and to move the nation towards sound rural development and
industrialization, and the establishment of owner cultivatorship of economic-sized
farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard to
the rights of landowners to just compensation and to the ecological needs of the
nation, shall be undertaken to provide farmers and farm workers with the opportunity
to enhance their dignity and improve the quality of their lives through greater
productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof. To this end, the
State shall encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment of
just compensation. The State shall respect the right of small landowners and shall
provide incentives for voluntary land-sharing.
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of agricultural lands." Of note is
the term "opportunity" which is defined as a favorable chance or opening offered by
circumstances. Considering this, by no stretch of imagination can said provision be
construed as a guarantee in improving the lives of the FWBs. At best, it merely
provides for a possibility or favorable chance of uplifting the economic status of the
FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal
obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO
10, a violation of which would justify discarding the stock distribution option. Nothing
in that option agreement, law or department order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and
higher benefits exclusive of free hospital and medical benefits to their immediate
family. And attached as Annex "G" to HLIs Memorandum is the certified true report
of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations,
captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing
what HLI gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) =
PhP 303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of

the 500-hectare converted lands. While not included in the report, HLI manifests
having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land
traversed by the SCTEX. On top of these, it is worth remembering that the shares of
stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from
the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has
not anyway earned profits through the years, it cannot be over-emphasized that, as a
matter of common business sense, no corporation could guarantee a profitable run
all the time. As has been suggested, one of the key features of an SDP of a
corporate landowner is the likelihood of the corporate vehicle not earning, or, worse
still, losing money.
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood that
the plan "would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them individually." But
as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
actually exact assurance of success on something that is subject to the will of man,
the forces of nature or the inherent risky nature of business. 75 Just like in actual land
distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a
comfortable life for the FWBs. The Court can take judicial notice of the fact that there
were many instances wherein after a farmworker beneficiary has been awarded with
an agricultural land, he just subsequently sells it and is eventually left with nothing in
the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship,
if that really be the case, can hardly be attributed to HLI and its SDP and provide a
valid ground for the plans revocation. (Citations omitted; emphasis in the original.)
This Court, despite the above holding, still affirmed the revocation by PARC of its
approval of the SDP based on the following grounds: (1) failure of HLI to fully comply
with its undertaking to distribute homelots to the FWBs under the SDP; (2)
distribution of shares of stock to the FWBs based on the number of "man days" or
"number of days worked" by the FWB in a years time; and (3) 30-year timeframe for
the implementation or distribution of the shares of stock to the FWBs.
Just the same, Mallari, et al. posit that the homelots required to be distributed have
all been distributed pursuant to the SDOA, and that what merely remains to be done
is the release of title from the Register of Deeds. 76 They further assert that there has
been no dilution of shares as the corporate records would show that if ever not all of
the 18,804.32 shares were given to the actual original FWB, the recipient of the
difference is the next of kin or children of said original FWB. 77 Thus, they submit that
since the shares were given to the same "family beneficiary," this should be deemed
as substantial compliance with the provisions of Sec. 4 of DAO 10. 78 Also, they
argue that there has been no violation of the three-month period to implement the
SDP as mandated by Sec. 11 of DAO, since this provision must be read in light of
Sec. 10 of Executive Order No. 229, the pertinent portion of which reads, "The
approval by the PARC of a plan for such stock distribution, and its initial

implementation, shall be deemed compliance with the land distribution requirement

of the CARP."79
Again, the matters raised by Mallari, et al. have been extensively discussed by the
Court in its July 5, 2011 Decision. As stated:
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land distribution.
Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding section
shall be provided with homelots and small farmlots for their family use, to be taken
from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be
owned collectively by the worker-beneficiaries who shall form a workers cooperative
or association which will deal with the corporation or business association. Until a
new agreement is entered into by and between the workers cooperative or
association and the corporation or business association, any agreement existing at
the time this Act takes effect between the former and the previous landowner shall
be respected by both the workers cooperative or association and the corporation or
business association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge
among the qualified family-beneficiaries x x x residential or homelots of not more
than 240 sq. m. each, with each family beneficiary being assured of receiving and
owning a homelot in the barrio or barangay where it actually resides," "within a
reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240square meter homelots and, of those who were already given, some still do not have
the corresponding titles.

During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can
you also [prove] that the qualified family beneficiaries were already provided the 240
square meter homelots.
Atty. Asuncion: We will, your Honor please.
Other than the financial report, however, no other substantial proof showing that all
the qualified beneficiaries have received homelots was submitted by HLI. Hence, this
Court is constrained to rule that HLI has not yet fully complied with its undertaking to
distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the
SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI]
shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the
THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to
them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the
SECOND PARTY that are presently owned and held by the FIRST PARTY, until
such time as the entire block of 118,391,976.85 shares shall have been completely
acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of "man
days," that is, the number of days that the FWBs have worked during the year. This
formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes
of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of shares of
the same class and value, with the same rights and features as all other shares, to
each of the qualified beneficiaries. This distribution plan in all cases, shall be at least
the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock distribution
schemes taking into account factors such as rank, seniority, salary, position and
other circumstances which may be deemed desirable as a matter of sound company
policy.
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first

pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to

be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum
ratio contemplates of that "proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets." It is this set of shares of stock which, in line with Sec. 4 of
DAO 10, is supposed to be allocated "for the distribution of an equal number of
shares of stock of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous
extra grant, meaning that this set or category constitutes an augmentation share/s
that the corporate landowner may give under an additional stock distribution scheme,
taking into account such variables as rank, seniority, salary, position and like factors
which the management, in the exercise of its sound discretion, may deem desirable.
Before anything else, it should be stressed that, at the time PARC approved HLIs
SDP, HLI recognized 6,296individuals as qualified FWBs. And under the 30-year
stock distribution program envisaged under the plan, FWBs who came in after 1989,
new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of "man days," HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had
given up their rights to the land that could have been distributed to them, suffered a
dilution of their due share entitlement. As has been observed during the oral
arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs. Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter
SDOA instead of placing the land under CARP. And for that reason those who would
have gotten their shares of the land actually gave up their rights to this land in place
of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to
the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to
the farmers at that time that numbered x x x those who signed five thousand four
hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None,
if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original
(interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for
new workers who come in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already fixed. The TADECO
who has shares there about sixty six percent (66%) and the five thousand four
hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why,
why will you x x x what right or where did you get that right to use this shares, to
water down the shares of those who should have been benefited, and to use it as a
reward system decided by the company?
From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from watering
down of shares. As determined earlier, each original FWB is entitled to 18,804.32
HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares
per beneficiary, because the acquisition and distribution of the HLI shares were
based on "man days" or "number of days worked" by the FWB in a years time. As
explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work
in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs,
such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to
the Court, the total number of farmworkers of HLI as of said date stood at 10,502. All

these farmworkers, which include the original 6,296 FWBs, were given shares out of
the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding
capital stock of HLI. Clearly, the minimum individual allocation of each original FWB
of 18,804.32 shares was diluted as a result of the use of "man days" and the hiring of
additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a
30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to
what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of
the approved stock distribution plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by PARC. In fact, based on the said
provision, the transfer of the shares of stock in the names of the qualified FWBs
should be recorded in the stock and transfer books and must be submitted to the
SEC within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution
plan shall be implemented within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the PARC, and the transfer of the
shares of stocks in the names of the qualified beneficiaries shall be recorded in stock
and transfer books and submitted to the Securities and Exchange Commission
(SEC) within sixty (60) days from the said implementation of the stock distribution
plan.
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by PARC.
While neither of the clashing parties has made a compelling case of the thrust of this
provision, the Court is of the view and so holds that the intent is to compel the
corporate landowner to complete, not merely initiate, the transfer process of shares
within that three-month timeframe. Reinforcing this conclusion is the 60-day stock
transfer recording (with the SEC) requirement reckoned from the implementation of
the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can
veritably evade compliance with agrarian reform by simply deferring to absurd limits
the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the
fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution
under CARP shall be made in thirty (30) annual amortizations. To HLI, said section
provides a justifying dimension to its 30-year stock distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced
as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be
paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.

Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what is
involved is stock distribution, it is the corporate landowner who has the obligation to
distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
pay the cost of the land thus awarded them to make it less cumbersome for them to
pay the government. To be sure, the reason underpinning the 30-year
accommodation does not apply to corporate landowners in distributing shares of
stock to the qualified beneficiaries, as the shares may be issued in a much shorter
period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA
6657, the PARC and the DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making power, DAO 10 has
the force and effect of law and must be duly complied with. The PARC is, therefore,
correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated
November 21, l989 approving the HLIs SDP is nullified and voided. (Citations
omitted; emphasis in the original.)
Based on the foregoing ruling, the contentions of Mallari, et al. are either not
supported by the evidence on record or are utterly misplaced. There is, therefore, no
basis for the Court to reverse its ruling affirming PARC Resolution No. 2005-32-01
and PARC Resolution No. 2006-34-01, revoking the previous approval of the SDP by
PARC.
VII. Control over Agricultural Lands
After having discussed and considered the different contentions raised by the parties
in their respective motions, We are now left to contend with one crucial issue in the
case at bar, that is, control over the agricultural lands by the qualified FWBs.
Upon a review of the facts and circumstances, We realize that the FWBs will never
have control over these agricultural lands for as long as they remain as stockholders
of HLI. In Our July 5, 2011 Decision, this Court made the following observations:
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
policy on agrarian reform is that control over the agricultural land must always be in
the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it
the farmers should always own majority of the common shares entitled to elect the
members of the board of directors to ensure that the farmers will have a clear
majority in the board. Before the SDP is approved, strict scrutiny of the proposed
SDP must always be undertaken by the DAR and PARC, such that the value of the
agricultural land contributed to the corporation must always be more than 50% of the
total assets of the corporation to ensure that the majority of the members of the
board of directors are composed of the farmers. The PARC composed of the
President of the Philippines and cabinet secretaries must see to it that control over
the board of directors rests with the farmers by rejecting the inclusion of nonagricultural assets which will yield the majority in the board of directors to non-

farmers. Any deviation, however, by PARC or DAR from the correct application of
the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not
make said provision constitutionally infirm. Rather, it is the application of said
provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the
constitutional policy of ensuring control by the farmers. (Emphasis supplied.)
In line with Our finding that control over agricultural lands must always be in the
hands of the farmers, We reconsider our ruling that the qualified FWBs should be
given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs
will never gain control given the present proportion of shareholdings in HLI.
A revisit of HLIs Proposal for Stock Distribution under CARP and the Stock
Distribution Option Agreement (SDOA) upon which the proposal was based reveals
that the total assets of HLI is PhP 590,554,220, while the value of the 4,915.7466
hectares is PhP 196,630,000. Consequently, the share of the farmer-beneficiaries in
the HLI capital stock is 33.296% (196,630,000 divided by 590,554.220);
118,391,976.85 HLI shares represent 33.296%. Thus, even if all the holders of the
118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which
is unlikely, control will never be placed in the hands of the farmerbeneficiaries.1awp++i1 Control, of course, means the majority of 50% plus at least
one share of the common shares and other voting shares. Applying the formula to
the HLI stockholdings, the number of shares that will constitute the majority is
295,112,101 shares (590,554,220 divided by 2 plus one [1] HLI share). The
118,391,976.85 shares subject to the SDP approved by PARC substantially fall short
of the 295,112,101 shares needed by the FWBs to acquire control over HLI. Hence,
control can NEVER be attained by the FWBs. There is even no assurance that 100%
of the 118,391,976.85 shares issued to the FWBs will all be voted in favor of staying
in HLI, taking into account the previous referendum among the farmers where said
shares were not voted unanimously in favor of retaining the SDP. In light of the
foregoing consideration, the option to remain in HLI granted to the individual FWBs
will have to be recalled and revoked.
Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI
will no longer be operating under SDP and will only be treated as an ordinary private
corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary
stockholders and will no longer be under the protective mantle of RA 6657.
In addition to the foregoing, in view of the operative fact doctrine, all the benefits and
homelots80 received by all the FWBs shall be respected with no obligation to refund
or return them, since, as We have mentioned in our July 5, 2011 Decision, "the
benefits x x x were received by the FWBs as farmhands in the agricultural enterprise
of HLI and other fringe benefits were granted to them pursuant to the existing
collective bargaining agreement with Tadeco."
One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The
remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the
rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22
of RA 6657.

In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent
with its administrative prerogative to identify and select the agrarian reform
beneficiaries under RA 6657.81
WHEREFORE, the Motion for Partial Reconsideration dated July 20, 2011 filed by
public respondents Presidential Agrarian Reform Council and Department of
Agrarian Reform, the Motion for Reconsideration dated July 19, 2011 filed by private
respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita, the Motion
for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc., and the Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA are PARTIALLY
GRANTED with respect to the option granted to the original farmworker-beneficiaries
of Hacienda Luisita to remain with Hacienda Luisita, Inc., which is hereby
RECALLED and SET ASIDE. The Motion for Clarification and Partial
Reconsideration dated July 21, 2011 filed by petitioner HLI and the Motion for
Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari, Julio
Suniga, Supervisory Group of Hacienda Luisita, Inc. and Windsor Andaya are
DENIED.
The fallo of the Courts July 5, 2011 Decision is hereby amended and shall read:
PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No.
2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition scheme of the CARP, are
hereby AFFIRMED with the following modifications:
All salaries, benefits, the 3% of the gross sales of the production of the agricultural
lands, the 3% share in the proceeds of the sale of the 500-hectare converted land
and the 80.51-hectare SCTEX lot and the homelots already received by the 10,502
FWBs composed of 6,296 original FWBs and the 4,206 non-qualified FWBs shall be
respected with no obligation to refund or return them. The 6,296 original FWBs shall
forfeit and relinquish their rights over the HLI shares of stock issued to them in favor
of HLI. The HLI Corporate Secretary shall cancel the shares issued to the said FWBs
and transfer them to HLI in the stocks and transfer book, which transfers shall be
exempt from taxes, fees and charges. The 4,206 non-qualified FWBs shall remain as
stockholders of HLI.
DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARCs SDP-approving Resolution No. 89-12-2 the 500-hectare lot
subject of the August 14, l996 Conversion Order and the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX complex. After the segregation
process, as indicated, is done, the remaining area shall be turned over to DAR for
immediate land distribution to the original 6,296 FWBs or their successors-in-interest
which will be identified by the DAR. The 4,206 non-qualified FWBs are not entitled to
any share in the land to be distributed by DAR.1wphi1
HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of
the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary

Holdings, Inc., for the sale of the remaining 300 hectares of the aforementioned 500hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500
paid by the government through the Bases Conversion Development Authority for
the sale of the 80.51-hectare lot used for the construction of the SCTEX road
network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP
750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of
the proceeds of said transfers that were paid to the FWBs, the taxes and expenses
relating to the transfer of titles to the transferees, and the expenditures incurred by
HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this
purpose, DAR is ordered to engage the services of a reputable accounting firm
approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to
determine if the PhP 1,330,511,500 proceeds of the sale of the three (3)
aforementioned lots were actually used or spent for legitimate corporate purposes.
Any unspent or unused balance and any disallowed expenditures as determined by
the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to
DAR to be reckoned from November 21, 1989 which is the date of issuance of PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation
due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report, quarterly
reports on the execution of this judgment within the first 15 days after the end of
each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79416 September 5, 1989
ROSALINA BONIFACIO, surviving wife; and children GABRIEL, PONCIANO,
TIBURCIO, BEATRIZ, GENEROSA, SILVERIA, LEONARDO, FELOMENA,
ENCARNACION and LEONILA, all surnamed BONIFACIO,petitioners,
vs.
HON. NATIVIDAD G. DIZON, Presiding Judge of the Regional Trial Court of
Malolos, Branch XIII, Malolos, Bulacan and PASTORA SAN
MIGUEL, respondents.

FERNAN, C.J.:
The issue raised in the instant petition for certiorari certified to us by the Court of
Appeals in its resolution 1 dated November 28, 1986 in CA-G.R. SP No. 10033 as
involving a pure question of law is phrased by petitioners, thus:
WHETHER OR NOT, THE FAVORABLE JUDGMENT OBTAINED BY
THE DECEDENT IS INHERITED BY THE COMPULSORY HEIRS,
THEREBY VESTING TO THE LATTER, ALL THE RIGHTS
CONFERRED BY THE JUDGMENT TO (sic) THE DECEDENT. 2
The favorable judgment adverted to by petitioners traces its origin to the complaint
filed on July 1, 1968 by Olimpio Bonifacio before the then Court of Agrarian
Relations, Fifth Regional District, Branch I-A of Baliwag, Bulacan, seeking the
ejectment of private respondent Pastora San Miguel from Bonifacio's two-hectare
agricultural land situated at Patubig, Marilao, Bulacan and covered by Transfer
Certificate of Title No. T-27298. The ground relied upon therefor was personal
cultivation under Section 36 (1) of R.A. 3844, otherwise known as the Agricultural
Land Reform Code (CAR Case No. 2160-B'68).
After trial on the merits, judgment was rendered therein on September 18, 1970 by
Judge Manuel Jn. Serapio:
1. Granting authority to plaintiff OLIMPIO BONIFACIO to eject
defendant PASTORA SAN MIGUEL from the landholding in question
situated at Patubig, Marilao, Bulacan with an area of two (2) hectares,
more or less, and consequently, ordering said defendant to vacate the
same landholding and deliver possession thereof to said plaintiff for the
latter's personal cultivation, subject to the provisions of Section 25 of
R.A. 3844; and
2. Dismissing all other claims and counterclaims of the parties.

On appeal by private respondent Pastora San Miguel, the Court of

Appeals 4 modified said judgment with respect to her counterclaim by ordering
Olimpio Bonifacio to pay her the amount of P 1,376.00. The judgment was affirmed
in all other respects. 5
Still dissatisfied, private respondent Pastora San Miguel sought relief from this Court.
During the pendency of her petition, on August 7, 1983, Olimpio Bonifacio died. As
no notice of such death was given to the Court, no order for the substitution of his
heirs was made. On July 31, 1985, the Court En Banc resolved to deny private
respondent's petition for lack of merit and to affirm the decision of the Court of
Appeals. 6
Subsequently, petitioners Rosalina Bonifacio, as surviving wife, and Gabriel,
Ponciano, Tiburcio, Beatriz, Generosa, Silveria, Leonardo, Felomena, Encarnacion
and Leonila all surnamed Bonifacio, as children and heirs of Olimpio Bonifacio,
moved for the execution of the decision in CAR Case No. 2160-B'68 before the
respondent Regional Trial Court of Bulacan. A writ of execution was issued on
February 20, 1986 and on March 6, 1986, the Deputy Sheriff submitted his Report
(Partial Delivery of Possession), stating in part that except for a portion thereof
occupied by the house of Pastora San Miguel which the latter refused to vacate, he
had delivered the land subject matter of the action to Rosalina Bonifacio as surviving
wife of Olimpio Bonifacio.
Thereafter, private respondent Pastora San Miguel moved to quash the writ of
execution. This was opposed by petitioners who in turn sought the issuance of a writ
of demolition and an order declaring Pastora San Miguel in contempt of court for
allegedly re-entering the subject land.
After hearing, respondent Judge Natividad G. Dizon issued a resolution on July 15,
1986, the dispositive portion of which reads:
WHEREFORE, the implementation of the writ of execution of the
Decision dated September 18, 1970 made by the Sheriff of this Court,
per directive contained in our Order of February 18, 1986, is hereby
declared null and void; the "Motion for Demolition" filed by plaintiff is
hereby denied; and, the "Petition for Contempt" likewise denied.
SO ORDERED. 7
Petitioners assail this resolution in the petition for certiorari filed before the Court of
Appeals, which as stated earlier, was certified to us pursuant to Section 9 (3) of
Batas Pambansa Blg. 129 in relation to Section 5 (2) [e], Art. X of the 1973
Constitution and Rule 50, Sec. 3 of the Revised Rules of Court.
Petitioners contend that respondent judge committed grave abuse of discretion
tantamount to lack of jurisdiction in ruling that the decision in CAR Case No. 2160B'68 can no longer be executed as said action is purely personal in character and
therefore cannot, upon Olimpio Bonifacio's death, be inherited by his heirs. They
assert that CAR Case No. 2160-B'68, being an ejectment case and not one of those
specifically provided by law to be purely personal, survives the death of a party.

Furthermore, as under Rule 39, Section 49 (b) of the Rules of Court, a judgment is
binding not only upon the parties but also on their successors-in-interest, petitioners
are entitled to enforce the decision in CAR Case No. 2160-B'68.
Private respondent, on the other hand, places stress on the fact that the action under
consideration is not an ordinary ejectment case but an agrarian case for the
ejectment of an agricultural lessee. She theorizes that the right being asserted in the
action is personal to Olimpio Bonifacio, which necessarily died with him. She further
contends that the non-substitution of Olimpio Bonifacio by his heirs rendered the
proceedings taken after his death null and void. She also points to certain
supervening events which allegedly prohibit execution of the judgment in CAR Case
No. 2160-B'68, to wit: the amendment of Section 36 (1), R.A. 3844 by R.A. No. 6389
and 2) the promulgation of P.D. No. 27.
Private respondent is correct in characterizing CAR Case No. 2160-B'68 as more
than an ordinary ejectment case. It is, indeed, an agrarian case for the ejectment of
an agricultural lessee, which in the light of the public policy involved, is more closely
and strictly regulated by the State. This factor, however, does not operate to bar the
application to the instant case of the general rule that an ejectment case survives the
death of a party. 8
Much of the problem lies in the term "personal cultivation" by which the ground for
ejectment under Section 36 (1) of R.A. 3844 was loosely referred. As it is, the term
gave the impression that the ejectment of an agricultural lessee was allowed only if
and when the landowner-lessor and no other opted to cultivate the landholding;
thereby giving use to a bigger misconception that the right of cultivation pertained
exclusively to the landowner-lessor, and therefore his personal right alone. A reading
of Section 36 (1), R.A. 3844 however readily demonstrates the fallacy of this
interpretation. Said section provides:
Sec. 36. Possession of Landholding; Exceptions. Notwithstanding
any agreement as to the period or future surrender of the land, an
agricultural lessee shall continue in the enjoyment and possession of
his landholding except when his dispossession has been authorized by
the Court in a judgment that is final and executory if after due hearing it
is shown that:
(1) The agricultural lessor-owner or a member of the immediate family
will personally cultivate the landholding or will convert the landholding,
if suitably located, into residential, factory, hospital or school site or
other useful non-agricultural purposes . . . .
Under this provision, ejectment of an agricultural lessee was authorized not only
when the landowner-lessor desired to cultivate the landholding, but also when a
member of his immediate family so desired. In so providing, the law clearly did not
intend to limit the right of cultivation strictly and personally to the landowner but to
extend the exercise of such right to the members of his immediate family. Clearly
then, the right of cultivation as a ground for ejectment was not a right exclusive and
personal to the landowner-lessor. To say otherwise would be to put to naught the

right of cultivation likewise conferred upon the landowner's immediate family

members.
The right of cultivation was extended to the landowner's immediate family members
evidently to place the landowner-lessor in parity with the agricultural lessee who was
(and still is) allowed to cultivate the land with the aid of his farm household. In this
regard, it must be observed that an agricultural lessee who cultivates the landholding
with the aid of his immediate farm household is within the contemplation of the law
engaged in "personal cultivation."
Thus, whether used in reference to the agricultural lessor or lessee, the term
"personal cultivation" cannot be given a restricted connotation to mean a right
personal and exclusive to either lessor or lessee. In either case, the right extends to
the members of the lessor's or lessee's immediate family members.
Petitioners are not only the heirs and successors-in-interest, but the immediate
family members of the deceased landowner-lessor as well. The right to cultivate the
landholding asserted in CAR Case No. 2160-B'68 not being a purely personal right of
the deceased landowner-lessor, the same was transmitted to petitioners as heirs and
successors-in-interest. Petitioners are entitled to the enforcement of the judgment in
CAR Case No. 2160-B'68.
Rules of procedure make it the duty of the attorney to inform the court promptly of his
client's death, incapacity or incompetency during the pendency of the action and to
give the name and residence of his executor, administrator, guardian or other legal
representative. 9 In case of a party's death, the court, if the action survives, shall then
order upon proper notice the legal representatives of the deceased to appear and to
be substituted for the deceased within a period of 30 days or within such time as
may be granted. 10
In the case at bar, Olimpio Bonifacio's death during the pendency of private
respondent's petition was not communicated to the Court. As ruled by this Court in
the case of Florendo, Jr. vs. Coloma, supra, involving substantially the same facts
and issue:
. . . The petitioners challenge the proceeding in the Court of Appeals
after the death of the plaintiff-appellant Adela Salindon. They are of the
opinion that since there was no legal representative substituted for
Salindon after her death, the appellate court lost its jurisdiction over the
case and consequently, the proceedings in the said court are null and
void. This argument is without merit.
There is no dispute that an ejectment case survives the death of a
party. The supervening death of plaintiff-appellant Salindon did not
extinguish her civil personality (Republic v. Bagtas 6 SCRA 242; Vda.
de Haberes v. Court of Appeals, 104 SCRA 534). . . .
xxx xxx xxx

In the case at bar, Salindon's counsel after her death on December 11,
1976 failed to inform the court of Salindon's death. The appellate court
could not be expected to know or take judicial notice of the death of
Salindon without the proper manifestation from Salindon's counsel. In
such a case and considering that the supervening death of appellant
did not extinguish her civil personality, the appellate court was well
within its jurisdiction to proceed as it did with the case. There is no
showing that the appellate court's proceedings in the case were tainted
with irregularities.
Private respondent's challenge against the proceedings held after Olimpio
Bonifacio's death cannot therefore be heeded.
Neither can private respondent derive comfort from the amendment of Section 36 (1)
of R.A. 3844 by Section 7 of R.A. No. 6389 11 and the promulgation of P.D. No.
27. 12 In Nilo v. Court of Appeals, G.R. No. L-34586, April 2, 1984,128 SCRA 519,
we categorically ruled that both R.A. No. 6389 and P.D. No. 27 cannot be applied
retroactively under the general rule that statutes have no retroactive effect unless
otherwise provided therein.
There being no cogent reason to nullify the implementation of the writ of execution in
CAR Case No. 2160-B'68, respondent judge acted with grave abuse of discretion in
having done so. The writ prayed for should issue.
WHEREFORE, the petition is GRANTED. The assailed resolution dated July 15,
1986 is hereby SET ASIDE. The immediate execution of the decision in CAR Case
No. 2160-B'68 is ordered. This decision is immediately executory. No
pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-54281 March 19, 1990
CELSO PAGTALUNAN and PAULINA P. PAGTALUNAN, petitioners,
vs.
HON. ROQUE A. TAMAYO, Presiding Judge of the CFI of Bulacan, Branch VI,
REPUBLIC OF THE PHILIPPINES and TURANDOT, TRAVIATA, MARCELITA,
MARLENE PACITA, MATTHEW and ROSARY, all surnamed
ALDABA, respondents.
Emilio G. Garcia for petitioners.

CORTES, J.:
On January 17, 1978, respondent Republic of the Philippines filed a complaint with
the Court of First Instance of Bulacan for expropriation of a parcel of land located in
Bo. Tikay, Malolos, Bulacan, and owned by private respondents herein as evidenced
by TCT No. 24006, issued by the Register of Deeds of the province of Bulacan
[Petition, p. 2; Rollo, p. 10]. The complaint was docketed as Civil Case No. 5257-M
and entitled "Republic of the Philippines v. Turandot Aldaba, et al."
On March 2, 1978, the Court of First Instance issued a writ of possession placing the
Republic in possession of the land, upon its deposit of the amount of Seven
Thousand Two Hundred Pesos (P7,200.00) as provisional value of the land. On
June 8, 1978, petitioners herein filed a supplemental motion for leave to intervene,
with complaint in intervention attached thereto, alleging that petitioner Celso
Pagtalunan has been the bona fide agricultural tenant of a portion of the land.
Petitioners asked the trial court to order payment to Celso Pagtalunan of just
compensation for his landholding or, in the alternative, to order payment of his
disturbance compensation as bona fide tenant in an amount not less than Fifteen
Thousand Pesos (P15,000.00) per hectare.
On December 8, 1978, respondent Judge Roque A. Tamayo issued an order
denying the petitioners' supplemental motion, holding that to admit petitioners'
complaint in intervention would be tantamount to allowing a person to sue the State
without its consent since the claim for disturbance compensation is a claim against
the State. On January 12, 1979, petitioners filed a motion for reconsideration but this
was denied by respondent judge in an order dated February 13, 1979.
On July 23, 1980. the instant petition was filed and was docketed as G.R. No. 54281.
On January 14, 1981, this Court issued a resolution denying the instant petition for
lack of merit. On March 10, 1981, petitioners filed a motion for reconsideration,
limiting the discussion on the issue of lack of jurisdiction of the trial court over the

expropriation case. On August 19, 1981, this Court issued a resolution granting the
motion for reconsideration and gave due course to the petition.
Meanwhile on December 22, 1978, the Office of the Solicitor General filed in behalf
of the Republic of the Philippines a notice of appeal, as well as a first motion for
extension of thirty (30) days from January 12, 1979 within which to file record on
appeal which was granted by respondent court. The Solicitor General was appealing
from that portion of the December 8, 1978 decision of the Court of First Instance
which fixed the compensation for the land expropriated at Thirty Pesos (P30.00) per
square meter. Counsel for private respondents filed an objection to the public
respondent's record on appeal claiming that the same was filed beyond the
reglementary period. On August 13, 1979 the Court of First Instance dismissed the
appeal interposed by the Republic. The Office of the Solicitor General moved for
reconsideration but this was denied for lack of merit. Thereafter, public respondent
filed with the Court of Appeals a petition for certiorari, prohibition
and mandamus with preliminary injunction seeking the annulment of the orders of
the Court of First Instance. On April 29, 1980, the Court of Appeals rendered a
decision dismissing public respondent's petition. On October 24, 1980, public
respondent filed with this Court a petition, docketed as G.R. No. 54886, asking this
Court to annul the decision of the Court of Appeals and to direct and compel the
lower court to approve the Government's record on appeal and to elevate the same
to the Court of Appeals. In a decision dated August 10, 1981, the Court granted the
petition and directed the trial court to approve the Government's record on appeal
and to elevate the same to the Court of Appeals.
I.
The principal issue raised in the petition centers on the alleged right of petitioners to
intervene in the expropriation proceedings instituted by the State against private
respondents as registered owner of the subject property.
Intervention is not a matter of right but may be permitted by the courts when the
applicant shows facts which satisfy the requirements of the law authorizing
intervention [Gibson v. Revilla, G.R. No. L-41432, July 30, 1979, 92 SCRA 219].
Under Section 2, Rule 12 of the Revised Rules of Court, what qualifies a person to
intervene is his possession of a legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against both, or when he is so situated
as to be adversely affected by a distribution or other disposition of property in the
custody of the court or an officer thereof. The Court has ruled that such interest must
be actual, direct and material, and not simply contingent and expectant [Garcia v.
David, 67 Phil. 279 (1939); Batama Farmer's Cooperative Marketing Association,
Inc. v. Rosal, G.R. No. L-30526, November 29, 1971, 42 SCRA 408; Gibson v.
Revilla, supra].
In the present case, petitioners claim that Celso Pagtalunan possesses legal interest
in the matter in litigation for he, not private respondents herein, is the party entitled to
just compensation for the subject property sought to be expropriated or, in the
alternative, disturbance compensation as a bona fide tenant based on Section 36 (1)
of Rep. Act No. 3844, as amended by Rep. Act No. 6389.

Petitioners base their claim for just compensation on Certificate of Land Transfer No.
NS-054560 issued to them, where the tenant farmer/grantee is "deemed owner" of
the agricultural land identified therein. * Petitioners contend that the certificate is a
muniment of title evidencing their legal ownership of a portion of the subject property.
Thus, they conclude that they are entitled to a portion of the proceeds from the
expropriation proceedings instituted over the subject property.
There is no merit to the above contention.
The Court is fully aware that the phrase "deemed to be the owner" is used to
describe the grantee of a certificate of land transfer. But the import of such phrase
must be construed within the policy framework of Pres. Decree No. 27, and
interpreted with the other stipulations of the certificate issued pursuant to this decree.
Pres. Decree No. 27 (otherwise known as the "Tenant Emancipation Decree") was
anchored upon the fundamental objective of addressing valid and legitimate
grievances of land ownership giving rise to violent conflict and social tension in the
countryside. More importantly, it recognized the necessity to encourage a more
productive agricultural base of the country's economy. To achieve this end, the
decree laid down a system for the purchase by small farmers, long recognized as the
backbone of the economy, of the lands they were tilling. Landowners of agricultural
lands which were devoted primarily to rice and corn production and exceeded the
minimum retention area were thus compelled to sell, through the intercession of the
government, their lands to qualified farmers at liberal terms and conditions. However,
a careful study of the provisions of Pres. Decree No. 27, and the certificate of land
transfer issued to qualified farmers, will reveal that the transfer of ownership over
these lands is subject to particular terms and conditions the compliance with which is
necessary in order that the grantees can claim the right of absolute ownership over
them.
A certificate of land transfer issued pursuant to Pres. Decree No. 27 provides:
xxx xxx xxx
I, Ferdinand E. Marcos, President of the Philippines, declare
that _________ having manifested his desire to own the land under his
cultivation and having complied with the implementing rules and
regulations of the Department of Agrarian Reform, is hereby deemed to
be the owner of the agricultural land described as follows:
xxx xxx xxx
subject to the conditions that the cost of the portion herein transferred
to the tenant farmer as fixed by the authorities concerned, including the
interest rate at the rate of six percentum (6%) per annum shall be paid
by the tenant farmer in fifteen (15) equal annual amortization, that the
tenant framer must be a member of a Barrio Association upon
organization of such association in his locality, and that the title to the
land herein shall not be transferred except by hereditary succession or
to the Government in accordance with the provisions of Presidential

Decree Number 27, the Code of Agrarian Reform and other existing
laws and regulations.
xxx xxx xxx
[Annex "B" to the Petition; Rollo, p. 26, Emphasis supplied].
And under Pres. Decree No. 266 which specifies the procedure for the registration of
title to lands acquired under Pres. Decree No. 27, full compliance by the grantee with
the abovementioned undertakings is required for a grant of title under the Tenant
Emancipation Decree and the subsequent issuance of an emancipation patent in
favor of the farmer/grantee [Section 2, Pres. Decree No. 226]. It is the emancipation
patent which constitutes conclusive authority for the issuance of an Original
Certificate of Transfer, or a Transfer Certificate of Title, in the name of the grantee.
Hence, the mere issuance of the certificate of land transfer does not vest in the
farmer/grantee ownership of the land described therein. The certificate simply
evidences the government's recognition of the grantee as the party qualified to avail
of the statutory mechanisms for the acquisition of ownership of the land tilled by him
as provided under Pres. Decree No. 27. Neither is this recognition permanent nor
irrevocable. Failure on the part of the farmer/grantee to comply with his obligation to
pay his lease rentals or amortization payments when they fall due for a period of two
(2) years to the landowner or agricultural lessor is a ground for forfeiture of his
certificate of land transfer [Section 2, Pres. Decree No. 816].
Clearly, it is only after compliance with the above conditions which entitle
a farmer/grantee to an emancipation patent that he acquires the vested right of
absolute ownership in the landholding a right which has become fixed and
established, and is no longer open to doubt or controversy [See definition of vested
right" or "vested interest" in Balbao v. Farrales, 51 Phil. 498 (1928); Republic of the
Philippines v. de Porkan, G.R. No. 66866, June 18, 1987, 151 SCRA 88]. At best,
the farmer/grantee, prior to compliance with these conditions, merely possesses a
contingent or expectant right of ownership over the landholding.
In the present case, the State in the exercise of its sovereign power of eminent
domain has decided to expropriate the subject property for public use as a
permanent site for the Bulacan Area Shop of the Department of Public Works and
Highways. On the other hand, petitioners have not been issued an emancipation
patent. Furthermore, they do not dispute private respondents' allegation that they
have not complied with the conditions enumerated in their certificate of land transfer
which would entitle them to a patent [See Private Respondents' Comment, p.
3; Rollo, p. 34. And also Memorandum of Private Respondents, p. 6; Rollo, p. 109].
In fact, petitioners do not even claim that they had remitted to private respondents,
through the Land Bank of the Philippines, even a single amortization payment for the
purchase of the subject property.
Under these circumstances, petitioners cannot now successfully argue that Celso
Pagtalunan is legally entitled to a portion of the proceeds from the expropriation
proceedings corresponding to the value of the landholding.

Anent petitioners' claim for disturbance compensation, the Court finds that the law
cited by petitioners, Section 36 (1) of Rep. Act No. 3844, as amended by Rep. Act
No. 6389, cannot be invoked to hold the State liable for disturbance compensation
[See Campos v. CA, G.R. No. 51904, October 1, 1980] where this Court by
resolution denied for lack of merit therein petitioner's claim that, as agricultural
lessee or tenant, he was entitled to disturbance compensation against the State. It
refers to situations where the peaceful enjoyment and possession by the agricultural
tenants or lessees of the land is disturbed or interrupted by the owner/lessor thereof.
Paragraphs 1 to 7 of the said section enumerate the instances when the lessees
may be evicted by the owner/lessor, and paragraph 1 thereof provides that lessees
shall be entitled to disturbance compensation from the owner/lessor, if the land will
be converted by the latter into a residential, commercial or industrial land. Thus,
Section 36 (1) of Rep. Act No. 3844, as amended, deals with the liability of an
owner/lessor to his agricultural tenant/lessee and cannot be invoked to make the
State liable to petitioners herein for disturbance compensation.
Nor may petitioners invoke this section as basis to hold private respondents liable for
disturbance compensation. Section 36 (1) of Rep. Act No. 3844, as amended, is
applicable only when it is the owner/lessor who voluntarily opts for the conversion of
his land into non-agricultural land. In the present case, it is the State, not the private
respondents, who disturbed petitioners' possession of the subject property. The
conversion of the property into a permanent site for the Bulacan Area Shop of the
Department of Public Works and Highways was undertaken by the government
independent of the will of private respondents herein.
Parenthetically, it should be noted that the government has already paid petitioner
Celso Pagtalunan approximately FIVE THOUSAND PESOS (P5,000.00) to
compensate the latter for improvements introduced on the property, and expenses
for relocating his home [Petitioners' Reply to the Opposition to their Motion for
Reconsideration, p. 2; Rollo, p. 98. And also Private Respondents' Comment, p.
3; Rollo, p. 93].
Considering, therefore, that petitioners are not entitled to just compensation for the
expropriation of the subject property, nor to disturbance compensation under Rep.
Act No. 3844, as amended, the Court finds that the trial court committed no
reversible error in denying petitioners' motion for leave to intervene in the
expropriation proceedings below.
II.
On the issue of jurisdiction, petitioners contend that since their motion to intervene
alleges as justification therefor that petitioner Celso Pagtalunan is the bona
fide tenant of the subject property, the case should have been referred to the Court
of Agrarian Relations which has original and exclusive jurisdiction over expropriation
proceedings for public purpose of all kinds of tenanted properties.
The Court finds no reason to dwell on this point. The issue of what court has
jurisdiction over the expropriation proceedings in this case has been rendered moot
and academic by B.P. Blg. 129. Under Paragraph 7, Section 19 of B.P. Blg. 129, all
civil actions and special proceedings which were then under the exclusive jurisdiction

of the Court of Agrarian Relations were placed under the exclusive and original
jurisdiction of the Regional Trial Courts [formerly the Courts of First Instance].
WHEREFORE, the present petition is hereby DENIED for lack of merit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 76759 March 22, 1990
RAMON A. GONZALES, petitioner,
vs.
LAND BANK OF THE PHILIPPINES and COURT OF APPEALS, respondents.
Ramon A. Gonzales for and in his own behalf.
Manuel P. Tiaoqui and Florencio S. Jimenez for respondent Land Bank of the
Philippines.

FERNAN, C.J.:
This petition for review on certiorari seeks to reverse and set aside the December 2,
1986 decision of the Court of Appeals, reversing the decision of the trial court and in
effect denying the direct issuance of Land Bank bonds in the name of herein
petitioner as assignee thereof.
On the strength of a Deed of Assignment executed on August 8, 1981 by Ramos
Plantation Company, Inc. (hereafter referred to as the corporation) through its
president, Antonio Vic Zulueta, assigning its rights under Land Transfer Claim No.
82-757 unto petitioner Ramon A. Gonzales, the latter filed an action before the
Regional Trial Court of Manila, Branch LI entitled "Ramon A. Gonzales, plaintiff vs.
Land Bank of the Philippines and Ramos Plantation Company, Inc., defendants"
docketed as Civil Case No. 84-24461 to compel public respondent Land Bank of the
Philippines to issue Land Bank Bonds for the amount of P400,000.00 in the name of
petitioner instead of in the name of the aforesaid corporation as the original and
registered owner of the property covered by Transfer Certificate of Title No. T-28750
situated in La Suerte, Malang, North Cotabato with a total area of 251.4300
hectares, which had been brought under the land transfer program of the
government.
Defendant corporation was declared in default for failure to file its answer within the
reglementary period while defendant Land Bank filed an answer alleging that the
complaint states no cause of action since there is no privity of contract between
plaintiff and itself and that it deals only with the landowner whose land was subjected
to operation land transfer of the government under Presidential Decree No. 27 in
order to save time and effort in ascertaining the identities of additional claimants.
At the pre-trial, the parties submitted a Stipulation of Facts dated July 29, 1985
(subsequently supplemented on September 10, 1985) praying that judgment be
rendered on the basis thereof. In the aforesaid stipulation dated July 29, 1985, the

following admissions and submissions were made: the execution of the Deed of
Assignment; the fact that the corporation's president, Antonio Vic Zulueta, wrote
defendant bank requesting the latter to issue the payment for the real property
covered by TCT No. T-28755 through Land Bank Bonds amounting to P400,000.00
in the name of petitioner by virtue of the Deed of Assignment with the Board
Resolution attached to said letter; that on June 30, 1982, defendant bank through its
manager, Mr. Ceferino A. Pacio of the Land Transfer Operation Department, wrote
back informing the Ramos Plantation, Inc. that it has approved its Land Transfer
Claim No. 82-757 in the aggregate amount of P565,717.50 payment of which is
subject to the submission and/or accomplishment of the requirements of defendant
bank; that said corporation failed to comply with nine (9) of the requirements of
defendant bank as contained in Annexes "C-1" and "C-2". 1
On the other hand, the aforesaid Supplemental Stipulation of Facts dated September
10, 1985 provided that out of the 9 requirements for the first release in Annex "C-1"
of the stipulation of facts dated July 29, 1984, only 6 requirements have not been
complied with. 2
In a decision dated October 15, 1985, 3 the lower court found the plaintiff entitled to
the issuance of the Land Bank bonds, stating thus:
WHEREFORE, defendant Land Bank of the Philippines is hereby
ordered to issue in the name of Ramon A. Gonzales P400,000.00
worth of land bank bonds deducted from the P509,000.00 Land Bank
bonds payable to Ramos Plantation Company, Inc. under claim No. 82757 with the directive to the defendant landowner Ramos Plantation
Company, Inc. to comply with the six (6) requirements listed in
paragraph 1 of the Supplemental Stipulation of Facts dated September
10, 1985. No pronouncement as to costs. 4
Defendant-appellant Land Bank of the Philippines filed an appeal before respondent
Court of Appeals resulting in the reversal of the trial court's decision and the
dismissal of the complaint filed therein on the ground that even if there was
compliance with the remaining six (6) requirements by defendant Ramos Plantation,
Inc. still, the Land Bank bonds will have to be issued in the name of the said
corporation and not to plaintiff-appellee. It is only thereafter that Ramos Plantation
Co., Inc. may indorse the same to plaintiff. 5
Petitioner now comes to us on appeal by certiorari to set aside the decision of
respondent appellate court with these arguments: that respondent Court of Appeals
acted without jurisdiction in resolving the appeal inspite of the motion to certify this
case to the Supreme Court; that respondent Court of Appeals palpably erred in
finding that the Deed of Assignment is not effective to authorize LBP to issue the
Land Bank Bonds in the name of petitioner; that respondent Court of Appeals
palpably erred in holding that petitioner is not entitled to P400,000.00 worth of Land
Bank Bonds upon compliance with the remaining six (6) requirements for the first
release thereof.
We reduce the issues to two: whether the appellate court had jurisdiction to entertain
the appeal of respondent Land Bank; and whether respondent Land Bank can be

compelled to issue Land Bank bonds in the name of petitioner by virtue of the Deed
of Assignment executed by the landowner-assignor Ramos Plantation Company, Inc.
in favor of petitioner.
On the issue of lack of jurisdiction, petitioner vigorously asserts that since the trial
court rendered judgment on the basis of the stipulation of facts submitted by the
parties, the appeal from such a decision can only raise questions of law and
therefore, respondent Land Bank should have gone directly to the Supreme Court on
a petition for certiorari.
We do not fully subscribe to petitioner's contention, for as correctly observed by the
Solicitor General, the existence of a stipulation of facts between the parties does not
automatically mean that the parties agreed on all the facts considering that
stipulations may be total or partial. 6 In this instance, it was merely partial.
A perusal of the aforementioned Stipulation and Supplemental Stipulation of Facts
dated July 29, 1985 and September 10, 1985, respectively, readily reveals that the
same do not contain a complete or sufficient picture of the circumstances among the
parties and that certain vital matters are left out in said stipulations, i.e., the
significant policy of the Land Bank to issue its bonds directly and only in the name of
the landowners; and the fact that there are different stages in the release of
payments under the operation land transfer program with each stage having different
requirements that have to be complied with by the landowner in order to be entitled
to payment under a land transfer claim. In view of these omissions in the
Stipulations, the remedy of appeal before the appellate court resorted to by
respondent bank and assailed by petitioner is proper because it involved not only
pure questions of law but mixed questions of law and fact.
On the more substantive issue of whether public respondent Land Bank may be
compelled to honor the subject deed of assignment, it will be noted that respondent
bank in denying the issuance of the bond in the name of the petitioner-assignee was
guided by Resolution No. 75-68 entitled "PROPER PARTIES TO RECEIVE LAND
TRANSFER PAYMENT" promulgated purposely to govern, among others, the
issuance of Land Bank Bonds to assignees by virtue of Deeds of Assignment.
Thereunder the Land Bank can only issue bonds in the name of the assignorlandowner. It is only after the issuance of bonds in the landowner's name that he
shall be required to make the necessary indorsement of the bonds to his assignee.
This is in consonance with the Land Bank's policy to deal primarily with the
landowners in order to save time and effort in ascertaining the identities of
claimants. 7
However, petitioner relying on the provisions of Article 1311 of the Civil
Code, 8 maintains that by virtue of said deed, he stepped into the shoes of his
assignor and acquired all the rights of the latter and it was error on the part of the
appellate court to find that the aforesaid Deed of Assignment is not effective to
authorize the Land Bank of the Philippines to issue the Land Bank Bonds in the
name of petitioner upon compliance with the remaining six (6) requirements for the
first release thereof.

There is indeed no question that petitioner stepped into the shoes of his assignor,
the defendant corporation. But petitioner overlooked the fact that when the
corporation assigned its rights to him under Land Transfer Claim No. 82-757, the
same was subject to the rules and restrictions imposed by respondent Land Bank on
the matter of assignment of rights.
In the promulgation of said rules and regulations, the Land Bank relied on the
provisions of Section 76, R.A. 3844 as amended by P.D. 251, which specifically
provides:
Sec. 76. Issuance of Bonds. . . . The Board of Directors shall have the
power to prescribe rules and regulations for the issuance, reissuance,
servicing, placement and redemption of the bonds herein authorized to
be issued as well as the registration of such bonds at the request of the
holders thereof.
The act of assignment could not operate to erase liens or restrictions burdening the
right assigned. The assignee cannot, after all, acquire a greater right than that
pertaining to the assignor. 9
Thus, when Ramos Plantation Company, Inc. assigned its lights, title and interest in
Land Transfer Claim No. 82-757 for the amount of P400,000.00 in favor of petitioner
Ramon A. Gonzales, the latter acquired the same subject to the restrictions on
assignment of rights embodied in Resolution No. 75-68 dated February 25,
1975 10 passed by the Board of respondent Land Bank of the Philippines, the
pertinent provision of which reads:
4. In Assignment of Rights entered into by landowners vesting upon the
Assignee the right to receive full or partial payment from the Land Bank
pursuant to land transfer, the same, if found valid in form and
substance, shall be recognized by the Land Bank. Whenever
practicable, Land Bank bonds issued therefor must be made payable to
the Assignor-Landowner who shall be required to make the necessary
indorsement of said bonds to the Assignee. In case the cash portion is
the one assigned, the check in payment thereof shall be issued to the
original landowner who shall be required to make the indorsement to
the Assignee. Thus, for record purposes, it will appear that payment
was directly to the landowner concerned and who, by reason of the
Assignment, has caused the necessary indorsement of the bonds
and/or check, as the case may be, to the Assignee.
It is an elementary rule in administrative law that administrative regulations and
policies enacted by administrative bodies to interpret the law which they are
entrusted to enforce have the force of law and entitled to great respect. They have in
their favor a presumption of legality. 11
This Court is in total agreement with respondent appellate court's finding that it must
be the Ramos Plantation Company, Inc. which should comply with all the
requirements imposed by respondent bank to effect the release of payments under
land transfer claims because of the restriction that the bonds will only be released in

the name of the landowner-assignor corporation which may thereafter indorse the
same to petitioner. In fact, in the decision of the trial court, Ramos Plantation
Company, Inc. was directed to comply with the six (6) requirements 12 listed in
paragraph 1 of the Supplemental Stipulation of Facts dated September 10, 1985.
Since no appeal was taken by Ramos Plantation Company, Inc. from said decision,
said directive has become final and executory.
However, the decision of the appellate court dismissing the complaint of petitioner
had the effect of reversing said directive, thereby leaving petitioner without legal
authority to compel Ramos Plantation Company, Inc. to comply with the
requirements of the Land Bank for the release of the bonds and thereafter to
endorse the same to petitioner as assignee thereof. The decision of the appellate
court should therefore be, as it is hereby, modified accordingly.
WHEREFORE, the decision of the appellate court is hereby MODIFIED. The
directive to Ramos Plantation Company, Inc. contained in the lower court's decision
is reinstated. Ramos Plantation Company, Inc. is ordered to comply within thirty (30)
days from notice with the six (6) requirements listed in paragraph 1 of the
Supplemental Stipulation of Facts dated September 10, 1985, and as soon as the
bonds are released in its name, to immediately endorse the same to petitioner as
assignee thereof.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 77830 February 27, 1990
VICTOR TALAVERA and VISITACION AGUSTIN TALAVERA, petitioners,
vs.
HON. COURT OF APPEALS and JOSE LAXAMANA, respondents.
Wilfredo I. Untalan counsel for petitioners.
Bureau of Agrarian Legal Assistance for private respondent.

GUTIERREZ, JR., J.:

The Court is asked to examine whether or not the Court of Appeals committed
reversible error in its finding that there was no voluntary surrender of the landholding
in question on the part of respondent Laxamana as tenant.
This petition for review on certiorari assails the decision of the respondent appellate
court which affirmed in totothe judgment rendered by the Regional Trial Court of the
Third Judicial Region, Branch LXVI, Capas, Tarlac on July 21, 1986.
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
ordering the defendants:
(1) To reinstate Jose Laxamana as their tenant on the
landholding in question;
(2) To pay him the sum of FIVE THOUSAND PESOS
(P5,000.00) value of 50 cavans of palay at the rate of
P100.00 per cavan as his share for the agricultural year
1984-85;
(3) To continue paying him the same amount as
damages, every agricultural year thereafter until his
actual reinstatement. (CA Decision, p. 2; Rollo, p. 16)
The facts pertinent to the case at bar are as follows:
On July 10, 1984, an action for recovery of possession was instituted by the private
respondent against the petitioners over a parcel of agricultural land with an area of

21,081 square meters located at Brgy. Sto. Domingo 11, Sitio Tambo, Capas,
Tarlac.
The complaint alleged, among others, that respondent Laxamana had been a
bonafide tenant of the aforesaid parcel of land since 1958 until the petitioners took
possession thereof sometime in 1984; that respondent Laxamana had been in
continuous possession and cultivation of the said landholding since 1958 but the
petitioners, for unknown reasons and without the knowledge of respondent
Laxamana, planted palay thereon in 1984 through force and intimidation after
plowing and harrowing were done by respondent Laxamana; and that due to the
petitioners' illegal actions, respondent Laxamana suffered damages in the amount of
P500.00 and the price equivalent to sixty-five (65) cavans of palay per agricultural
year from the time of his dispossession until his reinstatement as tenant over the
landholding in question.
In their answer, the petitioners counter-alleged, among others, that their tenancy
relationship with respondent Laxamana was terminated pursuant to a document
captioned "Casunduan" executed on March 30, 1973 whereby the latter sold his
rights and interests over the agricultural landholding under litigation for a
consideration of P1,000.00; that respondent Laxamana was not actually a tenant of
the petitioners and whatever tenancy rights the former had exercised over the
landholding in question were voluntarily surrendered by him upon the execution of
the aforesaid document; that respondent Laxamana had only himself to blame for
the litigation expenses resulting from his baseless and patently frivolous complaint;
and that respondent Laxamana was no longer entitled to the amount equivalent to 65
cavans of palay per agricultural year as claimed since he was no longer a tenant of
the petitioners.
After trial, the private respondent obtained a favorable judgment from which the
petitioners appealed to the respondent Court.
In a decision promulgated on March 3, 1987, the Court of Appeals affirmed the lower
court's holding that the Casunduan even if assumed to be valid did not constitute
"voluntary surrender" as contemplated by law, hence, respondent Laxamana ought
to be reinstated as tenant of the petitioners' landholding.
Consequently, this petition was filed to seek a reversal of the decision of the
appellate court. According to the petitioners, the Court of Appeals erred:
I
IN HOLDING THAT PRIVATE RESPONDENT DID NOT VOLUNTARILY
SURRENDER THE LANDHOLDING IN QUESTION.
II
IN OVERLOOKING THE PROBATIVE VALUE OF A WRITTEN INSTRUMENT
ENTITLED 'CASUNDUAN' WHICH SHOWS VOLUNTARY SURRENDER. (Rollo, p.
4)

The petitioners bolster their claim that respondent Laxamana is no longer their
tenant over the landholding in question by invoking the rule on parol evidence with
respect to the probative value of the "Casunduan" executed by respondent
Laxamana on March 30, 1973. They further argue that the execution of the
"Casunduan" clearly showed the intention of respondent Laxamana to surrender
whatever rights he had as tenant over the said landholding. Hence, we are
presented with the issue of whether or not by virtue of the "Casunduan" dated March
30, 1973, respondent Laxamana as tenant is deemed to have surrendered
voluntarily the subject landholding to its owners the petitioners.
The evidence on record and the petitioners' arguments are not enough to overcome
the rights of the private respondent provided in the Constitution and agrarian statutes
which have been upheld by this Court.
The very essence of agricultural tenancy lies in the cardinal rule that an agricultural
tenant enjoys security of tenurial status. The Code of Agrarian Reforms of the
Philippines (Republic Act No. 3844, as amended) specifically enumerates the
grounds for the extinguishment of agricultural leasehold relations. Section 8 of the
said Code provides:
Extinguishment of agricultural leasehold relation. The agricultural
leasehold relation established under this Code shall be extinguished
by:
(1) Abandonment of the landholding without the
knowledge of the agricultural lessor;
(2) Voluntary surrender of the land holding by the
agricultural lessee, written notice of which shall be served
three months in advance; or
(3) Absence of the persons under Section rune to
succeed to the lessee, in the event of death or permanent
incapacity of the lessee.
The petitioners invoke voluntary surrender under Paragraph 2 of Section 8 as the
reason for the end of the tenancy relationship.
Voluntary surrender, as a mode of extinguishment of tenancy relations, does not
require any court authorization considering that it involves the tenant's own volition.
(see Jacinto v. Court of Appeals, 87 SCRA 263 [1978]). To protect the tenant's right
to security of tenure, voluntary surrender, as contemplated by law, must be
convincingly and sufficiently proved by competent evidence. The tenant's intention to
surrender the landholding cannot be presumed, much less determined by mere
implication. Otherwise, the right of a tenant to security of tenure becomes an illusory
one.
Standing by itself, the March 30, 1973 Casunduan indicates, as contended by the
petitioners, a voluntary relinquishment of tenancy rights. It states that on his own
initiative, Jose Laxamana went to the Talaveras and requested that he be allowed to

sell his "puesto cung asican" or "the plot I am farming" to the couple. A subscribing
witness, Ermela Lumanlan testified on the voluntary sale of tenancy rights for
P1,000.00, her signing as a witness at the bottom of the contract, and Laxamana's
signing the document.
The argument of the private respondent that under Section 28 of the Agrarian
Reform Code, a voluntary surrender to be valid must be "due to circumstances more
advantageous to him and his family" is double-edged. There appears no question
that Laxamana needed money to pay for the expenses incident to the illness of his
wife which led to her death. The money was to his advantage.
The basic issue in this case is-what did Laxamana give up in return for the
P1,000.00? The case is marked by poor handling at the trial stage and it is not clear
whether or not the P1,000.00 was a result of the usual paternalistic arrangements
between landlords and tenants where the latter meekly approach the landlords in
their hours of need or something else.
In the first place, the agreement was prepared by petitioner Visitacion A. Talavera.
Laxamana could hardly sign his own name. He was clearly at a disadvantage in the
execution of the contract and the wording of the agreement. The intention to give up
the landholding must be gleaned from evidence in addition to the document which
was signed by an ignorant and illiterate peasant in an hour of emotional stress and
financial need.
Second, and most important, Laxamana continued to work on the farm from 1973 up
to 1984 when the petitioners ejected him. As stated by the appellate court, why did it
take the petitioners more than ten years to enforce the Casunduan?
The Talaveras claim that they cultivated the land themselves from 1973 to 1984
when the complaint was filed. This claim is belied by Exhibits A and B. In Exhibit A,
barangay captain Francisco Manayang reports to the team leader of the Ministry of
Agrarian Reform that, per his own personal knowledge, Jose Laxamana has been
tilling the disputed land since 1958. Exhibit B is an affidavit to the same effect by
Manayang, Mr. Porfirio Manabat who is president of the Agrarian Reform
Beneficiaries Association, and a certain Romeo dela Cruz all of whom are residents
of the barangay where the land is located. Significantly, Laxamana is a resident of
Sitio Tambo, Barangay Sto. Domingo II where the disputed land is situated while the
Talaveras reside in another barangay, Arangureng, of Capas, Tarlac. We see no
reason why the factual findings of the trial court and the appellate court should be
reversed insofar as the continuous cultivation from 1973 to 1984 is concerned.
Third, it is not shown why Laxamana should voluntarily give up his sole source of
livelihood even if he needed money to pay off his debts. Or what he did from 1973 to
1984 if the claim of the Talaveras that they worked the land themselves is correct.
We are more inclined to believe that Laxamana was forced by circumstances to sign
something he did not fully understand and then went right back to the farm and
continued to work on it until 1984.
It is true that Cristobal Gamido, Jr., officer-in-charge of the Agrarian Reform Team
issued on May 8, 1986 a certification that the contested land is not tenanted.

However, the basis for the certification whether or not Mr. Gamido merely read the
Casunduan literally is not shown. It cannot overcome the more convincing evidence
of persons actually residing where the land is located.
Tenancy relations cannot be bargained away except for the strong reasons provided
by law which must be convincingly shown by evidence in line with the State's policy
of achieving a dignified existence for the small farmers free from pernicious
institutional restraints and practices (Sec. 2 [2], Code of Agrarian Reforms).
We, therefore, rule that except for compelling reasons clearly proved the
determination that a person is a tenant-farmer, a factual conclusion made by the trial
court on the basis of evidence directly available to it, will not be reversed on appeal
and will be binding on us. (see Macaraeg v. Court of Appeals, G.R. No. 48008,
January 20, 1989; Co v. Intermediate Appellate Court, 162 SCRA 390 [1988]).
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED.
The decision of the Court of Appeals dated March 3, 1987 is AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 85041 August 5, 1993

GRACIANO BERNAS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and NATIVIDAD BITO-ON
DEITA, respondents.
Rodriguez Dadivas for petitioner.
Orlanda Bigcas-Lumawag for private respondent.

PADILLA, J.:
Petitioner Graciano Bernas is before this Court assailing the decision * of the
respondent appellate court dated 19 August 1988 in CA G.R. SP No. 14359 (CAR),
which reversed the decision ** of the Regional Trial Court of Roxas City, Branch 18,
in Civil Case No. V-5146 entitled "Natividad Bito-on Deita, et al. vs, Graciano
Bernas." As disclosed by the records and the evidence of both parties, the facts
involved in the controversy are as follows:
Natividad Bito-on Deita is the owner of Lots Nos. 794, 801, 840 and 848 of the
Cadastral Survey of Panay, Capiz, with a total area of 5,831 square meters. Out of
liberality, Natividad entrusted the lots by way of "dugo" to her brother, Benigno Bitoon, so that he could use the fruits thereof to defray the cost of financing his children's
schooling in Manila. Prior to April 1978, these agricultural lots had been leased by
one Anselmo Billones but following the latter's death and consequent termination of
the lease, petitioner Graciano Bernas took over and worked on the land. Benigno
and Bernas worked out a production-sharing arrangement whereby the first provided
for all the expenses and the second worked the land, and after harvest, the two (2)
deducted said expenses and divided the balance of the harvest between the two of
them. The owner, Natividad, played no part in this arrangement as she was not privy
to the same.
In 1985, the lots were returned by Benigno to his sister Natividad, as all his children
had by then finished their schooling. When Natividad, and her husband sought to
take over possession of the lots, Bernas refused to relinquish, claiming that he was
an agricultural leasehold lessee instituted on the land, by Benigno and, as such, he
is entitled to security of tenure under the law.

Faced with this opposition from Bernas, Natividad filed an action with the Regional
Trial Court for Recovery of Possession, Ownership and Injunction with Damages.
After trial, the court a quo held in favor of the defendant (Bernas) and dismissed the
complaint, ruling that from the record and the evidence presented, notably the
testimony of the plaintiff's own brother Benigno, Bernas was indeed a leasehold
tenant under the provisions of Republic Act No. 1199 and an agricultural leasehold
lessee under Republic Act No. 3844, having been so instituted by the usufructuary of
the land (Benigno). As such, according to the trial court, his tenurial rights cannot be
disturbed save for causes provided by law.
Aggrieved, the plaintiff (Natividad) appealed to the Court of Appeals, contending that
the "dugo" arrangement between her and her brother Benigno was not in the nature
of a usufruct (as held by the court a quo), but actually a contract of commodatum.
This being the case, Benigno, the bailee in the commodatum, could neither lend nor
lease the properties loaned, to a third person, as such relationship (of bailor-bailee)
is one of personal character. This time, her contentions were sustained, with the
respondent appellate court, reversing the trial court's decision, ruling that having only
derived his rights from the usufructuary/bailee, Bernas had no better right to the
property than the latter who admittedly was entrusted with the property only for a
limited period. Further, according to the appellate court, there being no privity of
contract between Natividad and Bernas, the former cannot be expected to be bound
by or to honor the relationship or tie between Benigno and the latter (Bernas).
Hence, this petition by Bernas.
The issue for resolution by the Court is concisely stated by the respondent appellate
court as follows: whether the agricultural leasehold established by Benigno Bito-on in
favor of Graciano Bernas is binding upon the owner of the land, Natividad Bito-on,
who disclaims any knowledge of, or participation in the same.
In ruling for the private respondent (Natividad), the respondent appellate court held
that:
Indeed, no evidence has been adduced to clarify the nature of the
"dugo" transaction between plaintiff and her brother Benigno Bito-on.
What seems apparent is that Benigno Bito-on was gratuitously allowed
to utilize the land to help him in financing the schooling of his children.
Whether the transaction is one of usufruct, which right may be leased
or alienated, or one of commodatum, which is purely personal in
character, the beneficiary has the obligation to return the property upon
the expiration of the period stipulated, or accomplishment of the
purpose for, which it was constituted (Art. 612, Art. 1946, Civil Code).
Accordingly, it is believed that one who derives his right from the
usufructuary/bailee, cannot refuse to return the property upon the
expiration of the contract. In this case, Benigno Bito-on returned the
property lent to him on May 13, 1985 to the owners, the plaintiff herein.
We do not see how the defendant can have a better right to the
property than Benigno Bito-on, who admittedly possessed the land for
a limited period. There is no privity of contract between the owner of
the land and the cultivator. 1

At this point, it is appropriate to point out that, contrary to the appreciation of the
respondent appellate court, the general law on property and contracts, embodied in
the Civil Code of the Philippines, finds no principal application on the present
conflict. Generalibus specialia derogant. The environmental facts of the case at bar
indicate that this is not a mere case of recovery of ownership or possession of
property. Had this been so, then the Court would have peremptorily dismissed the
present petition. The fact, however, that cultivated agricultural land is involved
suffices for the Court to pause and review the legislation directly relevant and
applicable at the time this controversy arose.
In this regard, it would appear that Republic Act No. 1199, invoked by the trial court,
had already been rendered inoperative by the passage of Republic Act No. 3844, as
amended, otherwise known as the Agricultural Land Reform Code (Code, for
brevity). The former, also known as the Agricultural Tenancy Act of the Philippines
and approved in August 1954 had sought to establish a system of agricultural
tenancy relations between the tenant and the landholder, defining two (2) systems of
agricultural tenancy: the share and the leasehold tenancy. At this point, however,
further discussion of the foregoing would appear futile, for the Code, enacted in
August, 1963, had expressly declared agricultural share tenancy to be contrary to
public policy and abolished the same. As for leasehold tenancy relations entered into
prior to the effectivity of the Code, the rights and obligations arising therefrom were
deemed to continue to exist until modified by the parties thereto in accordance with
the provisions of the Code. 2 Thus, for all intents and purposes, Republic Act No.
3844 is the governing statute in the petition at bar. The pertinent provisions therefore
state as follows:
Sec. 5. Establishment of Agricultural Leasehold
Relations. The agricultural leasehold relation shall be established by
operation of law in accordance with Section four of this Code and, in
other, cases, either orally or in writing, expressly or impliedly.
Sec. 6. Parties to Agricultural Leasehold Relation. The agricultural
leasehold relation shall be limited to the person who furnishes the
landholding, either as owner, civil law lessee, usufructuary, or legal
possessor, and the person who personally cultivates the same.
(emphasis supplied).
Sec. 7. Tenure of Agricultural Leasehold Relation. The Agricultural
Leasehold Relation once established shall confer upon the agricultural
lessee the right to continue working on the landholding until such
leasehold relationship is extinguished. The agricultural lessee shall be
entitled to security of tenure on his landholding and cannot be ejected
therefrom unless authorized by the Court for causes herein
provided. (emphasis supplied)
Sec. 8. Extinguishment of Agricultural Leasehold
Relation. The agricultural leasehold relation established under this
Code shall be extinguished by:

(1) Abandonment of the landholding without the knowledge of the

agricultural lessor;
(2) Voluntary surrender of the landholding by the agricultural lessee,
written notice of which shall be served three months in advance; or
(3) Absence of the persons under Section nine to succeed to the
lessee in the event of death of permanent incapacity of the lessee.
xxx xxx xxx
Sec. 10. Agricultural Leasehold Relation Not Extinguished by
Expiration of Period, etc. The agricultural leasehold relation under
this Code shall not be extinguished by mere expiration of the term or
period in a leasehold contract nor by the sale, alienation or transfer of
the legal possession of the landholding. In case the agricultural lessor
sells, alienates or transfers the legal possession of the landholding, the
purchaser or transferee thereof shall be subrogated to the rights and
substituted to the obligations of the agricultural lessor.
xxx xxx xxx
Sec. 36. Possession of Landholding; Exceptions. Notwithstanding
any agreement as to the period or future surrender of the land, an
agricultural lessee shall continue in the enjoyment and possession of
his landholding except when his dispossession has been authorized by
the Court in a judgment that is final and executory if after due hearing it
is shown that:
(1) The agricultural lessor-owner or a member of his immediate family
will personally cultivate the landholding or will convert the landholding,
if suitably located, into residential, factory, hospital or school site or
other useful non-agricultural purposes: Provided, That the agricultural
lessee shall, be entitled to disturbance compensation equivalent to five
years rental on his landholding in addition to his rights under Sections
twenty-five and thirty-four, except when the land owned and leased by
the agricultural lessor is not more than five hectares, in which case
instead of disturbance compensation the lessee may be entitled to an
advanced notice of at least one agricultural year before ejectment
proceedings are filed against him: Provided, further, That should the
landholder not cultivate the land himself for three years or fail to
substantially carry out such conversion within one year after the
dispossession of the tenant, it shall be presumed that he acted in bad
faith and the tenant shall have the right to demand possession of the
land and recover damages for any loss incurred by him because of
said dispossession; 3
(2) the agricultural lessee failed to substantially comply with any of the
terms and conditions of the contract or any of the provisions of this
Code unless his failure is caused by fortuitous event or force majeure:

(3) the agricultural lessee planted crops or used the landholding for a
purpose other than what had been previously agreed upon;
(4) the agricultural lessee failed to adopt proven farm practices as
determined under paragraph 3 of Section twenty-nine;
(5) the land or other substantial permanent improvement thereon is
substantially damaged or destroyed or has unreasonably deteriorated
through the fault or negligence of the agricultural lessee;
(6) the agricultural lessee does not pay the lease rental when it falls
due: Provided, That if the nonpayment of the rental shall be due to crop
failure to the extent of seventy-five per centum as a result of a
fortuitous event, the non-payment shall not be a rental due that
particular crop year, is not thereby extinguished; or
(7) the lessee employed a sub-lessee on his landholding in violation of
the terms of paragraph 2 of Section twenty seven.
Sec. 37. Burden of Proof. The burden of proof to show the existence
of a lawful cause for the ejectment of an agricultural lessee shall rest
upon the agricultural lessor.
There is no dispute, as it is admitted by the parties in this case, that Benigno Bito-on
was granted possession of the property in question by reason of the liberality of his
sister, Natividad (the private respondent). In short, he (Benigno) was the LEGAL
POSSESSOR of the property and, as such, he had the authority and capacity to
enter into an agricultural leasehold relation with Bernas. Consequently, there is no
need to dwell on the contentions of the private respondent that, her brother Benigno
was not a usufructuary of the property but actually a bailee in commodatum.
Whatever was the true nature of his designation, he (Benigno) was the LEGAL
POSSESSOR of the property and the law expressly grants him, as legal possessor,
authority and capacity to institute an agricultural leasehold lessee on the property he
legally possessed.
In turn, having been instituted by Benigno as an agricultural leasehold lessee,
Bernas is vested by law with the rights accruing thereto, including the right to
continue working the landholding until such lease is legally extinguished, and the
right to be protected in his tenure i. e., not to be ejected from the land, save for the
causes provided by law, and as appropriately determined by the courts. In this
connection, there is no clear indication in the record that the circumstances or
conditions envisioned in Section 36 of Republic Act. No. 3844, as amended, for
termination of the agricultural lease relation, have supervened, and therefore Bernas'
right to the possession of the property remains indisputable. This conclusion is
buttressed by Sec. 37 of the Code which provides that:
Sec. 37. Burden of Proof. The burden of proof to show the existence
of a lawful cause for the ejectment of an agricultural lessee shall rest
upon the agricultural lessor.

As to any suggestion that the agricultural lease of Bernas may have terminated
because the landowner (Natividad) has decided to cultivate the land herself, we
submit that this Court is not in a position to settle this issue in this case, not only
because of insufficient evidence to determine whether or not, the grounds provided
by law for termination of the agricultural leasehold relation are present but, more
importantly, because the issue of termination of the agricultural leasehold
relationship by reason of the landowner's alleged decision to till the land herself, was
not squarely raised nor adequately litigated in the trial court. 4 It will be noted that
while Natividad in her complaint with the court a quo alleged, among others, that "on
20 May 1985, the plaintiffs spouses were already in the process of taking over the
land by employing a tractor operator to commence plowing the land," this allegation
was denied by Bernas in his answer. But the main thrust of Natividad's complaint
was that she had no privity with Bernas and that the latter should vacate the land
because Benigno (from whom Bernas had received his right to possess) had himself
ceased to have any rights to the land. Faced with these allegations, the court a
quo in its pre-trial order dated 9 September 1985 formulated the issues in this case,
without objection from the parties, as follows:
ISSUES
1. Is defendant an agricultural leasehold lessee of the parcels of land
described in the Complaint?
2. Whether the parties are entitled to damages claims by them in their
respective pleadings.
In short, the parties went to trial on the merits on the basis of the foregoing issues.
Private respondent did not object to the above issues as formulated; neither can it be
plausibly contended now that the first issue (i.e. whether Bernas is an agricultural
leasehold lessee) embraces the issue of whether Natividad has validly terminated
the agricultural leasehold because of a decision to cultivate the land herself, since
under sec. 36(1) of the Code (before its amendment by Section 7 of Rep. Act No.
6389), the landowner's right to take over possession of his land for personal
cultivation ASSUMES that it is under a valid and subsisting agricultural leasehold
and he must obtain an order from the court to dispossess the agricultural leasehold
lessee who otherwise is entitled to continued use and possession of the landholding.
In other words, if Natividad had really intended to raise as an issue that she had
validly terminated Bernas' agricultural leasehold, she or her counsel could have
expressly included among the issues for determination the question of whether or
not she had complied with the requirements of the law for dispossessing the
agricultural leasehold lessee because she, as landowner, had decided to personally
cultivate the landholding. But she did not.
The trial court in its decision dated 20 October 1987 (latter appealed to the Court of
Appeals) held (consistent with the formulated issues in the case) that
xxx xxx xxx
As to issues, parties presented only two (2) issues and which are:

1. Whether or not defendant is an agricultural leasehold lessee of the

parcels of land described in the complaint;
2. Whether the parties are entitled to damages claimed by them in their
respective pleadings.
(Pre-Trial Order dated September 9, 1985, p. 41 records)
and finally disposed as follows:
From the above discussions, this Court opines that defendant was a
share tenant on the parcels of land subject of the complaint, and an
agricultural leasehold lessee under the provisions of the Agricultural
Land Reform Code as amended by Presidential Decrees on the matter.
No damages as damages were proved or established by evidence by
the defendant.
WHEREFORE, and in view of the above considerations, a decision is
rendered dismissing plaintiffs complaint, and declaring defendant as
the agricultural leasehold lessee on Lot Nos. 794, 801, 840 and 848 of
the Cadastral Survey of Panay, Capiz, with an area of 5,831 square
meters, situated at Calitan, Panay, Capiz, with security of tenure as an
Agricultural Leasehold Lessee thereof; and plaintiffs to pay the costs of
the suit.
In the Court of Appeals, the litigated issue was
xxx xxx xxx
The legal issue that presents itself is whether the agricultural leasehold
established by Benigno Bito-on was binding upon the owner of the
land, plaintiff Natividad Bito-on, who disclaims knowledge of any
arrangement with defendant Bernas. The lower court held that the
"dugo" arrangement was in the nature of usufruct, and that the act of
the usufructuary as legal possessor was sufficient to establish tenancy
relations.
xxx xxx xxx 5
The long settled rule in this jurisdiction is that a party is not allowed to change his
theory of the case or his cause of action on appeal. 6 We have previously held that
"courts of justice have no jurisdiction or power to decide question not in issue" 7 and
that a judgment going outside the issues and purporting to adjudicate something
upon which the parties were not heard is not merely irregular, but extrajudicial and
invalid. 8 The rule is based on the fundamental tenets of fair play and, in the present
case, the Court is properly compelled not to go beyond the issue litigated in the
court a quo and in the Court of Appeals of whether or not the petitioner, Graciano
Bernas, is an agricultural leasehold lessee by virtue of his installation as such by
Benigno Bito-on, the legal possessor of the landholding at the time Bernas was so

installed and, consequently entitled to security of tenure on the land. Should grounds
for the dispossession of Bernas, as an agricultural leasehold lessee, subsequently
arise, then and only then can the private respondent (land owner) initiate a separate
action to dispossess the lessee, and in that separate action, she must allege and
prove compliance with Sec. 36(1) of the Code which consist of, among others, a one
year advance notice to the agricultural leasehold lessee (the land involved being less
than 5 hectares) and readiness to pay him the damages required also by the Code.
The issue of whether or not Bernas planted crops or used the land in a manner
contrary to what was agreed upon between Natividad and Benigno, and thereby
constituting a ground for terminating the leasehold relationship under Sec. 36, par. 3
of Rep. Act No. 3844 likewise cannot be passed upon by this Court since the issue
was never raised before the courts below. Furthermore, there is no showing that
Natividad and Benigno agreed that only certain types of crops could be planted on
the land. What is clear is, that the "dugo" arrangement was made so that Benigno
could use the produce of the land to provide for the schooling of his children. The
alleged conversion by Bernas of the land to riceland was made necessary for the
land to produce more and thus meet the needs of Benigno. It was consistent with the
purpose of making the land more productive that Benigno installed an agricultural
lessee. It may be recalled that when Natividad called on Benigno to testify as a
witness, he stated that the produce of the land was given to him by Bernas to defray
the expenses of his children (p. 3, trial court decision). The inevitable conclusion is
therefore not that there was use of the land different from the purpose for which it
was allegedly intended by Natividad and Benigno but rather that the installation of
the agricultural lessee was made necessary so that the land could produce more to
better serve the needs of the beneficiary (Benigno).
Additionally, it can be stated that the agricultural leasehold relationship in this case
was created between Benigno as agricultural lessor-legal possessor, on the one
hand, and Bernas as agricultural leasehold lessee, on the other. The agricultural
leasehold relationship was not between Natividad and Bernas. As Sec. 6 of the Code
states:
Sec. 6. Parties to Agricultural Leasehold Relations. The agricultural
leasehold relations shall be limited to the person who furnishes the
landholding, either as owner, civil law lessee, usufructuary, or legal
possessor, and the person who personally cultivates the same.
(emphasis supplied)
There was, as admitted by all, no privity or tie between Natividad and Bernas.
Therefore, even if Bernas had improperly used the lots as ricelands, it was Benigno
who could have objected thereto since it was his (the legal possessor's) landholding
that was being "improperly" used. But he (Benigno) did not. It is not for Natividad (as
landowner) to now complain that Bernas used the land "for a purpose other than
what had been previously agreed upon." Bernas had no agreement with her as to the
purpose for which the land was to be used. That they were converted into ricelands
(also for agricultural production) can only mean that the same (conversion) was
approved by Benigno (the undisputed agricultural lessor-legal possessor). It is thus
clear that sec. 36, par 3 of the Code cannot be used to eject Bernas.

The Court, must, in our view, keep in mind the policy of the State embodied in the
fundamental law and in several special statutes, of promoting economic and social
stability in the countryside by vesting the actual tillers and cultivators of the soil, with
rights to the continued use and enjoyment of their landholdings until they are validly
dispossessed in accordance with law. At this stage in the country's land reform
program, the agricultural lessee's right to security of tenure must be "firmed-up" and
not negated by inferences from facts not clearly established in the record nor
litigated in the courts below. Hand in hand with diffusion of ownership over
agricultural lands, it is sound public policy to encourage and endorse a diffusion of
agricultural land use in favor of the actual tillers and cultivators of the soil. It is one
effective way in the development of a strong and independent middle-class in
society.
In confirmation we believe of the foregoing views, Section 36 of Rep. Act No. 3844
(the Code) was expressly amended by Section 7 of Rep. Act No. 6389 which
replaced paragraph 1, Section 36 of the Code providing for personal cultivation by
the landowner as a ground for ejectment or dispossession of the agricultural
leasehold lessee with the following provision:
Sec. 7. Section 36 (1) of the same Code is hereby amended to read as follows:
(1) The landholding is declared by the department head upon
recommendation of the National Planning Commission to be suited for
residential, commercial, industrial or some other urban purposes:
Provided, That the agricultural lessee shall be entitled to disturbance
compensation equivalent to five times the average of the gross harvest
of his landholding during the last five preceding calendar years;
While it is true that in the case of Ancheta vs. Court of Appeals, 200 SCRA 407, the
Court, stated that:
It is well settled that RA 6389, which removed personal cultivation as a
ground for ejectment of tenant/lessee, cannot be given retroactive
effect in the absence of statutory provision for retroactivity or a clear
implication of the law to that effect.
however, Rep. Act No. 6389 was approved on 10 September 1971. 9 The complaint
in this case was filed on 21 June 1985 or long after the approval of Rep. Act No.
6389. By reason of the provision therein eliminating personal cultivation by the
landowner as a ground for ejectment or dispossession of the agricultural leasehold
lessee, any issue of whether or not the Court of Appeals decision should
nonetheless be affirmed because the landowner had shown her intention or decided
to personally cultivate the land (assuming without admitting that the issue was
properly raised before the trial court), had in fact become moot and academic (even
before it was hypothetically raised). The issued had been resolved by legislation
unmistakably against the landowner.
It may of course he argued that "she (Natividad) did not authorize her brother
(Benigno) to install a tenant thereon." (TSN, 13 February 1986, p. 6).

Even if there was a lack of authorization (from Natividad) for Benigno to install a
tenant, it still follows, in our view, that Benigno as legal possessor of the landholding,
could install an agricultural lessee on the landholding. For, as defined in Section 166
(3) of the Code, an agricultural lessor is a natural or juridical person who, either as
owner, civil law lessee, usufructuary or legal possessor lets or grants to another the
cultivation and use of his land for a price certain. Nothing in said section, it will be
noted, requires that the civil law lessee, usufructuary or legal possessor should have
the prior authorization of the landowner in order to let or grant to another the
cultivation or use of the landholding.
Another question comes up; did Natividad expressly prohibit Benigno from installing
a tenant on the land? Nothing in the evidence shows that Benigno was expressly
prohibited by Natividad from installing a tenant on the landholding. And even if there
was an express prohibition on the part of Natividad (landowner) for Benigno not to
install an agricultural leasehold lessee, it is to be noted that any such arrangement
(prohibition) was solely between Natividad and Benigno. There is no evidence to
show that Bernas was aware or informed of any such arrangement between
Natividad and Benigno. Neither was such arrangement (prohibition), if any, recorded
in the registry of deeds to serve as notice to third persons (as Bernas) and to the
whole world for that matter. Consequently, if there was indeed such a prohibition
(which is not borne out by the records) imposed by Natividad on Benigno, a violation
thereof may give rise to a cause of action for Natividad against Benigno but Bernas
is no less an agricultural leasehold lessee, for the law (Section 166 (2) of the Code)
defines an agricultural lessee as a person who by himself and with the help available
from within his immediate farm household cultivates the land belonging to or
possessed by another (in this case Benigno) with the latter's consent for purposes of
production for a price certain in money or in produce or both.
Ponce vs. Guevarra, L-19629 and L-19672-92, 31 March 1954 (10 SCRA 649)
provides dramatic support to the security of tenure of Bernas in the case at bar. In
the Ponce case, the owner (Ponce) had leased his agricultural land to Donato (the
lessee) for a stipulated period with a provision in the lease
contract prohibiting Donato from sub-leasing the land without the written consent of
the owner (Ponce). Notwithstanding these "express prohibition", Donato sub-leased
the land without the consent of Ponce (the owner). When the lease contract expired,
Donato returned the land to Ponce but the sub-lessees (tenants) refused to vacate,
claiming security of' tenure under the tenancy laws then enforced. One of the
contentions of Ponce (the owner) in seeking to dispossess the sub-lessees (tenants)
was that these tenants entered into possession of the land under a violation of the
lease contract by Donato (the lessee).
Over-ruling the above contention, this Court held:
It is true that the subleasing of said land to respondents herein
(tenants) without the written consent of the petitioner (owner),
constituted a violation of the original contract of lease. The breach of
contract was committed, however, by Donato (the lessee), . . . .
Of course, in the same Ponce case, the Court observed that Ponce renewed
his lease contract for another year with Donato, knowing at the time of such

renewal that the land had been sub-leased to the tenants, thereby injecting
the principle of estoppel against Ponce vis-a-vis the tenants. But, as we view
it, the ratio decidendi in the Court's decision is to the effect that the sublessees (tenants) were entitled to security of tenure on the land they were
cultivating, notwithstanding the undisputed fact that they became sub-lessees
(tenants) of the land as a result of a violation by the lessee (Donato) of an
express provision in the lease contract prohibiting him from sub-leasing the
land.
What more in the case of Bernas whose right to security of tenure as an agricultural
leasehold lessee is conferred and protected categorically, positively and clearly by
the provisions of the Code (Republic Act. 3844)?
It is of course possible to construe Sec. 6 of the Code which provides:
SEC 6. Parties to Agricultural Leasehold Relations. The agricultural
leasehold relation shall be limited to the person who furnishes the
landholding, either as owner, civil law lessee, usufructuary, or legal
possessor, and the person who personally cultivates the same.
(emphasis supplied).
in the following manner:
. . . it assumes that there is already an existing agricultural leasehold
relation, i.e. a tenant or agricultural lessee already works the land. As
may be gleaned from the epigraph of Sec. 6, it merely states who are
"Parties to Agricultural Leasehold Relations," which means that there is
already a leasehold tenant on the land. But this is precisely what We
are still asked to determine in these proceedings. (dissenting opinion,
p. 11.)
It would appear from the above interpretation of Sec. 6 of the Code that in the
absence of a judicial determination or declaration of an agricultural leasehold
relation, such relation does not or cannot even exist. We view this posture as
incorrect for an agricultural leasehold relationship exists by operation of law when
there is a concurrence of an agricultural lessor and an agricultural lessee. As clearly
stated in Section 5 of the code.
Sec. 5. Establishment of Agricultural Leasehold Relations. The
agricultural leasehold relation shall be established by operation of law
in accordance with Section four of this Code and, in other cases, either
orally or in writing, expressly or impliedly.
In other words, in the case at bar, from the moment Benigno, as legal possessor
(and, therefore, an agricultural lessor) granted this cultivation and use of the
landholding to Bernas in exchange or consideration for a sharing in the harvest, an
agricultural leasehold relationship emerged between them "by operation of law".
The fact that the transfer from Natividad to Benigno was gratuitous, we believe, is of
no consequence as far as the nature and status of Benigno's possession of the

landholding is concerned. He became the legal possessor thereof from the viewpoint
of the Code. And as legal possessor, he had the right and authority, also under the
Code, to install or institute an agricultural leasehold lessee on his landholding, which
was exactly what he did, i.e. install Bernas as an agricultural leasehold lessee.
The argument that Benigno's (and consequently, Bernas') possession was meant to
last for a limited period only, may appeal to logic, but it finds no support in the Code
which has its own underlying public policy to promote. For Section 7 of the Code
provides:
Sec. 7. Tenure of Agricultural Leasehold Relation. The Agricultural
Leasehold Relation once established shall confer upon the agricultural
lessee the right to continue working on the landholding until such
leasehold relationship is extinguished. The agricultural lessee shall be
entitled to security of tenure on his landholding and cannot be ejected
therefrom unless authorized herein-provided. (emphasis supplied)
while Section 10 of the Code provides:
Sec. 10. Agricultural Leasehold Relation Not Extinguished by
Expiration of Period, etc. The agricultural leasehold relation under
this Code shall not be extinguished by mere expiration of the term or
period in a leasehold contract nor by the sale, alienation or transfer of
the legal possession of the landholding. In case the agricultural lessor.
sells, alienates or transfers the legal possession of the landholding, the
purchaser or transferee thereof shall be subrogated to the rights and
substituted to the obligations of the agricultural lessor. (emphasis
supplied).
and Section 36 of the Code provides:
Possession of Landholding; Exceptions. Notwithstanding any
agreement as to the period or future surrender of the land, an
agricultural lessee shall continue in the enjoyment and possession of
his landholding
. . . . (emphasis supplied)
Clearly the return of legal possession from Benigno to Natividad cannot prejudice the
rights of Bernas as an agricultural leasehold lessee. The grounds for ejectment of an
agricultural leasehold lessee are provided for by law. The enumeration
is exclusive and no other grounds can justify termination of the lease. The policy and
letter of the law are clear on this point. The relatively small area of the agricultural
landholding involved (a little over half a hectare) would appear, in our view, to be of
no consequence in this case. Here, the issue is not how much area may be retained
in ownership by the land owner Natividad but the issue is whether Bernas is a duly
constituted agricultural leasehold lessee of the agricultural landholding (regardless of
its area) and entitled to security of tenure therein. And, as abundantly shown, the
Code is definitely and clearly on his side of this issue.

It should be pointed out that the report and recommendation of the investigating
officer of the Ministry of Agrarian Reform (MAR) finding that Bernas is not an
agricultural leasehold should deserve little consideration. It should be stressed, in
this connection, that said report and recommendation is congenitally
defective because
a. it was based solely on the evidence presented by Natividad, Bernas did not
participate in said investigation.
b. the findings in the report are not supported by law or jurisprudence but are merely
the opinion and conclusions of the investigator whose knowledge of the Code and
the case Law appears to be sadly inadequate.
c. whether or not an agricultural leasehold relation exists in any case is basically a
question of law and cannot be left to the determination or opinion of a MARinvestigator on the basis of one-sided evidence.
This Court has ruled in Qua v. Court of Appeals, 198 SCRA 236 that
. . . as regards relations between litigants in land cases, the findings
and conclusions of the Secretary of Agrarian Reform, being preliminary
in nature, are not in any way binding on the trial courts which must
endeavor to arrive at their own independent conclusions.
The ruling finds support in the case of Graza v. CA (163 SCRA 39) citing
Section 12 of PD No. 946 expressly stating that "the preliminary determination
of the relationship between the contending parties by the Secretary of
Agrarian Reform or his authorized representative, is not binding upon the
court, judge or hearing officer to whom the case is certified as a proper case
for trial. Said court, judge or hearing officer, after hearing, may confirm,
reverse or modify said preliminary determination as the evidence and
substantial merits of the case may warrant." The court a quo in the case at bar
tried the case on the merits, receiving the evidence of both parties and arrived
at a conclusion different from that of the MAR investigator. It is to be noted
that even the Court of Appeals (which decided for Natividad) found no use for
the MAR investigator's report and recommendation, for obvious reasons. It is
clear that the question of the existence of an agricultural leasehold
relationship is a question of law which is properly within the province of the
courts.
The certification of the President of the Agrarian Reform Beneficiaries Association,
Panay chapter "issued upon the request of Mrs. Deita" (meaning Natividad) that
Bernas is not in the masterlist of tenants, should likewise be disregarded. Since
when, it may be noted, was the legal question of agricultural leasehold relationship
made to depend on a certification of such an association's president?
The argument, that Bernas is not a lawful tenant of Natividad based on the doctrine
in the case of Lastimoza v.Blanco (1 SCRA 231) is also not correct. The cited case
does not support the desired conclusion. In the Lastimoza case, a certain Nestor
Panada had an oral contract of tenancy with a certain Gallego who was then in

possession of the parcel of land. The latter however was ejected after the Court of
First Instance ruled in a land registration proceeding that it was Lastimoza who was
the true owner of the land. The Court in effect ruled that Gallego was an unlawful
possessor and thus Panada cannot be a lawful tenant. The factual background of the
Lastimoza case and the present Bernas case are totally different; the first case
cannot be applied to the second. When Bernas was instituted by Benigno as an
agricultural lessee, Benigno was a legal possessor of the landholding in question. No
one can dispute this.
The dissenting opinion states that ". . . it is not correct to say that every legal
possessor, be he a usufructuary, or a bailee, is authorized as a matter of right to
employ a tenant. His possession can be limited by agreement of the parties or by
operation of law." (p. 13) Even assuming arguendo that this is a correct legal
statement, there is absolutely no showing that the possession of Benigno was limited
by his agreement with Natividad (as to prohibit him from instituting a tenant) or by
operation of law; and because there is a total failure to disprove and even dispute
that Benigno was a legal possessor at the time Bernas was installed by him as an
agricultural lessee, then Bernas validly became an agricultural leasehold lessee of
the land and is protected by the law from ejectment except for causes specified
therein.
Finally, in relation to the dissenting opinion, it may be wise to repeat the statement of
the Court in Jose D. Lina, Jr.vs. Isidro Cario (G.R. No. 100127, 23 April 1993) thus

The Court believes that petitioner's argument cogent though it may

be as a social and economic comment is most appropriately
addressed, not to a court which must take the law as it is actually
written, but rather to the legislative authority which can, if it wishes,
change the language and content of the law. (emphasis supplied)
In the case at bar, the language, policy and intent of the law are clear; this Court
cannot interpose its own views as to alter them. That would be judicial legislation.
WHEREFORE the petition is GRANTED. The decision of the respondent appellate
court, is REVERSED and SET ASIDE and that of the Regional Trial Court.
REINSTATED. Costs against the private respondent.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 126425 August 12, 1998

POLICARPIO NISNISAN AND ERLINDA NISNISAN, petitioners,
vs.
COURT OF APPEALS, PACITA MANCERA, WENCESLAO MANCERA and
SILVESTRE POLANCOS, respondents.

MARTINEZ, J.:
This petition for review on certiorari filed under Rule 45 of the Revised Rules of Court
assails the decision 1 of the Court of Appeals in CA-G.R. CV No. 39416 affirming en
toto the decision 2 of the Regional Trial Court (Branch 21) of Bansalan, Davao del
Sur, in Civil Case No. XXI-5 (86), which dismissed petitioners' complaint for
reinstatement of tenancy holding filed against private respondents spouses Pacita
Mancera and Wenceslao Mancera.
The facts as culled from the record are as follows:
Spouses Gavino and Florencia Nisnisan are the owners of a parcel of land
denominated as Lot No. 2510, Cad 275 located at Dolo, Bansalan, Davao del Sur,
with an area of 4,9774 hectares, covered by Original Certificate of Title No. (P11676)-2151. Petitioner Policarpio Nisnisan, son of Gavino Nisnisan, has been
cultivating one hectare of the aforesaid land since 1961.
On April 1, 1976, Gavino Nisnisan and petitioner Policarpio Nisnisan entered into a
leasehold tenancy contract 3 which stipulates a sharing arrangement of 1/3:2/3 of
the harvest, the bigger share being given to the latter.
On December 28, 1978, Gavino Nisnisan sold two hectares of their land, including
the land tenanted by petitioners-spouses Policarpio and Erlinda Nisnisan, to private
respondents-spouses Wenceslao Mancera and Pacita H. Mancera.
As a result of the sale, petitioners-spouses were ousted from their landholding.
Hence, on November 24, 1982, petitioners-spouses instituted an action 4 for
reinstatement of tenancy holding against private respondent spouses Wenceslao
and Pacita Mancera before the Court of Agrarian Relations (CAR) in Davao City. The

case was later transferred to the Regional Trial Court when the CAR was abolished.
The said complaint was dismissed without prejudice on December 16, 1985.
Sometime in 1983, Gavino Nisnisan demanded from the Mancera spouses to
repurchase the said land but the latter refused. Hence, on November 3, 1986,
spouses Gavino and Florencia Nisnisan, together with the petitioners-spouses
Policarpio and Erlinda Nisnisan, filed a complaint with the Regional Trial Court for:
(a) repurchase of the subject land under the Public Land Act, (b) declaration of nullity
of the instrument of sale and Transfer Certificate of Title No. T-15954, (c)
reinstatement of tenancy holding and (d) damages. 5 The complaint alleged among
others,
xxx xxx xxx
FOURTH CAUSE OF ACTION
1. Plaintiffs herein are agricultural tenants-lessees under the Provisions
of PD No. 27 on a portion of one (1) hectare of that parcel of land sold
by plaintiffs to the defendants by virtue of the conveyance dated March
31, 1982; said tenanted portion is devoted and cultivated by tenants
plaintiffs to lowland rice culture as shown by an accomplished OTAC
FORM No. 56-B with the land owner prior to the aforementioned sale;
2. That, despite the verbal agreement between defendants vendee and
plaintiffs tenants for plaintiffs herein to continue and cultivate their
tenancy holdings in pursuant to PD No. 27 availing security of tenancy
tenure on any land sold if devoted to rice and corn culture, defendants
ejected the plaintiffs without court order, and therefore plaintiffs were
deprived of their only livelihood;
3. That, in disregard of and to subvert PD No. 27, defendants induced
plaintiff Policarpio Nisnisan to sign a prepared affidavit which he did not
know nor understood the correct import purporting that he has
surrendered his tenancy holdings; that the execution of said affidavit
was without the knowledge, consent, and participation of his tenant
spouse, Erlinda Nisnisan;
4. That, despite that plaintiffs and defendants agreed that in case of
sale or transfer of ownership of the tenanted portion the security of
tenure of the plaintiffs follows the land as established under PD. No.
27, but that after the sale, the defendants persisted in ejecting the
plaintiffs from said tenancy holdings; that despite plaintiffs availing of
the provisions of PD No. 1508, no settlement and/or conciliation was
reached in the Office of the Lupon Tagapayapa, as a result in case No.
70 a certification to file action has been issued;
5. That, plaintiffs have been deprived of their income from said land
holdings as tenant thereof under PD No. 27; defendants therefore are
liable for damages:

Traversing the allegation in the complaint with regard to the prayer for reinstatement
of tenancy holding of petitioners Nisnisan spouses, which is the sole subject matter
in this petition, the private respondents Mancera spouses countered that the
Nisnisan spouses have no cause of action, the latter having voluntarily surrendered
their landholding. 6
On June 25, 1992, the trial court rendered a decision dismissing the complaint ruling
that the petitioners-spouses' allegation of tenancy is repudiated by the affidavit
executed by Gavino Nisnisan to the effect that the subject land is not tenanted. The
trial court ratiocinated in this wise:
As to the claim of reinstatement by Policarpio Nisnisan, it appears from
the affidavit (Exhibit X for the Court) of Gavino Nisnisan which was
executed and filed with the Office of the Register of Deeds of Davao
del Sur, and recorded as Entry No. 117718, per memorandum of
encumbrances of Original Certificate of Title No. (P-11676)-2151
(Exhibit A/5-C) that the said land is not tenanted. This claim therefore
by no less than plaintiff Gavino Nisnisan, has totally shattered the claim
of tenancy of Policarpio Nisnisan. A fortiori therefore the claim for
reinstatement has to fail. 7
The above-quoted ruling of the trial court was affirmed by the respondent Court of
Appeals in its Decision dated November 20, 1995 which substantially adopted the
trial court's findings, thus:
The Memorandum of Encumbrances of appellant Gavino's OCT No.
(P-11676)-2151 (Exhibits A to A-3) contain two entries of affidavit of
non-tenancy. The first is Entry No. 72086 for Affidavit of Non-Tenancy
under Justice Circular No. 31. The second Entry No. 117718 for
Affidavit of Non-Tenancy executed by Gavino Nisnisan, vendor. Also
appellants-spouses Gavino and Florencia Nisnisan executed a Joint
Affidavit dated January 28, 1985 wherein they averred the following:
9. That it is not true that our son and his wife were our
tenants in the said land as they did not give any share to
us nor did we ask for it and any semblance of tenancy
they did have was only a ploy that did enable them to
borrow under the Masagana 99 programs of the
government which they did ultimately failed to pay but
which we paid as parents if only to save our son from
being prosecuted and jailed for estafa. 8
Aggrieved by the Court of Appeals' decision, petitioners-spouses now come to this
Court on the sole issue of: "Whether or not petitioners Spouses Policarpio and
Erlinda Nisnisan voluntarily surrendered their tenancy holding."
We find merit in the petition.
The finding of the Court of Appeals that the petitioners-spouses are not tenants of
the subject land holding is erroneous. While there are annotations in Gavino

Nisnisan's certificate of title (Entry No. 72086 for Affidavit of Non-Tenancy under
Justice Circular No. 31 and Entry No. 117718 for Affidavit of Non-Tenancy executed
by Gavino Nisnisan) that the subject land is not tenanted, said annotations are not
conclusive proof of the real relationship between Gavino Nisnisan and petitioner
Policarpio Nisnisan and are not binding upon the court. As we have ruled in Cuao
vs. Court of Appeals, 9
We believe and so hold that such annotation cannot be regarded as
conclusive upon the courts of justice as to the legal nature and
incidents of the relationship between the landowner(s) in this case and
private respondents. Firstly, the annotation serves basically as notice
to all persons of the existence of the Certification issued by Mr.
Eugenio Bernardo, but neither adds to the validity or correctness of that
certification nor converts a defective and invalid instrument into a valid
one as between the parties. Secondly, the certification issued by Mr.
Eugenio Bernardo of the MAR (Ministry of Agrarian Reform) is very
much like the certifications issued by the Secretary of Agrarian Reform
and other officials of the Ministry and later the Department of Agrarian
Reform concerning the existence of tenancy relationships in respect of
agricultural lands from which persons, who claim to be tenants, are
sought to be ejected. It is well-settled that the findings of or
certifications issued by the Secretary of Agrarian Reform, or his
authorized representative, in a given locality concerning the presence
or absence of a tenancy relationship between the contending parties
are merely preliminary or provisional and not binding upon the courts.
(Emphasis Ours)
Moreover, petitioners-spouses have sufficiently shown that they are the tenants of
the spouses Gavino and Florencia Nisnisan as evidenced by a document entitled
"Panagsabutan Sa Abang Sa Yuta" (Exhibit "D"), executed by Gavino Nisnisan and
Policarpio Nisnisan on April 1, 1976, acknowledged before the Municipal Trial Court
Judge Mariano C. Tupas of Bansalan, Davao del Sur, and registered before the
Municipal Treasurer's Office, portions of which read:
xxx xxx xxx
2 Nga ang yuta nga giasoy sa itaas pagatamnan sa NAGA-ABANG SA
YUTA ug humay . . . sa panahon sa ting-ulan ug humay . . . sa
panahon sa ting-init sulod sa termino niining kasabutan, ubos sa mga
kondisyones nga mao;
xxx xxx xxx
4. Nga ang naasoy nga yuta pagaabangan ug . . . 15 ka bakid nga . . .
humay sa tag 50 kilos kada bakid para sa panuig, ug 15 ka bakid nga .
. . humay sa tag 50 kilos kada bakid para sa pangulilang . . .;
5. Nga ang abang para sa tuig tingtanum adto ibayad sa
NAGAPAABANG o sa iyang piniyalan sa sulod sa 3 ka adlaw sukad sa
petsa sa ting-ani . . . ihatud sa balay sa nagpa-abang o kon

kagustuhan sa NAGAPAABANG SA YUTA, mahimo iyang kuha-on

ang abang sa petsa sa tinggiok . . . .
6. Nga kon pananglitan, ang maong tanum madaut nga balor ug 75%
tungod sa mga hinungdan nga dill tinuyo (fortuituos event or force
majeure) ang NAGA-ABANG SA YUTA DILI mapugos sa pagbayad sa
gikasabutan abang alang nianang tuiga, apan kinahangalan
pagbayaran niya kanang maong abang pinaagi sa data-data sa sukad
sa 50% (kuarta o humay sa kada ting-ani mag sugod sa sunod nga ting
tanum hangtud nga maimpas ang bayranan;
xxx xxx xxx
The above-quoted document evidences the leasehold tenancy relationship between
Gavino Nisnisan and petitioner Policarpio Nisnisan. It clearly shows that the subject
land is agricultural; that petitioner Policarpio Nisnisan is obligated to cultivate the
same by planting rice thereon; and, that there is sharing of the harvests between the
said parties. It is clear that essential elements of tenancy relationship 10 are present
in this case, namely:
1. the parties are the landowner and the tenant
2. the subject matter is agricultural land
3. there is consent
4. the purpose is agricultural production
5. there is personal cultivation by the tenants
6. there is sharing of harvests between parties
Significantly, this documentary evidence of leasehold tenancy relationship was never
rebutted by the private respondents-spouses. Furthermore, this leasehold tenancy
contract cannot be defeated by the aforementioned affidavit of non-tenancy executed
by Gavino Nisnisan, which is obviously self-serving.
Private respondents likewise impliedly admitted in their answer to the complaint that
petitioners-spouses are tenants when they alleged that petitioners-spouses have
voluntarily surrendered the subject landholding. 11 This brings us to the issue of
whether or not petitioners-spouses have indeed voluntarily surrendered the subject
landholding. Upon perusal of the record of the case, we find private respondents'
contention baseless. Other than their bare allegations, private respondents failed to
present any evidence to show that petitioners-spouses surrendered their landholding
voluntarily after the private respondents purchased the subject property. Moreover,
the filing of the complaint for reinstatement of leasehold tenancy by petitionersspouses against private respondents before the CAR militates against the private
respondents' claim that petitioners-spouses voluntarily surrendered their landholding
to them.

Under Section 8 of Republic Act No. 3844, 12 voluntary surrender, as a mode of

extinguishing agricultural leasehold tenancy relations, must be convincingly and
sufficiently proved by competent evidence. The tenant's intention to surrender the
landholding cannot be presumed, much less determined by mere implication. 13
Based on the foregoing disquisition, it is clear that petitioners-spouses are
agricultural lessees and are therefore entitled to security of tenure as mandated by
Section 10 of Republic Act 3844:
Sec. 10. Agricultural Leasehold Relation Not Extinguished by
Expiration of Period, etc. The agricultural leasehold relation under
this Code shall not be extinguished by mere expiration of the term or
period in a leasehold contract nor by the sale, alienation or transfer of
the legal possession of the landholding. In case the agricultural lessor
sells, alienates or transfers the legal possession of the landholdings,
the purchaser or transferee thereof shall be subrogated to the rights
and substituted to the obligations of the agricultural lessor. (Emphasis
Ours)
Thus, the agricultural leasehold relation cannot be extinguished by the mere
expiration of the term or period in an agricultural leasehold contract nor by the sale,
alienation or transfer of the legal possession of the landholding. He can only be
ejected for cause 14, which, however, is absent in the case at bar.
WHEREFORE, the Decision of the Court of Appeals dated November 20, 1995 is
hereby MODIFIED in that, petitioners-spouses Policarpio and Erlinda Nisnisan are
declared tenants and AFFIRMED in all other respects.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 120363 September 5, 1997

CECILLEVILLE REALTY and SERVICE CORPORATION, petitioner,
vs.
THE COURT OF APPEALS and HERMINIGILDO PASCUAL, respondents.

FRANCISCO, J.:
In synthesis, these are the antecedent facts:
Petitioner Cecilleville Realty and Service Corporation is the owner of a parcel
of land in Catmon, Sta. Maria, Bulacan. covered by T.C.T. No. 86.494 (M).
Private respondent Herminigildo Pascual occupies a portion thereof. Despite
repeated demands, private respondent refused to vacate and insisted that he
is entitled to occupy the land since he is helping his mother Ana Pascual,
petitioner's tenant, to cultivate the land in question. Thenceforth, petitioner
instituted an ejectment suit against private respondent before the Municipal
Trial Court of Sta. Maria, Bulacan. Finding no tenancy relationship between
petitioner and private respondent, the Municipal Trial Court on September 17,
1992, ordered private respondent to vacate the land and to pay "the sum of
P10,000.00 as attorney's fees" and "another sum of P500.00 monthly from the
filing of [the] complaint." 1 Private respondent appealed to the Regional Trial
Court which, on April 4, 1994, set aside the Municipal Trial Court's decision
and remanded the case to the DARAB for further adjudication. Thus:
There is no question that Ana Pascual may seek the assistance of
her immediate farm household in the cultivation of the land. The
law protects her in this regard. If the tenant Ana Pascual will be
deprived of such right by ejecting her son Herminigildo Pascual
from the land, it is tantamount to circumventing the law as Ana
Pascual will be deprived of the helping hands of her son. What
could not be done directly cannot be done indirectly. The issue of
tenancy relationship between the plaintiff corporation and Ana
Pascual cannot be avoided in this ejectment case.
WHEREFORE, in the light of the foregoing, this Court hereby
orders that the instant case be REMANDED to the DARAB for
further adjudication and the decision of the Court a quo is hereby
SET ASIDE . . . 2

Petitioner moved for reconsideration but to no avail; hence, it appealed

to respondent Court of Appeals. In its assailed decision 3, respondent
court 4 dismissed petitioner's appeal. The entire ruling of respondent
court in point states:
We find this petition devoid of merit.
There is a clear tenancy relationship between the plaintiff and the
defendant, such that the defendant cannot be ejected from the
premises like a common squatter.
The tenancy relationship dated back to 1976 when the defendant's
father, Sotero Pascual, became the tenant of Jose A.
Resurreccion, the President of the Cecilleville Realty and Service
Corporation. This tenancy continued until 1991 when Sotero
Pascual died and was succeeded by his wife Ann Pascual by
operation of law. That Ana Pascual is entitled to the security of
tenure was upheld by the DARAB in its Decision of November 8,
1993 which ordered the plaintiff to respect and maintain the
peaceful possession and cultivation of the property by the
defendant Ana Pascual and ordered the execution of a agricultural
leasehold contract between the parties.
The defendant Herminigildo Pascual is occupying and working on
the land holding to help his mother, a bona-fide tenant. He is an
immediate member of the family and is entitled to work on the
land. As the lower court held.
Under Republic Act No. 1199, as amended by RA 2263, entitled An
Act to Govern the Relations Between Landholders and Tenants of
Agricultural Lands (Leasehold and Share Tenancy), Section 5(a)
defines the term tenant, to wit:
Sec. 5.
(a) A tenant shall mean a person who, himself and with the aid
available from within his immediate farm household, cultivates the
land belonging to, or possessed by, another, with the latter's
consent for purposes of production, sharing the produce with the
landholderunder the share tenancy system, or paying to the
landholder a price certain or ascertainable in produce or in money
or both, under the leasehold tenancy system.
Similarly, the term "immediate farm household" is defined in the
same section as follows:
(o) Immediate farm household includes the members of the family
of the tenant, and such other persons, whether related to the
tenant or not, who are dependent upon him for support and who
usually help him operate the farm enterprise.

The defendant, although not the tenant himself, is afforded the

protection provided by law as his mother is already old and infirm
and is allowed to avail of the labor of her immediate household.
He is entitled to the security of tenure accorded his mother. His
having a house of his own on the property is merely incidental to
the tenancy.
WHEREFORE, the Decision appealed from is AFFIRMED with
costs against the petitioner. 5(Emphasis supplied.)
Dissatisfied, petitioner filed the instant petition for review
on certiorari anchored on a lone assignment of error, to wit:
Petitioner respectfully contends that the Honorable Court of
Appeals erred in not finding that while the private respondent is
entitled to work on the agricultural land of petitioner in his
capacity as member of the family of tenant Ana Pascual,
nonetheless he can not occupy a substantial portion thereof and
utilize the same for residential purposes. 6
On August 19, 1996, the Court gave due course to the petition and required the
parties to submit their respective memoranda. Thereafter, the Court
deliberated on the arguments set out in their pleadings.
The petition is impressed with merit.
At the outset, the Court notes that petitioner does not dispute respondent
court's finding that Ana Pascual, private respondent's mother, is its bona-fide
tenant. Neither does petitioner question "the right of Ana Pascual, the tenant,
to be assisted by a member of her household, who in this case is respondent
Herminigildo Pascual." 7 What petitioner impugns as erroneous is respondent
court's gratuitous pronouncement which effectively granted private
respondent not only a home lot, but also the right to maintain his own house in
petitioner's small parcel of land 8 despite the fact that Ana Pascual, the
adjudged bona-fide tenant, has previously been given a home lot and has an
existing house thereon. Private respondent Herminigildo Pascual, for his part,
insists that he is entitled by law, "(Section 22, (3) of Rep. Act No. l199, as
amended by Rep. Act No. 2263)," 9 to a home lot and the right to maintain
another house different from that of his mother. To bolster his contention,
private respondent adopts respondent court's ruling finding him as a member
of Ana Pascual's immediate farm household. Private respondent holds,
quoting extensively from the assailed decision, that "although not the tenant
himself, [he] is afforded the protection provided by law as his mother is
already old and infirm and is allowed to avail of the labor of her immediate
household. . . . [And] [h]is having a house of his own on the property is merely
incidental to the tenancy." 10
As the Court sees it, the issue lies on the interpretation of Section 22,
paragraph 3, of Rep. Act No. 1199, as amended by Rep. Act No. 2263. This
section provides in full as follows:

Sec. 22
xxx xxx xxx
(3) The tenant shall have the right to demand for a home lot
suitable for dwelling with an area of not more than 3 per cent of
the area of his landholding provided that it does not exceed one
thousand square meters and that it shall be located at a
convenient and suitable place within the land of the landholder to
be designated by the latter where the tenant shall construct his
dwelling and may raise vegetables, poultry, pigs and other
animals and engage in minor industries, the products of which
shall accrue to the tenant exclusively. The tenant'sdwelling shall
not be removed from the lot already assigned to him by the
landholder, except as provided in section twenty-six unless there
is a severance of the tenancy relationship between them as
provided under section nine, or unless the tenant is ejected for
cause, and only after the expiration of forty-five days following
such severance of relationship or dismissal for cause. (Emphasis
supplied)
The law is unambiguous and clear. Consequently, it must be applied
according to its plain and obvious meaning, according to its express
terms. Verba legis non est recedendum, or from the words of a statute
there should be no departure. 11 As clearly provided, only a tenant is
granted the right to have a home lot and the right to construct or
maintain a house thereon. And here, private respondent does not
dispute that he is not petitioner's tenant. In fact, he admits that he is a
mere member of Ana Pascual's immediate farm household. Under the
law, therefore, we find private respondent not entitled to a home lot.
Neither is he entitled to construct a house of his own or to continue
maintaining the same within the very small landholding of petitioner. To
rule otherwise is to make a mockery of the purpose of the tenancy
relations between a bona-fide tenant and the landholder as envisioned
by the very law, i.e., Rep. Act No. 1199, as amended, upon which private
respondent relies, to wit:
Sec. 2. Purpose. It is the purpose of this Act to establish
agricultural tenancy relations between landholders and tenants
upon the principle of social justice; to afford adequate protection
to the rights of both tenants and landholders; to insure the
equitable division of the produce and income derived from the
land; to provide tenant-farmers with incentives to greater
and more efficient agricultural production; to bolster their
economic position and to encourage their participation in the
development of peaceful, vigorous and democratic rural
communities. (Emphasis supplied )
Thus, if the Court were to follow private respondent's argument and allow all
the members of the tenant's immediate farm household to construct and

maintain their houses and to be entitled to not more than one thousand (1,000)
square meters each of home lot, as what private respondent wanted this Court
to dole-out, then farms will be virtually converted into rows, if not colonies, of
houses. How then can there be "equitable division of the produce and income
derived from the land" and "more efficient agricultural production" if the land's
productivity and use for growing crops is lessened or, more appropriately,
obliterated by its unceremonious conversion into residential use? It is a
fundamental principle that once the policy or purpose of the law has been
ascertained, effect should be given to it by the judiciary. 12This Court should
not deviate therefrom.
Further, it is undisputed that Ana Pascual, the tenant and private respondent's
mother, has an existing home lot and a house on the subject property in which
private respondent may take refuge while attending to his work. Curiously,
despite its availability private respondent chose to construct, without
petitioner's permission, a concrete house of his own thereby saving him the
trouble of paying appropriate rents. If the Court were to abide by the
respondent court's inordinate pronouncement that private respondent is
entitled to maintain his own house then we will be condoning the deprivation
of a landholder's property without even a fraction of compensation. It taxes the
credulity of the Court, therefore, to insist that private respondent's "having a
house of his own on the property is merely incidental to the tenancy" and to
afford him the convenience of attending to the cultivation of the land for, in the
first place, he is not the tenant as he himself admits. Besides, the "incidental"
use of his own house can very well be provided by the existing house of his
mother, who with her "old and infirm" condition, surely needs the attention
and care of her children, one of whom is herein private respondent. Be it
emphasized that like the tenant the landholder is also entitled to the protection
of the law as one of the purposes of the "Act" is "to afford adequate protection
to the rights of BOTH tenants and landholders". 13 The policy of social justice,
we reiterate, is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. "Compassion for the poor", as we said
in Galay, et. al. v. Court of Appeals, et. al. 14 "is an imperative of every humane
society but only when the recipient is not a rascal claiming an undeserved
privilege."
WHEREFORE, the petition is GRANTED. The part of the decision appealed
from which is inconsistent herewith is REVERSED and SET ASIDE. The
decision of the Municipal Trial Court directing the private respondent
Herminigildo Pascual to vacate the portion of the landholding he occupies and
to pay the petitioner attorney's fees in the amount of P10,000.00 and another
sum of P500.00 monthly from the filing of complaint is hereby REINSTATED.
Costs against private respondent.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118599 June 26, 1998

ANICETO 1 M. QUINO, petitioner,
vs.
COURT OF APPEALS, PURIFICACION L. CANSON, EDITHA G. LEONARDO,
CARMELITA L. MORI, JOSEFINA L. BAIS, AIDA L. COLLYER, ANTONIO G.
LEONARDO, RUDOLFO G. LEONARDO, ROBERTO G. LEONARDO and
TERESA L. REGNER, in substitution for ANTONIO LEONARDO SR., JOSEFA
GALAN and JOSE BITOON,respondents.

BELLOSILLO, J.:
On 29 October 1974 Bernarda and Rosario Galan sold their agricultural land with an
area of 2.3926 hectares situated in Basak, Compostela, Cebu, to spouses Antonio
Leonardo Sr. and Josefa Galan for P2,000.00. More than a decade later, or on 30
October 1986, petitioner Aniceto Quio filed a complaint for redemption of the
property against the vendees claiming that he had been instituted as tenant thereon
by the Galans since 1951; consequently, he had the right to be notified in writing of
the owners' intention to sell the property to enable him to exercise his right of
preemption under Sec. 11 of RA No. 3844 2 but that notwithstanding the Galans had
not informed him of the sale. He claimed that he learned of the transaction only on 1
September 1986 when he found out that the Leornardos were already the new
owners. He therefore prayed that he be allowed to redeem the property and
consigned the purchase price with the trial court on the same day he filed his
complaint.
Meanwhile, on 4 November 1986 the Leonardos sold the property to private
respondent Jose Bitoon for P30,000.00.
On 12 November 1986 petitioner filed another complaint against the same spouses
for injunction with a prayer for a restraining order to enjoin his ejectment from the
property.
During the pendency of the case, Antonio Leonardo Sr. died. His childred, private
respondents Purificacion L. Canson, Editha G. Leonardo, Carmelita, L. Mori,
Josefina L. Bais, Aida L. Collyer, Antonio G. Leonardo, Rudolfo G. Leonardo,
Roberto G. Leonardo and Teresa L. Ragner, were substituted in his stead as codefendants.

Something thereafter, petitioner received a letter from the counsel of respondent

Bitoon dated 24 November 1986 notifying him of the transfer of ownership of the
land to his client. As no supporting document was attached to the letter to bolster
counsel's claim, petitioner went to the Notarial Division of the Capitol Building and
obtained on 2 March 1987 a copy of the pertinent deed of sale between spouses
Leonardo and respondent Bitoon.
On 27 July 1987 petitioner filed an amended complaint impleading Jose Bitoon as
additional defendant. However, on 8 October 1990 the trial court dismissed the
original as well as the amended complaint after finding that majority of the esential
requisites of tenancy relationship between the parties did not exist. 3
The Court of Appeals however arrived at an entirely different evaluation of the
evidence. 4 On 5 August 1994 it held that all the essential requisites for tenancy
relationship were present, and being a tenant petitioner was entitled to the rights of
preemption and redemption under Secs. 11 and 12, respectively, of RA No. 3844.
Nevertheless it noted a stumbling block to petitioner's complete victory thus
Be that as it may, since the land in question had already pass(ed) on to
defendant-appellee Jose Bitoon, and plaintiff-appellant's quest against
defendant-appellees spouses Antonio Leonardo and Josefa Galan may
be considered moot and academic under RA 3844, Section 10,
defendant-appelle Jose Bitoon having been subrogated to the rights
and obligations of his predecessors-in-interest, his obligation under the
law to the tenant-plaintiff continues and subsists, that if he decides to
sell the land, then plaintiff-appellant can still exercise his rights under
the law (Velasquez v. Nery, 211 SCRA 28, emphasis supplied). 5
The appellate court decreed thus
1. declaring petitioner as tenant of Bernarda and Rosario Galan and
thereafter of their successor-in-interest, Antonio Leonardo Sr.
substituted by his (nine) children and in turn of the present owner,
respondent Bitoon.;
2. ordering respondent Bitoon to reinstate petitioner as agricultural
tenant and to maintain him in the peaceful possession and enjoyment
of the land tenanted by him;
3. ordering the Clerk of Court of the trial court to return to petitioner the
amount of two thousand pesos (P2,000.00) which he consigned with
the trial court as redemption price for the land in question, covered by
O.R. No. 9802404 J dated 30 October 1986; and,
4. no pronouncement as to costs.

On 23 November 1994 respondent Court of Appeals denied reconsideration.

The issue then is whether respondent Court of Appeals was correct in holding that
petitioner could not redeem the property from respondent Bitoon unless the latter
decided to sell it on the strength of the ruling in Velasquez v.Nery. 8
Petitioner asserts that Velasquez is inapplicable because of the difference in factual
circumstances. In that case, the sale made by the landowners to a third party was by
virtue of a court order and not as envisioned under Sec. 11 of RA No. 3844. In other
words, the right of the tenants therein to preemptively purchase wa not violated.
Hence the right of redemption was unavailing to them.
For a better understanding of the controversy, it is essential to discuss first the
statutory right of redemption and pertinent jurisprudence on the matter.
Sec. 12 of RA No. 3844 as amended by RA No. 6389 provides
Sec. 12. Lessee's right Redemption. In case the landholding is sold
to a third person without the knowledge of the agricultural lessee, the
latter shall have the right to redeem the same at a reasonable price
consideration . . . . The right of redemption under this Section may be
exercised within one hundred eighty days from notice in writing which
shall be served by the vendee on all lessees affected and the
Deaprtment of Agrarian Reform upon the registration of the sale . . . .
The redemption price shall be the reasonable price of the land at the
time of the sale . . . .
Simply stated, in the event that the landholding is sold to a third person without the
knowledge of the agricultural lessee, the latter is granted by law the right to redeem it
within one hundred eighty (180) days from notice in writing and at a reasonable price
and consideration. Petitioner was not notified of the first and second instances of
sale of the property apparently because all the respondents disputed petitioner's
assertion that he has been a tenant thereon since 1951. These instances of sale
without notification gave rise to his right to redeem the property as lessee although
no longer from the Leonardos but from its present owner, respondent Bitoon.
A letter dated 24 November 1986 from the counsel of respondent Bitoon was
received by petitioner informing him that the ownership of subject property has been
transferred to respondent Bitoon. However the counsel did not bother to furnish
petitioner with the supporting documents which is why petitioner did not readily
believe what was written in the letter. Petitioner had to proceed to the Notarial
Division of the Capitol Building on 2 March 1987 to secure a copy of the deed of sale
between spouses Leonardo and respondent Bitoon.
The purpose of the written notice required by law its to remove all uncertainties as to
the sale, its terms and its validity, and to quiet any doubts that the alienation is not
definitive. The law does not prescribe any particular form of notice, nor any
distinctive method for notifying the redemptioner. So long as the redemptioner is
informed in writing of the sale and the particulars thereof, the period for redemption
will start running. 9 The letter received by petitioner, being bare, was not such written
notice. It failed to make certain the terms, particulars and validity of the sale. Rather,
only a copy of the deed of sale, in an authentic form, will satisfy the requirement of

the law and serve the purpose thereof. Thus, it is proper to reckon the period of
redemption from receipt of the authentic document on 2 March 1987. The amended
complaint filed on 27 July 1987 is well within the redemption period of one hundred
eighty (180) days.
The preceding discussion leads us to the requirement concerning reasonable price
and consideration. An offer to redeem to be properly effected can either be through a
formal tender with consignation or by filing a complaint in court coupled with
consignation of the redemption price within the prescribed period. 10 It must be
stressed however that in making a repurchase it is not sufficient that a person
offering to redeem merely manifest his desire to purchase; this statement of intention
must be accompanied by an actual and simultaneous tender of payment which
constitutes the legal use or exercise of the right to repurchase. And the tender of
payment must be for the full amount of the repurchase price, otherwise the offer to
redeem will be held ineffectual. 11 As to what constitutes reasonable price and
consideration, the valuation placed by the Leonardo spouses and respondent Bitoon
themselves as price of the land must be taken to be such reasonable price and
consideration. 12
Petitioner consigned the amount of P2,000.00 paid by the Leonardos to the Galans.
However when he amended his complaint by impleading respondent Bitoon, he did
not increase the amount consigned as would have made it equivalent to P30,000.00,
representing payment by the second vendee. In this regard, petitioner submits that
he is not required to consign the latter amount since that would put an additional
burden on a tenant seeking redemption. After all, he would be paying whatever
amount be finally determined by the trial court as reasonable price and
consideration.
It is not difficult to discern why the full amount of the redemption price should be
consigned in court. Only by such means can the buyer become certain that the offer
to redeem is one made seriously and in good faith. A buyer cannot be expected to
entertain an offer of redemption without the attendant evidence that the redemptioner
can, and is willing to accomplish the repurchase immediately. A different rule would
leave the buyer open to harassment by speculators or crackpots, as well as to
unnecessary prolongation of the redemption period, contrary to the policy of the law
in fixing a definite term to avoid prolonged and anti-economic uncertainty as to
ownership of the thing sold. Consignation of the entire price would remove all
controversies as to the redemptioner's ability to pay at the proper time. 13 Against
such rationale, petitioner's submission is rendered insignificant. The amount so
consigned by him falls short short of the requirement of the law and leaves the Court
with no choice but to rule against him.
With the foregoing ratiocination, it becomes unnecessary to dwell on the issue of
whether petitioner may redeem the property from respondent Bitoon. Nevertheless,
we shall pursue the discussion thereon if only to rectify some points. In Velasquez,
the Velasquez spouses, in a nutshell, were agricultural lessees of the property
owned by the Nery spouses and the Lorenzos. Later, the owners filed an action for
partition before the trial court. In a compromise agreement, they agreed to sell the
property to Delta Motor Corporation. Having received information about the
impending sale, the Velasquez spouses filed an action for redemption before the

then Court of Agrarian Relations. Subsequently, the sale materialized. Unfortunately,

the redemption case was dismissed due to lack of interest to redeem the property at
its acquisition price. The appeal before respondent court and the petition before this
Court met the same fate. However, we also noted that the Philippine National Bank
(PNB), which was not a party to the case had in the meantime extrajudicially
foreclosed the property. By way of obiter dictum we stated
Because of the extra-judicial foreclosure of the mortgage over the
subject by the Philippine National Bank, the present case has become
moot and academic with regard to petitioners claim against Delta Motor
Corporation. It is now the PNB or its subsequent transferees from
whom the petitioners must redeem, if and when PNB decides to sell or
alienate the subject property in the future . . . .
Respondent appellate court must have taken out of context our statement therein
when the former ruled that "if respondent Bitoon decides to sell the land then
petitioner can still exercise his rights under the law." The phrase in
the Velasquez case that "if and when PNB decides to sell or alienate the subject
property in the future" logically refers to "its subsequent transferees" only, and not as
a condition precedent to the exercise of the right of redemption as what respondent
court perceived it to be. To further stress the matter, the ruling of respondent court
overlooks the essence of redemption provided in the amended Sec. 12 of RA No.
3844 which, as previously mentioned, grants to the lessee such right in case the
property is sold to a third person without his knowledge. Since that situation obtained
in Velasquez, the Velasquez spouses had the right to redeem the property from the
PNB as new owner. The circumstances that the property was sold to a third person
without the knowledge of the lessee provides the source from which the right of
redemption springs. Analyzing this right, it may be stated that such right works only
one way in favor of the redemptioner. For he can compel the purchase to sell but
he cannot be compelled to buy. Supposing the lessee failed to redeem the property
and the purchaser decided to sell or alienate it without notifying the former, the
property may be redeemed from the subsequent transferee because another
essence of the right of redemption is that it attaches to a particular landholding by
operation of law. 14 The plain import of the obiter dictum in the Velasquez case is that
the Velasquez spouses may redeem the property from the PNB as new owner, or
should PNB decide to sell the property they may redeem the same from its
transferee. Thus, contrary to the assertion of petitioner, Velasquez is applicable but
not as so applied by respondent court; instead, it should have based its main ruling
lack of interest to redeem the property at the acquisition price paid by respondent
Bitoon.
Hence we reiterate that, for of petitioner to consign the entire redemption price, there
was no valid exercise by him of his legal right to redeem.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals
(1) declaring petitioner as tenant of Bernarda and Rosario Galan and thereafter of
their successor-in-interest, Antonio Leonardo Sr. and Josefa Galan, and in turn, of
the present owner respondent Bitoon; (2) ordering respondent Jose Bitoon to
reinstate petitioner as agricultural tenant and to maintain him in the peaceful
possession and enjoyment of the land tenanted by him; (3) ordering the Clerk of

Court of the trial court to return to petitioner the amount of of P2,000.00 which he
consigned as redemption price for the land in question covered by O.R. No. 9802404
J dated 30 October 1986, with no pronouncement as to costs, is AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 100091 October 22, 1992

CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR.
LEONARDO A. CHUA, petitioner,
vs.
THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE
COURT OF APPEALS and ALVIN OBRIQUE, REPRESENTING BUKIDNON FREE
FARMERS AGRICULTURAL LABORERS ORGANIZATION
(BUFFALO),respondents.

CAMPOS, JR., J.:

This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to
nullify the proceedings and decision of the Department of Agrarian Reform
Adjudication Board (DARAB for brevity) dated September 4, 1989 and to set aside
the decision the decision * of the Court of Appeals dated August 20, 1990, affirming
the decision of the DARAB which ordered the segregation of 400 hectares of
suitable, compact and contiguous portions of the Central Mindanao University (CMU
for brevity) land and their inclusion in the Comprehensive Agrarian Reform Program
(CARP for brevity) for distribution to qualified beneficiaries, on the ground of lack of
jurisdiction.
This case originated in a complaint filed by complainants calling themselves as the
Bukidnon Free Farmers and Agricultural Laborers Organization (BUFFALO for
brevity) under the leadership of Alvin Obrique and Luis Hermoso against the CMU,
before the Department of Agrarian Reform for Declaration of Status as Tenants,
under the CARP.
From the records, the following facts are evident. The petitioner, the CMU, is an
agricultural educational institution owned and run by the state located in the town of
Musuan, Bukidnon province. It started as a farm school at Marilang, Bukidnon in
early 1910, in response to the public demand for an agricultural school in Mindanao.
It expanded into the Bukidnon National Agricultural High School and was transferred
to its new site in Managok near Malaybalay, the provincial capital of Bukidnon.
In the early 1960's, it was converted into a college with campus at Musuan, until it
became what is now known as the CMU, but still primarily an agricultural university.
From its beginning, the school was the answer to the crying need for training people
in order to develop the agricultural potential of the island of Mindanao. Those who
planned and established the school had a vision as to the future development of that

part of the Philippines. On January 16, 1958 the President of the Republic of the
Philippines, the late Carlos P. Garcia, "upon the recommendation of the Secretary of
Agriculture and Natural Resources, and pursuant to the provisions of Section 53, of
Commonwealth Act No. 141, as amended", issued Proclamation No. 476,
withdrawing from sale or settlement and reserving for the Mindanao Agricultural
College, a site which would be the future campus of what is now the CMU. A total
land area comprising 3,080 hectares was surveyed and registered and titled in the
name of the petitioner under OCT Nos. 160, 161 and 162. 1
In the course of the cadastral hearing of the school's petition for registration of the
aforementioned grant of agricultural land, several tribes belonging to cultural
communities, opposed the petition claiming ownership of certain ancestral lands
forming part of the tribal reservations. Some of the claims were granted so that what
was titled to the present petitioner school was reduced from 3,401 hectares to 3,080
hectares.
In the early 1960's, the student population of the school was less than 3,000. By
1988, the student population had expanded to some 13,000 students, so that the
school community has an academic population (student, faculty and non-academic
staff) of almost 15,000. To cope with the increase in its enrollment, it has expanded
and improved its educational facilities partly from government appropriation and
partly by self-help measures.
True to the concept of a land grant college, the school embarked on self-help
measures to carry out its educational objectives, train its students, and maintain
various activities which the government appropriation could not adequately support
or sustain. In 1984, the CMU approved Resolution No. 160, adopting a livelihood
program called "Kilusang Sariling Sikap Program" under which the land resources of
the University were leased to its faculty and employees. This arrangement was
covered by a written contract. Under this program the faculty and staff combine
themselves to groups of five members each, and the CMU provided technical knowhow, practical training and all kinds of assistance, to enable each group to cultivate 4
to 5 hectares of land for the lowland rice project. Each group pays the CMU a service
fee and also a land use participant's fee. The contract prohibits participants and their
hired workers to establish houses or live in the project area and to use the cultivated
land as a collateral for any kind of loan. It was expressly stipulated that no landlordtenant relationship existed between the CMU and the faculty and/or employees. This
particular program was conceived as a multi-disciplinary applied research extension
and productivity program to utilize available land, train people in modern agricultural
technology and at the same time give the faculty and staff opportunities within the
confines of the CMU reservation to earn additional income to augment their salaries.
The location of the CMU at Musuan, Bukidnon, which is quite a distance from the
nearest town, was the proper setting for the adoption of such a program. Among the
participants in this program were Alvin Obrique, Felix Guinanao, Joven Caballero,
Nestor Pulao, Danilo Vasquez, Aronio Pelayo and other complainants. Obrique was
a Physics Instructor at the CMU while the others were employees in the lowland rice
project. The other complainants who were not members of the faculty or nonacademic staff CMU, were hired workers or laborers of the participants in this
program. When petitioner Dr. Leonardo Chua became President of the CMU in July
1986, he discontinued the agri-business project for the production of rice, corn and

sugar cane known as Agri-Business Management and Training Project, due to

losses incurred while carrying on the said project. Some CMU personnel, among
whom were the complainants, were laid-off when this project was discontinued. As
Assistant Director of this agri-business project, Obrique was found guilty of
mishandling the CMU funds and was separated from service by virtue of Executive
Order No. 17, the re-organization law of the CMU.
Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help
project called CMU-Income Enhancement Program (CMU-IEP) to develop unutilized
land resources, mobilize and promote the spirit of self-reliance, provide socioeconomic and technical training in actual field project implementation and augment
the income of the faculty and the staff.
Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the
CMU-Integrated Development Foundation (CMU-IDF) and groups or "seldas" of 5
CMU employees, the CMU would provide the use of 4 to 5 hectares of land to a
selda for one (1) calendar year. The CMU-IDF would provide researchers and
specialists to assist in the preparation of project proposals and to monitor and
analyze project implementation. The selda in turn would pay to the CMU P100 as
service fee and P1,000 per hectare as participant's land rental fee. In addition, 400
kilograms of the produce per year would be turned over or donated to the CMU-IDF.
The participants agreed not to allow their hired laborers or member of their family to
establish any house or live within vicinity of the project area and not to use the
allocated lot as collateral for a loan. It was expressly provided that no tenant-landlord
relationship would exist as a result of the Agreement.
Initially, participation in the CMU-IEP was extended only to workers and staff
members who were still employed with the CMU and was not made available to
former workers or employees. In the middle of 1987, to cushion the impact of the
discontinuance of the rice, corn and sugar cane project on the lives of its former
workers, the CMU allowed them to participate in the CMU-IEP as special
participants.
Under the terms of a contract called Addendum To Existing Memorandum of
Agreement Concerning Participation To the CMU-Income Enhancement
Program, 3 a former employee would be grouped with an existing selda of his choice
and provided one (1) hectare for a lowland rice project for one (1) calendar year. He
would pay the land rental participant's fee of P1,000.00 per hectare but on a chargeto-crop basis. He would also be subject to the same prohibitions as those imposed
on the CMU employees. It was also expressly provided that no tenant-landlord
relationship would exist as a result of the Agreement.
The one-year contracts expired on June 30, 1988. Some contracts were renewed.
Those whose contracts were not renewed were served with notices to vacate.
The non-renewal of the contracts, the discontinuance of the rice, corn and sugar
cane project, the loss of jobs due to termination or separation from the service and
the alleged harassment by school authorities, all contributed to, and precipitated the
filing of the complaint.

On the basis of the above facts, the DARAB found that the private respondents were
not tenants and cannot therefore be beneficiaries under the CARP. At the same
time, the DARAB ordered the segregation of 400 hectares of suitable, compact and
contiguous portions of the CMU land and their inclusion in the CARP for distribution
to qualified beneficiaries.
The petitioner CMU, in seeking a review of the decisions of the respondents DARAB
and the Court of Appeals, raised the following issues:
1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for
Declaration of Status of Tenants and coverage of land under the CARP.
2.) Whether or not respondent Court of Appeals committed serious errors and grave
abuse of discretion amounting to lack of jurisdiction in dismissing the Petition for
Review on Certiorari and affirming the decision of DARAB.
In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants
Obrique, et al. claimed that they are tenants of the CMU and/or landless peasants
claiming/occupying a part or portion of the CMU situated at Sinalayan, Valencia,
Bukidnon and Musuan, Bukidnon, consisting of about 1,200 hectares. We agree with
the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of the
written agreement signed by Obrique, et. al., pursuant to the livelihood program
called "Kilusang Sariling Sikap Program", it was expressly stipulated that no
landlord-tenant relationship existed between the CMU and the faculty and staff
(participants in the project). The CMU did not receive any share from the
harvest/fruits of the land tilled by the participants. What the CMU collected was a
nominal service fee and land use participant's fee in consideration of all the kinds of
assistance given to the participants by the CMU. Again, the agreement signed by the
participants under the CMU-IEP clearly stipulated that no landlord-tenant relationship
existed, and that the participants are not share croppers nor lessees, and the CMU
did not share in the produce of the participants' labor.
In the same paragraph of their complaint, complainants claim that they are landless
peasants. This allegation requires proof and should not be accepted as factually
true. Obrique is not a landless peasant. The facts showed he was Physics Instructor
at CMU holding a very responsible position was separated from the service on
account of certain irregularities he committed while Assistant Director of the AgriBusiness Project of cultivating lowland rice. Others may, at the moment, own no land
in Bukidnon but they may not necessarily be so destitute in their places of origin. No
proof whatsoever appears in the record to show that they are landless peasants.
The evidence on record establish without doubt that the complainants were originally
authorized or given permission to occupy certain areas of the CMU property for a
definite purpose to carry out certain university projects as part of the CMU's
program of activities pursuant to its avowed purpose of giving training and instruction
in agricultural and other related technologies, using the land and other resources of
the institution as a laboratory for these projects. Their entry into the land of the CMU
was with the permission and written consent of the owner, the CMU, for a limited
period and for a specific purpose. After the expiration of their privilege to occupy and
cultivate the land of the CMU, their continued stay was unauthorized and their

settlement on the CMU's land was without legal authority. A person entering upon
lands of another, not claiming in good faith the right to do so by virtue of any title of
his own, or by virtue of some agreement with the owner or with one whom he
believes holds title to the land, is a squatter. 4 Squatters cannot enter the land of
another surreptitiously or by stealth, and under the umbrella of the CARP, claim
rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons
guilty of committing prohibited acts of forcible entry or illegal detainer do not qualify
as beneficiaries and may not avail themselves of the rights and benefits of agrarian
reform. Any such person who knowingly and wilfully violates the above provision of
the Act shall be punished with imprisonment or fine at the discretion of the Court.
In view of the above, the private respondents, not being tenants nor proven to be
landless peasants, cannot qualify as beneficiaries under the CARP.
The questioned decision of the Adjudication Board, affirmed in toto by the Court of
Appeals, segregating 400 hectares from the CMU land is primarily based on the
alleged fact that the land subject hereof is "not directly, actually and exclusively used
for school sites, because the same was leased to Philippine Packing Corporation
(now Del Monte Philippines)".
In support of this view, the Board held that the "respondent University failed to show
that it is using actually, really, truly and in fact, the questioned area to the exclusion
of others, nor did it show that the same is directly used without any intervening
agency or person", 5 and "there is no definite and concrete showing that the use of
said lands are essentially indispensable for educational purposes". 6 The reliance by
the respondents Board and Appellate Tribunal on the technical or literal definition
from Moreno's Philippine Law Dictionary and Black's Law Dictionary, may give the
ordinary reader a classroom meaning of the phrase "is actually directly and
exclusively", but in so doing they missed the true meaning of Section 10, R.A. 6657,
as to what lands are exempted or excluded from the coverage of the CARP.
The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, are as follows:
Sec. 4. SCOPE. The Comprehensive Agrarian Reform Law of 1988
shall cover, regardless of tenurial arrangement and commodity
produced, all public and private agricultural lands as provided in
Proclamation No. 131 and Executive Order No. 229 including other
lands of the public domain suitable for agriculture.
More specifically, the following lands are covered by the
Comprehensive Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain devoted to
or suitable for agriculture. No reclassification of forest of mineral lands
to agricultural lands shall be undertaken after the approval of this Act
until Congress, taking into account ecological, developmental and
equity considerations, shall have determined by law, the specific limits
of the public domain;

(b) All lands of the public domain in excess of the specific limits ad
determined by Congress in the preceding paragraph;
(c) All other lands owned by the Government devoted to or suitable for
agriculture; and
(d) All private lands devoted to or suitable for agriculture regardless of
the agricultural products raised or that can be raised thereon.
Sec. 10 EXEMPTIONS AND EXCLUSIONS. Lands actually, directly
and exclusively used and found to be necessary for parks, wildlife,
forest reserves, reforestration, fish sanctuaries and breeding grounds,
watersheds and mangroves, national defense, school sites and
campuses including experimental farm stations operated by public or
private schools for educational purposes, seeds and seedlings
research and pilot production centers, church sites and convents
appurtenant thereto, mosque sites and Islamic centers appurtenant
thereto, communal burial grounds and cemeteries, penal colonies and
penal farms actually worked by the inmates, government and private
research and quarantine centers and all lands with eighteen percent
(18%) slope and over, except those already developed shall be exempt
from the coverage of this Act. (Emphasis supplied).
The construction given by the DARAB to Section 10 restricts the land area of the
CMU to its present needs or to a land area presently, actively exploited and utilized
by the university in carrying out its present educational program with its present
student population and academic facility overlooking the very significant factor of
growth of the university in the years to come. By the nature of the CMU, which is a
school established to promote agriculture and industry, the need for a vast tract of
agricultural land and for future programs of expansion is obvious. At the outset, the
CMU was conceived in the same manner as land grant colleges in America, a type
of educational institution which blazed the trail for the development of vast tracts of
unexplored and undeveloped agricultural lands in the Mid-West. What we now know
as Michigan State University, Penn State University and Illinois State University,
started as small land grant colleges, with meager funding to support their ever
increasing educational programs. They were given extensive tracts of agricultural
and forest lands to be developed to support their numerous expanding activities in
the fields of agricultural technology and scientific research. Funds for the support of
the educational programs of land grant colleges came from government
appropriation, tuition and other student fees, private endowments and gifts, and
earnings from miscellaneous sources. 7 It was in this same spirit that President
Garcia issued Proclamation No. 476, withdrawing from sale or settlement and
reserving for the Mindanao Agricultural College (forerunner of the CMU) a land
reservation of 3,080 hectares as its future campus. It was set up in Bukidnon, in the
hinterlands of Mindanao, in order that it can have enough resources and wide open
spaces to grow as an agricultural educational institution, to develop and train future
farmers of Mindanao and help attract settlers to that part of the country.

In line with its avowed purpose as an agricultural and technical school, the University
adopted a land utilization program to develop and exploit its 3080-hectare land
reservation as follows: 8
No. of Hectares Percentage
a. Livestock and Pasture 1,016.40 33
b. Upland Crops 616 20
c. Campus and Residential sites 462 15
d. Irrigated rice 400.40 13
e. Watershed and forest reservation 308 10
f. Fruit and Trees Crops 154 5
g. Agricultural
Experimental stations 123.20 4
3,080.00 100%
The first land use plan of the CARP was prepared in 1975 and since then it has
undergone several revisions in line with changing economic conditions, national
economic policies and financial limitations and availability of resources. The CMU,
through Resolution No. 160 S. 1984, pursuant to its development plan, adopted a
multi-disciplinary applied research extension and productivity program called the
"Kilusang Sariling Sikap Project" (CMU-KSSP). The objectives 9 of this program
were:
1. Provide researches who shall assist in (a) preparation of proposal;
(b) monitor project implementation; and (c) collect and analyze all data
and information relevant to the processes and results of project
implementation;
2. Provide the use of land within the University reservation for the
purpose of establishing a lowland rice project for the party of the
Second Part for a period of one calendar year subject to discretionary
renewal by the Party of the First Part;
3. Provide practical training to the Party of the Second Part on the
management and operation of their lowland project upon request of
Party of the Second Part; and
4. Provide technical assistance in the form of relevant livelihood project
specialists who shall extend expertise on scientific methods of crop
production upon request by Party of the Second Part.

In return for the technical assistance extended by the CMU, the participants in a
project pay a nominal amount as service fee. The self-reliance program was adjunct
to the CMU's lowland rice project.
The portion of the CMU land leased to the Philippine Packing Corporation (now Del
Monte Phils., Inc.) was leased long before the CARP was passed. The agreement
with the Philippine Packing Corporation was not a lease but a Management and
Development Agreement, a joint undertaking where use by the Philippine Packing
Corporation of the land was part of the CMU research program, with the direct
participation of faculty and students. Said contracts with the Philippine Packing
Corporation and others of a similar nature (like MM-Agraplex) were made prior to the
enactment of R.A. 6657 and were directly connected to the purpose and objectives
of the CMU as an educational institution. As soon as the objectives of the agreement
for the joint use of the CMU land were achieved as of June 1988, the CMU adopted
a blue print for the exclusive use and utilization of said areas to carry out its own
research and agricultural experiments.
As to the determination of when and what lands are found to be necessary for use by
the CMU, the school is in the best position to resolve and answer the question and
pass upon the problem of its needs in relation to its avowed objectives for which the
land was given to it by the State. Neither the DARAB nor the Court of Appeals has
the right to substitute its judgment or discretion on this matter, unless the evidentiary
facts are so manifest as to show that the CMU has no real for the land.
It is our opinion that the 400 hectares ordered segregated by the DARAB and
affirmed by the Court of Appeals in its Decision dated August 20, 1990, is not
covered by the CARP because:
(1) It is not alienable and disposable land of the public domain;
(2) The CMU land reservation is not in excess of specific limits as
determined by Congress;
(3) It is private land registered and titled in the name of its lawful owner,
the CMU;
(4) It is exempt from coverage under Section 10 of R.A. 6657 because
the lands are actually, directly and exclusively used and found to be
necessary for school site and campus, including experimental farm
stations for educational purposes, and for establishing seed and
seedling research and pilot production centers. (Emphasis supplied).
Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of
the DARAB is limited only to matters involving the implementation of the CARP.
More specifically, it is restricted to agrarian cases and controversies involving lands
falling within the coverage of the aforementioned program. It does not include those
which are actually, directly and exclusively used and found to be necessary for,
among such purposes, school sites and campuses for setting up experimental farm
stations, research and pilot production centers, etc.

Consequently, the DARAB has no power to try, hear and adjudicate the case
pending before it involving a portion of the CMU's titled school site, as the portion of
the CMU land reservation ordered segregated is actually, directly and exclusively
used and found by the school to be necessary for its purposes. The CMU has
constantly raised the issue of the DARAB's lack of jurisdiction and has questioned
the respondent's authority to hear, try and adjudicate the case at bar. Despite the law
and the evidence on record tending to establish that the fact that the DARAB had no
jurisdiction, it made the adjudication now subject of review.
Whether the DARAB has the authority to order the segregation of a portion of a
private property titled in the name of its lawful owner, even if the claimant is not
entitled as a beneficiary, is an issue we feel we must resolve. The quasi-judicial
powers of DARAB are provided in Executive Order No. 129-A, quoted hereunder in
so far as pertinent to the issue at bar:
Sec. 13. AGRARIAN REFORM ADJUDICATION BOARD There
is hereby created an Agrarian Reform Adjudication Board under the
office of the Secretary. . . . The Board shall assume the powers and
functions with respect to adjudication of agrarian reform cases under
Executive Order 229 and this Executive Order . . .
Sec. 17. QUASI JUDICIAL POWERS OF THE DAR. The DAR is
hereby vested with quasi-judicial powers to determine and adjudicate
agrarian reform matters and shall have exclusive original jurisdiction
over all matters including implementation of Agrarian Reform.
Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows:
The DAR is hereby vested with primary jurisdiction to determine and
adjudicate agrarian reform matters and shall have original jurisdiction
over all matters involving the implementation of agrarian reform. . . .
Section 17 of Executive Order No. 129-A is merely a repetition of Section 50,
R.A. 6657. There is no doubt that the DARAB has jurisdiction to try and
decide any agrarian dispute in the implementation of the CARP. An agrarian
dispute is defined by the same law as any controversy relating to tenurial
rights whether leasehold, tenancy stewardship or otherwise over lands
devoted to
agriculture. 10
In the case at bar, the DARAB found that the complainants are not share tenants or
lease holders of the CMU, yet it ordered the "segregation of a suitable compact and
contiguous area of Four Hundred hectares, more or less", from the CMU land
reservation, and directed the DAR Regional Director to implement its order of
segregation. Having found that the complainants in this agrarian dispute for
Declaration of Tenancy Status are not entitled to claim as beneficiaries of the CARP
because they are not share tenants or leaseholders, its order for the segregation of
400 hectares of the CMU land was without legal authority. w do not believe that the
quasi-judicial function of the DARAB carries with it greater authority than ordinary
courts to make an award beyond what was demanded by the

complainants/petitioners, even in an agrarian dispute. Where the quasi-judicial body

finds that the complainants/petitioners are not entitled to the rights they are
demanding, it is an erroneous interpretation of authority for that quasi-judicial body to
order private property to be awarded to future beneficiaries. The order segregation
400 hectares of the CMU land was issued on a finding that the complainants are not
entitled as beneficiaries, and on an erroneous assumption that the CMU land which
is excluded or exempted under the law is subject to the coverage of the CARP.
Going beyond what was asked by the complainants who were not entitled to the
relief prayed the complainants who were not entitled to the relief prayed for,
constitutes a grave abuse of discretion because it implies such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction.
The education of the youth and agrarian reform are admittedly among the highest
priorities in the government socio-economic programs. In this case, neither need
give way to the other. Certainly, there must still be vast tracts of agricultural land in
Mindanao outside the CMU land reservation which can be made available to
landless peasants, assuming the claimants here, or some of them, can qualify as
CARP beneficiaries. To our mind, the taking of the CMU land which had been
segregated for educational purposes for distribution to yet uncertain beneficiaries is
a gross misinterpretation of the authority and jurisdiction granted by law to the
DARAB.
The decision in this case is of far-reaching significance as far as it concerns state
colleges and universities whose resources and research facilities may be gradually
eroded by misconstruing the exemptions from the CARP. These state colleges and
universities are the main vehicles for our scientific and technological advancement in
the field of agriculture, so vital to the existence, growth and development of this
country.
It is the opinion of this Court, in the light of the foregoing analysis and for the reasons
indicated, that the evidence is sufficient to sustain a finding of grave abuse of
discretion by respondents Court of Appeals and DAR Adjudication Board. We hereby
declare the decision of the DARAB dated September 4, 1989 and the decision of the
Court of Appeals dated August 20, 1990, affirming the decision of the quasi-judicial
body, as null and void and hereby order that they be set aside, with costs against the
private respondents.
SO ORDERED