G.R. No. 112526.

October 12, 2001

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS

Facts:
Petitioner Sta. Rosa Realty Development Corporation (hereafter SRRDC) was the registered owner
of two parcels of land, situated at Barangay Casile, Cabuyao, Laguna, with a total area of 254.6 hectares.
According to petitioner, the parcels of land are watersheds, which provide clean potable water to the
Canlubang community, and that ninety 90 light industries are now located in the area.

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the ecosystem.
Sometime in December 1985, respondents led a civil case with the RTC, Laguna, seeking an easement of
a right of way to and from Barangay Casile. By way of counterclaim, however, petitioner sought the
ejectment of private respondents. In October 1986 to August 1987, petitioner led with the Municipal Trial
Court, Cabuyao, Laguna separate complaints for forcible entry against respondents.

On August 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna issued a notice of
coverage to petitioner and invited its officials or representatives to a conference on August 1989. During
the meeting, the following were present: representatives of petitioner, the Land Bank of the Philippines,
PARCCOM, PARO of Laguna, MARO of Laguna, the BARC Chairman of Barangay Casile and some
potential farmer beneficiaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was the
consensus and recommendation of the assembly that the landholding of SRRDC be placed under
compulsory acquisition.

On August 1989, petitioner led with the Municipal Agrarian Reform Office (MARO), Cabuyao, Laguna a
"Protest and Objection" to the compulsory acquisition of the property on the ground that the area was not
appropriate for agricultural purposes. The area was rugged in terrain with slopes of 18% and above and
that the occupants of the land were squatters, who were not entitled to any land as beneficiaries. The farmer
beneficiaries together with the BARC chairman answered the protest and objection stating that the slope
of the land is not 18% but only 510% and that the land is suitable and economically viable for agricultural
purposes, as evidenced by the Certification of the Department of Agriculture, municipality of Cabuyao,
Laguna.

On September 1989, MARO Belen dela Torre made a summary investigation report and forwarded the
Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter
PARO). PARO Durante Ubeda forwarded his endorsement of the compulsory acquisition to the Secretary
of Agrarian Reform.

On November 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and
Development, DAR forwarded 2 Compulsory Acquisition Claim Folders covering the landholding of SRRDC
to the President, Land Bank of the Philippines for further review and evaluation.

On December 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent 2 notices of acquisition
to petitioner, stating that petitioner's landholdings containing an area of 188.2858 and 58.5800 hectares,
valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed under the Comprehensive
Agrarian Reform Program.

On February 1990, SRRDC in 2 letters separately addressed to Secretary Abad and the Director, Bureau
of Land Acquisition and Distribution, sent its formal protest, protesting not only the amount of compensation
offered by DAR for the property but also the 2 notices of acquisition.
On March 1990, Secretary Abad referred the case to the DARAB for summary proceedings to determine
just compensation under R. A. No. 6657, Section 16. On March 1990, the LBP returned the 2 claim folders
previously referred for review and evaluation to the Director of BLAD mentioning its inability to value the
SRRDC landholding due to some deficiencies.

On March 1990, Executive Director Emmanuel S. Galvez wrote Land Bank President Deogracias Vistan to
forward the 2 claim folders involving the property of SRRDC to the DARAB for it to conduct summary
proceedings to determine the just compensation for the land. On April 1990, petitioner sent a letter to the
Land Bank of the Philippines stating that its property under the aforesaid land titles were exempt from CARP
coverage because they had been classified as watershed area and were the subject of a pending petition
for land conversion.

Issues: Whether the property in question is covered by CARP despite the fact that the entire property was
formed part of a watershed area prior to the enactment of R.A. No. 6657.

Ruling:
Under Republic Act No. 6657, there are two modes of acquisition of private land: compulsory and
voluntary. In the case at bar, the Department of Agrarian Reform sought the compulsory acquisition of
subject property under R. A. No. 6657, Section 16.

In compulsory acquisition of private lands, the landholding, the landowners and farmer beneficiaries must
first be identified. After identification, the DAR shall send a notice of acquisition to the landowner, by
personal delivery or registered mail, and post it in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Within 30 days from receipt of the notice of
acquisition, the landowner, his administrator or representative shall inform the DAR of his acceptance or
rejection of the offer.
If the landowner accepts, he executes and delivers a deed of transfer in favor of the government and
surrenders the certificate of title. Within 30 days from the execution of the deed of transfer, the Land Bank
of the Philippines (LBP) pays the owner the purchase price. If the landowner accepts, he executes and
delivers a deed of transfer in favor of the government and surrenders the certificate of title. Within thirty
days from the execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays the owner the
purchase price. If the landowner rejects the DAR's offer or fails to make a reply, the DAR conducts summary
administrative proceedings to determine just compensation for the land. The landowner, the LBP
representative and other interested parties may submit evidence on just compensation within fifteen days
from notice. Within thirty days from submission, the DAR shall decide the case and inform the owner of its
decision and the amount of just compensation.

Upon receipt by the owner of the corresponding payment, or, in case of rejection or lack of response from
the latter, the DAR shall deposit the compensation in cash or in LBP bonds with an accessible bank. The
DAR shall immediately take possession of the land and cause the issuance of a transfer certificate of title
in the name of the Republic of the Philippines. The land shall then be redistributed to the farmer
beneficiaries. Any party may question the decision of the DAR in the special agrarian courts for final
determination of just compensation.

The DAR has made compulsory acquisition the priority mode of land acquisition to hasten the
implementation of the CARP. Under Sec. 16 of the CARL, the first step in compulsory acquisition is the
identification of the land, the landowners and the farmer beneficiaries. However, the law is silent on how
the identification process shall be made. To fill this gap, on July 1989, the DAR issued Administrative Order
No. 12, series of 1989, which set the operating procedure in the identification of such lands.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of coverage and
letter of invitation to a preliminary conference sent to the landowner, the representative of the BARC, LBP,
farmer beneficiaries and other interested parties pursuant to DAR A.O. No. 12, series of 1989; and (2) the
notice of acquisition sent to the landowner under Section 16 of the CARL.

The importance of the first notice, that is, the notice of coverage and the letter of invitation to a conference,
and its actual conduct cannot be understated. They are steps designed to comply with the requirements of
administrative due process. The implementation of the CARL is an exercise of the State's police power and
the power of eminent domain. To the extent that the CARL prescribes retention limits to the landowners,
there is an exercise of police power for the regulation of private property in accordance with the Constitution.
But where, to carry out such regulation, the owners are deprived of lands they own in excess of the
maximum area allowed, there is also a taking under the power of eminent domain. The taking contemplated
is not mere limitation on the use of the land. What is required is the surrender of the title to and physical
possession of the excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary.

In the case at bar, DAR has executed the taking of the property in question. However, payment of just
compensation was not in accordance with the procedural requirement. The law required payment in cash
or LBP bonds, not by trust account as was done by DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, SC held that "The
CARP Law, for its part, conditions the transfer of possession and ownership of the land to the government
on receipt of the landowner of the corresponding payment or the deposit by the DAR of the compensation
in cash or LBP bonds with an accessible bank. Until then, title also remains with the landowner. No outright
change of ownership is contemplated either."

Consequently, petitioner questioned before the CA DARAB's decision ordering the compulsory acquisition
of petitioner's property. Here, petitioner pressed the question of whether the property was a watershed, not
covered by CARP. Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:

"Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any ground water
may be declared by the Department of Natural resources as a protected area. Rules and Regulations may
be promulgated by such Department to prohibit or control such activities by the owners or occupants thereof
within the protected area which may damage or cause the deterioration of the surface water or ground
water or interfere with the investigation, use, control, protection, management or administration of such
waters."

Watersheds may be defined as "an area drained by a river and its tributaries and enclosed by a boundary
or divide which separates it from adjacent watersheds." Watersheds generally are outside the commerce
of man. At the time of the titling, the Department of Agriculture and Natural Resources had not the declared
the property as watershed area. The parcels of land in Barangay Casile were declared as "PARK" by a
Zoning Ordinance adopted by the municipality of Cabuyao in 1979, as certified by the Housing and Land
Use Regulatory Board. On January 1994, the Sangguniang Bayan of Cabuyao, Laguna issued a Resolution
voiding the zoning classification of the land at Barangay Casile as Park and declaring that the land was
now classified as agricultural land.
The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of its
police power, not the power of eminent domain. "A zoning ordinance is defined as a local city or municipal
legislation which logically arranges, prescribes, defines and apportions a given political subdivision into
specific land uses as present and future projection of needs." In Natalia Realty, Inc. v. Department of
Agrarian Reform SC held that lands classified as non-agricultural prior to the effectivity of the CARL may
not be compulsorily acquired for distribution to farmer beneficiaries. However, more than the classification
of the subject land as PARK is the fact that subsequent studies and survey showed that the parcels of land
in question form a vital part of a watershed area.

In the case at bar, DAR included the disputed parcels of land for compulsory acquisition simply because
the land was allegedly devoted to agriculture and was titled to SRRDC, hence, private and alienable land
that may be subject to CARP. However, the scenario has changed, after an in-depth study, survey and
reassessment. We cannot ignore the fact that the disputed parcels of land form a vital part of an area that
need to be protected for watershed purposes.

The definition does not exactly depict the complexities of a watershed. The most important product of a
watershed is water which is one of the most important human necessities. The protection of watersheds
ensures an adequate supply of water for future generations and the control of flash floods that not only
damage property but cause loss of lives. Protection of watersheds is an "intergenerational responsibility"
that needs to be answered now.

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land may be
excluded from the compulsory acquisition coverage of CARP because of its very high slopes. To resolve
the issue as to the nature of the parcels of land involved in the case at bar, the Court directs the DARAB to
conduct a re-evaluation of the issue.