[G.R. No. 127198. May 16, 2005]

LAND BANK OF THE PHILIPPINES, petitioner, vs. HON. ELI G. C. NATIVIDAD,

Presiding Judge of the Regional Trial Court, Branch 48, San Fernando, Pampanga,

and JOSE R. CAGUIAT represented by Attorneys-in-fact JOSE T. BARTOLOME

and VICTORIO MANGALINDAN, respondents.

D E C I S I O N

TINGA, J.:

This is a Petition for Review[1]

dated December 6, 1996 assailing the Decision[2]

of the

Regional Trial Court[3]

dated July 5, 1996 which ordered the Department of Agrarian Reform

(DAR) and petitioner Land Bank of the Philippines (Land Bank) to pay private respondents the

amount of P30.00 per square meter as just compensation for the States acquisition of private respondents properties under the land reform program.

The facts follow.

On May 14, 1993, private respondents filed a petition before the trial court for the

determination of just compensation for their agricultural lands situated in Arayat, Pampanga,

which were acquired by the government pursuant to Presidential Decree No. 27 (PD 27). The

petition named as respondents the DAR and Land Bank. With leave of court, the petition was

amended to implead as co-respondents the registered tenants of the land.

After trial, the court rendered the assailed Decision the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of petitioners and against respondents,

ordering respondents, particularly, respondents Department of Agrarian Reform and the Land

Bank of the Philippines, to pay these lands owned by petitioners and which are the subject of

acquisition by the State under its land reform program, the amount of THIRTY PESOS (P30.00)

per square meter, as the just compensation due for payment for same lands of petitioners located

at San Vicente (or Camba), Arayat, Pampanga.

Respondent Department of Agrarian Reform is also ordered to pay petitioners the amount of

FIFTY THOUSAND PESOS (P50,000.00) as Attorneys Fee, and to pay the cost of suit.

SO ORDERED.[4]

DAR and Land Bank filed separate motions for reconsideration which were denied by the

trial court in its Order[5]

dated July 30, 1996 for being pro forma as the same did not contain a

notice of hearing. Thus, the prescriptive period for filing an appeal was not tolled. Land Bank

consequently failed to file a timely appeal and the assailed Decision became final and executory.

Land Bank then filed a Petition for Relief from Order Dated 30 July 1996,[6]

citing

excusable negligence as its ground for relief. Attached to the petition for relief were two

affidavits of merit claiming that the failure to include in the motion for reconsideration a notice

of hearing was due to accident and/or mistake.[7]

The affidavit of Land Banks counsel of record notably states that he simply scanned and signed the Motion for Reconsideration for Agrarian Case No. 2005, Regional Trial Court of Pampanga, Branch 48, not knowing, or unmindful that it

had no notice of hearing[8] due to his heavy workload.

The trial court, in its Order[9]

of November 18, 1996, denied the petition for relief because

Land Bank lost a remedy in law due to its own negligence.

In the instant petition for review, Land Bank argues that the failure of its counsel to include

a notice of hearing due to pressure of work constitutes excusable negligence and does not make

the motion for reconsideration pro forma considering its allegedly meritorious defenses. Hence,

the denial of its petition for relief from judgment was erroneous.

According to Land Bank, private respondents should have sought the reconsideration of the

DARs valuation of their properties. Private respondents thus failed to exhaust administrative remedies when they filed a petition for the determination of just compensation directly with the

trial court. Land Bank also insists that the trial court erred in declaring that PD 27 and Executive

Order No. 228 (EO 228) are mere guidelines in the determination of just compensation, and in

relying on private respondents evidence of the valuation of the properties at the time of possession in 1993 and not on Land Banks evidence of the value thereof as of the time of acquisition in 1972.

Private respondents filed a Comment[10]

dated February 22, 1997, averring that Land Banks failure to include a notice of hearing in its motion for reconsideration due merely to counsels heavy workload, which resulted in the motion being declared pro forma, does not constitute

excusable negligence, especially in light of the admission of Land Banks counsel that he has been a lawyer since 1973 and has mastered the intricate art and technique of pleading.

Land Bank filed a Reply[11]

dated March 12, 1997 insisting that equity considerations

demand that it be heard on substantive issues raised in its motion for reconsideration.

The Court gave due course to the petition and required the parties to submit their respective

memoranda.[12]

Both parties complied.[13]

The petition is unmeritorious.

At issue is whether counsels failure to include a notice of hearing constitutes excusable negligence entitling Land Bank to a relief from judgment.

Section 1, Rule 38 of the 1997 Rules of Civil Procedure provides:

Sec. 1. Petition for relief from judgment, order, or other proceedings.When a judgment or final order is entered, or any other proceeding is thereafter taken against a party in any court

through fraud, accident, mistake, or excusable negligence, he may file a petition in such court

and in the same case praying that the judgment, order or proceeding be set aside.

As can clearly be gleaned from the foregoing provision, the remedy of relief from judgment

can only be resorted to on grounds of fraud, accident, mistake or excusable

negligence. Negligence to be excusable must be one which ordinary diligence and prudence

could not have guarded against.[14]

Measured against this standard, the reason profferred by Land Banks counsel, i.e., that his heavy workload prevented him from ensuring that the motion for reconsideration included a

notice of hearing, was by no means excusable.

Indeed, counsels admission that he simply scanned and signed the Motion for Reconsideration for Agrarian Case No. 2005, Regional Trial Court of Pampanga, Branch 48, not

knowing, or unmindful that it had no notice of hearing speaks volumes of his arrant negligence, and cannot in any manner be deemed to constitute excusable negligence.

The failure to attach a notice of hearing would have been less odious if committed by a

greenhorn but not by a lawyer who claims to have mastered the intricate art and technique of pleading.[15]

Indeed, a motion that does not contain the requisite notice of hearing is nothing but a mere

scrap of paper. The clerk of court does not even have the duty to accept it, much less to bring it

to the attention of the presiding judge.[16]

The trial court therefore correctly considered the

motion for reconsideration pro forma. Thus, it cannot be faulted for denying Land Banks motion for reconsideration and petition for relief from judgment.

It should be emphasized at this point that procedural rules are designed to facilitate the

adjudication of cases. Courts and litigants alike are enjoined to abide strictly by the rules. While

in certain instances, we allow a relaxation in the application of the rules, we never intend to forge

a weapon for erring litigants to violate the rules with impunity. The liberal interpretation and

application of rules apply only in proper cases of demonstrable merit and under justifiable causes

and circumstances. While it is true that litigation is not a game of technicalities, it is equally true

that every case must be prosecuted in accordance with the prescribed procedure to ensure an

orderly and speedy administration of justice. Party litigants and their counsel are well advised to

abide by, rather than flaunt, procedural rules for these rules illumine the path of the law and

rationalize the pursuit of justice.[17]

Aside from ruling on this procedural issue, the Court shall also resolve the other issues

presented by Land Bank, specifically as regards private respondents alleged failure to exhaust administrative remedies and the question of just compensation.

Land Bank avers that private respondents should have sought the reconsideration of the

DARs valuation instead of filing a petition to fix just compensation with the trial court.

The records reveal that Land Banks contention is not entirely true. In fact, private respondents did write a letter

[18] to the DAR Secretary objecting to the land valuation summary

submitted by the Municipal Agrarian Reform Office and requesting a conference for the purpose

of fixing just compensation. The letter, however, was left unanswered prompting private

respondents to file a petition directly with the trial court.

At any rate, in Philippine Veterans Bank v. Court of Appeals,[19]

we declared that there is

nothing contradictory between the DARs primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the

implementation of agrarian reform, which includes the determination of questions of just

compensation, and the original and exclusive jurisdiction of regional trial courts over all petitions

for the determination of just compensation. The first refers to administrative proceedings, while

the second refers to judicial proceedings.

In accordance with settled principles of administrative law, primary jurisdiction is vested in

the DAR to determine in a preliminary manner the just compensation for the lands taken under

the agrarian reform program, but such determination is subject to challenge before the courts.

The resolution of just compensation cases for the taking of lands under agrarian reform is, after

all, essentially a judicial function.[20]

Thus, the trial did not err in taking cognizance of the case as the determination of just

compensation is a function addressed to the courts of justice.

Land Banks contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based

on the value of the property as of that time and not at the time of possession in 1993, is likewise

erroneous. In Office of the President, Malacaang, Manila v. Court of Appeals,[21]

we ruled that

the seizure of the landholding did not take place on the date of effectivity of PD 27 but would

take effect on the payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is still incomplete

as the just compensation to be paid private respondents has yet to be settled. Considering the

passage of Republic Act No. 6657 (RA 6657)[22]

before the completion of this process, the just

compensation should be determined and the process concluded under the said law. Indeed, RA

6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably

with our ruling in Paris v. Alfeche.[23]

Section 17 of RA 6657 which is particularly relevant, providing as it does the guideposts for

the determination of just compensation, reads as follows:

Sec. 17. Determination of Just Compensation.In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the

sworn valuation by the owner, the tax declarations, and the assessment made by government

assessors shall be considered. The social and economic benefits contributed by the farmers and

the farm-workers and by the Government to the property as well as the non-payment of taxes or

loans secured from any government financing institution on the said land shall be considered as

additional factors to determine its valuation.

It would certainly be inequitable to determine just compensation based on the guideline

provided by PD 27 and EO 228 considering the DARs failure to determine the just compensation for a considerable length of time. That just compensation should be determined in

accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that

just compensation should be the full and fair equivalent of the property taken from its owner by

the expropriator, the equivalent being real, substantial, full and ample.[24]

In this case, the trial court arrived at the just compensation due private respondents for their

property, taking into account its nature as irrigated land, location along the highway, market

value, assessors value and the volume and value of its produce. This Court is convinced that the trial court correctly determined the amount of just compensation due private respondents in

accordance with, and guided by, RA 6657 and existing jurisprudence.

WHEREFORE, the petition is DENIED. Costs against petitioner.

SO ORDERED.

FIRST DIVISION

JOSEFINA S. LUBRICA, in her G.R. No. 170220

capacity as Assignee of FEDERICO

C. SUNTAY, NENITA SUNTAY

TAEDO and EMILIO A.M.

SUNTAY III, Petitioners, Present:

Panganiban, C.J. (Chairperson),

- versus - Ynares-Santiago,

Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

LAND BANK OF THE PHILIPPINES, Respondent. Promulgated:

November 20, 2006

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the

October 27, 2005 Amended Decision[1]

of the Court of Appeals in CA-G.R. SP No. 77530,

which vacated its May 26, 2004 Decision affirming (a) the Order of the Regional Trial Court of

San Jose, Occidental Mindoro, Branch 46, acting as Special Agrarian Court, in Agrarian Case

Nos. R-1339 and R-1340, dated March 31, 2003 directing respondent Land Bank of the

Philippines (LBP) to deposit the provisional compensation as determined by the Provincial

Agrarian Reform Adjudicator (PARAD); (b) the May 26, 2003 Resolution denying LBPs

motion for reconsideration; and (c) the May 27, 2003 Order requiring Teresita V. Tengco, LBPs

Land Compensation Department Manager, to comply with the March 31, 2003 Order.

The facts of the

case are as follows:

Petitioner Josefina S. Lubrica is the assignee[2]

of Federico C. Suntay over certain parcels

of agricultural land located at Sta. Lucia, Sablayan, Occidental Mindoro, with an area of

3,682.0285 hectares covered by Transfer Certificate of Title (TCT) No. T-31 (T-1326)[3]

of the

Registry of Deeds of Occidental Mindoro. In 1972, a portion of the said property with an area of

311.7682 hectares, was placed under the land reform program pursuant to Presidential Decree

No. 27 (1972)[4]

and Executive Order No. 228 (1987).[5]

The land was thereafter subdivided and

distributed to farmer beneficiaries. The Department of Agrarian Reform (DAR) and the LBP

fixed the value of the land at P5,056,833.54 which amount was deposited in cash and bonds in

favor of Lubrica.

On the other hand, petitioners Nenita Suntay-Taedo and Emilio A.M. Suntay III inherited

from Federico Suntay a parcel of agricultural land located at Balansay, Mamburao, Occidental

Mindoro covered by TCT No. T-128[6]

of the Register of Deeds of Occidental Mindoro,

consisting of two lots, namely, Lot 1 with an area of 45.0760 hectares and Lot 2 containing an

area of 165.1571 hectares or a total of 210.2331 hectares. Lot 2 was placed under the coverage

of P.D. No. 27 but only 128.7161 hectares was considered by LBP and valued the same at

P1,512,575.05.

Petitioners rejected the valuation of their properties, hence the Office of the Provincial

Agrarian Reform Adjudicator (PARAD) conducted summary administrative proceedings for

determination of just compensation. On January 29, 2003, the PARAD fixed the preliminary just

compensation at P51,800,286.43 for the 311.7682 hectares (TCT No. T-31) and P21,608,215.28

for the 128.7161 hectares (TCT No. T-128).[7]

Not satisfied with the valuation, LBP filed on February 17, 2003, two separate

petitions[8]

for judicial determination of just compensation before the Regional Trial Court of San

Jose, Occidental Mindoro, acting as a Special Agrarian Court, docketed as Agrarian Case No. R-

1339 for TCT No. T-31 and Agrarian Case No. R-1340 for TCT No. T-128, and raffled to

Branch 46 thereof.

Petitioners filed separate Motions to Deposit the Preliminary Valuation Under Section

16(e) of Republic Act (R.A.) No. 6657 (1988)[9]

and Ad Cautelam Answer praying among others

that LBP deposit the preliminary compensation determined by the PARAD.

On March 31, 2003, the trial court issued an Order[10]

granting petitioners motion, the

dispositive portion of which reads:

WHEREFORE, Ms. Teresita V. Tengco, of the Land Compensation

Department I (LCD I), Land Bank of the Philippines, is hereby ordered pursuant

to Section 16 (e) of RA 6657 in relation to Section 2, Administrative Order No. 8,

Series of 1991, to deposit the provisional compensation as determined by the

PARAD in cash and bonds, as follows:

1. In Agrarian Case No. R-1339, the amount of P 51,800,286.43, minus the

amount received by the Landowner;

2. In Agrarian Case No. R-1340, the amount of P 21,608,215.28, less the

amount of P 1,512,575.16, the amount already deposited.

Such deposit must be made with the Land Bank of

the Philippines, Manila within five (5) days from receipt of a copy of this order

and to notify this court of her compliance within such period.

Let this order be served by the Sheriff of this Court at the expense of the

movants.

SO ORDERED.[11]

LBPs motion for reconsideration was denied in a Resolution[12] dated May 26,

2003. The following day, May 27, 2003, the trial court issued an Order[13]

directing Ms. Teresita

V. Tengco, LBPs Land Compensation Department Manager, to deposit the amounts.

Thus, on June 17, 2003, LBP filed with the Court of Appeals a Petition for Certiorari and

Prohibition under Rule 65 of the Rules of Court with application for the issuance of a Temporary

Restraining Order and Writ of Preliminary Injunction docketed as CA-G.R. SP No. 77530.[14]

On June 27, 2003, the appellate court issued a 60-day temporary restraining order[15]

and

on October 6, 2003, a writ of preliminary injunction.[16]

On May 26, 2004, the Court of Appeals rendered a Decision[17]

in favor of the petitioners,

the dispositive portion of which reads:

WHEREFORE, premises considered, there being no grave abuse of

discretion, the instant Petition for Certiorari and Prohibition is DENIED.

Accordingly, the Order dated March 31, 2003, Resolution datedMay 26, 2003,

and Order dated May 27, 2003 are hereby AFFIRMED. The preliminary

injunction We previously issued is hereby LIFTED and DISSOLVED.

SO ORDERED.[18]

The Court of Appeals held that the trial court correctly ordered LBP to deposit the

amounts provisionally determined by the PARAD as there is no law which prohibits LBP to

make a deposit pending the fixing of the final amount of just compensation. It also noted that

there is no reason for LBP to further delay the deposit considering that the DAR already took

possession of the properties and distributed the same to farmer-beneficiaries as early as 1972.

LBP moved for reconsideration which was granted. On October 27, 2005, the appellate

court rendered the assailed Amended Decision,[19]

the dispositive portion of which reads:

Wherefore, in view of the prescription of a different formula in the case of

Gabatin which We hold as cogent and compelling justification necessitating Us to

effect the reversal of Our judgment herein sought to be reconsidered, the instant

Motion for Reconsideration is GRANTED, and Our May 26, 2004 Decision is

hereby VACATED and ABANDONED with the end in view of giving way to and

acting in harmony and in congruence with the tenor of the ruling in the case of

Gabatin. Accordingly, the assailed rulings of the Special Agrarian Court is (sic)

commanded to compute and fix the just compensation for the expropriated

agricultural lands strictly in accordance with the mode of computation prescribed

(sic) Our May 26, 2004 judgment in the case of Gabatin.

SO ORDERED.[20]

In the Amended Decision, the Court of Appeals held that the immediate deposit of the

preliminary value of the expropriated properties is improper because it was erroneously

computed. Citing Gabatin v. Land Bank of the Philippines,[21]

it held that the formula to compute

the just compensation should be: Land Value = 2.5 x Average Gross Production x Government

Support Price. Specifically, it held that the value of the government support price for the

corresponding agricultural produce (rice and corn) should be computed at the time of the legal

taking of the subject agricultural land, that is, on October 21, 1972 when landowners were

effectively deprived of ownership over their properties by virtue of P.D. No. 27. According to

the Court of Appeals, the PARAD incorrectly used the amounts of P500 and P300 which are the

prevailing government support price for palay and corn, respectively, at the time of payment,

instead of P35 and P31, the prevailing government support price at the time of the taking in

1972.

Hence, this petition raising the following issues:

A. THE COURT A QUO HAS DECIDED THE CASE IN A WAY NOT IN

ACCORD WITH THE LATEST DECISION OF THE SUPREME COURT IN

THE CASE OF LAND BANK OF THEPHILIPPINES VS. HON. ELI G.C.

NATIVIDAD, ET AL., G.R. NO. 127198, PROM. MAY 16, 2005; and[22]

B. THE COURT A QUO HAS, WITH GRAVE GRAVE ABUSE OF

DISCRETION, SO FAR DEPARTED FROM THE ACCEPTED AND USUAL

COURSE OF JUDICIAL PROCEEDINGS, DECIDING ISSUES THAT HAVE

NOT BEEN RAISED, AS TO CALL FOR AN EXERCISE OF THE POWER OF

SUPERVISION.[23]

Petitioners insist that the determination of just compensation should be based on the value

of the expropriated properties at the time of payment. Respondent LBP, on the other hand,

claims that the value of the realties should be computed as of October 21, 1972 when P.D. No.

27 took effect.

The petition is impressed with merit.

In the case of Land Bank of the Philippines v. Natividad,[24]

the Court ruled thus:

Land Banks contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo

just compensation should be based on the value of the property as of that time and

not at the time of possession in 1993, is likewise erroneous. In Office of the

President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of

the landholding did not take place on the date of effectivity of PD 27 but would

take effect on the payment of just compensation.

The Natividad case reiterated the Courts ruling in Office of the President v. Court of

Appeals[25]

that the expropriation of the landholding did not take place on the effectivity of P.D.

No. 27 on October 21, 1972 but seizure would take effect on the payment of just compensation

judicially determined.

Likewise, in the recent case of Heirs of Francisco R. Tantoco, Sr. v. Court of

Appeals,[26]

we held that expropriation of landholdings covered by R.A. No. 6657 take place, not

on the effectivity of the Act on June 15, 1988, but on the payment of just compensation.

In the instant case, petitioners were deprived of their properties in 1972 but have yet to

receive the just compensation therefor. The parcels of land were already subdivided and

distributed to the farmer-beneficiaries thereby immediately depriving petitioners of their

use. Under the circumstances, it would be highly inequitable on the part of the petitioners to

compute the just compensation using the values at the time of the taking in 1972, and not at the

time of the payment, considering that the government and the farmer-beneficiaries have already

benefited from the land although ownership thereof have not yet been transferred in their

names. Petitioners were deprived of their properties without payment of just compensation

which, under the law, is a prerequisite before the property can be taken away from its

owners.[27]

The transfer of possession and ownership of the land to the government are

conditioned upon the receipt by the landowner of the corresponding payment or deposit by the

DAR of the compensation with an accessible bank. Until then, title remains with the

landowner.[28]

Our ruling in Association of Small Landowners in the Philippines, Inc. v. Secretary of

Agrarian Reform[29]

is instructive, thus:

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-

farmer as October 21, 1972 and declared that he shall be deemed the owner of a portion of land consisting of a family-sized farm except that no title to the land owned by him was to be actually issued to him unless and until he had become a

full-fledged member of a duly recognized farmers cooperative. It was understood, however, that full payment of the just compensation also had to be

made first, conformably to the constitutional requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

All qualified farmer-beneficiaries are now deemed full

owners as of October 21, 1972 of the land they acquired by virtue

of Presidential Decree No. 27 (Emphasis supplied.)

it was obviously referring to lands already validly acquired under the said decree,

after proof of full-fledged membership in the farmers cooperatives and full payment of just compensation. x x x

The CARP Law, for its part, conditions the transfer of possession and

ownership of the land to the government on receipt by the landowner of the

corresponding payment or the deposit by the DAR of the compensation in cash or

LBP bonds with an accessible bank. Until then, title also remains with the

landowner. No outright change of ownership is contemplated either.

We also note that the expropriation proceedings in the instant case was initiated under

P.D. No. 27 but the agrarian reform process is still incomplete considering that the just

compensation to be paid to petitioners has yet to be settled. Considering the passage of R.A. No.

6657 before the completion of this process, the just compensation should be determined and the

process concluded under the said law. Indeed, R.A. No. 6657 is the applicable law, with P.D.

No. 27 and E.O. No. 228 having only suppletory effect.[30]

In Land Bank of the Philippines v. Court of Appeals,[31]

we held that:

RA 6657 includes PD 27 lands among the properties which the DAR shall

acquire and distribute to the landless. And to facilitate the acquisition and

distribution thereof, Secs. 16, 17 and 18 of the Act should be adhered to.

Section 18 of R.A. No. 6657 mandates that the LBP shall compensate the landowner in

such amount as may be agreed upon by the landowner and the DAR and the LBP or as may be

finally determined by the court as the just compensation for the land. In determining just

compensation, the cost of the acquisition of the land, the current value of like properties, its

nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the

assessment made by government assessors shall be considered. The social and economic

benefits contributed by the farmers and the farmworkers and by the government to the property

as well as the nonpayment of taxes or loans secured from any government financing institution

on the said land shall be considered as additional factors to determine its valuation.[32]

Corollarily, we held in Land Bank of the Philippines v. Celada[33]

that the above

provision was converted into a formula by the DAR through Administrative Order No. 05, S.

1998, to wit:

Land Value (LV) = (Capitalized Net Income x 0.6) + (Comparable Sales x 0.3) + (Market

Value per Tax Declaration x 0.1)

Petitioners were deprived of their properties way back in 1972, yet to date, they have not

yet received just compensation. Thus, it would certainly be inequitable to determine just

compensation based on the guideline provided by P.D. No. 227 and E.O. No. 228 considering the

failure to determine just compensation for a considerable length of time. That just compensation

should be determined in accordance with R.A. No. 6657 and not P.D. No. 227 or E.O. No. 228,

is important considering that just compensation should be the full and fair equivalent of the

property taken from its owner by the expropriator, the equivalent being real, substantial, full and

ample.[34]

WHEREFORE, premises considered, the petition is GRANTED. The assailed Amended

Decision dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 77530

is REVERSED and SET ASIDE. The Decision dated May 26, 2004 of the Court of Appeals

affirming (a) the March 31, 2003 Order of the Special Agrarian Court ordering the respondent

Land Bank of the Philippines to deposit the just compensation provisionally determined by the

PARAD; (b) the May 26, 2003 Resolution denying respondents Motion for Reconsideration;

and (c) the May 27, 2003 Order directing Teresita V. Tengco, respondents Land Compensation

Department Manager to comply with the March 31, 2003 Order, is REINSTATED. The

Regional Trial Court of San Jose, Occidental Mindoro, Branch 46, acting as Special Agrarian

Court is ORDERED to proceed with dispatch in the trial of Agrarian Case Nos. R-1339 and R-

1340, and to compute the final valuation of the subject properties based on the aforementioned

formula.

Republic of the Philippines

SUPREME COURT Manila

SECOND DIVISION

G.R. No. 118712 October 6, 1995

LAND BANK OF THE PHILIPPINES, petitioner,

vs.

COURT OF APPEALS, PEDRO L. YAP, HEIRS OF EMILIANO F. SANTIAGO,

AGRICULTURAL MANAGEMENT & DEVELOPMENT CORP., respondents.

G.R. No. 118745 October 6, 1995

DEPARTMENT OF AGRARIAN REFORM, represented by the Secretary of Agrarian

Reform, petitioner,

vs.

COURT OF APPEALS, PEDRO L. YAP, HEIRS OF EMILIANO F. SANTIAGO,

AGRICULTURAL MANAGEMENT & DEVELOPMENT CORP., ET AL., respondents.

FRANCISCO, R., J.:

It has been declared that the duty of the court to protect the weak and the underprivileged should

not be carried out to such an extent as deny justice to the landowner whenever truth and justice

happen to be on his side. 1

As eloquently stated by Justice Isagani Cruz:

. . . social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case

of reasonable doubt, we are called upon to tilt the balance in favor of the poor, to

whom the Constitution fittingly extends its sympathy and compassion. But never

is it justified to prefer the poor simply because they are poor, or to reject the rich

simply because they are rich, for justice must always be served, for poor and rich

alike, according to the mandate of the law. 2

In this agrarian dispute, it is once more imperative that the aforestated principles be applied in its

resolution.

Separate petitions for review were filed by petitioners Department of Agrarian Reform (DAR)

(G.R. No. 118745) and Land Bank of the Philippines (G.R. No. 118712) following the adverse

ruling by the Court of Appeals in CA-G.R. SP No. 33465. However, upon motion filed by

private respondents, the petitions were ordered consolidated.3

Petitioners assail the decision of the Court of Appeals promulgated on October 20, 1994, which

granted private respondents' Petition for Certiorari and Mandamus and ruled as follows:

WHEREFORE, premises considered, the Petition for Certiorari and Mandamus is

hereby GRANTED:

a) DAR Administrative Order No. 9, Series of 1990 is

declared null and void insofar as it provides for the opening of trust

accounts in lieu of deposits in cash or bonds;

b) Respondent Landbank is ordered to immediately deposit not merely "earmark", "reserve" or "deposit in trust" with an accessible bank designated by respondent DAR in the names of the

following petitioners the following amounts in cash and in

government financial instruments within the parameters of Sec. 18 (1) of RA 6657:

P 1,455,207.31 Pedro L. Yap

P 135,482.12 Heirs of Emiliano Santiago

P 15,914,127.77 AMADCOR;

c) The DAR-designated bank is ordered to allow the petitioners to

withdraw the above-deposited amounts without prejudice to the

final determination of just compensation by the proper authorities;

and

d) Respondent DAR is ordered to

1) immediately conduct summary administrative proceedings to

determine the just compensation for the lands of the petitioners

giving the petitioners 15 days from notice within which to submit

evidence and to 2) decide the cases within 30 days after they are

submitted for decision. 4

Likewise, petitioners seek the reversal of the Resolution dated January 18,

1995, 5

denying their motion for reconsideration.

Private respondents are landowners whose landholdings were acquired by the DAR and

subjected to transfer schemes to qualified beneficiaries under the Comprehensive Agrarian

Reform Law (CARL, Republic Act No. 6657).

Aggrieved by the alleged lapses of the DAR and the Landbank with respect to the

valuation and payment of compensation for their land pursuant to the provisions of RA

6657, private respondents filed with this Court a Petition

for Certiorari and Mandamus with prayer for preliminary mandatory injunction. Private

respondents questioned the validity of DAR Administrative Order No. 6, Series of

1992 6

and DAR Administrative Order No. 9, Series of 1990, 7

and sought to compel the

DAR to expedite the pending summary administrative proceedings to finally determine

the just compensation of their properties, and the Landbank to deposit in cash and bonds

the amounts respectively "earmarked", "reserved" and "deposited in trust accounts" for

private respondents, and to allow them to withdraw the same.

Through a Resolution of the Second Division dated February 9, 1994, this Court referred the

petition to respondent Court of Appeals for proper determination and disposition.

As found by respondent court , the following are undisputed:

Petitioner Pedro Yap alleges that "(o)n 4 September 1992 the transfer certificates

of title (TCTs) of petitioner Yap were totally cancelled by the Registrar of Deeds

of Leyte and were transferred in the names of farmer beneficiaries collectively,

based on the request of the DAR together with a certification of the Landbank that

the sum of P735,337.77 and P719,869.54 have been earmarked for Landowner

Pedro L. Yap for the parcels of lands covered by TCT Nos. 6282 and 6283,

respectively, and issued in lieu thereof TC-563 and TC-562, respectively, in the

names of listed beneficiaries (ANNEXES "C" & "D") without notice to petitioner

Yap and without complying with the requirement of Section 16 (e) of RA 6657 to

deposit the compensation in cash and Landbank bonds in an accessible bank.

(Rollo, p. 6).

The above allegations are not disputed by any of the respondents.

Petitioner Heirs of Emiliano Santiago allege that the heirs of Emiliano F. Santiago

are the owners of a parcel of land located at Laur, NUEVA ECIJA with an area of

18.5615 hectares covered by TCT No. NT-60359 of the registry of Deeds of

Nueva Ecija, registered in the name of the late Emiliano F. Santiago; that in

November and December 1990, without notice to the petitioners, the Landbank

required and the beneficiaries executed Actual tillers Deed of Undertaking

(ANNEX "B") to pay rentals to the LandBank for the use of their farmlots

equivalent to at least 25% of the net harvest; that on 24 October 1991 the DAR

Regional Director issued an order directing the Landbank to pay the landowner

directly or through the establishment of a trust fund in the amount of P135,482.12,

that on 24 February 1992, the Landbank reserved in trust P135,482.12 in the name

of Emiliano F. Santiago. (ANNEX "E"; Rollo,

p. 7); that the beneficiaries stopped paying rentals to the landowners after they

signed the Actual Tiller's Deed of Undertaking committing themselves to pay

rentals to the LandBank (Rollo, p. 133).

The above allegations are not disputed by the respondents except that respondent

Landbank claims 1) that it was respondent DAR, not Landbank which required

the execution of Actual Tillers Deed of Undertaking (ATDU, for brevity); and 2)

that respondent Landbank, although armed with the ATDU, did not collect any

amount as rental from the substituting beneficiaries (Rollo, p. 99).

Petitioner Agricultural Management and Development Corporation (AMADCOR,

for brevity) alleges with respect to its properties located in San Francisco, Quezon that the properties of AMADCOR in San Francisco, Quezon consist of a parcel of land covered by TCT No. 34314 with an area of 209.9215 hectares and

another parcel covered by TCT No. 10832 with an area of 163.6189 hectares; that

a summary administrative proceeding to determine compensation of the property

covered by TCT No. 34314 was conducted by the DARAB in Quezon City

without notice to the landowner; that a decision was rendered on 24 November

1992 (ANNEX "F") fixing the compensation for the parcel of land covered by

TCT No. 34314 with an area of 209.9215 hectares at P2,768,326.34 and ordering

the Landbank to pay or establish a trust account for said amount in the name of

AMADCOR; and that the trust account in the amount of P2,768,326.34 fixed in

the decision was established by adding P1,986,489.73 to the first trust account

established on 19 December 1991 (ANNEX "G"). With respect to petitioner

AMADCOR's property in Tabaco, Albay, it is alleged that the property of

AMADCOR in Tabaco, Albay is covered by TCT No. T-2466 of the Register of

Deeds of Albay with an area of 1,629.4578 hectares'; that emancipation patents

were issued covering an area of 701.8999 hectares which were registered on 15

February 1988 but no action was taken thereafter by the DAR to fix the

compensation for said land; that on 21 April 1993, a trust account in the name of

AMADCOR was established in the amount of P12,247,217.83', three notices of

acquisition having been previously rejected by AMADCOR. (Rollo, pp. 8-9)

The above allegations are not disputed by the respondents except that respondent

Landbank claims that petitioner failed to participate in the DARAB proceedings

(land valuation case) despite due notice to it (Rollo, p. 100). 8

Private respondents argued that Administrative Order No. 9, Series of 1990 was issued without

jurisdiction and with grave abuse of discretion because it permits the opening of trust accounts

by the Landbank, in lieu of depositing in cash or bonds in an accessible bank designated by the

DAR, the compensation for the land before it is taken and the titles are cancelled as provided

under Section 16(e) of RA 6657. 9

Private respondents also assail the fact that the DAR and the

Landbank merely "earmarked", "deposited in trust" or "reserved" the compensation in their

names as landowners despite the clear mandate that before taking possession of the property, the

compensation must be deposited in cash or in bonds. 10

Petitioner DAR, however, maintained that Administrative Order No. 9 is a valid exercise of its

rule-making power pursuant to Section 49 of RA 6657. 11

Moreover, the DAR maintained that

the issuance of the "Certificate of Deposit" by the Landbank was a substantial compliance with

Section 16(e) of RA 6657 and the ruling in the case of Association of Small Landowners in the

Philippines, Inc., et al. vs. Hon. Secretary of Agrarian Reform, G.R. No. 78742, July 14, 1989

(175 SCRA 343). 12

For its part, petitioner Landbank declared that the issuance of the Certificates of Deposits was in

consonance with Circular Nos. 29, 29-A and 54 of the Land Registration Authority where the

words "reserved/deposited" were also used. 13

On October 20, 1994, the respondent court rendered the assailed decision in favor of private

respondents. 14

Petitioners filed a motion for reconsideration but respondent court denied the

same. 15

Hence, the instant petitions.

On March 20, 1995, private respondents filed a motion to dismiss the petition in G.R. No.

118745 alleging that the appeal has no merit and is merely intended to delay the finality of the

appealed decision. 16

The Court, however, denied the motion and instead required the

respondents to file their comments. 17

Petitioners submit that respondent court erred in (1) declaring as null and void DAR

Administrative Order No. 9, Series of 1990, insofar as it provides for the opening of trust

accounts in lieu of deposit in cash or in bonds, and (2) in holding that private respondents are

entitled as a matter of right to the immediate and provisional release of the amounts deposited in

trust pending the final resolution of the cases it has filed for just compensation.

Anent the first assignment of error, petitioners maintain that the word "deposit" as used in

Section 16(e) of RA 6657 referred merely to the act of depositing and in no way excluded the

opening of a trust account as a form of deposit. Thus, in opting for the opening of a trust account

as the acceptable form of deposit through Administrative Circular No. 9, petitioner DAR did not

commit any grave abuse of discretion since it merely exercised its power to promulgate rules and

regulations in implementing the declared policies of RA 6657.

The contention is untenable. Section 16(e) of RA 6657 provides as follows:

Sec. 16. Procedure for Acquisition of Private Lands

xxx xxx xxx

(e) Upon receipt by the landowner of the corresponding payment or, in case of

rejection or no response from the landowner, upon the deposit with an accessible

bank designated by the DAR of the compensation in cash or in LBP bonds in

accordance with this Act, the DAR shall take immediate possession of the land

and shall request the proper Register of Deeds to issue a Transfer Certificate of

Title (TCT) in the name of the Republic of the Philippines. . . . (emphasis

supplied)

It is very explicit therefrom that the deposit must be made only in "cash" or in "LBP bonds".

Nowhere does it appear nor can it be inferred that the deposit can be made in any other form. If it

were the intention to include a "trust account" among the valid modes of deposit, that should

have been made express, or at least, qualifying words ought to have appeared from which it can

be fairly deduced that a "trust account" is allowed. In sum, there is no ambiguity in Section 16(e)

of RA 6657 to warrant an expanded construction of the term "deposit".

The conclusive effect of administrative construction is not absolute. Action of an administrative

agency may be disturbed or set aside by the judicial department if there is an error of law, a

grave abuse of power or lack of jurisdiction or grave abuse of discretion clearly conflicting with

either the letter or the spirit of a legislative enactment. 18

In this regard, it must be stressed that

the function of promulgating rules and regulations may be legitimately exercised only for the

purpose of carrying the provisions of the law into effect. The power of administrative agencies is

thus confined to implementing the law or putting it into effect. Corollary to this is that

administrative regulations cannot extend

the law and amend a legislative enactment, 19

for settled is the rule that administrative regulations

must be in harmony with the provisions of the law. And in case there is a discrepancy between

the basic law and an implementing rule or regulation, it is the former that prevails. 20

In the present suit, the DAR clearly overstepped the limits of its power to enact rules and

regulations when it issued Administrative Circular No. 9. There is no basis in allowing the

opening of a trust account in behalf of the landowner as compensation for his property because,

as heretofore discussed, Section 16(e) of RA 6657 is very specific that the deposit must be made

only in "cash" or in "LBP bonds". In the same vein, petitioners cannot invoke LRA Circular Nos.

29, 29-A and 54 because these implementing regulations cannot outweigh the clear provision of

the law. Respondent court therefore did not commit any error in striking down Administrative

Circular No. 9 for being null and void.

Proceeding to the crucial issue of whether or not private respondents are entitled to withdraw the

amounts deposited in trust in their behalf pending the final resolution of the cases involving the

final valuation of their properties, petitioners assert the negative.

The contention is premised on the alleged distinction between the deposit of compensation under

Section 16(e) of RA 6657 and payment of final compensation as provided under Section 18 21

of

the same law. According to petitioners, the right of the landowner to withdraw the amount

deposited in his behalf pertains only to the final valuation as agreed upon by the landowner, the

DAR and the LBP or that adjudged by the court. It has no reference to amount deposited in the

trust account pursuant to Section 16(e) in case of rejection by the landowner because the latter

amount is only provisional and intended merely to secure possession of the property pending

final valuation. To further bolster the contention petitioners cite the following pronouncements in

the case of "Association of Small Landowners in the Phil. Inc. vs. Secretary of Agrarian

Reform". 22

The last major challenge to CARP is that the landowner is divested of his property

even before actual payment to him in full of just compensation, in contravention

of a well-accepted principle of eminent domain.

xxx xxx xxx

The CARP Law, for its part conditions the transfer of possession and ownership

of the land to the government on receipt by the landowner of the corresponding

payment or the deposit by the DAR of the compensation in cash or LBP bonds

with an accessible bank. Until then, title also remains with the landowner. No

outright change of ownership is contemplated either.

xxx xxx xxx

Hence the argument that the assailed measures violate due process by arbitrarily

transferring title before the land is fully paid for must also be rejected.

Notably, however, the aforecited case was used by respondent court in discarding petitioners'

assertion as it found that:

. . . despite the "revolutionary" character of the expropriation envisioned under

RA 6657 which led the Supreme Court, in the case of Association of Small

Landowners in the Phil. Inc. vs. Secretary of Agrarian Reform (175 SCRA 343),

to conclude that "payments of the just compensation is not always required to be

made fully in money" even as the Supreme Court admits in the same case "that the traditional medium for the payment of just compensation is money and no

other" the Supreme Court in said case did not abandon the "recognized rule . . . that title to the property expropriated shall pass from the owner to the

expropriator only upon full payment of the just compensation." 23

(Emphasis

supplied)

We agree with the observations of respondent court. The ruling in the "Association" case merely

recognized the extraordinary nature of the expropriation to be undertaken under RA 6657

thereby allowing a deviation from the traditional mode of payment of compensation and

recognized payment other than in cash. It did not, however, dispense with the settled rule that

there must be full payment of just compensation before the title to the expropriated property is

transferred.

The attempt to make a distinction between the deposit of compensation under Section 16(e) of

RA 6657 and determination of just compensation under Section 18 is unacceptable. To withhold

the right of the landowners to appropriate the amounts already deposited in their behalf as

compensation for their properties simply because they rejected the DAR's valuation, and

notwithstanding that they have already been deprived of the possession and use of such

properties, is an oppressive exercise of eminent domain. The irresistible expropriation of private

respondents' properties was painful enough for them. But petitioner DAR rubbed it in all the

more by withholding that which rightfully belongs to private respondents in exchange for the

taking, under an authority (the "Association" case) that is, however, misplaced. This is misery

twice bestowed on private respondents, which the Court must rectify.

Hence, we find it unnecessary to distinguish between provisional compensation under Section

16(e) and final compensation under Section 18 for purposes of exercising the landowners' right

to appropriate the same. The immediate effect in both situations is the same, the landowner is

deprived of the use and possession of his property for which he should be fairly and immediately

compensated. Fittingly, we reiterate the cardinal rule that:

. . . within the context of the State's inherent power of eminent domain, just

compensation means not only the correct determination of the amount to be paid

to the owner of the land but also the payment of the land within a reasonable time

from its taking. Without prompt payment, compensation cannot be considered

"just" for the property owner is made to suffer the consequence of being

immediately deprived of his land while being made to wait for a decade or more

before actually receiving the amount necessary to cope with his loss. 24

(Emphasis

supplied)

The promulgation of the "Association" decision endeavored to remove all legal obstacles in the

implementation of the Comprehensive Agrarian Reform Program and clear the way for the true

freedom of the farmer. 25

But despite this, cases involving its implementation continue to

multiply and clog the courts' dockets. Nevertheless, we are still optimistic that the goal of totally

emancipating the farmers from their bondage will be attained in due time. It must be stressed,

however, that in the pursuit of this objective, vigilance over the rights of the landowners is

equally important because social justice cannot be invoked to trample on the rights of property

owners, who under our Constitution and laws are also entitled to protection. 26

WHEREFORE, the foregoing premises considered, the petition is hereby DENIED for lack of

merit and the appealed decision is AFFIRMED in toto.

SO ORDERED.

Regalado, Puno and Mendoza, JJ., concur.

Narvasa, C.J., is on leave.

Footnotes

1 Gelos v. Court of Appeals, 208 SCRA 608. 615 (1992), quoting Justice

Alicia Sempio-Diy.

2 Ibid, p. 616.

3 Rollo, p. 7.

4 Rollo, pp. 122-123.

5 Rollo, p. 149.

6 which provides formulas for the valuation of land expropriated under

RA 6657.

7 which provides for the opening of trust accounts in the Land Bank

instead of depositing in an accessible bank, in cash and bonds, the

compensation for land expropriated by the DAR.

8 Rollo, pp. 109-111.

9 Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private lands, the following shall be followed:

xxx xxx xxx

(e) Upon receipt by the landowner of the corresponding payment or, in

case of rejection or no response from the landowner, upon the deposit with

an accessible bank designated by the DAR of the compensation in cash or

in LBP bonds in accordance with this Act, the DAR shall take immediate

possession of the land and shall request the proper Register of Deeds to

issue a Transfer Certificate of Title (TCT) in the name of the Republic of

the Philippines. The DAR shall thereafter proceed with the redistribution

of the land to the qualified beneficiaries.

10 Rollo, p. 111.

11 Sec. 49. Rules and Regulations. The PARC and the DAR shall have the power to issue rules and regulations, whether substantive or

procedural, to carry out the objects and purposes of this Act. Said rules

shall take effect ten (l0) days after the publication in two (2) national

newspapers of general circulation.

12 Rollo, pp. 111-112.

13 Rollo, p. 112.

14 Rollo, p. 107.

15 Rollo, p. 149.

16 Rollo, p. 63.

17 Rollo, p. 67.

18 Peralta vs. Civil Service Commission 212 SCRA 425, 432 (1992).

19 Toledo vs. Civil Service Commission 202 SCRA 507, 54

(1991) citing Teoxon v. Members of the Board of Administrators,

Philippine Veterans Administration, 33 SCRA 585, 589

(1970),citing Santos vs. Estenzo, 109 Phil. 419 (1960); Animos vs. Phil.

Veterans Affairs Office, 174 SCRA 214, 223-224 (1989).

20 Shell Philippines, Inc. vs. Central Bank of the Philippines, 162 SCRA

628 (1988).

21 Sec. 18. Valuation and Mode of Compensation. The LBP shall compensate the landowner in such amount as may be agreed upon by the

landowner and the DAR and LBP in accordance with the criteria provided

for in Sections 16 and 17 and other pertinent provisions hereof, or as may

be finally determined by the court as the just compensation for the land.

22 175 SCRA 343.

23 Decision, Court of Appeals, p. 14.

24 Municipality of Makati vs. Court of Appeals, 190 SCRA 207, 213

(1990) citing Cosculluela vs. The Hon. Court of Appeals, 164 SCRA 393,

400 (1988); Provincial Government of Sorsogon vs. Vda. de Villaroya,

153 SCRA 291, 302 (1987).

25 175 SCRA 343, 392.

26 Mata vs. Court of Appeals, 207 SCRA 748, 753 (1992).

DEPARTMENT OF AGRARIAN G.R. No. 162070

REFORM, represented by SECRETARY

JOSE MARI B. PONCE (OIC), Present:

Petitioner, Davide, C.J.,

Puno,

Panganiban,

Quisumbing,

Ynares-Santiago,

Sandoval-Gutierrez,

Carpio,

- versus - Austria-Martinez,

Corona,

Carpio Morales,

Callejo, Sr.,

Azcuna,

Tinga,

Chico-Nazario and

Garcia, JJ.

DELIA T. SUTTON, ELLA T.

SUTTON-SOLIMAN and Promulgated:

HARRY T. SUTTON,

Respondents. October 19, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

PUNO, J.:

This is a petition for review filed by the Department of Agrarian Reform (DAR) of the

Decision and Resolution of the Court of Appeals, dated September 19, 2003 and February 4,

2004, respectively, which declared DAR Administrative Order (A.O.) No. 9, series of 1993, null

and void for being violative of the Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has

been devoted exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then

existing agrarian reform program of the government, respondents made a voluntary offer to sell

(VOS)[1]

their landholdings to petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the

Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage

farms used for raising livestock, poultry and swine.

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

DAR,[2]

this Court ruled that lands devoted to livestock and poultry-raising are not included in

the definition of agricultural land. Hence, we declared as unconstitutional certain provisions of

the CARL insofar as they included livestock farms in the coverage of agrarian reform.

In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request

to withdraw their VOS as their landholding was devoted exclusively to cattle-raising and thus

exempted from the coverage of the CARL.[3]

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate,

inspected respondents land and found that it was devoted solely to cattle-raising and

breeding. He recommended to the DAR Secretary that it be exempted from the coverage of the

CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS

and requested the return of the supporting papers they submitted in connection

therewith.[4]

Petitioner ignored their request.

On December 27, 1993, DAR issued A.O. No. 9, series of 1993,[5]

which provided that

only portions of private agricultural lands used for the raising of livestock, poultry and swine as

of June 15, 1988 shall be excluded from the coverage of the CARL. In determining the area of

land to be excluded, the A.O. fixed the following retention limits, viz: 1:1 animal-land ratio

(i.e., 1 hectare of land per 1 head of animal shall be retained by the landowner), and a ratio of

1.7815 hectares for livestock infrastructure for every 21 heads of cattle shall likewise be

excluded from the operations of the CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider

as final and irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their

entire landholding is exempted from the CARL.[6]

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an

Order[7]

partially granting the application of respondents for exemption from the coverage of

CARL. Applying the retention limits outlined in the DAR A.O. No. 9, petitioner exempted 1,209

hectares of respondents land for grazing purposes, and a maximum of 102.5635 hectares for

infrastructure. Petitioner ordered the rest of respondents landholding to be segregated and

placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding

should be exempted as it is devoted exclusively to cattle-raising. Their motion was

denied.[8]

They filed a notice of appeal[9]

with the Office of the President assailing: (1) the

reasonableness and validity of DAR A.O. No. 9, s. 1993, which provided for a ratio between land

and livestock in determining the land area qualified for exclusion from the CARL, and (2) the

constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz Farms case which declared

cattle-raising lands excluded from the coverage of agrarian reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner

DAR.[10]

It ruled that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as

the A.O. provided the guidelines to determine whether a certain parcel of land is being used for

cattle-raising. However, the issue on the constitutionality of the assailed A.O. was left for the

determination of the courts as the sole arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O.

No. 9, s. 1993, void for being contrary to the intent of the 1987 Constitutional Commission to

exclude livestock farms from the land reform program of the government. The dispositive

portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09,

Series of 1993 is hereby DECLARED null and void. The assailed order of the

Office of the President dated 09 October 2001 in so far as it affirmed the

Department of Agrarian Reforms ruling that petitioners landholding is covered by the agrarian reform program of the government isREVERSED and SET

ASIDE.

SO ORDERED.[11]

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of

1993, which prescribes a maximum retention limit for owners of lands devoted to livestock

raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it

issued DAR A.O. No. 9 to limit the area of livestock farm that may be retained by a landowner

pursuant to its mandate to place all public and private agricultural lands under the coverage of

agrarian reform. Petitioner also contends that the A.O. seeks to remedy reports that some

unscrupulous landowners have converted their agricultural farms to livestock farms in order to

evade their coverage in the agrarian reform program.

Petitioners arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to

make rules and regulations. They have been granted by Congress with the authority to issue

rules to regulate the implementation of a law entrusted to them. Delegated rule-making has

become a practical necessity in modern governance due to the increasing complexity and variety

of public functions. However, while administrative rules and regulations have the force and

effect of law, they are not immune from judicial review.[12]

They may be properly challenged

before the courts to ensure that they do not violate the Constitution and no grave abuse of

administrative discretion is committed by the administrative body concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and

regulations must be issued by authority of a law and must not contravene the provisions of

the Constitution.[13]

The rule-making power of an administrative agency may not be used to

abridge the authority given to it by Congress or by the Constitution. Nor can it be used to

enlarge the power of the administrative agency beyond the scope intended. Constitutional

and statutory provisions control with respect to what rules and regulations may be

promulgated by administrative agencies and the scope of their regulations.[14]

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the

Constitution. The A.O. sought to regulate livestock farms by including them in the coverage of

agrarian reform and prescribing a maximum retention limit for their ownership. However, the

deliberations of the 1987 Constitutional Commission show a clear intent to exclude, inter

alia, all lands exclusively devoted to livestock, swine and poultry- raising. The Court

clarified in the Luz Farms case that livestock, swine and poultry-raising are industrial activities

and do not fall within the definition of agriculture or agricultural activity. The raising of

livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an

agricultural, activity. A great portion of the investment in this enterprise is in the form of

industrial fixed assets, such as: animal housing structures and facilities, drainage, waterers and

blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive

warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas and

digester plants augmented by lagoons and concrete ponds, deepwells, elevated water tanks,

pumphouses, sprayers, and other technological appurtenances.[15]

Clearly, petitioner DAR has no power to regulate livestock farms which have been

exempted by the Constitution from the coverage of agrarian reform. It has exceeded its

power in issuing the assailed A.O.

The subsequent case of Natalia Realty, Inc. v. DAR[16]

reiterated our ruling in the Luz

Farms case. In Natalia Realty, the Court held that industrial, commercial and residential lands

are not covered by the CARL.[17]

We stressed anew that while Section 4 of R.A. No. 6657

provides that the CARL shall cover all public and private agricultural lands, the term

agricultural land does not include lands classified as mineral, forest, residential,

commercial or industrial. Thus, in Natalia Realty, even portions of the Antipolo Hills

Subdivision, which are arable yetstill undeveloped, could not be considered as agricultural

lands subject to agrarian reform as these lots were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising

of livestock, poultry and swine have been classified as industrial, not agricultural, lands and thus

exempt from agrarian reform. Petitioner DAR argues that, in issuing the impugned A.O., it was

seeking to address the reports it has received that some unscrupulous landowners have been

converting their agricultural lands to livestock farms to avoid their coverage by the agrarian

reform. Again, we find neither merit nor logic in this contention. The undesirable scenario

which petitioner seeks to prevent with the issuance of the A.O. clearly does not apply in this

case. Respondents family acquired their landholdings as early as 1948. They have long been in

the business of breeding cattle in Masbate which is popularly known as the cattle-breeding

capital of the Philippines.[18]

Petitioner DAR does not dispute this fact. Indeed, there is no

evidence on record that respondents have just recently engaged in or converted to the business of

breeding cattle after the enactment of the CARL that may lead one to suspect that respondents

intended to evade its coverage. It must be stressed that what the CARL prohibits is

the conversion of agricultural lands for non-agricultural purposes after the effectivity of the

CARL. There has been no change of business interest in the case of respondents.

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

statute by Congress without substantial change is an implied legislative approval and adoption of

the previous law. On the other hand, by making a new law, Congress seeks to supersede an

earlier one.[19]

In the case at bar, after the passage of the 1988 CARL, Congress enacted R.A.

No. 7881[20]

which amended certain provisions of the CARL. Specifically, the new law changed

the definition of the terms agricultural activity and commercial farming by dropping

from its coverage lands that are devoted to commercial livestock, poultry and swine-

raising.[21]

With this significant modification, Congress clearly sought to align the

provisions of our agrarian laws with the intent of the 1987 Constitutional Commission to

exclude livestock farms from the coverage of agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the

provisions of the Constitution. They cannot amend or extend the Constitution. To be valid, they

must conform to and be consistent with the Constitution. In case of conflict between an

administrative order and the provisions of the Constitution, the latter prevails.[22]

The assailed

A.O. of petitioner DAR was properly stricken down as unconstitutional as it enlarges the

coverage of agrarian reform beyond the scope intended by the 1987 Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and

Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004,

respectively, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT Manila

EN BANC

G.R. No. 103302 August 12, 1993

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS

CORP., petitioners,

vs.

DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR.

WILFREDO LEANO, DAR REGION IV, respondents.

Lino M. Patajo for petitioners.

The Solicitor General for respondents.

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the

Housing and Land Use Regulatory Board and its precursor agencies 1

prior to 15 June

1988, 2

covered by R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of

1988? This is the pivotal issue in this petition for certiorari assailing the Notice of Coverage 3

of

the Department of Agrarian Reform over parcels of land already reserved as townsite areas

before the enactment of the law.

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous

parcels of land located in Banaba, Antipolo, Rizal, with areas of 120.9793 hectares, 1.3205

hectares and 2.7080 hectares, or a total of 125.0078 hectares, and embraced in Transfer

Certificate of Title No. 31527 of the Register of Deeds of the Province of Rizal.

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located

in the Municipalities of Antipolo, San Mateo and Montalban as townsite areas to absorb the

population overspill in the metropolis which were designated as the Lungsod Silangan Townsite.

The NATALIA properties are situated within the areas proclaimed as townsite reservation.

Since private landowners were allowed to develop their properties into low-cost housing

subdivisions within the reservation, petitioner Estate Developers and Investors Corporation

(EDIC, for brevity), as developer of NATALIA properties, applied for and was granted

preliminary approval and locational clearances by the Human Settlements Regulatory

Commission. The necessary permit for Phase I of the subdivision project, which consisted of

13.2371 hectares, was issued sometime in 1982; 4

for Phase II, with an area of 80,000 hectares,

on 13 October 1983; 5

and for Phase III, which consisted of the remaining 31.7707 hectares, on

25 April 1986. 6

Petitioner were likewise issued development permits 7

after complying with the

requirements. Thus the NATALIA properties later became the Antipolo Hills Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of

1988" (CARL, for brevity), went into effect. Conformably therewith, respondent Department of

Agrarian Reform (DAR, for brevity), through its Municipal Agrarian Reform Officer, issued on

22 November 1990 a Notice of Coverage on the undeveloped portions of the Antipolo Hills

Subdivision which consisted of roughly 90.3307 hectares. NATALIA immediately registered its

objection to the notice of Coverage.

EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and

twice wrote him requesting the cancellation of the Notice of Coverage.

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc.

(SAMBA, for the brevity), filed a complaint against NATALIA and EDIC before the DAR

Regional Adjudicator to restrain petitioners from developing areas under cultivation by SAMBA

members. 8

The Regional Adjudicator temporarily restrained petitioners from proceeding with

the development of the subdivision. Petitioners then moved to dismiss the complaint; it was

denied. Instead, the Regional Adjudicator issued on 5 March 1991 a Writ of Preliminary

Injunction.

Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication Board

(DARAB); however, on 16 December 1991 the DARAB merely remanded the case to the

Regional Adjudicator for further proceedings. 9

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request

to set aside the Notice of Coverage. Neither respondent Secretary nor respondent Director took

action on the protest-letters, thus compelling petitioners to institute this proceeding more than a

year thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including

undedeveloped portions of the Antipolo Hills Subdivision within the coverage of the CARL.

They argue that NATALIA properties already ceased to be agricultural lands when they were

included in the areas reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They

maintain that the permits granted petitioners were not valid and binding because they did not

comply with the implementing Standards, Rules and Regulations of P.D. 957, otherwise known

as "The Subdivision and Condominium Buyers Protective Decree," in that no application for

conversion of the NATALIA lands from agricultural residential was ever filed with the DAR. In

other words, there was no valid conversion. Moreover, public respondents allege that the instant

petition was prematurely filed because the case instituted by SAMBA against petitioners before

the DAR Regional Adjudicator has not yet terminated. Respondents conclude, as a consequence,

that petitioners failed to fully exhaust administrative remedies available to them before coming

to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and

Locational Clearances as well as the Development Permits granted petitioners for Phases I, II

and III of the Antipolo Hills Subdivision reveals that contrary to the claim of public respondents,

petitioners NATALIA and EDIC did in fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development

Corporation, the agency tasked to oversee the implementation of the development of the townsite

reservation, before applying for the necessary permits from the Human Settlements Regulatory

Commission. 10

And, in all permits granted to petitioners, the Commission

stated invariably therein that the applications were in "conformance" 11

or "conformity" 12

or

"conforming" 13

with the implementing Standards, Rules and Regulations of P.D. 957. Hence,

the argument of public respondents that not all of the requirements were complied with cannot be

sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval

from DAR. The NATALIA properties were within the areas set aside for the Lungsod Silangan

Reservation. Since Presidential Proclamation No. 1637 created the townsite reservation for the

purpose of providing additional housing to the burgeoning population of Metro Manila, it in

effect converted for residential use what were erstwhile agricultural lands provided all requisites

were met. And, in the case at bar, there was compliance with all relevant rules and requirements.

Even in their applications for the development of the Antipolo Hills Subdivision, the predecessor

agency of HLURB noted that petitioners NATALIA and EDIC complied with all the

requirements prescribed by P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and

condominiums in general. On the other hand, Presidential Proclamation No. 1637 referred only

to the Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory

construction that between a general law and a special law, the latter prevails. 14

Interestingly, the Office of the Solicitor General does not contest the conversion of portions of

the Antipolo Hills Subdivision which have already been developed. 15

Of course, this is contrary

to its earlier position that there was no valid conversion. The applications for the developed and

undeveloped portions of subject subdivision were similarly situated. Consequently, both did not

need prior DAR approval.

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657

provides that the CARL shall "cover, regardless of tenurial arrangement and commodity

produced, all public and private agricultural lands." As to what constitutes "agricultural land," it

is referred to as "land devoted to agricultural activity as defined in this Act and not classified as

mineral, forest, residential, commercial or industrial land." 16

The deliberations of the

Constitutional Commission confirm this limitation. "Agricultural lands" are only those lands

which are "arable and suitable agricultural lands" and "do not include commercial, industrial and

residential lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills

Subdivision cannot in any language be considered as "agricultural lands." These lots were

intended for residential use. They ceased to be agricultural lands upon approval of their inclusion

in the Lungsod Silangan Reservation. Even today, the areas in question continued to be

developed as a low-cost housing subdivision, albeit at a snail's pace. This can readily be gleaned

from the fact that SAMBA members even instituted an action to restrain petitioners from

continuing with such development. The enormity of the resources needed for developing a

subdivision may have delayed its completion but this does not detract from the fact that these

lands are still residential lands and outside the ambit of the CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These

include lands previously converted to non-agricultural uses prior to the effectivity of CARL by

government agencies other than respondent DAR. In its Revised Rules and Regulations

Governing Conversion of Private Agricultural Lands to Non-Agricultural Uses, 18

DAR itself

defined "agricultural land" thus

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

R.A. 6657 and not classified as mineral or forest by the Department of

Environment and Natural Resources (DENR) and its predecessor agencies,

and not classified in town plans and zoning ordinances as approved by the

Housing and Land Use Regulatory Board (HLURB) and its preceding competent

authorities prior to 15 June 1988 for residential, commercial or industrial use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by

such conversion. It was therefore error to include the undeveloped portions of the Antipolo Hills

Subdivision within the coverage of CARL.

Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian

Reform, noted in an Opinion 19

that lands covered by Presidential Proclamation No. 1637, inter

alia, of which the NATALIA lands are part, having been reserved for townsite purposes "to be

developed as human settlements by the proper land and housing agency," are "not deemed

'agricultural lands' within the meaning and intent of Section 3 (c) of R.A. No. 6657. " Not being

deemed "agricultural lands," they are outside the coverage of CARL.

Anent the argument that there was failure to exhaust administrative remedies in the instant

petition, suffice it to say that the issues raised in the case filed by SAMBA members differ from

those of petitioners. The former involve possession; the latter, the propriety of including under

the operation of CARL lands already converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter-

protests, this after sitting it out for almost a year. Given the official indifference, which under the

circumstances could have continued forever, petitioners had to act to assert and protect their

interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in

issuing the assailed Notice of Coverage of 22 November 1990 by of lands over which they no

longer have jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22

November 1990 by virtue of which undeveloped portions of the Antipolo Hills Subdivision were

placed under CARL coverage is hereby SET ASIDE.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero,

Nocon, Melo, Quiason, Puno and Vitug, JJ., concur.

# Footnotes

1 National Housing Authority and Human Settlements Regulatory Commission;

see C.T. Torres v. Hibionada, G.R. No. 80916, 9 November 1990, 191 SCRA

268.

2 Date of effectivity of R.A. 6657, otherwise known as the Comprehensive

Agrarian Reform Law of 1988.

3 Annex "H", Petition; Rollo, p. 33.

4 Annex "A", Petition; Rollo, p. 26.

5 Annex "C", Petition; Rollo, p. 28.

6 Annex "E", Petition; Rollo, p. 30.

7 Annexes "B", "D" and "F", Petition; Rollo, pp. 27, 29 and 31.

8 Complaint, p. 3; Rollo, p. 68.

9 DARAB Resolution, 16 December 1991, p. 8; Rollo, p. 82.

10 Renamed Housing and Land Use Regulatory Board (HLURB) per E.O. No. 90,

dated 17 December 1986.

11 Annexes "A" and "C", Petition; Rollo, pp. 26 and 28.

12 Annex "B", Petition; Rollo, p. 27.

13 Annexes "D" and "E", petition; Rollo, pp. 29-30.

14 National Power Corporation v. Presiding Judge, RTC, Br. XXV, G.R. No.

72477, 16 October 1990, 190 SCRA 477.

15 Comment, p. 8; Rollo, p. 63.

16 Sec. 3 (c), R.A. 6657.

17 Luz Farms v. Secretary of the Department of Agrarian Reform, G.R. No.

86889, 4 December 1990, 192 SCRA 51, Citing Record, CONCOM, 7 August

1986, Vol. III, p. 30.

18 DAR Administrative Order No. 1, Series of 1990.

19 Opinion No. 181, Series of 1990.

20 Rocamora v. RTC-Cebu, Br. VIII, G.R. No. 65037, 23 November 1988, 167