Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

MILESTONE FARMS, INC., G.R. No. 182332

Petitioner,
Present:

CARPIO, J.,
Chairperson,
- versus - NACHURA,
PERALTA,
ABAD, and
VILLARAMA, JR.,* JJ.

Promulgated:
OFFICE OF THE PRESIDENT,
Respondent. February 23, 2011
x-----------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of

the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Amended Decision[2] dated October 4, 2006 and its Resolution[3] dated March 27,
2008.

The Facts
 Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the
Securities and Exchange Commission on January 8, 1960.[4] Among its pertinent
secondary purposes are: (1) to engage in the raising of cattle, pigs, and other
livestock; to acquire lands by purchase or lease, which may be needed for this
purpose; and to sell and otherwise dispose of said cattle, pigs, and other livestock
and their produce when advisable and beneficial to the corporation; (2) to breed,
raise, and sell poultry; to purchase or acquire and sell, or otherwise dispose of the
supplies, stocks, equipment, accessories, appurtenances, products, and by-products
of said business; and (3) to import cattle, pigs, and other livestock, and animal food
necessary for the raising of said cattle, pigs, and other livestock as may be authorized
by law.[5]
On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL), took effect,
which included the raising of livestock, poultry, and swine in its coverage. However,
on December 4, 1990, this Court, sitting en banc, ruled in Luz Farms v. Secretary of
the Department of Agrarian Reform[6] that agricultural lands devoted to livestock,
poultry, and/or swine raising are excluded from the Comprehensive Agrarian
Reform Program (CARP).

Thus, in May 1993, petitioner applied for the exemption/exclusion of its 316.0422-
hectare property, covered by Transfer Certificate of Title Nos. (T-410434) M-15750,
(T-486101) M-7307, (T-486102) M-7308, (T-274129) M-15751, (T-486103) M-
7309, (T-486104) M-7310, (T-332694) M-15755, (T-486105) M-7311, (T-486106)
M-7312, M-8791, (T-486107) M-7313, (T-486108) M-7314, M-8796, (T-486109)
M-7315, (T-486110) M-9508, and M-6013, and located in Pinugay, Baras, Rizal,
from the coverage of the CARL, pursuant to the aforementioned ruling of this Court
in Luz Farms.

Meanwhile, on December 27, 1993, the Department of Agrarian Reform

(DAR) issued Administrative Order No. 9, Series of 1993 (DAR A.O. No. 9), setting
forth rules and regulations to govern the exclusion of agricultural lands used for
livestock, poultry, and swine raising from CARP coverage. Thus, on January 10,
1994, petitioner re-documented its application pursuant to DAR A.O. No. 9.[7]
Acting on the said application, the DARs Land Use Conversion and Exemption
Committee (LUCEC) of Region IV conducted an ocular inspection on petitioners
property and arrived at the following findings:

[T]he actual land utilization for livestock, swine and poultry is 258.8422
hectares; the area which served as infrastructure is 42.0000 hectares; ten
(10) hectares are planted to corn and the remaining five (5) hectares are
devoted to fish culture; that the livestock population are 371 heads of cow,
20 heads of horses, 5,678 heads of swine and 788 heads of cocks; that the
area being applied for exclusion is far below the required or ideal area
which is 563 hectares for the total livestock population; that the
approximate area not directly used for livestock purposes with an area of
15 hectares, more or less, is likewise far below the allowable 10%
variance; and, though not directly used for livestock purposes, the ten (10)
hectares planted to sweet corn and the five (5) hectares devoted to
fishpond could be considered supportive to livestock production.

The LUCEC, thus, recommended the exemption of petitioners 316.0422-

hectare property from the coverage of CARP. Adopting the LUCECs findings and
recommendation, DAR Regional Director Percival Dalugdug (Director Dalugdug)
issued an Order dated June 27, 1994, exempting petitioners 316.0422-hectare
property from CARP.[8]

The Southern Pinugay Farmers Multi-Purpose Cooperative, Inc. (Pinugay

Farmers), represented by Timiano Balajadia, Sr. (Balajadia), moved for the
reconsideration of the said Order, but the same was denied by Director Dalugdug in
his Order dated November 24, 1994.[9] Subsequently, the Pinugay Farmers filed a
letter-appeal with the DAR Secretary.

Correlatively, on June 4, 1994, petitioner filed a complaint for Forcible Entry

against Balajadia and company before the Municipal Circuit Trial Court (MCTC) of
Teresa-Baras, Rizal, docketed as Civil Case No. 781-T.[10] The MCTC ruled in favor
of petitioner, but the decision was later reversed by the Regional Trial Court, Branch
80, of Tanay, Rizal. Ultimately, the case reached the CA, which, in its
Decision[11] dated October 8, 1999, reinstated the MCTCs ruling, ordering Balajadia
and all defendants therein to vacate portions of the property covered by TCT Nos.
M-6013, M-8796, and M-8791. In its Resolution[12] dated July 31, 2000, the CA held
that the defendants therein failed to timely file a motion for reconsideration, given
the fact that their counsel of record received its October 8, 1999 Decision; hence, the
same became final and executory.

In the meantime, R.A. No. 6657 was amended by R.A. No. 7881,[13] which
was approved on February 20, 1995. Private agricultural lands devoted to livestock,
poultry, and swine raising were excluded from the coverage of the CARL. On
October 22, 1996, the fact-finding team formed by the DAR Undersecretary for Field
Operations and Support Services conducted an actual headcount of the livestock
population on the property. The headcount showed that there were 448 heads of
cattle and more than 5,000 heads of swine.

The DAR Secretarys Ruling

On January 21, 1997, then DAR Secretary Ernesto D. Garilao (Secretary

Garilao) issued an Order exempting from CARP only 240.9776 hectares of the
316.0422 hectares previously exempted by Director Dalugdug, and declaring
75.0646 hectares of the property to be covered by CARP.[14]

Secretary Garilao opined that, for private agricultural lands to be excluded

from CARP, they must already be devoted to livestock, poultry, and swine raising
as of June 15, 1988, when the CARL took effect. He found that the Certificates of
Ownership of Large Cattle submitted by petitioner showed that only 86 heads of
cattle were registered in the name of petitioners president, Misael Vera, Jr., prior to
June 15, 1988; 133 were subsequently bought in 1990, while 204 were registered
from 1992 to 1995. Secretary Garilao gave more weight to the certificates rather than
to the headcount because the same explicitly provide for the number of cattle owned
by petitioner as of June 15, 1988.

Applying the animal-land ratio (1 hectare for grazing for every head of
cattle/carabao/horse) and the infrastructure-animal ratio (1.7815 hectares for 21
heads of cattle/carabao/horse, and 0.5126 hectare for 21 heads of hogs) under DAR
A.O. No. 9, Secretary Garilao exempted 240.9776 hectares of the property, as
follows:

1. 86 hectares for the 86 heads of cattle existing as of 15 June 1988;

2. 8 hectares for infrastructure following the ratio of 1.7815

hectares for every 21 heads of cattle;

3. 8 hectares for the 8 horses;

4. 0.3809 square meters of infrastructure for the 8 horses; [and]

5. 138.5967 hectares for the 5,678 heads of swine.[15]

Petitioner filed a Motion for Reconsideration,[16] submitting therewith copies

of Certificates of Transfer of Large Cattle and additional Certificates of Ownership
of Large Cattle issued to petitioner prior to June 15, 1988, as additional proof that it
had met the required animal-land ratio. Petitioner also submitted a copy of a
Disbursement Voucher dated December 17, 1986, showing the purchase of 100
heads of cattle by the Bureau of Animal Industry from petitioner, as further proof
that it had been actively operating a livestock farm even before June 15,
1988. However, in his Order dated April 15, 1997, Secretary Garilao denied
petitioners Motion for Reconsideration.[17]

Aggrieved, petitioner filed its Memorandum on Appeal[18] before the Office

of the President (OP).

The OPs Ruling

On February 4, 2000, the OP rendered a decision[19] reinstating Director

Dalugdugs Order dated June 27, 1994 and declared the entire 316.0422-hectare
property exempt from the coverage of CARP.

However, on separate motions for reconsideration of the aforesaid decision

filed by farmer-groups Samahang Anak-Pawis ng Lagundi (SAPLAG) and Pinugay
Farmers, and the Bureau of Agrarian Legal Assistance of DAR, the OP issued a
resolution[20]dated September 16, 2002, setting aside its previous decision. The
dispositive portion of the OP resolution reads:

WHEREFORE, the Decision subject of the instant separate

motions for reconsideration is hereby SET ASIDE and a new one entered
REINSTATING the Order dated 21 January 1997 of then DAR Secretary
Ernesto D. Garilao, as reiterated in another Order of 15 April 1997,
without prejudice to the outcome of the continuing review and verification
proceedings that DAR, thru the appropriate Municipal Agrarian Reform
Officer, may undertake pursuant to Rule III (D) of DAR Administrative
Order No. 09, series of 1993.

SO ORDERED.[21]

The OP held that, when it comes to proof of ownership, the reference is the
Certificate of Ownership of Large Cattle. Certificates of cattle ownership, which are
readily available being issued by the appropriate government office ought to match
the number of heads of cattle counted as existing during the actual headcount. The
presence of large cattle on the land, without sufficient proof of ownership thereof,
only proves such presence.

Taking note of Secretary Garilaos observations, the OP also held that, before
an ocular investigation is conducted on the property, the landowners are notified in
advance; hence, mere reliance on the physical headcount is dangerous because there
is a possibility that the landowners would increase the number of their cattle for
headcount purposes only. The OP observed that there was a big variance between
the actual headcount of 448 heads of cattle and only 86 certificates of ownership of
large cattle.

Consequently, petitioner sought recourse from the CA.[22]

The Proceedings Before the CA and Its Rulings

 On April 29, 2005, the CA found that, based on the documentary evidence
presented, the property subject of the application for exclusion had more than
satisfied the animal-land and infrastructure-animal ratios under DAR A.O. No. 9.
The CA also found that petitioner applied for exclusion long before the effectivity
of DAR A.O. No. 9, thus, negating the claim that petitioner merely converted the
property for livestock, poultry, and swine raising in order to exclude it from CARP
coverage. Petitioner was held to have actually engaged in the said business on the
property even before June 15, 1988. The CA disposed of the case in this wise:

WHEREFORE, the instant petition is hereby GRANTED. The

assailed Resolution of the Office of the President dated September 16,
2002 is hereby SET ASIDE, and its Decision dated February 4, 2000
declaring the entire 316.0422 hectares exempt from the coverage of the
Comprehensive Agrarian Reform Program is
hereby REINSTATED without prejudice to the outcome of the
continuing review and verification proceedings which the Department of
Agrarian Reform, through the proper Municipal Agrarian Reform Officer,
may undertake pursuant to Policy Statement (D) of DAR Administrative
Order No. 9, Series of 1993.

SO ORDERED.[23]

Meanwhile, six months earlier, or on November 4, 2004, without the

knowledge of the CA as the parties did not inform the appellate court then DAR
Secretary Rene C. Villa (Secretary Villa) issued DAR Conversion Order No. CON-
0410-0016[24](Conversion Order), granting petitioners application to convert
portions of the 316.0422-hectare property from agricultural to residential and golf
courses use. The portions converted with a total area of 153.3049 hectares were
covered by TCT Nos. M-15755 (T-332694), M-15751 (T-274129), and M-15750
(T-410434). With this Conversion Order, the area of the property subject of the
controversy was effectively reduced to 162.7373 hectares.
On the CAs decision of April 29, 2005, Motions for Reconsideration were
filed by farmer-groups, namely: the farmers represented by Miguel
Espinas[25] (Espinas group), the Pinugay Farmers,[26] and the SAPLAG.[27] The
farmer-groups all claimed that the CA should have accorded respect to the factual
findings of the OP. Moreover, the farmer-groups unanimously intimated that
petitioner already converted and developed a portion of the property into a leisure-
residential-commercial estate known as the Palo Alto Leisure and Sports Complex
(Palo Alto).

Subsequently, in a Supplement to the Motion for Reconsideration on Newly

Secured Evidence pursuant to DAR Administrative Order No. 9, Series of
1993[28] (Supplement) dated June 15, 2005, the Espinas group submitted the
following as evidence:

1) Conversion Order[29] dated November 4, 2004, issued by Secretary Villa,

converting portions of the property from agricultural to residential and golf courses
use, with a total area of 153.3049 hectares; thus, the Espinas group prayed that the
remaining 162.7373 hectares (subject property) be covered by the CARP;

2) Letter[30] dated June 7, 2005 of both incoming Municipal Agrarian Reform

Officer (MARO) Bismark M. Elma (MARO Elma) and outgoing MARO Cesar C.
Celi (MARO Celi) of Baras, Rizal, addressed to Provincial Agrarian Reform Officer
(PARO) II of Rizal, Felixberto Q. Kagahastian, (MARO Report), informing the
latter, among others, that Palo Alto was already under development and the lots
therein were being offered for sale; that there were actual tillers on the subject
property; that there were agricultural improvements thereon, including an irrigation
system and road projects funded by the Government; that there was no existing
livestock farm on the subject property; and that the same was not in the possession
and/or control of petitioner; and

3) Certification[31] dated June 8, 2005, issued by both MARO Elma and

MARO Celi, manifesting that the subject property was in the possession and
cultivation of actual occupants and tillers, and that, upon inspection, petitioner
maintained no livestock farm thereon.

Four months later, the Espinas group and the DAR filed their respective
Manifestations.[32] In its Manifestation dated November 29, 2005, the DAR
confirmed that the subject property was no longer devoted to cattle raising. Hence,
in its Resolution[33] dated December 21, 2005, the CA directed petitioner to file its
comment on the Supplement and the aforementioned Manifestations. Employing the
services of a new counsel, petitioner filed a Motion to Admit Rejoinder,[34] and
prayed that the MARO Report be disregarded and expunged from the records for
lack of factual and legal basis.

With the CA now made aware of these developments, particularly Secretary

Villas Conversion Order of November 4, 2004, the appellate court had to
acknowledge that the property subject of the controversy would now be limited to
the remaining 162.7373 hectares. In the same token, the Espinas group prayed that
this remaining area be covered by the CARP.[35]
On October 4, 2006, the CA amended its earlier Decision. It held that its April
29, 2005 Decision was theoretically not final because DAR A.O. No. 9 required the
MARO to make a continuing review and verification of the subject property. While
the CA was cognizant of our ruling in Department of Agrarian Reform v.
Sutton,[36] wherein we declared DAR A.O. No. 9 as unconstitutional, it still resolved
to lift the exemption of the subject property from the CARP, not on the basis of DAR
A.O. No. 9, but on the strength of evidence such as the MARO Report and
Certification, and the Katunayan[37] issued by the Punong Barangay, Alfredo Ruba
(Chairman Ruba), of Pinugay, Baras, Rizal, showing that the subject property was
no longer operated as a livestock farm. Moreover, the CA held that the lease
agreements,[38] which petitioner submitted to prove that it was compelled to lease a
ranch as temporary shelter for its cattle, only reinforced the DARs finding that there
was indeed no existing livestock farm on the subject property. While petitioner
claimed that it was merely forced to do so to prevent further slaughtering of its cattle
allegedly committed by the occupants, the CA found the claim unsubstantiated.
Furthermore, the CA opined that petitioner should have asserted its rights when the
irrigation and road projects were introduced by the Government within its property.
Finally, the CA accorded the findings of MARO Elma and MARO Celi the
presumption of regularity in the performance of official functions in the absence of
evidence proving misconduct and/or dishonesty when they inspected the subject
property and rendered their report. Thus, the CA disposed:
WHEREFORE, this Courts Decision dated April 29, 2005 is
hereby amended in that the exemption of the subject landholding from the
coverage of the Comprehensive Agrarian Reform Program is hereby
lifted, and the 162.7373 hectare-agricultural portion thereof is hereby
declared covered by the Comprehensive Agrarian Reform Program.

SO ORDERED.[39]
 Unperturbed, petitioner filed a Motion for Reconsideration.[40] On January 8,
2007, MARO Elma, in compliance with the Memorandum of DAR Regional
Director Dominador B. Andres, tendered another Report[41] reiterating that, upon
inspection of the subject property, together with petitioners counsel-turned witness,
Atty. Grace Eloisa J. Que (Atty. Que), PARO Danilo M. Obarse, Chairman Ruba,
and several occupants thereof, he, among others, found no livestock farm within the
subject property. About 43 heads of cattle were shown, but MARO Elma observed
that the same were inside an area adjacent to Palo Alto. Subsequently, upon Atty.
Ques request for reinvestigation, designated personnel of the DAR Provincial and
Regional Offices (Investigating Team) conducted another ocular inspection on the
subject property on February 20, 2007. The Investigating Team, in its
Report[42] dated February 21, 2007, found that, per testimony of petitioners
caretaker, Rogelio Ludivices (Roger),[43] petitioner has 43 heads of cattle taken care
of by the following individuals: i) Josefino Custodio (Josefino) 18 heads; ii) Andy
Amahit 15 heads; and iii) Bert Pangan 2 heads; that these individuals pastured the
herd of cattle outside the subject property, while Roger took care of 8 heads of cattle
inside the Palo Alto area; that 21 heads of cattle owned by petitioner were seen in
the area adjacent to Palo Alto; that Josefino confirmed to the Investigating Team that
he takes care of 18 heads of cattle owned by petitioner; that the said Investigating
Team saw 9 heads of cattle in the Palo Alto area, 2 of which bore MFI marks; and
that the 9 heads of cattle appear to have matched the Certificates of Ownership of
Large Cattle submitted by petitioner.

Because of the contentious factual issues and the conflicting averments of the
parties, the CA set the case for hearing and reception of evidence on April 24,
2007.[44] Thereafter, as narrated by the CA, the following events transpired:

On May 17, 2007, [petitioner] presented the Judicial Affidavits of

its witnesses, namely, [petitioners] counsel, [Atty. Que], and the alleged
caretaker of [petitioners] farm, [Roger], who were both cross-examined
by counsel for farmers-movants and SAPLAG. [Petitioner] and SAPLAG
then marked their documentary exhibits.

On May 24, 2007, [petitioners] security guard and third witness, Rodolfo
G. Febrada, submitted his Judicial Affidavit and was cross-examined by
 counsel for fa[r]mers-movants and SAPLAG. Farmers-movants also
marked their documentary exhibits.

Thereafter, the parties submitted their respective Formal Offers of

Evidence. Farmers-movants and SAPLAG filed their objections to
[petitioners] Formal Offer of Evidence. Later, [petitioner] and farmers-
movants filed their respective Memoranda.

In December 2007, this Court issued a Resolution on the parties offer of

evidence and considered [petitioners] Motion for
[45]
Reconsideration submitted for resolution.

Finally, petitioners motion for reconsideration was denied by the CA in its

Resolution[46] dated March 27, 2008. The CA discarded petitioners reliance
on Sutton. It ratiocinated that the MARO Reports and the DARs Manifestation could
not be disregarded simply because DAR A.O. No. 9 was declared unconstitutional.
The Sutton ruling was premised on the fact that the Sutton property continued to
operate as a livestock farm. The CA also reasoned that, in Sutton, this Court did not
remove from the DAR the power to implement the CARP, pursuant to the latters
authority to oversee the implementation of agrarian reform laws under Section
50[47] of the CARL. Moreover, the CA found:

Petitioner-appellant claimed that they had 43 heads of cattle which

are being cared for and pastured by 4 individuals. To prove its ownership
of the said cattle, petitioner-appellant offered in evidence 43 Certificates
of Ownership of Large Cattle. Significantly, however, the
said Certificates were all dated and issued on November 24, 2006, nearly
2 months after this Court rendered its Amended Decision lifting the
exemption of the 162-hectare portion of the subject landholding. The
acquisition of such cattle after the lifting of the exemption clearly reveals
that petitioner-appellant was no longer operating a livestock farm, and
suggests an effort to create a semblance of livestock-raising for the
purpose of its Motion for Reconsideration.[48]

On petitioners assertion that between MARO Elmas Report dated January 8,

2007 and the Investigating Teams Report, the latter should be given credence, the
CA held that there were no material inconsistencies between the two reports because
both showed that the 43 heads of cattle were found outside the subject property.

Hence, this Petition assigning the following errors:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

WHEN IT HELD THAT LANDS DEVOTED TO LIVESTOCK
FARMING WITHIN THE MEANING OF LUZ FARMS AND SUTTON,
AND WHICH ARE THEREBY EXEMPT FROM CARL COVERAGE,
ARE NEVERTHELESS SUBJECT TO DARS CONTINUING
VERIFICATION AS TO USE, AND, ON THE BASIS OF SUCH
VERIFICATION, MAY BE ORDERED REVERTED TO
AGRICULTURAL CLASSIFICATION AND COMPULSORY
ACQUISITION[;]

II.

GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO

REVERTED TO AGRICULTURAL CLASSIFICATION, STILL THE
PROCEEDINGS FOR SUCH PURPOSE BELONGS TO THE
EXCLUSIVE ORIGINAL JURISDICTION OF THE DAR, BEFORE
WHICH THE CONTENDING PARTIES MAY VENTILATE
FACTUAL ISSUES, AND AVAIL THEMSELVES OF USUAL
REVIEW PROCESSES, AND NOT TO THE COURT OF APPEALS
EXERCISING APPELLATE JURISDICTION OVER ISSUES
COMPLETELY UNRELATED TO REVERSION [; AND]

III.

IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND

COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT HELD
THAT THE PROPERTY IN DISPUTE IS NO LONGER BEING USED
FOR LIVESTOCK FARMING.[49]

Petitioner asseverates that lands devoted to livestock farming as of June 15,

1988 are classified as industrial lands, hence, outside the ambit of the CARP;
that Luz Farms, Sutton, and R.A. No. 7881 clearly excluded such lands on
constitutional grounds; that petitioners lands were actually devoted to livestock even
before the enactment of the CARL; that livestock farms are exempt from the CARL,
not by reason of any act of the DAR, but because of their nature as industrial lands;
that petitioners property was admittedly devoted to livestock farming as of June 1988
and the only issue before was whether or not petitioners pieces of evidence comply
with the ratios provided under DAR A.O. No. 9; and that DAR A.O. No. 9 having
been declared as unconstitutional, DAR had no more legal basis to conduct a
continuing review and verification proceedings over livestock farms. Petitioner
argues that, in cases where reversion of properties to agricultural use is proper, only
the DAR has the exclusive original jurisdiction to hear and decide the same; hence,
the CA, in this case, committed serious errors when it ordered the reversion of the
property and when it considered pieces of evidence not existing as of June 15, 1988,
despite its lack of jurisdiction; that the CA should have remanded the case to the
DAR due to conflicting factual claims; that the CA cannot ventilate allegations of
fact that were introduced for the first time on appeal as a supplement to a motion for
reconsideration of its first decision, use the same to deviate from the issues pending
review, and, on the basis thereof, declare exempt lands reverted to agricultural use
and compulsorily covered by the CARP; that the newly discovered [pieces of]
evidence were not introduced in the proceedings before the DAR, hence, it was
erroneous for the CA to consider them; and that piecemeal presentation of evidence
is not in accord with orderly justice. Finally, petitioner submits that, in any case, the
CA gravely erred and committed grave abuse of discretion when it held that the
subject property was no longer used for livestock farming as shown by the Report
of the Investigating Team. Petitioner relies on the 1997 LUCEC and DAR findings
that the subject property was devoted to livestock farming, and on the 1999 CA
Decision which held that the occupants of the property were squatters, bereft of any
authority to stay and possess the property.[50]

On one hand, the farmer-groups, represented by the Espinas group, contend

that they have been planting rice and fruit-bearing trees on the subject property, and
helped the National Irrigation Administration in setting up an irrigation system
therein in 1997, with a produce of 1,500 to 1,600 sacks of palay each year; that
petitioner came to court with unclean hands because, while it sought the exemption
and exclusion of the entire property, unknown to the CA, petitioner surreptitiously
filed for conversion of the property now known as Palo Alto, which was actually
granted by the DAR Secretary; that petitioners bad faith is more apparent since,
despite the conversion of the 153.3049-hectare portion of the property, it still seeks
to exempt the entire property in this case; and that the fact that petitioner applied for
conversion is an admission that indeed the property is agricultural. The farmer-
groups also contend that petitioners reliance on Luz Farms and Sutton is unavailing
because in these cases there was actually no cessation of the business of raising
cattle; that what is being exempted is the activity of raising cattle and not the property
itself; that exemptions due to cattle raising are not permanent; that the declaration of
DAR A.O. No. 9 as unconstitutional does not at all diminish the mandated duty of
the DAR, as the lead agency of the Government, to implement the CARL; that the
DAR, vested with the power to identify lands subject to CARP, logically also has
the power to identify lands which are excluded and/or exempted therefrom; that to
disregard DARs authority on the matter would open the floodgates to abuse and
fraud by unscrupulous landowners; that the factual finding of the CA that the subject
property is no longer a livestock farm may not be disturbed on appeal, as enunciated
by this Court; that DAR conducted a review and monitoring of the subject property
by virtue of its powers under the CARL; and that the CA has sufficient discretion to
admit evidence in order that it could arrive at a fair, just, and equitable ruling in this
case.[51]

On the other hand, respondent OP, through the Office of the Solicitor General
(OSG), claims that the CA correctly held that the subject property is not exempt from
the coverage of the CARP, as substantial pieces of evidence show that the said
property is not exclusively devoted to livestock, swine, and/or poultry raising; that
the issues presented by petitioner are factual in nature and not proper in this case;
that under Rule 43 of the 1997 Rules of Civil Procedure, questions of fact may be
raised by the parties and resolved by the CA; that due to the divergence in the factual
findings of the DAR and the OP, the CA was duty bound to review and ascertain
which of the said findings are duly supported by substantial evidence; that the
subject property was subject to continuing review and verification proceedings due
to the then prevailing DAR A.O. No. 9; that there is no question that the power to
determine if a property is subject to CARP coverage lies with the DAR Secretary;
that pursuant to such power, the MARO rendered the assailed reports and
certification, and the DAR itself manifested before the CA that the subject property
is no longer devoted to livestock farming; and that, while it is true that this Courts
ruling in Luz Farms declared that agricultural lands devoted to livestock, poultry,
and/or swine raising are excluded from the CARP, the said ruling is not without any
qualification.[52]

In its Reply[53] to the farmer-groups and to the OSGs comment, petitioner

counters that the farmer-groups have no legal basis to their claims as they admitted
that they entered the subject property without the consent of petitioner; that the rice
plots actually found in the subject property, which were subsequently taken over by
squatters, were, in fact, planted by petitioner in compliance with the directive of then
President Ferdinand Marcos for the employer to provide rice to its employees; that
when a land is declared exempt from the CARP on the ground that it is not
agricultural as of the time the CARL took effect, the use and disposition of that land
is entirely and forever beyond DARs jurisdiction; and that, inasmuch as the subject
property was not agricultural from the very beginning, DAR has no power to regulate
the same. Petitioner also asserts that the CA cannot uncharacteristically assume the
role of trier of facts and resolve factual questions not previously adjudicated by the
lower tribunals; that MARO Elma rendered the assailed MARO reports with bias
against petitioner, and the same were contradicted by the Investigating Teams
Report, which confirmed that the subject property is still devoted to livestock
farming; and that there has been no change in petitioners business interest as an
entity engaged in livestock farming since its inception in 1960, though there was
admittedly a decline in the scale of its operations due to the illegal acts of the
squatter-occupants.

Our Ruling

The Petition is bereft of merit.

Let it be stressed that when the CA provided in its first Decision that
continuing review and verification may be conducted by the DAR pursuant to DAR
A.O. No. 9, the latter was not yet declared unconstitutional by this Court. The first
CA Decision was promulgated on April 29, 2005, while this Court struck down as
unconstitutional DAR A.O. No. 9, by way of Sutton, on October 19, 2005. Likewise,
let it be emphasized that the Espinas group filed the Supplement and submitted the
assailed MARO reports and certification on June 15, 2005, which proved to be
adverse to petitioners case. Thus, it could not be said that the CA erred or gravely
abused its discretion in respecting the mandate of DAR A.O. No. 9, which was then
subsisting and in full force and effect.

While it is true that an issue which was neither alleged in the complaint nor
raised during the trial cannot be raised for the first time on appeal as it would be
offensive to the basic rules of fair play, justice, and due process,[54] the same is not
without exception,[55] such as this case. The CA, under Section 3,[56] Rule 43 of the
Rules of Civil Procedure, can, in the interest of justice, entertain and resolve factual
issues. After all, technical and procedural rules are intended to help secure, and not
suppress, substantial justice. A deviation from a rigid enforcement of the rules may
thus be allowed to attain the prime objective of dispensing justice, for dispensation
of justice is the core reason for the existence of courts.[57] Moreover, petitioner
cannot validly claim that it was deprived of due process because the CA afforded it
all the opportunity to be heard.[58] The CA even directed petitioner to file its
comment on the Supplement, and to prove and establish its claim that the subject
property was excluded from the coverage of the CARP. Petitioner actively
participated in the proceedings before the CA by submitting pleadings and pieces of
documentary evidence, such as the Investigating Teams Report and judicial
affidavits. The CA also went further by setting the case for hearing. In all these
proceedings, all the parties rights to due process were amply protected and
recognized.

With the procedural issue disposed of, we find that petitioners arguments fail to
persuade. Its invocation of Sutton is unavailing. In Sutton, we held:

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.
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.[59]

Indeed, as pointed out by the CA, the instant case does not rest on facts parallel to
those of Sutton because, in Sutton, the subject property remained a livestock farm.
We even highlighted therein the fact that there has been no change of business
interest in the case of respondents.[60] Similarly, in Department of Agrarian Reform
v. Uy,[61] we excluded a parcel of land from CARP coverage due to the factual
findings of the MARO, which were confirmed by the DAR, that the property was
entirely devoted to livestock farming. However, in A.Z. Arnaiz Realty, Inc.,
represented by Carmen Z. Arnaiz v. Office of the President; Department of Agrarian
Reform; Regional Director, DAR Region V, Legaspi City; Provincial Agrarian
Reform Officer, DAR Provincial Office, Masbate, Masbate; and Municipal Agrarian
Reform Officer, DAR Municipal Office, Masbate, Masbate,[62] we denied a similar
petition for exemption and/or exclusion, by according respect to the CAs factual
findings and its reliance on the findings of the DAR and the OP that

the subject parcels of land were not directly, actually, and exclusively used for
pasture.[63]
Petitioners admission that, since 2001, it leased another ranch for its own
livestock is fatal to its cause.[64] While petitioner advances a defense that it leased
this ranch because the occupants of the subject property harmed its cattle, like the
CA, we find it surprising that not even a single police and/or barangay report was
filed by petitioner to amplify its indignation over these alleged illegal acts.
Moreover, we accord respect to the CAs keen observation that the assailed MARO
reports and the Investigating Teams Report do not actually contradict one another,
finding that the 43 cows, while owned by petitioner, were actually pastured outside
the subject property.
`

Finally, it is established that issues of Exclusion and/or Exemption are

characterized as Agrarian Law Implementation (ALI) cases which are well within
the DAR Secretarys competence and jurisdiction.[65] Section 3, Rule II of the 2003
Department of Agrarian Reform Adjudication Board Rules of Procedure provides:
Section 3. Agrarian Law Implementation Cases.
The Adjudicator or the Board shall have no jurisdiction over
matters involving the administrative implementation of RA No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL)
of 1988 and other agrarian laws as enunciated by pertinent rules and
administrative orders, which shall be under the exclusive prerogative of
and cognizable by the Office of the Secretary of the DAR in accordance
with his issuances, to wit:

xxxx
3.8 Exclusion from CARP coverage of agricultural land used for
livestock, swine, and poultry raising.

Thus, we cannot, without going against the law, arbitrarily strip the DAR Secretary
of his legal mandate to exercise jurisdiction and authority over all ALI cases. To
succumb to petitioners contention that when a land is declared exempt from the
CARP on the ground that it is not agricultural as of the time the CARL took effect,
the use and disposition of that land is entirely and forever beyond DARs
jurisdiction is dangerous, suggestive of self-regulation. Precisely, it is the DAR
Secretary who is vested with such jurisdiction and authority to exempt and/or
exclude a property from CARP coverage based on the factual circumstances of each
case and in accordance with law and applicable jurisprudence. In addition, albeit
parenthetically, Secretary Villa had already granted the conversion into residential
and golf courses use of nearly one-half of the entire area originally claimed as
exempt from CARP coverage because it was allegedly devoted to livestock
production.
In sum, we find no reversible error in the assailed Amended Decision and Resolution
of the CA which would warrant the modification, much less the reversal, thereof.

WHEREFORE, the Petition is DENIED and the Court of Appeals Amended

Decision dated October 4, 2006 and Resolution dated March 27, 2008
are AFFIRMED. No costs.

SO ORDERED.

N BANC
 [G.R. No. 86889 : December 4, 1990.]
192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF
AGRARIAN REFORM, Respondent.

DECISION

PARAS, J.:

This is a petition for prohibition with prayer for restraining order and/or preliminary and
permanent injunction against the Honorable Secretary of the Department of Agrarian Reform
for acting without jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law of 1988 and in promulgating the
Guidelines and Procedure Implementing Production and Profit Sharing under R.A. No. 6657,
insofar as the same apply to herein petitioner, and further from performing an act in violation
of the constitutional rights of the petitioner.
As gathered from the records, the factual background of this case, is as follows:
On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes
the raising of livestock, poultry and swine in its coverage (Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and
Procedures Implementing Production and Profit Sharing as embodied in Sections 13 and 32
of R.A. No. 6657 (Rollo, p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations
implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry
business and together with others in the same business allegedly stands to be adversely
affected by the enforcement of Section 3(b), Section 11, Section 13, Section 16(d) and 17
and Section 32 of R.A. No. 6657 otherwise known as Comprehensive Agrarian Reform Law
and of the Guidelines and Procedures Implementing Production and Profit Sharing under R.A.
No. 6657 promulgated on January 2, 1989 and the Rules and Regulations Implementing
Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp. 2-36). : rd

Hence, this petition praying that aforesaid laws, guidelines and rules be declared
unconstitutional. Meanwhile, it is also prayed that a writ of preliminary injunction or
restraining order be issued enjoining public respondents from enforcing the same, insofar as
they are made to apply to Luz Farms and other livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny, among others, Luz Farms'
prayer for the issuance of a preliminary injunction in its Manifestation dated May 26, and 31,
1989. (Rollo, p. 98).
Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said
Motion for Reconsideration regarding the injunctive relief, after the filing and approval by this
Court of an injunction bond in the amount of P100,000.00. This Court also gave due course
to the petition and required the parties to file their respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168).
On December 22, 1989, the Solicitor General adopted his Comment to the petition as his
Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply
to it:
(a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition
of "Agricultural, Agricultural Enterprise or Agricultural Activity."
(b) Section 11 which defines "commercial farms" as "private agricultural lands devoted
to commercial, livestock, poultry and swine raising . . ."
(c) Section 13 which calls upon petitioner to execute a production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the
authority to summarily determine the just compensation to be paid for lands covered
by the Comprehensive Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan mentioned in Section 13
—
". . . (W)hereby three percent (3%) of the gross sales from the production of such
lands are distributed within sixty (60) days of the end of the fiscal year as
compensation to regular and other farmworkers in such lands over and above the
compensation they currently receive: Provided, That these individuals or entities
realize gross sales in excess of five million pesos per annum unless the DAR, upon
proper application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an additional ten (10%) of
the net profit after tax shall be distributed to said regular and other farmworkers within
ninety (90) days of the end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A.
No. 6657 (the Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes
the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules
and Guidelines promulgated in accordance therewith. :-cralaw

The constitutional provision under consideration reads as follows:

ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an agrarian reform program founded on
the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the rights of
small landowners. The State shall further provide incentives for voluntary land-
sharing.
x x x"
Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety.
In fact, it acknowledges the correctness of the decision of this Court in the case of the
Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
 Reform (G.R. 78742, 14 July 1989) affirming the constitutionality of the
Comprehensive Agrarian Reform Law. It, however, argued that Congress in enacting
the said law has transcended the mandate of the Constitution, in including land
devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131).
Livestock or poultry raising is not similar to crop or tree farming. Land is not the
primary resource in this undertaking and represents no more than five percent (5%)
of the total investment of commercial livestock and poultry raisers. Indeed, there are
many owners of residential lands all over the country who use available space in their
residence for commercial livestock and raising purposes, under "contract-growing
arrangements," whereby processing corporations and other commercial livestock and
poultry raisers (Rollo, p. 10). Lands support the buildings and other amenities
attendant to the raising of animals and birds. The use of land is incidental to but not
the principal factor or consideration in productivity in this industry. Including backyard
raisers, about 80% of those in commercial livestock and poultry production occupy
five hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and poultry raising is
embraced in the term "agriculture" and the inclusion of such enterprise under Section 3(b) of
R.A. 6657 is proper. He cited that Webster's International Dictionary, Second Edition (1954),
defines the following words:
"Agriculture — the art or science of cultivating the ground and raising and harvesting
crops, often, including also, feeding, breeding and management of livestock, tillage,
husbandry, farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . . .
Livestock — domestic animals used or raised on a farm, especially for profit.
Farm — a plot or tract of land devoted to the raising of domestic or other animals." (Rollo,
pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary task in constitutional
construction is to ascertain and thereafter assure the realization of the purpose of the framers
in the adoption of the Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31
SCRA 413 [1970]). : rd

Ascertainment of the meaning of the provision of Constitution begins with the language of the
document itself. The words used in the Constitution are to be given their ordinary meaning
except where technical terms are employed in which case the significance thus attached to
them prevails (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which are ambiguous or of
doubtful meaning, the courts may consider the debates in the constitutional convention as
throwing light on the intent of the framers of the Constitution. It is true that the intent of the
convention is not controlling by itself, but as its proceeding was preliminary to the adoption
by the people of the Constitution the understanding of the convention as to what was meant
by the terms of the constitutional provision which was the subject of the deliberation, goes a
long way toward explaining the understanding of the people when they ratified it (Aquino, Jr.
v. Enrile, 59 SCRA 183 [1974]).
The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning
of the word "agricultural," clearly show that it was never the intention of the framers of the
Constitution to include livestock and poultry industry in the coverage of the constitutionally-
mandated agrarian reform program of the Government.
The Committee adopted the definition of "agricultural land" as defined under Section 166 of
R.A. 3844, as laud devoted to any growth, including but not limited to crop lands, saltbeds,
fishponds, idle and abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).
The intention of the Committee is to limit the application of the word "agriculture."
Commissioner Jamir proposed to insert the word "ARABLE" to distinguish this kind of
agricultural land from such lands as commercial and industrial lands and residential properties
because all of them fall under the general classification of the word "agricultural". This
proposal, however, was not considered because the Committee contemplated that agricultural
lands are limited to arable and suitable agricultural lands and therefore, do not include
commercial, industrial and residential lands (Record, CONCOM, August 7, 1986, Vol. III, p.
30).
In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed
several questions, among others, quoted as follows:
x x x
"Line 19 refers to genuine reform program founded on the primary right of farmers
and farmworkers. I wonder if it means that leasehold tenancy is thereby proscribed
under this provision because it speaks of the primary right of farmers and farmworkers
to own directly or collectively the lands they till. As also mentioned by Commissioner
Tadeo, farmworkers include those who work in piggeries and poultry projects.
I was wondering whether I am wrong in my appreciation that if somebody puts up a
piggery or a poultry project and for that purpose hires farmworkers therein, these
farmworkers will automatically have the right to own eventually, directly or ultimately
or collectively, the land on which the piggeries and poultry projects were constructed.
(Record, CONCOM, August 2, 1986, p. 618).
x x x
The questions were answered and explained in the statement of then Commissioner
Tadeo, quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan.
Ipinaaalam ko kay Commissioner Regalado na hindi namin inilagay ang agricultural
worker sa kadahilanang kasama rito ang piggery, poultry at livestock workers. Ang
inilagay namin dito ay farm worker kaya hindi kasama ang piggery, poultry at livestock
workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).
It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private
agricultural lands devoted to commercial livestock, poultry and swine raising" in the definition
of "commercial farms" is invalid, to the extent that the aforecited agro-industrial activities are
made to be covered by the agrarian reform program of the State. There is simply no reason
to include livestock and poultry lands in the coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of
R.A. 6657 directing "corporate farms" which include livestock and poultry raisers to execute
and implement "production-sharing plans" (pending final redistribution of their landholdings)
whereby they are called upon to distribute from three percent (3%) of their gross sales and
ten percent (10%) of their net profits to their workers as additional compensation is
unreasonable for being confiscatory, and therefore violative of due process (Rollo, p. 21). :-cra law

It has been established that this Court will assume jurisdiction over a constitutional question
only if it is shown that the essential requisites of a judicial inquiry into such a question are
first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself (Association of Small Landowners of the Philippines,
Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v.
Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when confronted with constitutional
issues, it will not hesitate to declare a law or act invalid when it is convinced that this must
be done. In arriving at this conclusion, its only criterion will be the Constitution and God as
its conscience gives it in the light to probe its meaning and discover its purpose. Personal
motives and political considerations are irrelevancies that cannot influence its decisions.
Blandishment is as ineffectual as intimidation, for all the awesome power of the Congress and
Executive, the Court will not hesitate "to make the hammer fall heavily," where the acts of
these departments, or of any official, betray the people's will as expressed in the Constitution
(Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform,
G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R.
79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope of its constitutional
powers, it becomes the duty of the judiciary to declare what the other branches of the
government had assumed to do, as void. This is the essence of judicial power conferred by
the Constitution "(I)n one Supreme Court and in such lower courts as may be established by
law" (Art. VIII, Section 1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution
and which was adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the
1987 Constitution) and which power this Court has exercised in many instances (Demetria v.
Alba, 148 SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and
32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock, poultry and swine in
its coverage as well as the Implementing Rules and Guidelines promulgated in accordance
therewith, are hereby DECLARED null and void for being unconstitutional and the writ of
preliminary injunction issued is hereby MADE permanent.
SO ORDERED.
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla,
Bidin, Griño-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., is on leave.

Separate Opinions

SARMIENTO, J., concurring:

I agree that the petition be granted.
It is my opinion however that the main issue on the validity of the assailed provisions of R.A.
6657 (the Comprehensive Agrarian Reform Law of 1988) and its Implementing Rules and
Guidelines insofar as they include the raising of livestock, poultry, and swine in their coverage
cannot be simplistically reduced to a question of constitutional construction.
It is a well-settled rule that construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without them. A close reading
however of the constitutional text in point, specifically, Sec. 4, Art. XIII, particularly the
phrase, ". . . in case of other farmworkers, to receive a just share of the fruits thereof,"
provides a basis for the clear and possible coverage of livestock, poultry, and swine raising
within the ambit of the comprehensive agrarian reform program. This accords with the
principle that every presumption should be indulged in favor of the constitutionality of a
statute and the court in considering the validity of a statute should give it such reasonable
construction as can be reached to bring it within the fundamental law. 1
The presumption against unconstitutionality, I must say, assumes greater weight when a
ruling to the contrary would, in effect, defeat the laudable and noble purpose of the law, i.e.,
the welfare of the landless farmers and farmworkers in the promotion of social justice, by the
expedient conversion of agricultural lands into livestock, poultry, and swine raising by
scheming landowners, thus, rendering the comprehensive nature of the agrarian program
merely illusory.
The instant controversy, I submit, boils down to the question of whether or not the assailed
provisions violate the equal protection clause of the Constitution (Article II, section 1) which
teaches simply that all persons or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed. 2
There is merit in the contention of the petitioner that substantial distinctions exist between
land directed purely to cultivation and harvesting of fruits or crops and land exclusively used
for livestock, poultry and swine raising, that make real differences, to wit:
x x x
No land is tilled and no crop is harvested in livestock and poultry farming. There are no tenants
nor landlords, only employers and employees.
Livestock and poultry do not sprout from land nor are they "fruits of the land."
Land is not even a primary resource in this industry. The land input is inconsequential that all
the commercial hog and poultry farms combined occupy less than one percent (1%) (0.4%
for piggery, 0.2% for poultry) of the 5.45 million hectares of land supposedly covered by the
CARP. And most farms utilize only 2 to 5 hectares of land. : nad

In every respect livestock and poultry production is an industrial activity. Its use of an
inconsequential portion of land is a mere incident of its operation, as in any other undertaking,
business or otherwise.
The fallacy of defining livestock and poultry production as an agricultural enterprise is nowhere
more evident when one considers that at least 95% of total investment in these farms is in
the form of fixed assets which are industrial in nature.
These include (1) animal housing structures and facilities complete with drainage, waterers,
blowers, misters and in some cases even piped-in music; (2) feedmills complete with grinders,
mixers, conveyors, exhausts, generators, etc.; (3) extensive warehousing facilities for feeds
and other supplies; (4) anti-pollution equipment such as bio-gas and digester plants
augmented by lagoons and concrete ponds; (5) deepwells, elevated water tanks, pumphouses
and accessory facilities; (6) modern equipment such as sprayers, pregnancy testers, etc.; (7)
laboratory facilities complete with expensive tools and equipment; and a myriad other such
technologically advanced appurtances.
How then can livestock and poultry farmlands be arable when such are almost totally occupied
by these structures?
The fallacy of equating the status of livestock and poultry farmworkers with that of agricultural
tenants surfaces when one considers contribution to output. Labor cost of livestock and
poultry farms is no more than 4% of total operating cost. The 98% balance represents inputs
not obtained from the land nor provided by the farmworkers — inputs such as feeds and
biochemicals (80% of the total cost), power cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by minimum wage law rather than
by tenancy law. They are entitled to social security benefits where tenant-farmers are not.
They are paid fixed wages rather than crop shares. And as in any other industry, they receive
additional benefits such as allowances, bonuses, and other incentives such as free housing
privileges, light and water.
Equating livestock and poultry farming with other agricultural activities is also fallacious in
the sense that like the manufacturing sector, it is a market for, rather than a source of
agricultural output. At least 60% of the entire domestic supply of corn is absorbed by livestock
and poultry farms. So are the by-products of rice (rice-bran), coconut (copra meal), banana
(banana pulp meal), and fish (fish meal). 3
x x x
In view of the foregoing, it is clear that both kinds of lands are not similarly situated and
hence, cannot be treated alike. Therefore, the assailed provisions which allow for the inclusion
of livestock and poultry industry within the coverage of the agrarian reform program
constitute invalid classification and must accordingly be struck down as repugnant to the equal
protection clause of the Constitution.chanrob les vi rtual law lib rary
EN BANC

DEPARTMENT OF AGRARIAN G.R. No. 162070

REFORM, represented by SECRETARY
JOSE MARI B. PONCE (OIC), Present:
Petitioner, Davide, C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
Carpio,
- versus - Austria-Martinez,
Corona,
Carpio Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario and
Garcia, JJ.
DELIA T. SUTTON, ELLA T.
SUTTON-SOLIMAN and Promulgated:
HARRY T. SUTTON,
Respondents. October 19, 2005
x-----------------------------------x

DECISION

PUNO, J.:

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

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

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

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

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

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

Masbate, inspected respondents land and found that it was devoted solely to cattle-
raising and breeding. He recommended to the DAR Secretary that it be exempted
from the coverage of the CARL.
 On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal
of their VOS and requested the return of the supporting papers they submitted in
connection therewith.[4] Petitioner ignored their request.

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

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

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

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

Respondents moved for reconsideration. They contend that their entire

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

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

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR
A.O. No. 9, s. 1993, void for being contrary to the intent of the 1987 Constitutional
Commission to exclude livestock farms from the land reform program of the
government. The dispositive portion reads:
WHEREFORE, premises considered, DAR Administrative Order No.
09, Series of 1993 is hereby DECLARED null and void. The assailed
order of the Office of the President dated 09 October 2001 in so far as
it affirmed the Department of Agrarian Reforms ruling that petitioners
landholding is covered by the agrarian reform program of the
government is REVERSED and SET ASIDE.
SO ORDERED.[11]
Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series
of 1993, which prescribes a maximum retention limit for owners of lands devoted to
livestock raising.
Invoking its rule-making power under Section 49 of the CARL, petitioner submits
that it issued DAR A.O. No. 9 to limit the area of livestock farm that may be retained
by a landowner pursuant to its mandate to place all public and private agricultural
lands under the coverage of agrarian reform. Petitioner also contends that the A.O.
seeks to remedy reports that some unscrupulous landowners have converted their
agricultural farms to livestock farms in order to evade their coverage in the agrarian
reform program.

Petitioners arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the
power to make rules and regulations. They have been granted by Congress with the
authority to issue rules to regulate the implementation of a law entrusted to them.
Delegated rule-making has become a practical necessity in modern governance due
to the increasing complexity and variety of public functions. However, while
administrative rules and regulations have the force and effect of law, they are not
immune from judicial review.[12]They may be properly challenged before the courts
to ensure that they do not violate the Constitution and no grave abuse of
administrative 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 yet still undeveloped, could not be considered as
agricultural lands subject to agrarian reform as these lots were already classified as
residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to
raising of livestock, poultry and swine have been classified as industrial, not
agricultural, lands and thus exempt from agrarian reform. Petitioner DAR argues
that, in issuing the impugned A.O., it was seeking to address the reports it has
received that some unscrupulous landowners have been converting their agricultural
lands to livestock farms to avoid their coverage by the agrarian reform. Again, we
find neither merit nor logic in this contention. The undesirable scenario which
petitioner seeks to prevent with the issuance of the A.O. clearly does not apply
in this case. Respondents family acquired their landholdings as early as 1948. They
have long been in the business of breeding cattle in Masbate which is popularly
known as the cattle-breeding capital of the Philippines.[18] Petitioner DAR does not
dispute this fact. Indeed, there is no evidence on record that respondents have just
recently engaged in or converted to the business of breeding cattle after the
enactment of the CARL that may lead one to suspect that respondents intended to
evade its coverage. It must be stressed that what the CARL prohibits is
the conversion of agricultural lands for non-agricultural purposes after the
effectivity of the CARL. There has been no change of business interest in the
case of respondents.
 Moreover, it is a fundamental rule of statutory construction that the
reenactment of a statute by Congress without substantial change is an implied
legislative approval and adoption of the previous law. On the other hand, by making
a new law, Congress seeks to supersede an earlier one.[19] In the case at bar, after the
passage of the 1988 CARL, Congress enacted R.A. No. 7881[20] which amended
certain provisions of the CARL. Specifically, the new law changed the definition
of the terms agricultural activity and commercial farming by dropping from its
coverage lands 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.
 REPUBLIC ACT NO. 7881
AN ACT AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NO. 6657,
ENTITLED “AN ACT INSTITUTING A COMPREHENSIVE AGRARIAN REFORM
PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION,
PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER
PURPOSES”
SECTION 1. Section 3, Paragraph (b) of Republic Act No. 6657 is hereby amended to read
as follows:chanroblesvirtualawlibrary
“Sec. 3. Definitions. — For the purpose of this Act, unless the context indicates otherwise:
“(b) Agriculture, Agricultural Enterprise or Agricultural Activity means the cultivation of
the soil, planting of crops, growing of fruit trees, including the harvesting of such farm
products, and other farm activities and practices performed by a farmer in conjunction
with such farming operations done by persons whether natural or juridical.”
Sec. 2. Section 10 of Republic Act No. 6657 is hereby amended to read as follows:
“Sec. 10. Exemptions and Exclusions.
“(a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves,
reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves shall be
exempt from the coverage of this Act.
“(b) Private lands actually, directly and exclusively used for prawn farms and fishponds
shall be exempt from the coverage of this Act: Provided, That said prawn farms and
fishponds have not been distributed and Certificate of Land Ownership Award (CLOA)
issued to agrarian reform beneficiaries under the Comprehensive Agrarian Reform
Program.
“In cases where the fishponds or prawn farms have been subjected to the Comprehensive
Agrarian Reform Law, by voluntary offer to sell, or commercial farms deferment or
notices of compulsory acquisition, a simple and absolute majority of the actual regular
workers or tenants must consent to the exemption within one (1) year from the effectivity
of this Act. When the workers or tenants do not agree to this exemption, the fishponds or
prawn farms shall be distributed collectively to the worker-beneficiaries or tenants who
shall form a cooperative or association to manage the same.
“In cases where the fishponds or prawn farms have not been subjected to the
Comprehensive Agrarian Reform Law, the consent of the farm workers shall no longer be
necessary, however, the provision of Section 32-A hereof on incentives shall apply.”
“(c) Lands actually, directly and exclusively used and found to be necessary for national
defense, school sites and campuses, including experimental farm stations operated by
public or private schools for educational purposes, seeds and seedling research and pilot
production center, church sites and convents appurtenant thereto, mosque sites and
Islamic centers appurtenant thereto, communal burial grounds and cemeteries, penal
colonies and penal farms actually worked by the inmates, government and private research
and quarantine centers and all lands with eighteen percent (18%) slope and over, except
those already developed, shall be exempt from the coverage of this Act.”
Sec. 3. Section 11 Paragraph 1 is hereby amended to read as follows:
“Sec. 11. Commercial Farming. — Commercial farms, which are private agricultural lands
devoted to saltbeds, fruit farms, orchards, vegetable and cut-flower farms, and cacao,
coffee and rubber plantations, shall be subject to immediate compulsory acquisition and
distribution after ten (10) years from the effectivity of this Act.In the case of new farms, the
ten-year period shall begin from the first year of commercial production and operation, as
determined by the DAR.During the ten-year period, the Government shall initiate steps
necessary to acquire these lands, upon payment of just compensation for the land and the
improvements thereon, preferably in favor of organized cooperatives or associations which
shall thereafter manage the said lands for the workers-beneficiaries.”
Sec. 4. There shall be incorporated after Section 32 of Republic Act No. 6657 a new section
to read as follows:
“Sec. 32-A. Incentives. — Individuals or entities owning or operating fishponds and prawn
farms are hereby mandated to execute within six (6) months from the effectivity of this Act
an incentive plan with their regular fishpond or prawn farmworkers or fishpond or prawn
farm workers’ organization, if any, whereby seven point five percent (7.5%) of their net
profit before tax from the operation of the fishpond or prawn farms are distributed within
sixty (60) days at the end of the fiscal year as compensation to regular and other pond
workers in such ponds over and above the compensation they currently receive.
“In order to safeguard the right of the regular fishpond or prawn farm workers under the
incentive plan, the books of the fishpond or prawn farm owners shall be subject to periodic
audit or inspection by certified public accountants chosen by the workers.
“The foregoing provision shall not apply to agricultural lands subsequently converted to
fishpond or prawn farms provided the size of the land converted does not exceed the
retention limit of the landowner.”
Sec. 5. There shall be incorporated after Section 65 of Republic Act No. 6657 new sections
to read as follows:
“Sec. 65-A. Conversion into Fishpond and Prawn Farms. — No conversion of public
agricultural lands into fishponds and prawn farms shall be made except in situations where
the provincial government with the concurrence of the Bureau of Fisheries and Aquatic
Resources (BFAR) declares a coastal zone as suitable for fishpond development.In such
case, the Department of Environment and Natural Resources (DENR) shall allow the lease
and development of such areas: Provided, That the declaration shall not apply to
environmentally critical projects and areas as contained in title (A) sub-paragraph two, (B-
5) and (C-1) and title (B), number eleven (11) of Proclamation No. 2146, entitled
“Proclaiming Certain Areas and Types of Projects as Environmentally Critical and Within
the Scope of the Environmental Impact Statement (EIS) System established under
Presidential Decree No. 1586,” to ensure the protection of river systems, aquifers and
mangrove vegetations from pollution and environmental degradation: Provided,
further, That the approval shall be in accordance with a set of guidelines to be drawn up
and promulgated by the DAR and the BFAR: Provided, furthermore, That small-farmer
cooperatives and organizations shall be given preference in the award of the Fishpond
Lease Agreement (FLAs).
“No conversion of more than five (5) hectares of private lands to fishpond and prawn farms
shall be allowed after the passage of this Act, except when the use of the land is more
economically feasible and sound for fishpond and/or prawn farm, as certified by the
Bureau of Fisheries and Aquatic Resources (BFAR), and a simple and absolute majority of
the regular farm workers or tenants agree to the conversion, the Department of Agrarian
Reform, may approve applications for change in the use of the land: Provided, finally, That
no piecemeal conversion to circumvent the provisions of this Act shall be allowed.In these
cases where the change of use is approved, the provisions of Section 32-A hereof on
incentives shall apply.”
“Sec. 65-B. Inventory. — Within one (1) year from the effectivity of this Act, the BFAR
shall undertake and finish an inventory of all government and private fishponds and prawn
farms, and undertake a program to promote the sustainable management and utilization of
prawn farms and fishponds.No lease under Section 65-A hereof may be granted until after
the completion of the said inventory.
“The sustainable management and utilization of prawn farms and fishponds shall be in
accordance with the effluent standards, pollution charges and other pollution control
measures such as, but not limited to, the quantity of fertilizers, pesticides and other
chemicals used, that may be established by the Fertilizer and Pesticide Authority (FPA),
the Environmental Management Bureau (EMB), and other appropriate government
regulatory bodies, and existing regulations governing water utilization, primarily
Presidential Decree No. 1067, entitled “A Decree Instituting A Water Code, Thereby
Revising and Consolidating the Laws Governing the Ownership, Appropriation,
Utilization, Exploitation, Development, Conservation and Protection of Water Resources.”
“Sec. 65-C. Protection of Mangrove Areas. — In existing Fishpond Lease Agreements
(FLAs) and those that will be issued after the effectivity of this Act, a portion of the
fishpond area fronting the sea, sufficient to protect the environment, shall be established as
a buffer zone and be planted to specified mangrove species to be determined in consultation
with the regional office of the DENR.The Secretary of Environment and Natural Resources
shall provide the penalties for any violation of this undertaking as well as the rules for its
implementation.”
“Sec. 65-D. Change of Crops. — The change of crops to commercial crops or high value
crops shall not be considered as a conversion in the use or nature of the land. The change in
crop should, however, not prejudice the rights of tenants or leaseholders should there be
any and the consent of a simple and absolute majority of the affected farm workers, if any,
shall first be obtained.”
Sec. 6. There shall be incorporated after Section 73 of Republic Act No. 6657 a new section
to read as follows:
“Sec. 73-A. Exception. — The provisions of Section 73, paragraph (E), to the contrary
notwithstanding, the sale and/or transfer of agricultural land in cases where such sale,
transfer or conveyance is made necessary as a result of a bank’s foreclosure of the
mortgaged land is hereby permitted.”
Sec. 7. Separability Clause. — If for any reason, any section or provision of this Act is
declared null and void, no other section provision or part thereof shall be affected and the
same shall remain in full force and effect.
Sec. 8. Effectivity Clause. — This Act shall take effect fifteen (15) days after its publication
in at least two (2) newspapers of general circulation.
 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 agencies1 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 Coverage3 of the Department of Agrarian
Reform over parcels of land already reserved as townsite areas before the enactment of the law.

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

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

Since private landowners were allowed to develop their properties into low-cost housing subdivisions
within the reservation, petitioner Estate Developers and Investors Corporation (EDIC, for brevity), as
developer of NATALIA properties, applied for and was granted preliminary approval and locational
clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of
the subdivision project, which consisted of 13.2371 hectares, was issued sometime in 1982;4 for
Phase II, with an area of 80,000 hectares, on 13 October 1983;5 and for Phase III, which consisted of
the remaining 31.7707 hectares, on 25 April 1986.6 Petitioner were likewise issued development
permits7 after complying with the requirements. Thus the NATALIA properties later became the
Antipolo Hills Subdivision.

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

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

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA,
for the brevity), filed a complaint against NATALIA and EDIC before the DAR Regional Adjudicator to
restrain petitioners from developing areas under cultivation by SAMBA members.8 The Regional
Adjudicator temporarily restrained petitioners from proceeding with the development of the
subdivision. Petitioners then moved to dismiss the complaint; it was denied. 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, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Melo, Quiason, Puno and Vitug, JJ., concur.