No date supplied
AGRARIAN REFORM LAW AND JURISPRUDENCE (A DAR-UNDP SARDIC PUBLICATION
AGRARIAN LAW AND JURISPRUDENCE
This book has inauspicious beginnings. The original intent of the UNDP-SARDIC project, which eventually bore this book, was to map out special areas for policy reform in agrarian reform law. But as the project team delved deeper into the subject, the long unaddressed need for an organized and systematic presentation of agrarian law and existing jurisprudence was again put to fore. In response to that problem, the project team and the UNDP-SARDIC project decided to widen the scope of the project and, thus, what came of it was not only a map of the difficult problem areas in the law's implementation but also this book. TcHCDI
Any foray into the complicated, and often contentious, arena that is agrarian reform law necessitates a complete and well-grounded grasp of the basics. If anything, our study revealed that, even after decades, agrarian reform law remains vastly misunderstood and under-appreciated not only by stakeholders but by agrarian reform law implementors themselves.
This is largely due to the dearth of materials on the matter. Over the years, laws and their implementing rules have been refined and promulgated to reflect the lessons learned and the changing times. Simultaneously, the Supreme Court issued rulings that elucidate and interpret the law, as well as repudiate portions thereof. The rights and obligations of the different stakeholders have been constantly redefined and readjusted.
Despite these exciting developments, however, there has been little done to mesh all these pieces of knowledge into an organized whole.
This book is an effort towards that end.
In a nutshell, this book is a humble attempt in summing up years of agrarian reform law implementation. This book intends to reach out to all sectors and stakeholders to heighten their understanding and appreciation of the agrarian reform in the Philippines, and hopefully help refine the terms of the ongoing debates among them. This book hopes to appeal to both familiar and unfamiliar on the subject. It attempts to present, in an academic fashion, all relevant agrarian reform laws, DAR implementing rules, and pertinent judicial declarations on the matter. Hopefully, this will provide a holistic framework for understanding agrarian law.
Extra effort was also exerted to demonstrate agrarian reform in action by giving concrete illustrations and discussion from an operational perspective. Interspersed with the theoretical discussions are the various operational — issues and difficulties that DAR implementors faced or are still facing.
The authors would like to thank —
• the UNDP-SARDIC project management team for providing the financial and logistic support to see this project through.
• the members of DAR's management committee who shared with the project team their invaluable insights and experience in agrarian reform implementation. Their contribution in making this book complete and insightful is immeasurable.
• the DAR-PPLAO support staff for providing administrative and secretariat support; and
• Antonio Ramos who served as auditor for this project.
This is but a first step. We derive inspiration from the words of T.S. Eliot:
We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time
[From "Little Gidding"]
— THE AUTHORS
Coverage of the Comprehensive Agrarian Reform Program
The Comprehensive Agrarian Reform Program
The Comprehensive Agrarian Reform Program (CARP) is implemented by Republic Act No. 6657 (1988) otherwise known as the "Comprehensive Agrarian Reform Law". Prior to its enactment on 10 June 1988, President Corazon C. Aquino issued Proclamation No. 131 (1987) instituting a comprehensive agrarian reform program, and Executive Order No. 229 (1987) providing the mechanics for its implementation. RA 6657 took effect on 15 June 1988.
While expressly repealing specific provisions of prior enactments on agrarian reform, RA 6657 provides that the provisions of RA 3844 (1963), Presidential Decree No. 27 (1972) and PD 266 (1973), EO 228 (1987) and EO 229 (1987) and other laws not inconsistent with it shall have suppletory effect.
SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing.
The constitutionality of RA 6657 has been upheld in Association of Small Landowners v. Secretary of Agrarian Reform, 175 SCRA 342 (1989) and companion cases. The Supreme Court held that the requirement of public use has already been settled by the Constitution itself. It noted that "[n]o less than the 1987 Charter calls for agrarian reform which is the reason why private agricultural lands are to be taken from their owners, subject to the prescribed retention limits." (at 378)
While RA 6657 itself has been held constitutional, the Supreme Court in a subsequent case, Luz Farms v. Secretary of Agrarian Reform, 192 SCRA 51 (1990), declared unconstitutional Sec. 3 (b), 10 and 11 thereof in so far as they include lands devoted to the raising of livestock, swine and poultry within its coverage. As a result of this ruling, Congress enacted RA 7881 (1995) amending these provisions and incorporating new provisions to existing ones. The amendments adopted the Luz doctrine by removing livestock, swine and poultry farms from CARP coverage.
Scope of CARP
The Constitution in Sec. 4, Art. XIII, mandates the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits that the Congress may prescribe, taking into account ecological, developmental or equity considerations and subject to the payment of just compensation.
Prior to RA 6657, the operative law on land distribution was PD 27 (1972). However, PD 27 is limited in scope, covering only tenanted private agricultural lands primarily devoted to rice and corn operating under a system of share-crop or lease tenancy, whether classified as landed estate or not. The constitutional provision therefore expanded the scope of agrarian reform to cover all agricultural lands.
RA 6657 operationalized this constitutional mandate and provides in Sec. 4 thereof that the CARP shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands, as provided in Proclamation No. 131 and EO 229 including other lands of the public domain suitable for agriculture. More specifically, the following lands are covered by CARP:
a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture;
b) All lands of the public domain in excess of the specific limits as determined by Congress in Sec. 4 (a) of RA 6657;
c) All other lands owned by the government devoted to or suitable for agriculture; and
d) All private lands devoted or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon (Rep. Act No. 6657 , Sec. 4).
Definition of agricultural land
Sec. 3 (c) of RA 6657 defines agricultural lands as follows:
(c) Agricultural Land refers to land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land.
(b) Agriculture, Agriculture Enterprise or Agricultural Activity means cultivation of 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.
In Natalia v. DAR, 225 SCRA 278 (1993), the Supreme Court held:
Section 4 of RA 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." 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 and industrial lands" (at 282, 283).
Agricultural lands reclassified by local governments into "forest conservation zones"
Agricultural lands reclassified by local government units (LGUs) into "forest conservation zones" even prior to the effectivity of CARL do not become forest land under Sec. 3 (c) of RA 6657 as to be exempted from CARP coverage.
It should be noted that under the Constitution, lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks (CONST., Art. XII, Sec. 3). These classifications are called primary classifications or "classification in the first instance." The same provision of the Constitution also provides that agricultural lands of the public domain may be further classified according to the uses to which they may be devoted. This further classification of agricultural land is referred to as secondary classification. The responsibility over primary classification of lands of the public domain is vested in the President who exercises such power upon the recommendation of the Department of Environment and Natural Resources (DENR) (Com. Act No. 141 , Sec. 6; EO 192 ). On the other hand, the authority to reclassify agricultural lands into residential, commercial or industrial is lodged, among others, in cities and municipalities (Rep. Act No. 7160 , Sec. 20).
The group of lands referred to in Sec. 3 (c) of RA 6657 as non-agricultural (i.e., mineral, forest, residential, commercial or industrial) is a mix of primary and secondary classifications. Forest and mineral lands are, under the Constitution and Commonwealth Act No. 141 (1936), primary classifications, while the rest are secondary classifications.
Reclassification by LGUs of agricultural lands into "forest conservation zones" does not have the effect of converting such lands into forest lands as to be exempted from CARP. Firstly, an agricultural land is already a primary classification and, hence, can only be subjected to secondary classification. Secondly, LGUs have no authority or power to make primary classifications considering that such power is the sole prerogative of the President exercising such power upon the recommendation of the DENR.
The forest (or mineral) land referred to in Sec. 3 (c) of RA 6657 is therefore to be understood as referring to forest (or mineral) land declared to be such by the President/DENR and not by the LGUs. DAR Administrative Order No. 1 (1990) makes this qualification in its definition of "agricultural land," as follows:
. . . Agricultural land 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.
Agricultural lands reclassified LGUs into residential, commercial or industrial
Taking into consideration the effectivity of the law, the secondary classifications mentioned in Sec. 3 (c) of RA 6657 are treated according whether they were classified as such before or after the effectivity of the law on 15 June 1988.
If the agricultural land was classified as residential, commercial or industrial by the LGU and approved by the Housing and Land Use Regulatory Board (HLURB), or its predecessor agencies, prior to 15 June 1988, the land will be recognized as so classified under Sec. 3 (c) of RA and is therefore not covered by CARP. However, an exemption clearance from DAR is still necessary to confirm or declare its exempt status. (DAR Adm. O. No. 6 ).
This is based on Department of Justice Opinion No. 44 (1990) which provides that with respect to the conversion of agricultural lands covered by RA 6657 to non-agricultural uses, the authority of the DAR to approve such conversion may be exercised from the date of its effectivity or on 15 June 1988. Thus, all lands already classified as commercial, industrial or residential before that date no longer need any conversion clearance from the DAR.
If an agricultural land is reclassified after 15 June 1988, the provisions on land conversion under CARL and its implementing rules will apply (Rep. Act No. 6657 , sec. 65; DAR Adm. O. No. 1 ).
Conversion prior to 15 June 1988 through presidential proclamation binding before DAR
The reasoning in DOJ Opinion No. 44 (1990) was validated by the Supreme Court in Natalia v. DAR, supra. This case involved the question of whether or not lands already classified for residential, commercial or industrial use, as approved by HLURB and its precursor agencies, prior to 15 June 1988 are covered by CARP. SDHCac
Natalia Realty, Inc. vs. Department of Agrarian Reform
225 SCRA 278 (1993)
Petitioner Natalia Realty, Inc. is the owner of a 125.0078-ha land set aside by Presidential Proclamation No. 1637 (1979) as townsite area for the Lungsod Silangan Reservation. Estate Developers and Investors Corporation (EDIC), the developer of the area, was granted preliminary approval and locational clearances by the then Human Settlements Regulatory Commission (HSRC) for the establishment of the Antipolo Hills Subdivision therein. In November 1990, a Notice of Coverage was issued by DAR on the undeveloped portion of the landholding. The developer filed its objections and filed this case imputing grave abuse of discretion to respondent DAR for including the undeveloped portions of its landholding within the coverage of CARP.
Are lands already classified for residential, commercial or industrial use, and approved by HLURB and its precursor agencies prior to 15 June 1988, covered by RA 6657?
Sec. 4 of RA 6657 states that the CARL covers "regardless of tenurial arrangement and commodity produced, all public and private and agricultural lands" and as per the transcripts of the Constitutional Commission, "agricultural lands" covered by agrarian reform refers only to those which are "arable and suitable lands" and "do not include commercial, industrial and residential lands." The land subject of the controversy has been set aside for the Lungsod Silangan Reservation by Proclamation No. 1637 prior to the effectivity of RA 6657 and in effect converted these lands into residential use. Since the Natalia lands were converted prior to 15 June 1988, DAR is bound by such conversion, and thus it was an error to include these within the coverage of CARL.
Exemptions and Exclusions
a) Lands actually, directly or exclusively used for parks and wild-life, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves (Rep. Act No. 6657 , sec. 10 [a], as amended by Rep. Act No. 7881 ).
b) Private lands actually, directly and exclusively used for prawn farms and fishponds: Provided, That said prawn farms and fishponds have not been distributed and Certificate of Land Ownership Award (CLOA) issued to agrarian reform beneficiaries (ARBs) under CARP (Sec. 10 [b]).
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 (Sec. 10 [c]).
Lands devoted to raising of livestock, swine and poultry. The Luz Farms Case.
Before its amendment by RA 7881, Sec. 3(b) of RA 6657 included in its definition of agricultural activity the "raising of livestock, poultry or fish". Likewise, the original Sec. 11 of RA 6657 on commercial farming provided that "lands devoted to commercial livestock, poultry and swine raising shall be subject to compulsory acquisition within ten (10) years from the effectivity of the Act." However, the Supreme Court in Luz Farms vs. Secretary of Agrarian Reform, supra, held that Sec. 3 (b) and Sec. 11 of RA 6657 (along with Sec. 13 and 32) are unconstitutional in far as they include the raising of livestock and swine in the coverage of CARP.
Luz Farms vs. Secretary of the Department of Agrarian Reform
192 SCRA 51 (1990)
Petitioner Luz Farms is a corporation engaged in livestock and poultry business. It seeks to nullify Sec. 3 (b) and Sec. 11 of RA 6657 in so far as they apply to livestock and poultry business.
Sec. 3 (b) and Sec. 11 of RA 6657 are unconstitutional in so far as they include lands devoted to raising livestock, swine and poultry within its coverage. The use of land is incidental to but not the principal factor or consideration of productivity in this industry. The Supreme Court held that:
The transcripts of 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 RA 3844, as land devoted to any growth, including but not limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).
The Supreme Court noted that the intention of the Committee to limit the application of the word "agriculture" is further shown by the proposal of Commissioner Jamir to insert the word "arable" to distinguish this kind of agricultural land from such lands as commercial and industrial lands and residential properties. The 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, 7 August 1986, Vol. III, p. 30). IEHSDA
Moreover, in his answer to Commissioner Regalado's interpellation, Commissioner Tadeo clarified that the term "farmworker" was used instead of "agricultural worker" in order to exclude therein piggery, poultry and livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).
DAR AO 9 (1993) imposes two (2) conditions in order that these lands may be exempted: (a) that the land or portion thereof is exclusively, directly, or actually used for livestock, poultry and swine raising as of 15 June 1988; and (b) the farm must satisfy the ratios of land, livestock, poultry and swine, as follows:
cattle, carabao and horse raising maximum of 1 head to 1 hectare; 21 heads for every 1.7815 hectares of infrastructure
sheep and goat raising 7 heads to 1 hectare; 147 heads for every 0.7205 hectare of infrastructure
swine raising 21 heads of hogs for every 0.5126 hectare of infrastructure
poultry raising 500 layers for every 0.53 hectare of infrastructure or 1000 boilers for every 1.428 hectares of infrastructure
Fishponds and prawn ponds
With the amendment of Sec. 3 (c), 10 and 11 of RA 6657 by RA 7881, fishponds and prawnponds are also exempted from the coverage of CARP, provided that said lands have not been distributed to ARBs and no CLOAs have been issued.
To be exempted, the agricultural land must have been actually, directly and exclusively used for prawn farms and fishponds as of 12 March 1995, the date of effectivity of RA 7881. To avail of the exemption, a landowner or his authorized representative still has to file a written application for land exemption/exclusion with the DAR Provincial Office (DAR Adm. O. No. 3 ).
In cases were the fishponds or prawn farms have been subjected to CARP, by voluntary offer to sell, commercial farms deferment or notice of compulsory acquisition, they can be exempt from CARP if a simple and absolute majority of the actual regular workers or tenants consent to the exemption within one (1) year from the effectivity of RA 7881 or on 12 March 1995. In cases where the fishponds or prawnponds have not been subjected to CARP, the consent of the farm workers shall no longer be necessary (Rep. Act No. 6657 , sec. 10[b], as amended).
Sec. 4 of RA 7881 also amended RA 6657 by introducing a new provision mandating the introduction of an incentive plan for employees of all fishponds and prawn farms. Operators and entities owning or operating fishponds and prawn farms are directed to execute within six (6) months from its effectivity an incentive plan with their regular fishpond or prawn farm worker's organization, if any, whereby seven point five percent (7.5%) of net profits 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 over and above their current compensation. This incentive plan requirement, however, does not apply to agricultural lands subsequently converted to fishponds or prawn farms provided that the size of the land converted does not exceed the retention limit of the landowner.
Lands used for academic or educational use. The CMU case.
In Central Mindanao University vs. DARAB, 215 SCRA 85 (1992), the Supreme Court passed upon the exemption of lands directly, actually and exclusively used and found to be necessary for school sites and campuses, including experimental farm stations operated by public or private schools for educational purposes provided for under Sec. 10 of RA 6657, as amended.
Central Mindanao University vs. Department of Agrarian Reform Adjudication Board
215 SCRA 86 (1992)
On 16 January 1958, President Carlos Garcia issued Proclamation No. 467 reserving for the Mindanao Agricultural College, now the CMU, a piece of land to be used as its future campus. In 1984, CMU embarked on a project titled "Kilusang Sariling Sikap" wherein parcels of land were leased to its faculty members and employees. Under the terms of the program, CMU will assist faculty members and employee groups through the extension of technical know-how, training and other kinds of assistance. In turn, they paid the CMU a service fee for use of the land. The agreement explicitly provided that there will be no tenancy relationship between the lessees and the CMU.
When the program was terminated, a case was filed by the participants of the "Kilusang Sariling Sikap" for declaration of status as tenants under the CARP. In its resolution, DARAB, ordered, among others, the segregation of 400 hectares of the land for distribution under CARP. The land was subjected to coverage on the basis of DAR's determination that the lands do not meet the condition for exemption, that is, it is not "actually, directly, and exclusively used" for educational purposes.
Is the CMU land covered by CARP? Who determines whether lands reserved for public use by presidential proclamation is no longer actually, directly and exclusively used and necessary for the purpose for which they are reserved?
The land is exempted from CARP. CMU is in the best position to resolve and answer the question of when and what lands are found necessary for its use. The Court also chided the DARAB for resolving this issue of exemption on the basis of "CMU's present needs." The Court stated that the DARAB decision stating that for the land to be exempt it must be "presently, actively exploited and utilized by the university in carrying out its present educational program with its present student population and academic faculty" overlooked the very significant factor of growth of the university in the years to come. SHECcT
The CMU case is unique as it involves land transferred by the state to CMU through PD 467 which provided for its commitment to a specific use and purpose. Thus, the said land was already set aside for a specific purpose and, in effect, was taken outside the coverage of agrarian reform by law. It is submitted that a more accurate basis for the exemption should have been that the exclusive use of the land — both present and future — has been determined by law, and not because of the determination of the CMU of what it needs and how it intends to use it.
In ruling that the CMU is in the best position to determine the use of the land and not DAR, the Supreme Court seems to have overlooked EO 407 (1990), as amended by EO 448 (1991), which provides that DAR is vested with the power to determine whether lands reserved for public uses by presidential proclamation is no longer actually, directly and exclusively used and necessary for the purpose for which they are reserved. Said EO provides that:
Sec. 1-A. All lands or portions thereof reserved by virtue of Presidential proclamations for specific public uses by the government, its agencies and instrumentalities, including government-owned or controlled corporations suitable for agriculture and no longer actually, directly and exclusively used or necessary for the purposes for which they have been reserved, as determined by the Department of Agrarian Reform in coordination with the government agency or instrumentality concerned in whose favor the reservation was established, shall be segregated from the reservation and transferred to the Department of Agrarian Reform for distribution to qualified beneficiaries under the Comprehensive Agrarian Reform Program.
Thus, DAR in coordination with the agency or department involved, can determine whether the purpose or use for which the lands reserved continues to exist and therefore establish if they continue to be exempt from CARP coverage.
The Supreme Court's statement that lands of universities and academic institutions need not be actually, directly and exclusively used for educational or research purposes at the time of the effectivity of the RA 6657 to be exempt from CARP also fails to consider Sec. 10 of RA 6657. Sec. 10 is explicit that only those lands that are "actually, directly, and exclusively" used and found necessary for the uses enumerated therein are exempt from CARP coverage. A literal interpretation of the provision implies that the exemption applies only to those lands already committed for the enumerated purposes at the date of the effectivity of law on 15 June 1988. Thus, agricultural land acquired by academic institutions for academic, educational, or research purposes after 15 June 1988, or those owned by them but not committed exclusively, actually, and directly to the abovementioned uses before or on such date, are covered by CARP. For its exclusion from acquisition and distribution, and for its commitment to said purposes, the institution may file before DAR for clearance to convert these lands into non-agricultural use.
Lands with 18% slope
Lands with 18% slope or over are exempt from CARP coverage unless these are found to be agriculturally developed as of 15 June 1988.
This rule on exemption is based on PD 705 (1975), or the "Revised Forestry Code of the Philippines," which provides that lands with a slope of 18% or over are generally reserved as forest lands. Sec. 15 thereof states that "no land of the public domain eighteen per cent (18%) in slope or over shall be classified as alienable and disposable" and that "lands eighteen per cent (18%) in slope or over which have already been declared as alienable and disposable shall be reverted to the classification of forest lands by the Department Head, to form part of the forest reserves, unless they are already covered by existing titles or approved public land application, or actually occupied openly, continuously, adversely and publicly for a period of not less than thirty (30) years as of the effectivity of this Code, where the occupant is qualified for a free patent under the Public Land Act.
If the land has 18% slope or over and is agriculturally developed as of 15 June 1988, the same shall be allocated to the qualified applicants in the following manner:
a) If land is classified as forest land, and therefore is inalienable and indisposable, this shall be allocated by the DENR under its Integrated Social Forestry Program;
c) If private agricultural land, this shall be acquired in accordance with the provisions of RA 6657 (DAR Adm. O. No. 13 , item E, part II).
Effects of exemption
Sec. 10 of RA 6657 provides that exempted or excluded lands are removed from the coverage of CARP. However, there are two (2) contending views on whether these exempted or excluded lands are perpetually taken out from coverage of the CARP.
The first view is that lands exempted or excluded from the law are permanently taken out from coverage of the CARP. The basis of this interpretation is the phraseology of Sec. 10 which states that exempted lands are "exempt from the coverage of the law." The legal effect of this interpretation is that the owner can use and dispose the land as he deems fit without the need for any clearance from DAR.
The second view is that excluded and exempted lands can be covered by CARP when the reason for their exemption ceases to exist. Thus, when the reason for exemption ceases to exist for lands exempt under the Luz Farms ruling or Sec. 10, as amended by RA 7881 (except lands with 18% slope), they are removed from the exemption and are treated like any other agricultural land.
It must be remembered that the lands subject of exemption under Sec. 10 of RA 6657 and the Luz Farms ruling are considered agricultural lands as defined by Sec. 3 (c) of RA 6657, that is, they are in fact suitable to agriculture and not classified as mineral, forest, residential, commercial or industrial lands, but are exempt or excluded from CARP by reason of their actual use and their necessity for other purposes. Thus, in the event that these lands cease to be used or necessary for the purposes for which they are exempted, they are removed from the application of Sec. 10 and are then subject to CARP coverage.
The second view is anchored on the spirit and intent of the law to cover all agricultural lands suitable to agriculture. Moreover, as RA 6657 is a social welfare legislation the rules of exemptions and exclusions must be interpreted restrictively and any doubts as to the applicability of the law should be resolved in favor of inclusion.
In either case, the security of tenure of tenants enjoyed prior to 15 June 1988 shall be respected even when the lands are exempted. As to farmworkers, the exemption of the land shall not cause the loss of the benefits to which they are entitled under other laws. In addition, they are granted preference in the award of other lands covered by CARP (DAR Adm. O. No. 13 , part II).
In Alita vs. CA, the Supreme Court stated that homesteads are exempt from agrarian reform.
Alita vs. Court of Appeals
170 SCRA 706 (1989)
Subject matter of the case consists of two (2) parcels of land acquired by respondents' predecessors-in-interest through homestead patent under the provisions of CA 141. Respondents wanted to personally cultivate these lands, but the petitioners refused to vacate, relying on the provisions of PD 27 and PD 316 and appurtenant regulations issued by the then Ministry of Agrarian Reform.
Are lands obtained through homestead patent covered under PD 27?
No. While PD 27 decreed the emancipation of tenants from the bondage of the soil and transferring to them ownership of the land they till, the same cannot be invoked to defeat the very purpose of the enactment of the Public Land Act or CA 141. In Patricio v. Bayog, 112 SCRA 45, it was held that:
The Homestead Act has been enacted for the welfare and protection of the poor. The law gives a needy citizen a piece of land where he may build a modest house for himself and family and plant what is necessary for subsistence and for the satisfaction of life's other needs. The right of the citizens to their homes and to the things necessary for their subsistence is as vital as the right to life itself. They have a right to live with a certain degree of comfort as become human beings, and the State which looks after the welfare of the people's happiness is under a duty to safeguard the satisfaction of this vital right.
In this regard, Sec. 6 of Article XIII of the 1987 Constitution provides:
Section 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the disposition or utilization of other natural resources, including lands of public domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities to their ancestral lands.
Moreover, Sec. 6 of RA 6657 contains a proviso supporting the inapplicability of PD 27 to lands covered by homestead patents like those of the property in question, reading:
Section 6. Retention Limits. . . . Provided further, That original homestead grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead.
xxx xxx xxx
While homestead lots are declared exempt under PD 27, they are not expressly declared as such under RA 6657. However, Sec. 6 of RA 6657 provides that homesteaders are allowed to retain the total homestead lot subject to the conditions provided in the same section and as set DAR MC 4 (1991), to wit:
a) That the original homestead grantee or his/her direct compulsory heirs still own the land on 15 June 1988;
b) The original homestead grantee or his or her compulsory heirs cultivate the land as of 15 June 1988 and continue to cultivate the same.
Schedule of Implementation
Sec. 7 of RA 6657 lays out the schedule of acquisition and distribution of all agricultural lands through a period of ten (10) years from the effectivity of the Act:
Phase Lands Covered Schedule
I • Rice and corn lands under Presidential 1988-1992
Decree No. 27;
• all idle or abandoned lands;
• all private lands voluntarily offered by the owners
for agrarian reform;
• all lands foreclosed by the government financial
• all lands acquired by the Presidential Commission
on Good Government (PCGG); and
• all other lands owned by the government devoted
to or suitable for agriculture
II • All alienable and disposable public agricultural 1992-1995
• all arable public agricultural lands under agro-
forest, pasture and agricultural leases already
cultivated and planted to crops in accordance;
• all public agricultural lands which are to be opened
for new development and resettlement;
• and all private agricultural lands in excess of
fifty (50) hectares,
III-A • Landholdings above twenty-four (24) 1998-1992
hectares up to fifty hectares; and
III-B • Private agricultural lands with areas above the 1994-1998
retention limit up to 24 hectares
Though Sec. 7 of RA 6657 provides a fixed time table for the implementation of the CARP law, this provision should be interpreted as merely directory, rather than mandatory in character. This is the gist of DOJ Opinion No. 9 (1997). It has been held that the difference between a mandatory and a directory provision is often determined on grounds of expediency. Where a provision embodies a rule of procedure rather than one of substance, the provision as to time will be regarded as directory only notwithstanding the mandatory nature of the language used. Sec. 5 of RA 6657 is more procedural in nature than substantive. The ten (10)-year period is merely a time frame given to DAR for the acquisition and distribution of public and private agricultural lands covered by RA 6657. It is merely a guide to DAR in setting its priorities, and it is not, by any means, a limitation of its authority. Hence, Sec. 5 of RA 6657 should not be construed as a prescriptive period, the lapse of which bars the DAR from covering the land under CARP.
Thus, DAR need not wait for the full coverage of those lands in the first phase before those in the succeeding phases could be covered. DAR may also proceed with the coverage of lands in different phases simultaneously.
In view of the passing of the ten (10)-year period in 1998, Congress passed RA 8532 (1998) providing for the funding for land acquisitions for another ten (10) years.
Idle or abandoned lands
Sec 3 (e) of RA 6657 defines idle or abandoned land as "any agricultural land not cultivated, tilled or developed to produce any crop nor devoted to any specific economic purpose continuously for a period of three (3) years immediately prior to the receipt of notice of acquisition by the government as provided under RA 6657. However land that has become permanently or regularly devoted to non-agricultural purposes is not to be considered as idle or abandoned. Neither can it be considered as abandoned or idle any land which has become unproductive by reason of force majeure or any other fortuitous event, provided that prior to such event, such land was previously used for agricultural or other economic purpose."
Lands owned by government
To expedite the disposition of lands owned by the government, President Corazon C. Aquino issued EO 407 (1990) directing all government instrumentalities, government agencies, government owned and controlled corporations or financial institutions to transfer to the Republic of the Philippines, through the DAR, all landholdings suitable for agriculture. Sec. 3 of EO 407 (1990) likewise provides for the redistribution and award of fishponds, pasturelands and other lands of public domain suitable for agriculture subject of cancelled or amended lease agreement to the agrarian reform beneficiaries. EO 448 (1991) and EO 506 (1992) amended EO 407 by including all lands or portions thereof reserved by virtue of presidential proclamations for specific public uses by the government, its agencies and instrumentalities, and no longer actually, directly and exclusively used or necessary for the purposes for which they have been reserved. These also excluded national parks and other protected areas, proposed national parks, game refuge, bird sanctuaries, wild-life reserves, wilderness areas and other protected areas, including old growth or virgin forests and all forests above 1,000 meters elevation or above 50 percent slope until such time that they are segregated for agricultural purposes or retained under the National Integrated Protected Areas System.
Sec. 11 of RA 6657 allowed the deferment of the coverage of commercial farms. Deferred commercial farms shall be subject to immediate compulsory acquisition and distribution after ten (10) years from the effectivity of RA 6657 on 15 June 1988. For new farms, the ten (10)-year deferment will begin from the first year of commercial production and operation.
For a commercial farm to be qualified for deferment, it must have been planted to commercial crop or devoted to commercial farming operations before 15 June 1988. DAR AO 16 (1988) provided a 60-day period for the filing of applications of deferment which lapsed on 2 May 1989.
DAR AO 16 (1988) explicitly allows the DAR to automatically subject the lands to redistribution when it determines that the purpose for which deferment is granted no longer exists as when the particular farm areas ceases to be commercially productive. During the deferment period, the DAR shall initiate steps to acquire the lands. Final land transfer to the beneficiaries shall be effected at the end of the deferment period. The acquisition and distribution of these deferred commercial farms are governed by DAR AO 9 (1998).
Sec. 4, Art. XIII of the 1987 Constitution subjects the distribution of agricultural lands for agrarian reform to "reasonable retention limits as Congress may prescribe. Sec. 6 of RA 6657 operationalizes this mandate and observes the right of persons to own, or retain, directly or indirectly public or private agricultural land, the size of which shall vary according to factors governing a viable family-size farm in such as commodity produced terrain, infrastructure, and soil fertility, but in no case shall exceed five (5) hectares.
The retention limits under Sec. 6 of RA 6657 covers all persons whether natural or juridical. Juridical persons like corporations and partnerships are therefore subject to the five (5)-hectare limit.
With respect to married couples, their maximum retention limit is determined by the nature of their property relations. For marriages covered by the New Civil Code, in the absence of an agreement for the judicial separation of property, spouses who own only conjugal properties may retain a total of not more than five (5) hectares of such properties. However, if either or both of them are landowners in their own respective rights (capital and/or paraphernal), they may retain not more than five (5) hectares of their respective landholdings. In no case, however, shall the total retention of such couple exceed ten (10) hectares. (DAR Adm. O. No. 5 , sec. 9 [g]).
For marriages covered by the Family Code, which took effect on 3 August 1988, a husband owning capital property and/or a wife owning paraphernal property may retain not more than five (5) hectares each provided they executed a judicial separation of properties prior to entering into the marriage. In the absence of such an agreement, all properties (capital, paraphernal and conjugal) shall be considered to be held in absolute community, i.e., the ownership relation is one, and, therefore, only a total of five (5) hectares may be retained. (DAR Adm. O. No. 5 , sec. 9 [h]).
The five (5)-hectare retention limit applies to all lands regardless of how acquired (i.e., by purchase, award, succession, donation) as the law does not distinguish. Thus, a child who was awarded three (3) hectares as a preferred beneficiary under Sec. 6 of RA 6657 and subsequently acquires a five (5)-hectare landholding of his parent by succession can retain only five (5) hectares of the total landholding.
Landowners have the obligation to cultivate directly or through labor administration, and thereby make productive the area he retains. He is also prohibited from making any constructions therein or commit it to purposes incompatible with its agricultural nature. Before a landowner can commit the retained land to non-agricultural purposes, he must first secure a conversion order from DAR, otherwise he can be held liable for premature conversion (see DAR Adm. O. No. 1 ).
Award to children
If a landowner has children, three (3) hectares may be awarded to each subject to the following qualifications:
a) that he is at least fifteen (15) years old as of 15 June 1988; and
b) that he is actually tilling the land or directly managing it (Rep. Act No. 6657 , sec. 6).
DAR MC 4 (1994) defined the term "directly managing" as the cultivation of the land through personal supervision under the system of labor administration. DHcESI
The award to the child is not to be taken from the retained land of the landowner and is awarded to the child in his own right as a beneficiary. Thus, the award is not automatic. The child is merely given a preference over other beneficiaries.
As the right of the child is derived from his being a beneficiary, he must not only meet the requirements of preference laid out in Sec. 6 of RA 6657, but also all the other qualifications of a beneficiary enumerated under Sec. 22 of RA 6657. Thus, he must also be landless, a resident of the barangay or municipality where the land is located, and must have the willingness, aptitude and ability to cultivate and make the land as productive as possible. Moreover, he is subject to the same liabilities, responsibilities and limitations imposed on all agrarian reform beneficiaries.
Exceptions to the 5-hectare retention limit
The five (5)-hectare retention limit under RA 6657 does not apply to original homestead grantees or their direct compulsory heirs at the time of the approval of RA 6657 who continue to cultivate the same, and to those entitled to retain seven (7) hectares under PD 27.
In the Association cases, the Supreme Court held that landowners who failed to exercise their rights to retain under PD 27 can avail of their rights of retention under Sec. 6 of RA 6657 and retain only five (5) hectares. However, in the resolution of the Supreme Court on the motion for consideration in the said case, the Court qualified that those who, prior to the promulgation of RA 6657, complied with the requirements under Letter of Instruction (LOI) Nos. 41, 45 and 52 regarding the registration of the landholdings, shall be allowed to enjoy the seven (7) hectare retention limit. All those who refused to comply with the requirements cannot, in view of the passage of CARL, demand that their retention limit be determined under PD 27.
Thus, the following OLT owners are still entitled to retain seven (7) hectares even if they exercised their right of retention under PD 27 after 15 June 1988:
d) Heirs of a deceased landowner who manifested, while still alive, the intention to exercise the right of retention prior to 23 August 1990 (the finality of the Supreme Court decision in Association of Small Landowners vs. Hon. Secretary of DAR; supra) (DAR Adm. O. No. 4 ).
Exercise of right of retention
While Sec. 6 of RA 6657 acknowledges the right of the landowners to choose the area to be retained, it requires that the area be compact and contiguous, and shall be least prejudicial to the entire landholding and the majority of the farmers therein (DAR Adm. O. No. 5 , sec 2 [b]).
Sec. 4 of DAR AO 5 (2000) provides that under the Compulsory Acquisition (CA) scheme, the landowner shall exercise his right of retention within sixty (60) days from receipt of the Notice of Coverage from DAR. Failure to exercise this right within the prescribed period means that the landowner waives his right to choose which area to retain. Thereafter, the Municipal Agrarian Reform Officer (MARO) shall designate the retained area for the landowner.
Under the Voluntary Offer to Sell (VOS) scheme, the right of retention shall be exercised at the time the land is offered for sale. The offer should specify and segregate the portion covered by VOS and the portion applied for retention; otherwise, the landowner shall be deemed to have waived his right of retention over the subject property (DAR Adm. O. No. 5 , sec. 4).
As a matter of policy, all rights acquired by the tenant-farmers under PD 27 and the security of tenure of the farmers or farmworkers on the land prior to the approval of RA 6657 shall be respected (DAR Adm. O. No. 5 , sec. 2 [c]).
In case the area selected by the landowner or awarded for retention by the DAR is tenanted, the tenant has two (2) options:
a) To remain as a lessee. If he chooses to remain in the area retained, he shall be considered a lease holder and shall lose his right to be a beneficiary; or
b) Be a beneficiary in the same or another agricultural land with similar or comparable features.
The tenant must exercise either option within one (1) year after the landowner manifests his choice of the area for retention, or from the time the MARO has chosen the area to be retained by the landowner, or from the time an order is issued granting the retention (DAR Adm. O. No. 5 , sec. 10).
Sec. 10 of DAR AO 5 (2000) further provides that in case the tenant declines to enter into leasehold and there is no available land to transfer, or if there is, the tenant refuses the same, he may choose to be paid disturbance compensation by the landowner.
Where Certificates of Land Transfer (CLTs), Emancipation Patents (EPs) or Certificates of Land Ownership Award (CLOAs) have already been issued on the land chosen by the landowner as retention area, the DAR shall immediately inform the agrarian reform beneficiaries (ARBs) concerned and provide them the opportunity to contest the landowner's claim. Moreover, the DAR shall ensure that the affected ARBs, should they so desire, be given priority in the distribution of other lands of the landowner or other lands identified by the DAR for redistribution, subject to the rights of those already in the area (DAR Adm. O. No. 5 , sec. 11)
Waiver of right of retention
Sec. 7 of DAR AO 5 (2000) provides that the following acts constitute waiver on the landowner's right of retention:
a) Executing an affidavit, letter or any other document duly attested by the MARO, Provincial Agrarian Reform Officer (PARO) or Regional Director (RD) indicating that he is expressly waiving his retention right over subject landholding;
b) Signing of the Landowner-Tenant Production Agreement and Farmer's Undertaking (LTPA-FU) or Application to Purchase and Farmer's Undertaking (APFU) covering subject property;
c) Entering into a Voluntary Land Transfer/Direct Payment Scheme (VLT-DPS) agreement as evidenced by a Deed of Transfer over the subject property;
d) Offering the subject landholding under VOS scheme and failure to indicate his retained area;
e) Signing/submission of other documents indicating consent to have the entire property covered, such as the form letter of the LBP on the disposition of the cash and bond portions of a land transfer claim for payment, and the Deed of Assignment, warranties and undertaking executed in favor of the LBP;
f) Performing acts which constitute estoppel by laches; and
g) Doing such act or acts as would amount to a valid waiver in accordance with applicable laws and jurisprudence.
Public lands pertain to all lands that were not acquired by private persons or corporations either by grant or purchase. These lands are either (a) disposable (alienable) public lands or (b) non-disposable public lands.
CA 141 (1936), otherwise known as the "Public Land Act", governs the administration and disposition of lands of the public domain. Sec. 9 thereof classifies alienable or disposable lands of the public domain as (a) agricultural; (b) residential, commercial, industrial or for similar productive purposes; (c) educational, charitable, or other similar purposes; or (d) reservations for town sites and for public and quasi-public uses.
Non-disposable public lands or those not susceptible of private appropriation and include the following: (a) timber lands which are governed by PD 705 (1975) or the Revised Forestry Code; and (b) mineral lands which are governed by RA 7942 (1995) or the Philippine Mining Act of 1995 and other related laws.
All lands of the public domain are under the exclusive jurisdiction of the DENR except those placed by law and/or by executive issuances under the jurisdiction of other government agencies. Under Sec. 3 and 5 of CA 141, the Secretary of Agriculture and Natural Resources (now the Secretary of DENR) is the executive officer charged with carrying out the provisions of the Public Land Act. It is empowered to prepare and issue such forms, instructions, rules and regulations consistent with the Public Land Act. Sec. 6 of CA 141 (see also EO 192 ) reserves the power to classify lands in the public domain into either agricultural (disposable), timber or mineral lands to the President, with the recommendation of the Secretary of DENR.
Under Sec. 4 of RA 6657, public and private agricultural lands and lands of the public domain suitable for agriculture are covered by CARP. It provides, among others, that all alienable and disposable lands of the public domain devoted or suitable or devoted to agriculture (Sec 4 [a]) and all lands of the public domain in excess of the specific limits of the public domain as determined by Congress (Sec. 4 [b]) shall be covered by CARP. It has also been determined that public agricultural lands that are untitled and privately claimed are covered by CARP. In response to a query by DAR, the Department of Justice issued Opinion No. 176 (1992) which stated:
. . . Thus, it has been held that there should be no distinction in the application of the law where non is indicated therein (SSS vs. City of Bacolod, 115 SCRA 412) . . . By said rule, the term "private agricultural lands" in the aforementioned section should be interpreted as including all private lands, whether titled or untitled. . . .
RA 6657 has created an overlapping of jurisdictions between the DENR and the DAR over the disposition of these lands. RA 6657 mandates DAR to acquire and distribute these public lands to agrarian beneficiaries while CA 141 vests upon the DENR the power to control, survey, classification, lease, sale or any other form of concession or disposition and management of the lands of the public domain.
To resolve the overlapping mandates of the DENR and DAR in the disposition and distribution of public lands for CARP purposes, the two agencies issued Joint DAR-DENR MC 9 (1995) which recognizes that lands of the public domain are under the jurisdiction of the DENR unless placed by law and/or by executive issuances under the jurisdiction of other government departments or entities. Under the said circular, the disposition of non-registrable lands of the public domain is the exclusive responsibility of the DENR under its various programs (i.e., the Integrated Social Forestry). In this instance, the role of the DAR is to assist the DENR in identifying and screening of farmer beneficiaries. The responsibility and authority of DAR to distribute public lands shall be limited to the following:
a) Lands proclaimed by the President as DAR Resettlement Projects and placed under the administration of the DAR for distribution to qualified farmer beneficiaries under CARP;
b) Lands which are placed by law under the jurisdiction of DAR; and
Untitled public alienable and disposable lands are still within the exclusive jurisdiction of DENR pursuant to CA 141. However, in accordance with DOJ Opinion No. 176 (1992), Joint DAR-DENR MC 14 (1997) provides that all untitled public alienable and disposable lands are deemed "private" if the criteria specified in RA 6940 for the determination of whether or not a person has already acquired a recognizable private right over a landholding is met, namely:
a) Continuous occupancy and cultivation by oneself or through one's predecessors-in-interest for at least thirty (30) years prior to the effectivity of RA 6940 on 16 April 1990;
b) The land must have been classified as alienable and disposable for at least thirty (30) years prior to the effectivity on 16 April 1990;
c) One must have paid the real estate tax thereon; and
d) There are no adverse claims on the land.
For these privately claimed public alienable and disposable lands, the DENR first issues a Free Patent to qualified applicants for the retained area of not more than five (5) hectares. The DAR shall then cover the excess area and issue a CLOA or EP and distribute these to qualified beneficiaries. TcCDIS
For untitled public alienable and disposable lands which are tenanted and with claimants not qualified under the criteria specified in RA 6940, the disposition shall be under the jurisdiction of the DENR. The role of the DAR in this case is limited to the documentation and protection of the leasehold arrangement between the public land claimant and the tenants.
If the alienable and disposable land is not tenanted but has actual farm occupants, and the public land claimant lacks the requisite thirty (30)-year possession, these shall be under the jurisdiction of the DENR and the appropriate tenurial instrument shall be applied.
It is submitted, however, that these alienable and disposable lands that are privately claimed by claimants who are not qualified under the criteria set under RA 6940 (1990) should be turned over to DAR for distribution under CARP. As these claimants/tenants are mere occupants and can not be granted Free Patents by the DENR, these land should instead be committed for agrarian purposes.
A recently issued DENR MC 22 (1999) entitled "DENR Jurisdiction over all Alienable ad Disposable Lands of the Public Domain," seems to abrogate or set aside Joint DAR-DENR MC 14 (1997). It directs all Regional Executive Directors to strictly exercise DENR's jurisdiction over all alienable and disposable lands of the public domain, including those lands not specifically placed under the jurisdiction of other government agencies, and prepare the same for disposition to qualified and legitimate recipients under the People's Alliance for the Rehabilitation of Environment of the Office of the Secretary of the DENR.
This recent issuance impliedly prohibits the turnover of alienable and disposable lands to CARP, and thus, effectively removes remaining public alienable and disposable lands out of the scope of CARP. While merely an administrative order that can not overturn legislation on the matter, DENR MC 22 (1999) poses another roadblock which if not corrected or legally challenged in court can derail the already delayed coverage of public agricultural lands. Sec. 7 of RA 6657 explicitly provides that alienable and disposable public agricultural lands are among the priority lands for distribution. Needless to say, the political implications of government's reluctance to commit public agricultural lands for agrarian ends in the face of its relentless expropriation of private landholdings is serious.
Sec. 9 of RA 6657 defines ancestral lands as those lands that include, but not limited to, lands in actual, continuous and open possession of an indigenous cultural community and its members. Sec. 3 (b) of RA 8371 (1997) or the "Indigenous Peoples Rights Act of 1997," has a more encompassing definition, to wit:
Sec. 3. Definition of Terms. — . . .
b). Ancestral Lands — Subject to Section 56 hereof, refers to lands occupied, possessed and utilized by individuals, families, and clans who are members of the ICCs/IPs (indigenous cultural communities/indigenous peoples) since time immemorial, by themselves or through their predecessors-in-interests, under claims of individual or traditional group ownership continuously, to the present, except when interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of government projects and other voluntary dealings entered into by government and private individuals/corporations, including, but not limited to, residential lots, rice terraces or paddies, private forests, swidden farms and treelots;
Policy for ancestral lands under CARP
CARP ensures the protection of the right of ICCs/IPs to their ancestral lands to ensure their economic, social and cultural well being. Systems of land ownership, land use, and modes of settling land disputes of the ICCs/IPs shall be recognized and respected in line with principles of self-determination and autonomy.
The Presidential Agrarian Reform Committee (PARC), notwithstanding any law to the contrary, has the power to suspend the implementation of the CARP with respect to ancestral lands for the purpose of identifying and delineating such lands. It shall also respect laws on ancestral domain enacted by the respective legislators of autonomous regions, subject to the provisions of the Constitution and the principles enunciated in RA 6657 and other national laws.
However, the full protection of the rights of the ICCs/IPs to their ancestral lands under CARP is hampered by various legal constraints. For one, while Sec. 9 respects or protects the rights of the ICCs/IPs to their ancestral lands as means to protect their economic, social and cultural well-being, its definition of ancestral lands is circumscribed by the limitation that the Torrens System shall be respected. This is a fundamental legal setback to the rights of ICCs/IPs. It should be noted that the vested rights of these communities to ancestral lands have been recognized to have pre-existed the Regalian Doctrine which underlie the government's perspective to full ownership and control over natural resources as well as the current legal system that regulates private property rights.
CARP involves alienable and disposable lands only while ancestral lands of ICCs/IPs encompass forest and mineral lands and other lands of the public domain which are by definition inalienable and indisposable. Thus, the benefit of being awarded CLOAs over ancestral lands to these ICCs/IPs are limited to private agricultural lands and public agricultural lands transferred to DAR.
In any case, to promote and protect the rights of the ICCs/IPs over ancestral lands situated in inalienable and indisposable public lands, DAR issues member/s of the ICCs who are engaged in agricultural activities over the said lands CARP Beneficiary Certificate (CBC). Though these do not vest title, it likewise recognizes the claim of the ICC over these lands and allows them to access support services from DAR.
RA 8371 (1997) has a more expansive definition of ancestral domains and ancestral lands which includes lands that are legally determined as indisposable and inalienable public lands. RA 8371 is a clear departure from earlier law and regulation for not only does it expand the definition of ancestral lands but recognizes the right of the ICCs/IPs to own these lands. National Commission on Indigenous Peoples (NCIP), a body created by RA 8371, is vested, among others with the power and issue Certificates of Ancestral Domain/Land Titles over ancestral lands.
Definition and nature of agricultural tenancy
Agricultural tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, whether in produce or in money, or both." (RA 1199 , sec. 3)
In Gelos vs. CA, 208 SCRA 608 (1992), the Supreme Court held that agricultural tenancy is not a purely factual relationship. The written agreement of the parties is far more important as long it is complied with and not contrary to law.
Gelos vs. Court of Appeals
208 SCRA 608 (1992)
Rafael Gelos was employed by Ernesto Alzona and his parents as their laborer on a 25,000-sq. m farmland. They executed a written contract which stipulated that as hired laborer Gelos would receive a daily wage of P5.00. Three (3) years later, Gelos was informed of the termination of his services and was asked to vacate the property. Gelos refused and continued working on the land. Alzona filed a complaint for illegal detainer. The lower court found Gelos as tenant of the property and entitled to remain thereon as such. The decision was reversed by the Court of Appeals. DHACES
What is the nature of the contract between Gelos and Alzona?
The parties entered into a contract of employment, not a tenancy agreement. The agreement is a lease of services, not of the land in dispute. . . . The petitioner would disavow the agreement, but his protestations are less than convincing. His wife's testimony that he is illiterate is belied by his own testimony to the contrary in another proceeding. Her claim that they were tricked into signing the agreement does not stand up against the testimony of Atty. Santos Pampolina, who declared under his oath as a witness (and as an attorney and officer of the court) that he explained the meaning of the document to Gelos, who even read it himself before signing it. . . . Gelos points to the specific tasks mentioned in the agreement and suggests that they are the work of a tenant and not of a mere hired laborer. Not so. The work specified is not peculiar to tenancy. What a tenant may do may also be done by a hired laborer working under the direction of the landowner, as in the case at bar. It is not the nature of the work involved but the intention of the parties that determines the relationship between them. As this Court has stressed in a number of cases, "tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the land. It is also a legal relationship. The intent of the parties, the understanding when the farmer is installed, and as in this case, their written agreements, provided these are complied with and are not contrary to law, are even more important."
Classes of agricultural tenancy
Agricultural tenancy is classified into share tenancy and leasehold tenancy (M. A. GERMAN, SHARE AND LEASEHOLD TENANCY, 13 ).
Share tenancy means "the relationship which exists whenever two persons agree on a joint undertaking for agricultural production wherein one party furnishes the land and the other his labor, with either or both contributing any one or several of the items of production, the tenant cultivating the land personally with aid of labor available from members of his immediate farm household, and the produce thereof to be divided between the landholder and the tenant." (Rep. Act No. 3844 . Sec. 166 ).
With the passage of RA 3844, share tenancy has been declared to be contrary to public policy and abolished (Rep. Act No. 3844 , sec. 4) except in the case of fishponds, saltbeds, and lands principally planted to citrus, coconuts, cacao, coffee, durian and other similar permanent trees at the time of the approval of said Act (Rep. Act No. 3844 , sec. 35). When RA 6389 (1971) was enacted, agricultural share tenancy has been automatically converted to leasehold but the exemptions remained. It was only under RA 6657 when the exemptions were expressly repealed.
Leasehold tenancy exists when a person who, either personally or with the aid of labor available from members of his immediate farm household undertakes to cultivate a piece of agricultural land susceptible of cultivation by a single person together with members of his immediate farm household, belonging to or legally possessed by, another in consideration of a fixed amount in money or in produce or in both (Rep. Act No. 1199 , sec. 4).
Under RA 6657, the only agricultural tenancy relation that is recognized is leasehold tenancy. Said law expressly repealed Sec. 35 of RA 3844, making all tenanted agricultural lands throughout the country subject to leasehold.
Leasehold tenancy may be established by operation of law, that is, through the abolition of share tenancy under Sec. 4 of RA 3844; through the exercise by the tenant of his right to elect leasehold; or by agreement of the parties either orally or in writing, expressly or impliedly, which was the condition before 1972 (M.A. German, supra, at 27).
Leasehold relation is instituted in retained areas with tenant(s) under RA 6657 or PD 27 who opts to choose to remain therein instead of becoming a beneficiary in the same or another agricultural land with similar or comparable features. The tenant must exercise his option within one (1) year from the time the landowner manifests his choice of the area for retention (Rep. Act No. 6657 , sec. 6). Leasehold relation also exists in all tenanted agricultural lands that are not yet covered under CARP (DAR Adm. O. No. 5 ).
The institution of leasehold in these areas ensure the protection and improvement of the tenurial and economic status of tenant-tillers therein. (Rep. Act No. 6657 , sec. 6).
Leasehold tenancy distinguished from civil law lease
In Gabriel vs. Pangilinan, 58 SCRA 590 (1974), the Supreme Court distinguished leasehold tenancy from civil law lease.
There are important differences between a leasehold tenancy and a civil law lease. The subject matter of leasehold tenancy is limited to agricultural land; that of civil law lease may be either rural or urban property. As to attention and cultivation, the law requires the leasehold tenant to personally attend to, and cultivate the agricultural land, whereas the civil law lessee need not personally cultivate or work the thing leased. As to purpose, the landholding in leasehold tenancy is devoted to agriculture, whereas in civil law lease, the purpose may be for any other lawful pursuits. As to the law that governs, the civil law lease is governed by the Civil Code, whereas leasehold tenancy is governed by special laws (at 596).
Elements of Agricultural Tenancy
The following are the essential requisites for the existence of a tenancy relation:
a) The parties are the landholder and the tenant;
b) The subject is agricultural land;
c) There is consent by the landholder for the tenant to work on the land, given either orally or in writing, expressly or impliedly;
d) The purpose is agricultural production;
e) There is personal cultivation or with the help of the immediate farm household; and
f) There is compensation in terms of payment of a fixed amount in money and/or produce. (Carag vs. CA, 151 SCRA 44 ; Gabriel vs. Pangilinan, 58 SCRA 590 ; Oarde vs. CA, 280 SCRA 235 ; Qua vs. CA, 198 SCRA 236 )
The Supreme Court emphasized in numerous cases that "(a)ll these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. This is so because unless a person has established his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by the Land Reform Program of the Government under existing tenancy laws." (Caballes v. DAR, 168 SCRA 254 )
In the case of Teodoro vs. Macaraeg, 27 SCRA 7 (1969), the Court found all the elements of an agricultural leasehold relation contained in the contract of lease executed by the parties.
Teodoro vs. Macaraeg
27 SCRA 7 (1969)
Macaraeg had been the lessee of the property of Teodoro for the past seven (7) years when he was advised by the latter to vacate the property because it would be given to another tenant. Thereafter, a new tenant was installed who forbade Macaraeg from working on the riceland. On the other hand, Teodoro denied that Macaraeg was his tenant and claimed that he had always leased all of his 39-hectare riceland under civil lease. He further claimed that after the expiration of his "Contract of Lease" with Macaraeg in 1961, the latter did not anymore renew his contract.
The Contract of Lease between the parties contains the essential elements of a leasehold tenancy agreement. The landholding in dispute is unmistakably an agricultural land devoted to agricultural production. More specifically, the parties stipulated that "the property leased shall be used or utilized for agricultural enterprise only." Furthermore, the parties also agreed that the farmland must be used for rice production as could be inferred from the stipulation that "the rental of nine (9) cavans of palay per hectare for one agricultural year . . . must be of the same variety (of palay) as that produced by the LESSEE."
The land is definitely susceptible of cultivation by a single person as it is of an area of only four and a half (4-1/2) ha. This court has held that even a bigger area may be cultivated personally by the tenant, singly or with the help of the members of his immediate farm household.
From the stipulation that "the rental must be of the same variety as that produced by the LESSEE," it can reasonably be inferred that the intention of the parties was that Macaraeg personally work the land, which he did as found by the Agrarian Court, thus: "In the instant case, petitioner (Macaraeg) cultivated the landholding belonging to said respondent (Teodoro) for the agricultural year 1960-61 in consideration of a fixed annual rental." (italics supplied) Moreover, there is no evidence that Macaraeg did not personally cultivate the land in dispute. Neither did Teodoro allege, much less prove, that Macaraeg availed of outside assistance in the cultivation of the said riceland.
Teodoro is the registered owner of the disputed landholding and he delivered the possession thereof to Macaraeg in consideration of a rental certain to be paid in produce. Evidently, there was a valid leasehold tenancy agreement. Moreover, the provision that the rental be accounted in terms of produce — 9 cavans per hectare — is an unmistakable earmark, considering the other stipulations, that the parties did actually enter into a leasehold tenancy relation (at 16-17; underscoring supplied).
Agricultural tenancy relation is different from farm employer-farm employee relation. The Court clarified the difference in the case of Gelos vs. CA, 208 SCRA 608 (1992), as follows:
On the other hand, the indications of an employer-employee relationship are: 1) the selection and engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the power to control the employee's conduct — although the latter is the most important element.
According to a well-known authority on the subject, tenancy relationship is distinguished from farm employer-farm worker relationship in that: "In farm employer-farm worker relationship, the lease is one of labor with the agricultural laborer as the lessor of his services and the farm employer as the lessee thereof. In tenancy relationship, it is the landowner who is the lessor, and the tenant the lessee of agricultural land. The agricultural worker works for the farm employer and for his labor he receives a salary or wage regardless of whether the employer makes a profit. On the other hand, the tenant derives his income from the agricultural produce or harvest." (at 614)
Parties: landholder and tenant
A tenant is "a person who by himself, or with the aid available from within his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for purposes of production, sharing the produce with the landholder or for a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system." (Rep. Act No. 1199 , sec. 5 (a)).
An overseer of a coconut plantation is not considered a tenant.
Zamoras vs. Su, Jr.
184 SCRA 248 (1990)
Zamoras was hired by Su as overseer of his coconut land in Dapitan City. Zamoras was tasked to have the land titled in Su's name. He was also "assigning portions of the land to be worked by tenants, supervising the cleaning, planting, care and cultivation of the land, the harvesting of coconuts and selling of the copra." As compensation, he was paid salary of P2,400 per month plus 1/3 of the proceeds of the sales of the copra. Su got another 1/3 of the proceeds while the other third went to the tenants. In 1981, Su obtained a loan from Anita Hortellano and the latter was authorized by Su to harvest the coconuts. Meanwhile, he informed Zamoras that he was being temporarily laid-off until the loan is settled. Zamoras filed a case for illegal termination and breach of contract before the Regional Arbitration Branch of the Ministry of Labor. The Labor Arbiter held that Zamoras' dismissal was without just cause and ordered Zamoras reinstatement. On appeal, the National Labor Relation Commission reversed the Labor Arbiter by holding that there is no employee-employer relation existing between the parties but a landlord-tenant relation hence jurisdiction rests with the agrarian court. Zamoras assailed the decision of NLRC.
The NLRC's conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut plantation. As overseer, Zamoras hired the tenants and assigned their respective portions which they cultivated under Zamoras' supervision. The tenants dealt directly with Zamoras and received their one-third share of the copra produce from him. The evidence also shows that Zamoras, aside from doing administrative work for Su, regularly managed the sale of copra processed by the tenants. There is no evidence that Zamoras cultivated any portion of Su's land personally or with the aid of his immediate farm household.
The following circumstances indicate an employer-employee relationship between them: 1. Zamoras was selected and hired by Su as overseer of the coconut plantation. 2. His duties were specified by Su. 3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should sell the copra produced from the plantation. 4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as compensation for managing the plantation."
There is no tenancy relation because the element of personal cultivation does not exist.
Castillo vs. CA
205 SCRA 529 (1992)
Alberto Ignacio filed a complaint for injunction against Castillo alleging that he is the agricultural tenant of the latter. He claims that Castillo allowed him to construct a rest house in the property and that, thereafter, Castillo started cutting fruit-bearing trees on the land and filled with adobe stones the area intended for vegetables. On the other hand, Castillo denied that Ignacio was his tenant but that the latter was only a "magsisiga" of the landholding and that he did not ask permission from Ignacio when he constructed his rest house. The trial court found no tenancy relationship between the parties but this was reversed by the Court of Appeals.
The element of personal cultivation is absent in this case. The alleged tenant "is a businessman by occupation and this is his principal source of income. He manufactures hollow blocks. He also has a piggery and poultry farm as well as a hardware store on the land adjoining the subject land. To add to that, the respondent farms the riceland of one Dr. Luis Santos. It is thus evident that the working hours of the respondent as a businessman and his other activities do not permit him to undertake the work and obligations of a real tenant. This is further supported by the undisputed fact that the respondent cannot even personally perform the work of a smudger because on 22 October 1986, the respondent hired some 20 people who are not members of his family to cut and burn the grass in the premises of the subject land." (at 535-536).
An owner tilling his own agricultural land is not a tenant within the contemplation of the law (Baranda vs. Baguio, 189 SCRA 194 (1990).
In Oarde vs. CA, et al., 280 SCRA 235 (1997), certifications of tenancy/non-tenancy issued by DAR are not conclusive.
"The certifications issued by administrative agencies or officers that a certain person is a tenant are merely provisional and not conclusive on courts, as ruled by this Court in Cuaño vs. Court of Appeals, citing Puertollano vs. IAC. Secondly, it is well-settled that the "findings of or certifications issued by the Secretary of Agrarian Reform, or his authorized representative, in a given locality concerning the presence or absence of a tenancy relationship between the contending parties is merely preliminary or provisional and is not binding upon the courts." (at 246)
A landholder-lessor is defined as "any person, natural or juridical, either as owner, lessee, usufructuary or legal possessor of agricultural land, who lets, leases or rents to another said property for purposes of agricultural production and for a price certain or ascertainable either in an amount of money or produce." (Rep. Act No. 1199 , sec. 42). Thus, consent need not be necessarily given personally by the registered owner as long as the person giving the consent is the lawful landholder as defined by law.
Bernas vs. Court of Appeals
225 SCRA 119 (1993)
Natividad Deita is the owner of a 5,831-sq m property which she entrusted to her brother, Benigno, so that he could use the fruits thereof to defray the cost of his children's education in Manila. The property was leased by Bernas pursuant to a production sharing arrangement executed between Bernas and Benigno. Natividad played no part in this arrangement. In 1985, the lots were returned by Benigno to his sister but when the owners sought to take possession, Bernas refused to relinquish the property. Bernas was claiming that he was an agricultural lessee entitled to security of tenure. Natividad filed an action for recovery of possession. The trial court ruled in favor of Bernas but this was subsequently reversed by the CA.
Is consent by a legal possessor, even if without the consent of landowner, sufficient to create tenancy relationship? TDEASC
Yes. As legal possessor of the property, Benigno had the authority and capacity to enter into an agricultural leasehold relation with Bernas. "The law expressly grants him, as legal possessor, authority and capacity to institute an agricultural leasehold lessee on the property he legally possessed." (at 125-126)
Subject is agricultural land
For agricultural tenancy to exist, the subject of the agreement must be an agricultural land.
RA 6657 defines the term "agricultural land" as "land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land." (see discussion on scope of CARP, Chapter I). Under RA 3844, "agricultural land" refers to land devoted to any growth, including but not limited to crop lands, salt beds, fish ponds, idle land and abandoned land.
The area of agricultural land that a lessee may cultivate has no limit, but he should cultivate the entire area leased. The three (3) hectare limit under RA 6657 applies only to the award that may be given to the agrarian reform beneficiary.
Consent by landholder
As discussed earlier, consent must be given by the true and lawful landholder of the property. In Hilario vs. IAC, 148 SCRA 573 (1987), the Supreme Court held that tenancy relation does not exist where a usurper cultivates the land.
Hilario vs. Intermediate Appellate Court
148 SCRA 573 (1987)
Salvador Baltazar was working on the land pursuant to a contract executed between him and Socorro Balagtas involving a two (2)-ha property. According to Baltazar, in 1965, he relinquished 1.5 ha to certain individuals and what remained under his cultivation was ½-ha owned by Corazon Pengzon. After Socorro's death, no new contract was executed. Sometime in 1980, the Hilarios started cultivating a 4,000-sq m portion of the property and enjoined Baltazar from entering the same. The Hilarios claimed that they acquired the landholding from the Philippine National Bank after a foreclosure proceeding. On the other hand, Corazon Pengzon explained that she did not get any share from the produce of the land since 1964 and she would not have accepted it knowing that she did not own the property anymore.
Baltazar is not a tenant because no consent was given by Pengzon. As held in Tiongson v. Court of Appeals, 130 SCRA 482, tenancy relationship can only be created with the consent of the true and lawful landholder through lawful means and not by imposition or usurpation. "So the mere cultivation of the land by usurper cannot confer upon him any legal right to work the land as tenant and enjoy the protection of security of tenure of the law (Spouses Tiongson vs. Court of Appeals, 130 SCRA 482)."
Successors-in-interest of the true and lawful landholder/owner who gave the consent are bound to recognize the tenancy established before they acquired the agricultural land.
Endaya vs. Court of Appeals
215 SCRA 109 (1992)
Spouses San Diego owned a 2.0200-ha rice and corn land. The property has been cultivated by Pedro Fideli as a tenant of the couple under a 50-50 sharing agreement. In 1974, a lease contract was executed between spouses San Diego and a certain Regino Cassanova for a period of four (4) years at P400.00 per ha per annum rental and gave him the authority to oversee the planting of crops. The contract was subsequently renewed to last until 1980. In both cases, Fideli signed as witness. While the contract was subsisting, Fideli continuously worked on the property, sharing equally with Cassanova the net produce of the harvests. In 1980, the land was sold to spouses Endaya. Fideli continued tilling the land despite the Endaya's demand to vacate the property. Fideli refused to leave and deposited with Luzon Development Bank the landowner's share in the harvests. Fideli filed a complaint praying that he be declared the agricultural tenant of the Endayas. The trial court ruled in favor of the Endayas but the same was subsequently reversed by the CA holding that Fideli is an agricultural lessee entitled to security of tenure.
It is true that the Court has ruled that agricultural tenancy is not created where the consent of the true and lawful owners is absent. But this doctrine contemplates a situation where an untenanted farm land is cultivated without the landowner's knowledge or against her will or although permission to work on the farm was given, there was no intention to constitute the worker as the agricultural lessee of the farm land. The rule finds no application in the case at bar where the petitioners are successors-in-interest to a tenanted land over which an agricultural leasehold has long been established. The consent given by the original owners to constitute private respondent as the agricultural lessee of the subject landholding binds private respondents who, as successors-in-interest of the Spouses San Diego, step into the latter's shoes, acquiring not only their rights but also their obligations. (at 118; underscoring supplied).
Purpose is agricultural production
Tenancy status arises only if an occupant of a parcel of land has been given its possession for the primary purpose of agricultural production.
Caballes vs. Department of Agrarian Reform
168 SCRA 248 (1988)
Spouses Caballes acquired subject land from the Millenes family. Prior to the sale, Abajon constructed his house on a portion of the property, paying a monthly rental to the owner. Abajon was also allowed to plant on a portion of the land and that the produce thereof would be shared by them on a 50-50 basis. When the new owners took over, they told Abajon to transfer his dwelling to the southern portion of the property because they would be building a poultry near Abajon's house. Later, the Caballes asked Abajon to leave because they needed the property. Abajon refused. During the trial the former landowner testified that Abajon dutifully gave her 50% share of the produce of the land under his cultivation.
The fact of sharing alone is not sufficient to establish a tenancy relationship. The circumstances of this case indicate that the private respondent's status is more of a caretaker who was allowed by the owner out of benevolence or compassion to live in the premises and to have a garden of some sort at its southwestern side rather than a tenant of the said portion. Agricultural production as the primary purpose being absent in the arrangement, it is clear that the private respondent was never a tenant of the former owner, Andrea Millenes. Consequently, Sec. 10 of RA 3844, as amended, does not apply. Simply stated, the private respondent is not a tenant of the herein petitioner.
Under DAR AO 5 (1993), cultivation is not limited to the plowing and harrowing of the land, but also the husbanding of the ground to forward the products of the earth by general industry, the taking care of the land and fruits growing thereon, fencing of certain areas, and the clearing thereof by gathering dried leaves and cutting of grasses. In coconut lands, cultivation includes the clearing of the landholding, the gathering of the coconuts, their piling, husking and handling as well as the processing thereof into copra, although at times with the aid of hired laborers.
Meaning of "Personal Cultivation"
"Personal cultivation" exists when a person cultivates the land by himself and with the aid available from his immediate farm household.
In Oarde vs. CA, et al., supra, the Court held that the element of personal cultivation is essential for an agricultural leasehold. There should be personal cultivation by the tenant or by his immediate farm household or members of the family of the lessee or other persons who are dependent upon him for support or who usually help him in his activities (Evangelista vs. CA, 158 SCRA 41). The law is explicit in requiring the tenant and his immediate family to work the land (Bonifacio vs. Dizon, 177 SCRA 294), and the lessee cannot hire many persons to help him cultivate the land (De Jesus vs. IAC, 175 SCRA 559). In Gabriel vs. Pangilinan, supra, the Court held that the tenancy relation was severed when the tenant and/or his immediate farm household ceased from personally working the fishpond when he became ill and incapacitated.
Compensation in money and/or produce
In Matienzo v. Servidad, 107 SCRA 276 (1981), the Supreme Court held that:
A tenant is defined under section 5(a) of Republic Act No. 1199 as a person who, himself, and with the aid available from within his immediate household, cultivates the land belonging to or possessed by another, with the latter's consent for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying to the landholder a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system. From the above definition of a tenant, it is clear that absent a sharing arrangement, no tenancy relationship had ever existed between the parties. What transpired was that plaintiff was made overseer over a 7-hectare land area; he was to supervise applications for loans from those residing therein; he was allowed to build his house thereon and to plant specified plants without being compensated; he was free to clear and plant the land as long as he wished; he had no sharing arrangement between him and defendant; and he was not obligated to pay any price certain to nor share the produce, with the latter. CaSHAc
Security of Tenure
Under Sec. 7 of RA 1199, "the agricultural leasehold relation once established shall confer upon the agricultural lessee the right to continue working on the landholding until such leasehold relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding and cannot be ejected therefrom unless authorized by the Court for causes herein provided."
The Supreme Court has consistently ruled that once a leasehold relation has been established, the agricultural lessee is entitled to security of tenure. The tenant has a right to continue working on the land except when he is ejected therefrom for cause as provided by law (De Jesus vs. IAC, 175 SCRA 559 ).
Transfer of ownership or legal possession does not affect security of tenure.
In Tanpingco vs. IAC, 207 SCRA 653 (1992), the Court upheld the validity of donation but the donee must respect the rights of the tenant and ordered the donee to pay the tenant disturbance compensation.
Tanpingco vs. Intermediate Appellate Court
207 SCRA 653 (1992)
In 1985, Tanpingco filed a complaint for payment of disturbance compensation against Benedicto Horca, Sr. Tanpingco alleged that he is the tenant-lessee in Horca's riceland under a leasehold contract; that he was asked to desist from working on the land because it was already donated to the Ministry of Education, Culture and Sports; and that he is willing to accept disturbance compensation or in the alternative to remain as tenant-lessee of the subject land.
Is the security of tenure of a tenant affected by the transfer of ownership or legal possession of an agricultural land?
Under Art. 428 of the Civil Code, the owner has the right to dispose of a thing without other limitations than those established by law. As an incident of ownership, therefore, there is nothing to prevent a landowner from donating his naked title to the land. However, the new owner must respect the rights of the tenant. Sec. 7 of RA No. 3844, as amended, gives the agricultural lessee the right to work on the landholding once the leasehold relationship is established. It also entitles him to security of tenure on his landholding. He can only be ejected by the court for cause. Time and again, this Court has guaranteed the continuity and security of tenure of a tenant even in cases of a mere transfer of legal possession. As elucidated in the case of Bernardo v. Court of Appeals (168 SCRA 439 ), security of tenure is a legal concession to agricultural lessees which they value as life itself and deprivation of their landholdings is tantamount to deprivation of their only means of livelihood. Also, under Section 10 of the same Act, the law explicitly provides that the leasehold relation is not extinguished by the alienation or transfer of the legal possession of the landholding. The only instances when the agricultural leasehold relationship is extinguished are found in Section 8, 28 and 35 of the Code of Agrarian Reforms of the Philippines. The donation of the land did not terminate the tenancy relationship. However, the donation itself is valid." (at 657-658; underscoring supplied).
Constitutionality of the provision on security of tenure
The constitutionality of the provision on security of tenure has long been settled by the Supreme Court in the case of Primero vs. Court of Agrarian Relations, 101 Phil. 675 (1957).
Primero vs. Court of Agrarian Relations
101 Phil. 675 (1957)
Primero owns a tenanted riceland in Cavite. Because of his desire to let the property to one Porfirio Potente, he notified his tenant advising the latter to vacate the land. The tenant refused. Primero filed a case with CAR which subsequently dismissed the same. On appeal, Primero assailed the constitutionality of Sec. 9 and 50 of RA 1199 claiming that said provisions are limitations on freedom of contract, a denial of equal protection of law, and an impairment of, or limitation on, property rights.
The provisions of law assailed as unconstitutional do not impair the right of the landowner to dispose or alienate his property nor prohibit him to make such transfer or alienation; they only provide that in case of transfer or in case of lease, as in the instant case, the tenancy relationship between the landowner and his tenant should be preserved in order to insure the well-being of the tenant or protect him from being unjustly dispossessed by the transferee or purchaser of the land; in other words, the purpose of the law in question is to maintain the tenants in the peaceful possession and cultivation of the land or afford them protection against unjustified dismissal from their landholdings. Republic Act 1199 is unquestionably a remedial legislation promulgated pursuant to the social justice precepts of the Constitution and in the exercise of the police power of the state to promote the commonwealth. It is a statute relating to public subjects within the domain of the general legislative powers of the State and involving the public rights and public welfare of the entire community affected by it. Republic Act 1199, like the previous tenancy laws enacted by our lawmaking body, was passed by congress in compliance with the constitutional mandates that "the promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State" (Art II, sec. 5) and that "the state shall regulate the relations between landlord and tenant in agriculture" (Art. XIV, sec. 6). (at 680).
In Pineda vs. de Guzman, 21 SCRA 1450 (1967), the Supreme Court also held:
Section 49 of the Agricultural Tenancy Act, Republic Act 1199, as amended, enunciates the principle of security of tenure of the tenants, such that it prescribes that the relationship of landholder and tenant can only be terminated for causes provided by law. The principle is epitomized by the axiom on land tenure that once a tenant, always a tenant. Attacks on the constitutionality of this guarantee have centered on the contention that it is a limitation on freedom of contract, a denial of the equal protection of the law, and an impairment of or a limitation on property rights. The assault is without reason. The law simply provides that the tenancy relationship between the landholder and his tenant should be preserved in order to insure the well-being of the tenant and protect him from being unjustly dispossessed of the land. Its termination can take place only for causes and reasons provided in the law. It was established pursuant to the social justice precept of the State to promote the common weal. (Primero vs. Court of Industrial Relations, G.R. No. L-10594, May 29, 1957) (at 1456).
Rights and Responsibilities of the Parties
Rights and responsibilities of lessee
The lessee shall have the following rights:
a) To have possession and peaceful enjoyment of the land;
b) To manage and work on the land in a manner and method of cultivation and harvest which conform to the proven farm practices;
c) To mechanize all or any phase of his farm work;
d) To deal with millers and processors and attend to the issuance of quedans and warehouse receipts of the produce due him/her;
e) To continue in the exclusive possession and enjoyment of any homelot the lessee may have occupied upon the effectivity of RA 3844;
f) To be indemnified for the costs and expenses incurred in the cultivation and for other expenses incidental to the improvement of the crop in case the lessee surrenders, abandons or is ejected from the landholding;
g) To have the right of pre-emption and redemption; and
h) To be paid disturbance compensation in case the conversion of the farmholding has been approved (Rep. Act No. 3844 , sec. 23, 24, 25, 11, 12, 36)
On the other hand, the lessee shall have the following responsibilities under Sec. 26 of RA 3844:
a) Cultivate and take care of the farm, growing crops, and other improvements on the land and perform all the work therein in accordance with proven farm practices;
b) Inform the lessor within a reasonable time of any trespass committed by third persons on the farm, without prejudice to his/her direct action against the trespasser;
c) Take reasonable care of the work animals and farm implements delivered to him/her by the lessor and see to it that they are not used for purposes other than those intended, or used by another without the knowledge and consent of the lessor;
d) Keep the farm and growing crops attended to during the work season; and
e) To pay the lease rental to the lessor when it falls due.
One of the rights of a lessee is to be entitled to a homelot. But only the tenant-lessee has this right and that members of the immediate family of the tenants are not entitled to a homelot.
Cecilleville Realty and Service Corporation vs. Court of Appeals
278 SCRA 819 (1997)
Petitioner Cecilleville Realty owns a parcel of land, a portion of which is occupied by Herminigildo Pascual. Despite repeated demands, Herminigildo refused to vacate the property and insisted that he is entitled to occupy the land since he is helping his mother, the corporation's tenant, to cultivate the property.
Only a tenant is granted the right to have a home lot and the right to construct or maintain a house thereon. And here, private respondent does not dispute that he is not petitioner's tenant. In fact, he admits that he is a mere member of Ana Pascual's immediate farm household. Under the law, therefore, we find private respondent not entitled to a homelot. Neither is he entitled to construct a house of his own or to continue maintaining the same within the very small landholding of petitioner. . . . Thus, if the Court were to follow private respondent's argument and allow all the members of the tenant's immediate farm household to construct and maintain their houses and to be entitled to not more than one thousand (1,000) square meters each of home lot, as what private respondent wanted this Court to dole-out, then farms will be virtually converted into rows, if not colonies, of houses.
In sugarcane lands, the lessee shall have the following rights to be exercised by him personally or through a duly registered cooperative/farmers' association of which he is a bona fide member (DAR Adm. O. No. 5 ):
a) To enter into a contract with the sugar central millers for the milling of the sugarcane grown on the leased property;
b) To be issued a warehouse receipt (quedan) or molasses storage certificate by the sugar central for the manufactured sugar, molasses and other by-products;
c) To have free access to the sugar central's factory, facilities, and laboratory for purposes of checking and/or verifying records and procedures in the processing of sugarcane through professional representation;
d) To be furnished a weekly statement of cane and sugar account showing, among other things, the tonnage of the delivered cane and analysis of the crusher juice;
e) To be given 30 days notice in writing before the sugar and other by-products are sold through public auction; and
f) To be provided with the standard tonnage allocation by the miller/sugar central.
Rights and responsibilities of lessor
The lessor shall have the following rights:
a) To inspect and observe the extent of compliance with the terms and conditions of the leasehold contract;
b) To propose a change in the use of the landholding to other agricultural purposes, or in the kind of crops planted;
c) To require the lessee, taking into consideration his/her financial capacity and the credit facilities available to him/her, to adopt proven farm practices necessary to the conservation of the land, improvement of the fertility and increase in productivity; and
d) To mortgage expected rentals (Rep. Act No. 3844 , sec. 29):
The lessor may propose a change in use but the change shall be agreed upon by the landowner and the lessee. In case of disagreement, the matter may be settled by the Provincial Agrarian Reform Adjudicator (PARAD), or in his absence the Regional Agrarian Reform Adjudicator (RARAD) (DAR Adm. O. No. 5 )
The lessor shall have the following obligations:
a) To keep the lessee in peaceful possession and cultivation of the land; and
b) To keep intact such permanent useful improvements existing on the landholding at the start of the leasehold relation (Rep. Act No. 3844 , sec. 30).
Sec. 31 of RA 3844 provides that the lessor is prohibited to perform any of the following acts:
a) To dispossess the lessee of his/her landholding except upon authorization by the Court;
b) To require the lessee to assume, directly or indirectly, the payment of the taxes or part thereof levied by the government on the land;
c) To require the lessee to assume, directly or indirectly, any rent or obligation of the lessor to a third party;
d) To deal with millers or processors without written authorization of the lessee in cases where the crop has to be sold in processed form before payment of the lease rental;
e) To discourage, directly or indirectly, the formation, maintenance or growth of unions or organizations of lessees in his/her landholding; and
f) For coconut lands, indiscriminate cutting of coconut trees will be deemed prima facie evidence to dispossess the tenant of his/her landholding unless there is written consent of the lessee and there is PCA certification, copy of the findings and recommendations of which shall be furnished to affected tenants or lessees, or a resolution from the Municipal Board allowing the cutting for valid reasons (DAR Adm. O. No. 5  and DAR Adm. O. No. 19 ).
Termination of Tenancy Relation
Causes for termination of leasehold relation
Section 8 of RA 3844 provides that agricultural leasehold relation shall be extinguished by the following acts or omissions:
a) Abandonment of the landholding without the knowledge of the agricultural lessor;
b) Voluntary surrender of the landholding by the agricultural lessee, written notice of which shall be served three months in advance; or
c) Absence of an heir to succeed the lessee in the event of his/her death or permanent incapacity.
Conversion of the land to non-agricultural uses also extinguishes the leasehold relation because the subject land is no longer an agricultural land and the purpose is no longer agricultural production. However, under Sec. 16 of DAR AO 1 (1999), the tenant affected by the conversion is entitled to disturbance compensation which must be paid within sixty (60) days from the issuance of the order of conversion.
In the case of Teodoro vs. Macaraeg, supra, it was held that the word "abandon," in its ordinary sense, means to forsake entirely, to forsake or renounce utterly. "The emphasis is on the finality and the publicity with which some thing or body is thus put in the control of another, and hence the meaning of giving up absolutely, with intent never again to resume or claim one's rights or interests." In other words, the act of abandonment constitutes actual, absolute and irrevocable desertion of one's right or property. . . . Likewise, failure to cultivate the land by reason of the forcible prohibition to do so by a third party cannot also amount to abandonment, for abandonment presupposes free will." (at 19-20; underscoring supplied).
Voluntary surrender of property
The tenant's intention to surrender landholding cannot be presumed, much less determined by mere implication, but must be convincingly and sufficiently proved.
Nisnisan, et al vs. Court of Appeals
294 SCRA 173 (1998)
Spouses Gavino and Florencia Nisnisan are the owners of a 4.9774 hectare land in Davao del Sur. Policarpio, the son of Gavino, has been cultivating one (1) ha of said land since 1961. In 1976, Gavino and Policarpio executed a leasehold contract which stipulates a sharing arrangement of 1/3:2/3 of the harvest. In 1978, Gavino sold two (2) ha of the land, including the land tenanted by Policarpio, to spouses Mancera. As a result of the sale, Policarpio and family were ousted. They then filed an action for reinstatement of tenancy against the Manceras. The Manceras, on the other hand, countered that spouses Nisnisan have no cause of action because they voluntarily surrendered their landholding.
Is the tenant deemed to have voluntarily surrendered subject landholding?
Other than their bare allegations, private respondents failed to present any evidence to show that petitioners-spouses surrendered their landholding voluntarily after the private respondents purchased the subject property. Moreover, the filing of the complaint for reinstatement of leasehold tenancy by petitioners-spouses against private respondents before the CAR militates against the private respondents' claim that petitioners-spouses voluntarily surrendered their landholding to them. Under Sec. 8 of RA 3844, voluntary surrender, as a mode of extinguishing agricultural leasehold tenancy relations, must be convincingly and sufficiently proved by competent evidence. The tenant's intention to surrender the landholding cannot be presumed, much less determined by mere implication.
Effect of death or permanent incapacity of tenant-lessee on leasehold relation
Under Sec. 9 of RA 3844, in case of death or permanent incapacity, the leasehold relation continues between the lessor and the person who can cultivate the land personally, chosen by the lessor within one month from such death or incapacity, from among the following:
a) The surviving spouse;
b) The eldest direct descendant by consanguinity;
c) The next eldest descendant or descendants in the order of age.
The age requirement is applied under the presumption that all heirs/successors are qualified.
The leasehold relation is not terminated by death or permanent incapacity of the landholder-lessor. It binds his legal heirs (Rep. Act No. 3844 , sec. 9).
Also, Sec. 10 of RA 3844 provides that the mere expiration of the term or period in a leasehold contract nor by sale, alienation or transfer of the legal possession of the landholding does not extinguished leasehold. In these cases, the transferee is subrogated to the rights and substituted to the obligations of the lessor.
Dispossession of Tenants
Under Sec. 36 of RA 3844, dispossession of tenants may be authorized by the Court in a judgment that is final and executory if after due hearing it is shown that:
a) The lessee failed to substantially comply with the terms and conditions of the contract or with pertinent laws unless the failure is caused by a fortuitous event or force majeure;
b) The lessee planted crops or used the land for a purpose other than what has been previously agreed upon;
(Note: Under DAR AO 5 , the lessee is now allowed to intercrop or plant secondary crops after the rental has been fixed, provided the lessee shoulders the expenses.)
c) The lessee failed to adopt proven farm practices necessary to conserve the land, improve its fertility, and increase its productivity taking into consideration the lessee's financial capacity and the credit facilities available to him;
d) There has been substantial damage, destruction or unreasonable deterioration of the land or any permanent improvement thereon due to the fault or negligence of the lessee;
e) The lessee failed to pay lease rental on time except when such non-payment is due to crop failure to the extent of 75% as a result of a fortuitous event;
f) The lessee employed a sub-lessee; or
g) The landholding is declared by the DAR to be suited for residential, commercial, industrial or some other urban purposes subject to payment of disturbance compensation to the lessee.
(Note: Under Sec. 36  of RA 3844, as amended by RA 6389, disturbance compensation is equivalent to five  times the average of the gross harvest on his landholding during the last five  preceding calendar years.)
In the case of Garchitorena vs. Panganiban, 6 SCRA 338 (1962), it was held that when non-payment of lease rentals occurs for several years, said omission has the effect of depriving the landowner of the enjoyment of the possession and use of the land.
Under Sec. 36 (1) of RA 3844, as amended, a lessor who ejects his tenant without the court's authorization shall be liable for:
a) fine or imprisonment;
b) damages suffered by the agricultural lessee in addition to the fine or imprisonment for unauthorized dispossession;
c) payment of attorney's fees incurred by the lessee; and
d) the reinstatement of the lessee.
Determination of Lease Rentals
The lease rental shall not be more than the equivalent of 25% of the average normal harvest during the three (3) agricultural years preceding the following dates:
• 10 September 1971, the date of effectivity of RA 6389 for tenanted rice and corn lands;
• 15 June 1988 or date the tenant opted to enter into leasehold agreement, whichever is sooner, for tenanted sugar lands; or
• 15 June 1988 or date of leasehold agreement by the parties concerned, whichever is sooner, for all other agricultural lands after deducting the amount used for seeds and the cost of harvesting, threshing, loading, hauling and processing whichever is applicable (DAR Adm. O. No. 5 ).
DAR AO 5 (1993) defines "normal harvest" as the usual or regular produce obtained from the land when it is not affected by any fortuitous event like drought, earthquake, volcanic eruption, and the like. If there had been no normal harvest, the estimated normal harvest during the three (3) preceding agricultural years shall be considered as the normal harvest.
"Agricultural year" refers to the period of time required for raising a particular product, including the preparation of the land, sowing, planting and harvesting of crops and, whenever applicable, threshing of said crops: Provided, however, That in case of crops yielding more than one harvest from one planting, "agricultural year" shall be the period from the preparation of the land to the first harvest and thereafter from harvest to harvest. In both cases, the period may be shorter or longer than a calendar year.
The law states that only the amount used for seeds and the cost of harvesting, threshing, loading, hauling, and processing, whichever is applicable, are considered allowable deductions from the normal harvest in order to determine the lease rental.
The lease rental shall cover the whole farmholding attended to by the lessee. Computation of lease rental shall include both primary and secondary crops existing as of 15 June 1988. Secondary crops which are planted to an aggregate area of half a hectare or less shall not be included in the computation of the lease rental (DAR Adm. O. No. 5 ).
If the land has been cultivated for a period of less than three agricultural years prior to 15 June 1988, the initial rental shall be based on the average normal harvest during the preceding agricultural years when the land was actually cultivated.
After the lapse of the first three (3) normal harvests, the final rental shall be based on the average normal harvest during these three (3) preceding agricultural years.
Registration of Landholdings and Landowners
Sec. 14 of RA 6657 requires all persons, natural or juridical, and government entities that own or claim to own agricultural lands, whether, in their names or in the name of others, are required, to file a sworn statement with the assessor's office, containing the following data:
a) the description and area of the property;
b) the average gross income from the property for at least three (3) years;
c) the names of all tenants and farmworkers therein;
d) the crops planted in the property and the area covered by each crop as of 1 June 1987;
e) the terms of mortgages, lease, and management contracts subsisting as of 1 June 1987; and
f) the latest declared market value of the land as determined by the city or provincial assessor.
The registration drive, denominated as Listasaka II, is governed by Department of Finance MC 5 (1988).
Effect of failure to register
Under Sec. 4 of EO 229 (1987), which originally provided for the compulsory registration of agricultural landholdings, if the landowner fails to register within the prescribed period, the government shall base the valuation of his property for landowner compensation purposes on the City/Provincial Assessor's value.
The effects of non-registration provided in Sec. 40 of EO 229, however, are now deemed superseded by Sec. 14 of RA 6657 which does not provide for such effects. In the Association cases, the Supreme Court stated:
The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be viable any more as it appears that Section 4 of the said Order has been superseded by Section 14 of the CARP Law. This repeats the requisites of registration as embodied in the earlier measure but does not provide, as the latter did, that in case of failure or refusal to register the land, the valuation thereof shall be that given by the provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the just compensation shall be ascertained on the basis of the factors mentioned in its Section 17 and in the manner provided for in Section 16.
Registration of Potential Beneficiaries
The law requires the DAR to register all potential beneficiaries and compile a data bank containing pertinent information on them.
The registration of beneficiaries is governed by DAR AO 10 (1989). The objectives of this activity include the validation of data reported by landowners under the LISTASAKA program, and to provide basic data for the planning and development of support programs.
Beneficiaries of PD 27 who have culpably sold, disposed of, or abandoned their lands, and landowners of PD 27 beneficiaries who already own or have already received at least three (3) hectares of land are excluded from registration, they being disqualified to become beneficiaries under Secs. 22 and 23 of RA 6657.
Effect of farmer's failure to register
The failure of a farmer to register does not have any effect prejudicial to his rights as a potential farmer-beneficiary. DAR AO 10 (1989) does not provide for any penalty against the failure of a farmer to register. He may simply avail of the next registration period. Under this administrative order, the registration of new qualified registrants is undertaken as a continuing activity of the DAR.
Landholdings Covered by CARP
The schedule of acquisition and distribution of agricultural lands covered by CARP is provided for under Sec. 7 of RA 6657. Land distribution and acquisition covers three phases. However, this does not mean that in the implementation of the program, a particular category should be finished first before going to the next category. In other words, the three (3) phases as outlined in Sec. 7 should not be interpreted as an exclusive order of priority. Rather, what is contemplated is simultaneous over-all implementation (Records of the Senate, Volume I, No. 101, pp. 3239-32340; Speech of Rep. Roño, Congressional Deliberations, 6 October 1987). The guiding principle in the implementation of the program is the readiness of the different farmer groups to work fully without restraints on the land and make the land productive (Sponsorship Speech of Rep. Andolana, Congressional Deliberations, 23 September 1987).
It is within this framework that the following lands are to be acquired by the Republic of the Philippines for ultimate distribution to the qualified farmer-beneficiaries: rice and corn lands under PD 27/EO 228; idle or abandoned lands; lands foreclosed by private and government financial institutions; private agricultural lands; lands acquired by the Presidential Commission on Good Government (PCGG), and public agricultural lands.
At the time of the deliberations on House Bill No. 400, otherwise known as "An Act Instituting a Comprehensive Agrarian Reform Program and Providing the Mechanism for Its Implementation," and Senate Bill No. 249, otherwise known as "An Act Instituting a Comprehensive Agrarian Reform Program to promote Social Justice and Industrialization, Providing the Mechanism for its Implementation and for Other Purposes," the agrarian reform program was already in place, albeit limited in scope. Specifically, on 21 October 1972 then President Marcos, through PD 27, instituted the agrarian reform program and placed all tenanted rice and corn lands under its coverage. On 17 July 1987, President Aquino issued EO 228 which declared full ownership by qualified farmer beneficiaries of lands they acquired by virtue of PD 27.
During the congressional deliberations, it was noted that as of 1987 or fourteen (14) years of implementation of PD 27, approximately 547,000 hectares involving 397,896 beneficiaries had been left untouched. The inclusion of rice and corn lands under PD 27 and EO 228 in the CARP is to be seen as a mere continuation of an unfinished business. (Speech of Rep. Gillego, Congressional Deliberations, 6 October 1987).
Idle or abandoned land
The DAR is mandated to initiate the expropriation or acquisition of idle or abandoned agricultural lands at the earliest possible time for distribution to farmer-beneficiaries of the agrarian reform program (Const. Art. XVIII, sec 22; EO 229, sec 18[h]). Idle or abandoned land refers to any agricultural land not cultivated, tilted or developed to produce any crop nor devoted to any specific economic purpose continuously for a period of three (3) years immediately prior to the receipt of notice of acquisition by the government as provided under this Act, but not include land that has become permanently or regularly devoted to non-agricultural purposes. It does not include land which has become unproductive by reason of force majeure or any other fortuitous event, provided that prior such event, such land was previously used for agricultural or other economic purpose (RA 6657, sec 3 [e]).
Private agricultural lands
Private agricultural lands within the context of RA 6657 refer to those lands devoted to agricultural activity and not classified as residential, commercial or industrial owned by persons, whether natural or juridical, other than the government or its instrumentalities. Abandoned private agricultural lands, commercial farms and agricultural lands subject of mortgage or foreclosure by natural or juridical persons, private banking or financial institutions are special classes of private agricultural lands subject of acquisition or distribution to farmer-beneficiaries.
Agricultural lands under mortgage or foreclosure
Mortgage is an accessory contract whereby the debtor (or a third person) guarantees the performance of the principal obligation by subjecting real property or real rights as security in case of non-fulfillment of said obligation within the period agreed upon. A mortgage follows the property whoever the possessor may be and subjects it to the fulfillment of the obligation for whose security it was constituted. (Bonnevie vs. Court of Appeals, 125 SCRA 122, ). Therefore, even if the ownership of the mortgaged property changes, the encumbrance, unless extinguished by any means allowed by law, subsists. The parties to such contract, the mortgagee and the mortgagor under the law, have their respective rights and obligations. It is the essence of the mortgage contract that when the principal obligation becomes due, the things in which the mortgage consists may be alienated for the payment to the creditor. (New Civil Code, Art. 2087) This remedy is referred to as foreclosure. In the foreclosure proceedings, the mortgaged property is sold on default of the mortgagor in satisfaction of the mortgage debt.
The nature and the legal effects of and legal relationships formed by a contract of mortgage gives rise to an important issue: at what point may the creditor be considered as the landowner and when may he be treated as a mere lienholder for the purpose of placing the landholdings under CARP coverage?
When placing mortgaged private agricultural lands under CARP, it is important to distinguish between the status of creditor as landowner and creditor as lien-holder/mortgagee. The significance of this distinction lies in the rights and obligations to which the landowner and mortgagee are entitled and subjected to as enumerated in Sec. 8 and 9 of DAR AO 1 (2000). Thus, the creditor-mortgagee shall be considered as the landowner for the purpose of covering the properties under CARP under two (2) circumstances: (a) when the mortgagee is the purchaser in the foreclosure sale and the redemption period has already expired where the right of redemption exists; or (b) when the mortgagee is the purchaser in the foreclosure sale and said sale is confirmed by the court in cases where only equity of redemption is provided (DAR Adm. O. No. 1 , sec. 4).
On the other hand, the creditor is considered as a lien-holder or mortgagee if as of the date the land transfer claim was received by the Land Bank of the Philippines (LBP) from the DAR and either of the following circumstances obtain: the mortgage debt is not yet due and demandable; or the mortgage debt is already due and demandable but the mortgagee has not foreclosed on the property; or the mortgage has already been foreclosed but the period to exercise the right of redemption has not expired or the foreclosure sale has not yet been confirmed by the court in cases where there is only equity of redemption (DAR Adm. O. No. 1 , sec. 5)
It is likewise important to state that mortgages and other claims registered with the register of deeds shall be assumed by the government (when landholdings subject or mortgage or claim is acquired for CARP purposes) up to an amount equivalent to the landowner's compensation value as provided in Sec. 72 (b) of RA 6657. In other words, the government shall assume the mortgage indebtedness not exceeding the just compensation due the landowner. For instance, the debt secured by the mortgage is P100,000.00. Assuming that when the mortgaged landholding is placed under the CARP and acquired by the government, the landowner's just compensation is determined to be P80,000.00. In this case, what the government merely assumes is P80,000.00 out of the P100,000.00 indebtedness. This amount is what the government is obligated to pay the landowner by virtue of its acquisition under CARP. It cannot be made to pay the balance of P20,000.00. Said amount is collectible from the debtor/mortgagor. The obligation of the debtor to pay the debt to the mortgagee stands although the mortgaged property to secure the payment of said debt may have been transferred to a third person. (Mccullough & Co. vs. Veloso, 46 Phil. 1, ).
Commercial farms are private agricultural lands devoted to commercial livestock, poultry and swine raising, and aquaculture including saltbeds, fishponds and prawn ponds, fruit farms, orchards, vegetable and cut-flower farms, and cacao, coffee and rubber plantations. These farms are subject to immediate compulsory acquisition and distribution after ten (10) years from the effectivity of RA 6657 or 15 June 1988. In the case of new farms, the ten (10)-year period begins from the first year of commercial production and operation as determined by DAR (Rep. Act No. 6657 , sec. 11). Upon the expiration of the ten (10)-year deferment period on 15 June 1998, the DAR issued AO 9 (1998), otherwise known as "Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms." All commercial farms whose deferment expired as of 15 June 1998 shall be subject to immediate acquisition and distribution under the CARP. Those whose deferments have yet to expire will be acquired and distributed only upon expiration of their respective deferment periods as originally determined by the DAR or earlier if the DAR determines that the purpose for which it was deferred no longer exists and revokes its deferment (DAR Adm. O. No. 9 , sec. 2 [a]). All infrastructure facilities and improvements including buildings, roads, machineries, receptacles, instruments or implements permanently attached to the land which are necessary and beneficial to the operations of the farm as determined by the DAR, and shall be subject to acquisition upon the recommendation of the ARBs (DAR Adm. O. No. 9 , sec. 2 [d]).
Commercial farms with expired deferment period shall be acquired through VOS, CA or direct payment scheme. The acquisition of facilities and improvements as a general rule, shall be encouraged through the direct payment scheme (DAR Adm. O. No. 9 , sec. 24).
Corporate farms are those owned or operated by corporations or other business associations (Rep. Act No. 6657 , sec. 29). Corporate farms may be acquired through voluntary land transfer, VOS, CA and voluntary stock distribution plan (Rep. Act No. 6657 , sec. 31). It must be noted that corporate farm owners cannot avail of the ten-year deferment period under DAR AO 9 (1998). Only commercial farms are subject of deferment. (Rep. Act No. 6657 , sec. 11; DAR Adm. O. No. 9 ).
Lands owned by the State in proprietary capacity
Under Sec. 1 of EO 407 (1990), all government instrumentalities were directed to transfer to the Republic of the Philippines through the DAR all landholdings suitable for agriculture. The government instrumentalities directed to do so included government agencies, government owned and controlled corporations or financial institutions such as the Development Bank of the Philippines, Philippine National Bank, Republic Planters Bank, Asset Privatization Trust, Presidential Commission on Good Government, Department of Agriculture, State Colleges and Universities, Department of National Defense and others.
Modes of Acquisition of Private Agricultural Lands
CARP is founded on the right of landless farmers and regular farmers to own directly or collectively the lands they till through the just distribution of all agricultural lands. To achieve this end, a mechanism is provided in the law for the identification, acquisition, distribution of agricultural lands. As earlier discussed, CARP covers both private and public agricultural lands. Since the State owns the latter, they just need to be identified and distributed to the beneficiaries. Private agricultural lands, upon the other hand, generally have to go through the acquisition process before their ultimate distribution to the farmers.
In order for the acquisition process to be completed, several requisites must be satisfied. First, the land should be privately owned and found suitable for agriculture. Second, there are beneficiaries willing to take over the ownership of the land and make it more productive. Third, the landowner is paid just compensation or deposit in cash or LBP bonds is made in his name if the value is contested. Finally, title to the land is transferred in the name of the Republic of the Philippines.
It must be clarified, however, that full payment of just compensation is not necessarily required in Voluntary Land Transfer (VLT)/Direct Payment Scheme (DPS) because the terms of payment of just compensation are governed by the mutual agreement of the parties, i.e., the farmer-beneficiary and the landowner. Likewise, under EO 407, the payment of just compensation to the government instrumentality as landowner may come even after land distribution, that is, thirty (30) days from the registration of the ownership documents by the Register of Deeds in favor of the Department of Agrarian Reform (Exec. Order No. 407 , sec. 1, par. 4).
In the same manner that full payment of just compensation is not always necessary to complete acquisition, transfer of title to the Republic of the Philippines is not necessary in VLT/DPS since the landholding is directly transferred from the landowner to the beneficiary.
The modes by which private agricultural lands may be acquired are as follows: Operation Land Transfer (OLT), Voluntary Offer to Sell (VOS), Voluntary Land Transfer/ Direct Payment Scheme (VLT/DPS), Compulsory Acquisition (CA), and Voluntary Stock Distribution in the case of corporate farms.
Operation Land Transfer
Operation Land Transfer (OLT) is a mechanism established for the implementation of PD 27 (1972) and EO 228 (1987). It is a mode by which ownership of tenanted rice and corn lands is transferred to tenant-beneficiaries. It must be stressed that for lands to come under OLT pursuant to PD 27, there must be first showing that they are tenanted lands. (Castro vs. CA, 99 SCRA 722 )
LOI 227 (1974) was issued by then President Marcos directing the immediate extension of the OLT to the landholdings of over seven (7) hectares. Subsequently, LOI 474 (1976) was issued placing all tenanted rice and corn lands with areas of seven (7) ha or less belonging to landowners who own other agricultural lands exceeding seven (7) ha or lands used for residential, commercial, industrial, or other urban purposes from which they derive adequate income to support themselves and their families.
LOI 474 was subjected to constitutional scrutiny in the case of Zurbano vs. Estrella, 137 SCRA 333 (1989). In this case, petitioners who are owners of 56.14 ha of coconut lands and 1.86 ha of ricelands, assailed the constitutionality of LOI 474, arguing that it is a class legislation and therefore a violation of the equal protection clause. Furthermore, petitioners averred that said issuance is violative of the due process clause as it would be, as applied to them, a taking of private property without just compensation. The Supreme Court in upholding its constitutionality held that:
. . . there is no legal basis for declaring LOI No. 474 void on its face on equal protection, due process and taking of property without just compensation grounds. The Constitution decrees no less than the emancipation of tenants, and there are safeguards therein to assure that there are no arbitrariness or injustice in its enforcement. There are, moreover, built-in safeguards to preclude any unlawful taking of the property. There is no merit to the contention that LOI 474 denies equal protection. To condemn as class legislation an executive act intended to promote the welfare of tenants is to ignore not only the letter of the Constitution — incidentally cited in the petition itself — requiring the formulation and implementation of an agrarian reform program aimed at emancipating the tenant from the bondage of the soil, but also the nation's history. . . . The attack on due process ground is unavailing as on the face of the challenged measure fairness and justice may easily be discerned. Nothing in its language lend support to the contention that consequences so harsh and drastic would attend its implementation. In language, scheme and framework, this Letter of Instruction reveals the plan and purpose to attain the goal envisioned by the Constitution but with due regard to the land owners affected. . . . Neither is there any merit on the contention that there would be a taking of private property for public use without just compensation. The Constitution itself imposes the duty of the State to emancipate the tenants from the bondage of the soil. What is more, even a month before its adoption by the 1971-1972 Constitutional Convention, P.D. No. 27 was issued. Its validity, to repeat, was unanimously sustained by this Tribunal. No other conclusion could have been reached, conforming as it did to what the fundamental law ordained.
In the case of Locsin vs. Valenzuela, 194 SCRA 195 (1991), the Supreme Court explained the legal effect of land being placed under OLT as vesting ownership in the tenant. However, in a subsequent case, Vinzons-Magana vs. Estrella, 201 SCRA 536 , the High Tribunal, citing Pagtalunan vs. Tamayo which predated the Locsin case, ruled that the mere issuance of a certificate of land transfer does not vest ownership in the farmer/grantee. There seems to be an inconsistency regarding the treatment of the legal effect of the placing of the property under the Operation Land Transfer. This is because the issuance of a Certificate of Land Transfer (CLT) over a landholding presupposes that the property has already been covered under the OLT. Therefore, if indeed, as the Locsin doctrine enunciated, ownership of the land is transferred to the farmer at the time the property is placed under OLT, then, it necessarily follows the CLT, being an instrument issued subsequent to the coverage of the land under OLT, is evidence of ownership. However, the latter case of Vinzons-Magana disputes this conclusion.
In the case of Locsin vs. Valenzuela, 194 SCRA 195 (1991), the petitioners are owners of a landholding which was subject to the lifetime usufructuary of private respondent. The subject landholding was placed under the Operation Land Transfer. Petitioners filed a collection suit against the private respondent claiming that the payments made by the tenants in the subject properties should be considered as amortization payments for the price of land and as such should belong to the landowners and not to the usufructuary. The Court, upholding the petitioners contention, by construing PD No. 27 in relation to PD No. 57, Department Circular No. 8, dated 1 April 1975 and EO No. 228 dated 17 July 1987, ruled that under PD No. 27, the tenant-farmer became owner of the land as of 21 October 1972.
. . . Reading the foregoing provisions together, we observe that under Presidential Decree No. 27, the basic statute, the tenant-farmer became owner of a family-size farm of five (5) hectares or, if the land was irrigated, three (3) hectares, and that the tenant-owner had to pay for the cost of the land within fifteen (15) years by paying fifteen (15) equal annual amortization payments. Thus, it appears clear that ownership over lands (like Lot No. 2-C-A-3) subjected to Operation Land Transfer moved from the registered owner (the old landowner) to the tenants (the new landowners). The fifteen (15) annual amortizations to be paid by the tenants-owners were intended to replace the landholdings which the old landowners gave up in favor of the new landowners, the tenants-owners. It follows that in respect of land subjected to Operation Land Transfer, the tenants-farmers became owners of the land they tilled as of the effective date of Presidential Decree No. 27, i.e., 21 October 1972. Pending full payment of the cost of the land to the old landowner by the Land Bank of the Philippines, the leasehold system was "provisionally maintained" but the "lease rentals" paid by the tenants-farmers prior to such full payment by the Land Bank to the old landowner, would be credited no longer as rentals but rather as "amortization payments" of the price of the land, the unamortized portion being payable by the Land Bank. In respect of lands brought within the coverage of Operation Land Transfer, the leasehold system was legally and effectively terminated immediately on 21 October 1972 (notwithstanding the curious statement in Department Circular No. 8 that it was "provisionally maintained"). It was in respect of lands not yet subjected to the terms and effects of Operation Land Transfer that the leasehold system did continue to govern the relationship between the "landowner and his tenant-tillers".
The exemption of the old landowner from the capital gains tax on the amortization payments made to him by the tenants-purchasers, under Presidential Decree No. 57 (supra), underscores the fact, referred to above, that ownership or dominion over the land moved immediately from landowner to tenant-farmer, rather than upon completion of payment of the price of the land. In general, capital gains are realized only when the owner disposes of his property. . . .
In the case of Pagtalunan vs. Tamayo, 183 SCRA 252 (1990), petitioner sought to intervene in the expropriation proceedings filed by the Republic of the Philippines over the subject parcel of land. Petitioner argues that he, being a bona fide tenant of and holder of Certificate of Land Transfer covering the subject properties, is entitled to the proceeds of the expropriation. The Supreme Court, in rejecting petitioner's contention, ruled that the petitioner, being merely a CLT holder is not the owner of the subject property and thus, not entitled to just compensation. In explaining the nature of the CLT, the Court stated that:
. . . However, a careful study of the provisions of Pres. Decree No. 27, and the certificate of land transfer issued to qualified farmers, will reveal that the transfer of ownership over these lands is subject to particular terms and conditions the compliance with which is necessary in order that the grantees can claim the right of absolute ownership over them.
Under Pres. Decree No. 266 which specifies the procedure for the registration of title to lands acquired under Pres. Decree No. 27, full compliance by the grantee with the abovementioned undertakings is required for a grant of title under the Tenant Emancipation Decree and the subsequent issuance of an emancipation patent in favor of the farmer/grantee [Section 2, Pres. Decree No. 226]. It is the emancipation patent which constitutes conclusive authority for the issuance of an Original Certificate of Transfer, or a Transfer Certificate of Title, in the name of the grantee.
The mere issuance of the certificate of land transfer does not vest in the farmer/grantee ownership of the land described therein. The certificate simply evidences the government's recognition of the grantee as the party qualified to avail of the statutory mechanisms for the acquisition of ownership of the land tilled by him as provided under Pres. Decree No. 27. Neither is this recognition permanent nor irrevocable. Failure on the part of the farmer/grantee to comply with his obligation to pay his lease rentals or amortization payments when they fall due for a period of two (2) years to the landowner or agricultural lessor is a ground for forfeiture of his certificate of land transfer [Section 2, Pres. Decree No. 816].
Clearly, it is only after compliance with the above conditions which entitle a farmer/grantee to an emancipation patent that he acquires the vested right of absolute ownership in the landholding — a right which has become fixed and established, and is no longer open to doubt or controversy . . . . At best, the farmer/grantee, prior to compliance with these conditions, merely possesses a contingent or expectant right of ownership over the landholding. . . .
The Pagtalunan doctrine was reiterated in the case of Vinzons-Magana vs. Estrella, 201 SCRA 536 (1991). In this case, the petitioner assailed the constitutionality of LOI No. 474 and its implementing guideline, DAR Memorandum Circular No. 78-1978 . Moreover, petitioner prayed for the cancellation of the CLT over the subject landholding arguing that the issuance of the CLT in favor of the tenant without first expropriating the property to pay the petitioner landowner the full market value thereof before ceding and transferring the land to the tenant is unconstitutional as it is confiscatory and violative of the due process clause. The Supreme Court, brushing aside the petitioner's theory, held that the issue of the constitutionality of the taking of private property under the CARP law has already been settled by the Court. Moreover, citing the Pagtalunan case, the Court explained the nature of the CLT, stating that it does not vest in the farmer/grantee ownership of the land described therein. Therefore, there is no taking of property without payment of just compensation.
It is noted that in all three cases, the facts from which the controversy arose occurred prior to the issuance of EO 228 of then President Aquino which declared that full ownership to qualified beneficiaries of the lands covered by PD No. 27 as of 21 October 1972. Likewise, all cases were promulgated after the issuance of EO No. 228 in 1987. Therefore, it cannot be said that the reason behind the Locsin ruling declaring the effect of OLT as vesting ownership in the tenant is the fact that EO 228, which categorically clarified the legal effect of PD No. 27, was factored in the discussion of the case. Why then was EO No. 228 not considered in the subsequent case of Vinzons-Magana when it was already in effect then? The ponente instead referred to the pre-Locsin case of Pagtalunan vs. Tamayo. In so doing, it ignored altogether the legal implications of the Locsin doctrine.
Voluntary Offer to Sell
Voluntary Offer to Sell (VOS) is a scheme whereby the landowners voluntarily offer their agricultural lands for coverage regardless of phasing. It does not, however, mean that landholdings voluntarily offered for sale are automatically accepted by DAR. A VOS may be rejected if the landholding is not suitable for agriculture, or has a slope of more than eighteen percent (18%) and is undeveloped. Likewise, said offer may be refused if there are no takers or persons willing to be agrarian reform beneficiaries and, lastly, the only identified ARBs are the qualified children of the landowner. [DAR A. O. No. 06 (1997)]
As a general rule, withdrawal of VOS shall no longer be allowed after the receipt by the DAR of the letter offer for VOS, i.e., CARP Form No. 1. (DAR A.O. No. 06 , II [A]). However, DAR may allow the withdrawal of voluntary offers to sell if the withdrawal of VOS is for the purpose of acquisition and compensation through the Voluntary Land Transfer/ Direct Payment Scheme (VLT/DPS), provided, that the claim folder has not yet been forwarded to the LBP for the computation of the land value. (DAR A.O. No. 06  II [A] 2nd par.). DAR may also allow the withdrawal of VOS if the subject landholding is determined by DAR to be more suitable for a townsite, resettlement site or individual site needed to address a matter of national interest or concern in calamity situation (DAR A.O. No. 06 , II [C]).
In case lands voluntarily offered for sale are subsequently found to be outside the coverage of CARP, such lands shall be reconveyed to the original transferors. The manner of reconveyance is governed by A.O. No. 09, Series of 1997.
In the case of commercial farms, the offer to sell must have been submitted before the expiration of the deferment period in order that their acquisition through VOS may be allowed, otherwise the property shall be placed under compulsory acquisition (Section 8 [a] DAR A. O. No. 02-1998).
Landowners who voluntarily offer their lands for sale shall be entitled to an additional five percent (5%) cash payment. It must be noted, however, that banks and other financial institutions are not covered by said incentive. (Rep. Act No. 6657, [1988 ], Sec. 19)
Voluntary Land Transfer/ Direct Payment Scheme
Voluntary Land Transfer or Direct Payment Scheme (VLT/DPS) is a mode of acquisition whereby the landowner and the beneficiary enter into a voluntary arrangement for the direct transfer of the lands to the latter. Not all private agricultural lands may be subject of voluntary land transfer. For instance, lands mortgaged with banking and/or financial institutions cannot be the subject of VLT/DPS.
All notices for voluntary land transfer must be submitted to the DAR within the first year of the implementation of the CARP. Negotiations between the landowners and qualified beneficiaries covering any voluntary land transfer which remain unresolved after one (1) year shall not be recognized and such land shall instead be acquired by the government and transferred pursuant to the Comprehensive Agrarian Reform Law. [Rep. Act No. 6657 (1988), sec. 20.] It must be stressed that this should not be construed to mean that VLT/DPS is no longer allowed after one year from the effectivity of R.A. 6657. It is submitted that VLT/DPS may be entered into even beyond 15 June 1989, or one year after the effectivity of R.A. No. 6657. It is argued that that the exact moment when the one-year period under Section 20, par (a) of R.A. No. 6657 within which notices of VLT/DPS may be filed commences from the date when the land subject of the VLT/DPS is scheduled for acquisition and distribution according to the various phases of implementation described under Section 7 and 11 and the landowner is served a notice of acquisition of his landholding.
If the law intended that the one year period be reckoned from the approval or effectivity of RA 6657, it would have expressly said so, as it did in the provisions on priorities (Sec. 7), commercial farms (Sec. 11), and stock transfer option (Sec. 31). Instead, the law used the phrase "within the first year of implementation of the CARP" which is at the time Section 16 is implemented relative to specific and distinct classes of agricultural lands. [Memorandum of Asst. Sec. Peñaflor for the Secretary, August 23, 1999, p. 6.]
Section 20 (b) of R.A. No. 6657 provides that the terms and conditions of the transfer under this mode shall not be less favorable to the transferee than those of the government's standing offer to purchase from the landowner and to resell to the beneficiaries, if such offers have been made and are fully known to both parties.(Sec. 20 (b)) However this does not mean that existence of "a standing government offer" is not essential to the consummation of a VLT/DPS. The restriction imposed under Section 20 (b) relative to the government's standing offer, is not absolute. The law itself subjects its application only in instances where there is a prior offer by the government and that the same is known to both the landowner and the qualified beneficiaries. [Memorandum of Asst. Sec. Peñaflor for the Secretary, August 23, 1999, p. 6.]
The terms and conditions of VLT/DPS should include the immediate transfer of possession and ownership of the land in favor of the identified beneficiaries. Certificates of Land Ownership Award (CLOAs) shall be issued to the ARBs with proper annotations. [DAR A.O. No. 08, 1997 (Section II (E).]. The voluntary agreement shall include sanctions for non-compliance by either party and shall be duly recorded and its implementation monitored by the DAR. [Rep. Act No. 6657 (1988), sec. 20.]
Direct payments in cash or in kind may be made by the farmer-beneficiary to the landowner under terms to be mutually agreed upon by both parties, which shall be binding upon them, upon registration with the approval by the DAR. Said approval should be received by the farmer-beneficiary within thirty (30) days from the date of registration. In the event they cannot agree on the price of land, the procedure for compulsory acquisition as provided in Section 16 shall apply. The LBP shall extend financing to the beneficiaries for purposes of acquiring the land. [Rep. Act No. 6657 (1988), sec. 21.]
A pressing issue respecting VLT/DPS is its application to commercial farms. One school of thought espouses the theory that VLT/DPS cannot apply to commercial farms as Section 11 of R.A. No. 6657 specifically requires their ". . . immediate compulsory acquisition and distribution . . ." beginning 15 June 1998. Hence, it is argued that commercial farms may be acquired only through compulsory acquisition.
It is submitted that commercial farms may be acquired not only through compulsory acquisition but through VLT/DPS as well.
There is no dispute that commercial farms whose deferments have expired as of 15 June 1998 are subject to immediate compulsory acquisition and distribution as provided in Section 11 of R.A. No. 6657. It should be stressed, however, that all acquisitions under R.A. No. 6657 are compulsory in nature, in the sense that the landowners whose agricultural lands are covered by CARP have really no choice except to submit to the program.
The procedures for acquisition of private lands are provided for under Chapter V, Section 16 (a) to (f). The procedure for land acquisition are further elaborated by Chapter VI, Section 17 through Section 21. These provisions prescribe specific rules for valuation and payment which include, among others, Section 20 on voluntary land transfer and Section 21 on direct payment of beneficiaries. Thus, even as the process of compulsory acquisition under Section 16 is already in motion, the option available under Sections 20 and 21 may still be exercised. The foregoing framework of acquisition is the context within which the phrase "immediate compulsory acquisition," as used in Section 11 should be understood.
The situation now is that before commercial farms could be compulsorily acquired and distributed pursuant to Section 16, the preliminary steps for their acquisition have to be continued or pursued, to wit: identification of beneficiaries, inspection or technical survey and valuation. During this period, the landowners and the qualified beneficiaries may, by reason of the options available under Section 20 and 21, manifest their intent to voluntarily arrange for direct transfer and payment of the property. In short, the phrase "immediate compulsory acquisition" under Section 11 of R.A. No. 6657, when taken in the context of the procedures for acquiring lands under CARP, still includes VLT/DPS as an option for valuation and payment of commercial farms subject of acquisition. [Memorandum of Asst. Sec. Peñaflor for the Secretary, August 23, 1999, pp. 2-5]
DPS involving commercial farms may be availed of any time during the acquisition process, after the preparation of the master list but prior to the transmittal of the claim folder to the LBP. If the notice of acquisition is served by the parties upon to the DAR prior to the preparation of the master list, the notice shall be validated by the MARO with identified ARBs included in the master list, in a referendum to be held for this purpose. Acquisition under DPS of lands with liens and encumbrances may be allowed provided that the amount corresponding to the mortgage over the subject landholding shall be deducted from the total value of the land to be paid by the ARBs. Provided further that said agreement shall be upon mutual consent of both the ARBs and the landowner, duly concurred with by the mortgagee or lienholder. In case of delinquent real estate taxes, the ARBs may be allowed to assume such liability to be deducted from the total value of the land. Upon mutual consent of the ARBs and the landowner, duly concurred with by the mortgagor or the lienholder, the ARBs may assume the mortgage, provided that such obligation shall not exceed the annual amortization otherwise due to the land pursuant to Section 26 of RA 6657, if the subject landholding was acquired under VOS or CA [DAR A. O. No. 09 (1998), Section 9 (b)].
Compulsory acquisition is a mode whereby the land is expropriated by the State in accordance with the procedure outlined in Section 16 of R.A. No. 6657.
All private agricultural lands which have become due under the phase of implementation as provided in Section 7 of R.A. No. 6657 are subject to compulsory acquisition. However, where the landowner opts for other modes of acquisition such as voluntary offer to sell or voluntary land transfer, compulsory acquisition is suspended. In these cases, if negotiations fail, CA is resumed. Likewise, all idle or abandoned agricultural lands regardless of size are subject to compulsory acquisition. Lands subjected to Compulsory Acquisition may be allowed to shift to Voluntary Land Transfer/Direct Payment Scheme or Voluntary Offer to Sell provided that the claim folder had not yet been forwarded to the LBP for the computation of land value. [DAR A. O. 06, (1997) II (D).]
Voluntary stock distribution of corporate farms
Voluntary stock distribution is an alternative arrangement to the physical distribution of lands wherein corporate owners voluntarily divest a portion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries. Stock ownership is based on the capital stocks of the corporation and is equivalent to the agricultural land actually devoted to agricultural activities valued in relation to the total assets of the corporation. (Rep. Act No. 6657 , sec. 31 as implemented by DAR Adm. O. No. 10  and DAR Adm. O. No. 1 )
To safeguard the rights of farmer-beneficiaries, corporate farms with a voluntary stock distribution plan must comply with the following conditions:
1) The books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries;
2) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; and
3) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares. Moreover, any transfer of shares of stock by the original beneficiaries shall be void unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. (Rep. Act No. 6657 , sec. 31 as implemented by DAR Adm. O. No. 10 ).
However, corporate farm owners cannot avail of voluntary stock distribution at present. Section 31 of RA 6657 states that "if within two (2) years from the effectivity of CARP, the land or stock transfer has not been made or the plan for such stock distribution has not been approved by the Presidential Agrarian Reform Council (PARC) within the same period, the agricultural land of the corporate owners or corporation shall be subject to compulsory acquisition under existing DAR rules and regulations.
The Case of Hacienda Luisita
Hacienda Luisita, Inc. is a corporate farm owning a total of 4,916 hectares planted to sugarcane located in Tarlac. In May 1988, it applied to avail of the stock distribution plan under CARP. The application was approved in November 1988. The farm has a total of 355,531,462 shares of stocks with a par value of P1.00 per share. One-third of these shares is subject for distribution to the farmworker-beneficiaries (FBs) under the stock distribution plan. The shares for the FBs are to be distributed in a span of 30 years. At the time of application for stock distribution, there were about 6,000 FBs within the farm. Under its stock distribution plan, FBs are supposed to receive cash dividends accruing to their respective shares, homelots, representation in the Board of Directors, production based incentives, and other fringe benefits.
Procedure for Acquisition of Private Agricultural Lands
The procedure for the acquisition of private agricultural lands as provided for in Sec. 16, RA 6657 are as follows:
a) After having identified the land, the landowners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered mail, and post the same in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Said notice shall contain the offer of the DAR to pay a corresponding value in accordance with the valuation set forth in Sections 17 and 18, and other pertinent provisions hereof.
DAR identifies the land to be covered by CARP as well as the landowners and beneficiaries thereof on the basis of a master list or inventory of landholdings prepared by the field offices pursuant to the Land Acquisition and Distribution Tracing System (LADTRACKS) and the CARP Scope Validation Project. Said master list in turn is obtained from the LISTASAKA statements as verified or complemented by the records of the Register of Deeds and Assessor's Offices, review of town plan and zoning ordinances, field surveys, interviews and community consultations and general knowledge of the land ownership pattern in the barangays or municipalities. The identification of lands is done by the DAR Municipal Office (DARMO) which gathers documents such as OCT/TCT, tax declaration, copy of the approved survey plan of the property and prepares the claim folder of the landowner. Thereafter, the DARMO conducts preliminary ocular inspection to determine initially whether or not the property may be covered under CARP.
If the property is coverable under CARP, the process of acquisition continues. DARMO sends the landowner the Notice of Coverage and Field Inspection with a copy of the Pre-OCI Report by personal delivery with proof of service or by registered mail with return card. However, in the case of deferred commercial farms, the Order of Deferment previously issued over the landholding shall serve, upon expiration of the deferment period of the subject commercial farm, as the Notice of Coverage, supported by the Compliance Work Program and Summary of Exceptions originally submitted with the approved deferment application. However, for record purposes, the landowner shall be served a Notice of Expiration of Deferment which shall contain a reminder of his right to retention should he wish to exercise the same. [Section 9 (a) (1), DAR A.O. No. 02-1998]. The landowner is invited to join the field investigation to select his retention area and to submit his statement of production and income. If the landowner cannot be contacted or refuses to accept said Notice, the notice shall be effected by publication in a newspaper of national circulation. Likewise, a notice on the schedule of the field investigation shall be sent to the BARC, DENR, DA, LBP and prospective beneficiaries. The DARMO then shall post a copy of the notice of coverage and field inspection for seven working days in the bulletin board of the barangay and municipal halls where the property is located and issues Certification of Posting Compliance. Thereafter, the DARMO shall conduct joint field investigation of the property with the LBP, DENR, DA BARC, landowner and prospective ARBs. Jointly with the LBP and BARC, the DARMO shall prepare the Field Investigation Report and the Land Use Map. The DARMO shall screen/select qualified ARBs and cause the signing of the Application Purchase and Farmer's Undertaking (APFU).The DARMO shall forward the claim folder to DARPO for review and completion of documents. The land is then surveyed. The claim folder is sent to the Land Bank for valuation. At this stage, the DARPO sends the Notice of Land Valuation and Acquisition to the Landowner (DAR A. O. No. 02 (1996) as amended by DAR A.O. No. 1 (1998).]
In the preliminary stage of the acquisition process, notice to the landowner is vital to the validity of coverage and acquisition of the landholding. The Supreme Court had occasion to discuss and stress the importance of these notices in the case of Roxas & Co. vs. CA, G.R. No. 127876, December 17, 1999. In this case, petitioner Roxas and Co., a domestic corporation owns three haciendas. Notices of acquisition informing the landowner that two of the haciendas were being compulsorily acquired were sent by the DAR and served on the administrator in his address in the hacienda. The administrator participated in the acquisition proceedings as representative of the owner. Subject landholdings were acquired by the DAR and subsequently distributed to the beneficiaries. The petitioner assailed the validity of the acquisition proceedings on the ground, among others, that it was denied due process as no notice of acquisition was ever served on it. The Supreme Court held that:
. . . the procedure in sending notices is important to comply with the requisites of due process especially when the owner is a juridical entity.
. . . The Notice of Acquisition in Section 16 of the CARL is required to be sent to the landowner by personal delivery or registered mail. Whether the landowner be a natural or juridical person to whose address the Notice may be sent by personal delivery or registered mail, the law does not distinguish. The DAR administrative orders also do not distinguish. In the proceedings before the DAR the distinction between natural and juridical persons in the sending of notices may be found in the Revised Rules of Procedure of the DARAB. Service of pleadings before the DARAB is governed by Section 6, Rule V of the DARAB Revised Rules of Procedure. Notices and Pleadings are served on private domestic corporations or partnerships in the following manner:
"Section 6. Service Upon Private Domestic or Partnership. — If defendant is a corporation organized under the laws of the Philippines or a partnership duly registered service may be made on the president, manager, secretary, cashier, agent or any of its directors or partners"
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14 provides:
"Section 13. Service upon private domestic corporation or partnership. — If the defendant is a corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager, secretary, cashier, agent or any of its directors."
Summonses, pleadings and notices in cases against private domestic corporation before the DARAB and the regular courts are served on the president, manager, secretary, cashier, agent or any of its directors. These persons are those through whom the private domestic corporation or partnership is capable of action.
Jaime Pimentel (the administrator) is not the president, manager, secretary, cashier, agent or any of its director of the landowner corporation. Is he, the administrator of the two Haciendas, considered an agent of the corporation?
The purpose of all rules for the service of process on a corporation is to make it reasonably certain that the corporation will receive prompt notice in an action against it. Service must be made on a representative so integrated with the corporation as to make it a priori supposable that he will realize his responsibilities and know what he should do with any legal papers served on him, and bring home to the corporation notice of the filing of the action. The DAR's evidence does not indicate whether the administrator's duties is so integrated with the corporation that he would immediately realize his responsibilities and know what he should do with any legal papers served on him. . . ."
It is submitted that the DARAB Rules and Procedure and the Rules of Court were improperly applied to the aforecited case. The rules on service of summons provided in the Rules Court should have not been applied since what is involved in this case is acquisition proceedings which is administrative in nature. Moreover, it must be emphasized that the DAR, in adjudicating agrarian reform matters, is not bound by technical rules of procedure. (Sec. 50, R.A. 6657). What is important in administrative adjudication is the right to be heard. Said requirement was substantially complied with in this case considering that the administrator, who takes charge of the daily operations of the subject properties, participated in the acquisition proceedings. Therefore, it cannot be argued that there was denial of due process. Finally, the application of the DARAB Rules of Procedure is erroneous. This is so since the matter of service of notice of acquisition does not fall within the jurisdiction of the DARAB.
b) Within thirty (30) days from the date of receipt of written notice by personal delivery or registered mail, the landowner, his administrator or representative shall inform the DAR of his acceptance or rejection of the offer.
c) If the landowner accepts the offer of the DAR, the Land Bank of the Philippines (LBP) shall pay the landowner the purchase price of the land within thirty (30) days after he executes and delivers a deed of transfer in favor of the government and surrenders the Certificate of Title and other muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision.
The constitutionality of the aforementioned provision was upheld by the Supreme Court in the case of Association of Small Land Owners in the Philippines, Inc., vs. Secretary of Agrarian Reform, 175 SCRA 343 (1989):
Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the offer of the government to buy his land. . .
To be sure, the determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other branch or official of the government. . . .
A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that rendered the challenged decrees constitutionally objectionable. Although the proceedings are described as summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit evidence on the real value of the property. But more importantly, the determination of the just compensation by the DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section 16(f) clearly provides: Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation. The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts of justice will still have the right to review with finality the said determination in the exercise of what is admittedly a judicial function."
Said ruling was reiterated in the case of Vinzons-Magana vs. Estrella, 201 SCRA 538 (1991).
The factors to be considered in the determination of just compensation as enumerated in Section 17 of R.A. No. 6657 are not exclusive. The DAR and LBP are not confined in their determination of just compensation to the factors/criteria set forth in said provision. Notably, Section 17 does not provide hard and fast rules which must be strictly adhered to by DAR and LBP in the determination of just compensation. While said section provides that the factors/criteria mentioned therein" shall be considered" it does not expressly state that only these factors/criteria and no other shall be considered. The factors/criteria set forth in Sections 17, 18 and other pertinent provisions for that matter should be deemed as mere standards to guide the proper officials in the determining just compensation, but in no case shall control or limit such determination, the ultimate consideration being that the compensation be the full and fair equivalent of the property taken from its owner by the expropriator. [DOJ Opinion No. 109 (1991), July 25, 1991).]
In the case of Land Bank of the Philippines vs. CA and Pascual, G. R. No. 128557, December 29, 1999, the Supreme Court ruled that in the determination of just compensation pursuant to Section 18 of R.A. No. 6657, consent of the farmer-beneficiary is not needed. Furthermore, the Court ruled that once the Land Bank agreed to the valuation, it is its duty to pay the landowner said amount. In this case, private respondent's properties were subjected to Operation Land Transfer. Consequently, the PARO issued a valuation of the land which was rejected by the private respondent who filed a case before the PARAD seeking to annul the PARO's valuation. The PARAD, ruled in favor of private respondent, came up with its own valuation, and directed the petitioner LBP to pay private respondent said amount. Petitioner refused to pay the value of the land as determined by the PARAD arguing among others that since it merely guarantees or finances the payment of the value of the land, the farmer-beneficiary's consent, is indispensable and that the only time the petitioner becomes legally bound to finance the transaction is when the farmer-beneficiary approves the appraised value of the land. In other words, petitioner asserts that the landowner, the DAR, the Land Bank and the farmer-beneficiary must all agree to the value of the land as determined by them. The Court, brushing aside petitioner's contention, stated:
A perusal of the law however shows that the consent of the farmer-beneficiary is not required in establishing the vinculum juris for the proper compensation of the landowner. Section 18 of R. A. No. 6657 states —
Sec. 18. Valuation and Mode of Compensation. — The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP in accordance with the criteria provided for in Sections 16 and 17 and other pertinent provisions hereof, or as may be finally determined by the court as just compensation for the land.
As may be gleaned from the aforementioned section, the landowner, the DAR and the Land Bank are the only parties involved. The law does not mention the participation of the farmer beneficiary.
. . . Once the Land Bank agrees with the appraisal of the DAR, which bears the approval of the landowner, it becomes its legal duty to finance the transaction. In the instant case, petitioner participated in the valuation proceedings held in the Office of the PARAD through its counsel . . .
e) Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the qualified beneficiaries.
The CARP Law conditions the transfer of possession and ownership of the land to the government on the receipt by the landowner of the corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title remains with the landowner. No outright change of ownership is contemplated either. (Association of Small Land Owners in the Philippines vs. Secretary of Agrarian Reform), 175 SCRA 343 (1989.)
It must be noted, however, that the opening of a trust account and issuance of a certification from Land Bank that a certain sum has been earmarked for the landowner does not constitute substantial compliance with Section 16(e) of R.A. No. 6657. In the case of LBP vs. CA [248 SCRA 149 (1995)] respondent landowners assailed the acquisition of their properties on the ground that there was a taking without just compensation. They averred that the "earmarking," "reservation" and "deposit in trust" made by the DAR and the Land Bank pursuant to DAR A. O. No. 09-1990 is not equivalent to just compensation under R.A. No. 6657. The Court nullified DAR A.O. No. 09-1990, ruling as follows:
. . . It is very explicit from Section 16 (e) that the deposit must be made only in "cash" or in "LBP bonds." Nowhere does it appear nor can it be inferred that the deposit can be made in any other form. If it were the intention to include a "trust account" among the valid modes of deposit, that should have been made express, or at least, qualifying words ought to have appeared from which it can be fairly deduced that a "trust account" is allowed. In sum, there is no ambiguity in Section 16 (e) of R. A. No. 6657 to warrant an expanded construction of the term "deposit." . . .
. . . The ruling in the Association of Small Landowners case [that payment of the just compensation is not always required to made fully in money] merely recognized the extraordinary nature of the expropriation to be undertaken under R. A. No. 6657 thereby allowing a deviation from the traditional mode of payment other than in cash. It did not, however, dispense with the settled rule that there must be full payment of just compensation before title to the expropriated property is transferred. . . .
What the Supreme Court nullified was merely the form in which the deposit was made, i.e., the deposit in trust and not the deposit per se as payment to the landowners for the expropriated lands. Thus, in effect, the Court in making such pronouncement, upheld the validity of deposit per se as payment of just compensation.
f) Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination.
The operating procedures for the acquisition of private agricultural lands are outlined in the following administrative issuances:
• DAR A. O. No. 2, Series of 1996 entitled "Revised Rules Governing the Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell (VOS) and Compulsory Acquisition (CA) Pursuant to R. A. 6657" as amended by DAR A. O. No. 2-98;
• DAR A. O. No. 09, Series of 1998 entitled "Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms";
• DAR A. O. No. 08, Series of 1997 entitled "Revised Rules on the Acquisition and Distribution of Compensable Agricultural Lands Under VLT/DPS";
• DAR A. O. No. 12, Series of 1990 entitled "Policy Guidelines and Operating Procedures in the Identification and Acquisition of Idle and Abandoned Lands".
Reconstitution of Lost or Damaged Title
A pressing operational problem besetting agrarian reform implementors is the delay in the acquisition and distribution of agricultural lands with lost or destroyed titles. To address this concern, DAR Memorandum Circular No. 05, Series of 1994 was issued outlining the procedures on the reconstitution of lost or destroyed titles.
Reconstitution of a certificate of title denotes restoration of the instrument which is supposed to have been lost or destroyed in its original form and condition. The purpose of the reconstitution of title or any document is to have the same reproduced, after proper proceedings, in the same form they were when the loss or destruction occurred. (Heirs of Pedro Pinote vs. Dulay 198 SCRA 12 )
There are two types of reconstitution of titles: judicial and administrative. Judicial reconstitution partakes of a land registration proceeding and is perforce a proceeding in rem. (Republic vs. Intermediate Appellate Court, 157 SCRA 62 ). Judicial reconstitution is governed by Republic Act No. 26 in relation to Section 110 of P. D. No. 1529. Administrative reconstitution of title is likewise governed by Republic Act No. 26, as amended by Republic Act No. 6732. Under DAR Memorandum Circular No. 5 (1994), the Department of Agrarian Reform (DAR), through the duly authorized DAR lawyer, may file a petition for administrative or judicial reconstitution when the notice of coverage over landholdings whose titles were lost or destroyed has already been issued.
As a general rule, the remedy for the reconstitution of lost or destroyed original copies of certificates of titles in the offices of the Register of Deeds is the filing of a petition for judicial reconstitution of title. However, administrative reconstitution of lost or destroyed original copies of certificates of title may be availed of in case of substantial loss or destruction of land titles due to fire, flood or other force majeure where the number of certificates lost or damaged is at least ten (10) percent of the total number of titles in the custody of the Register of Deeds but in no case shall the number of titles lost or damaged be less than five hundred (500) as determined by the Administrator of the Land Registration Authority. (Section 1, R.A. No. 6732 ).
Detailed discussion of the procedures for the filing of petition for reconstitution are provided for in R.A. No. 6732 as implemented by LRA Circular dated 26 July 1989, R.A. No. 26 as amended, LRA Circular No. 35 dated 13 June 1983 and DAR Memorandum Circular No. 05, Series of 1994.
Just compensation means the equivalent for the value of the property at the time of its taking. It means a fair and full equivalent for the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements and capabilities should be considered. (Export Processing Zone Authority vs. Dulay, 149 SCRA 305 ).
In the case of Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, supra, the Supreme Court further explained the meaning of "just compensation". It said:
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the measure is not the taker's gain but the owner's loss. The word "just" is used to intensify the meaning of the word "compensation" to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, ample.
As held in Republic of the Philippines v. Castellvi, there is compensable taking when the following conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more than a momentary period; (3) the entry must be under warrant or color of authority; (4) the property must be devoted to public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property. All these are envisioned in the measures before us (at 378, 379).
(T)he content and manner of the just compensation provided for in the afore-quoted Section 18 of the CARP Law is not violative of the Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all this Court is not a cloistered institution removed from the realities and demands of society or oblivious to the need for its enhancement. The Court is as acutely anxious as the rest of our people to see the goal of agrarian reform achieved at last after the frustrations and deprivations of our peasant masses during all these disappointing decades. We are aware that invalidation of the said section will result in the nullification of the entire program, killing the farmer's hopes even as they approach realization and resurrecting the spectre of discontent and dissent in the restless countryside. That is not in our view the intention of the Constitution, and that is not what we shall decree today" (at 388).
Determination of Just Compensation
Under Sec. 17 of RA 6657, the factors considered in the determination of just compensation are:
a) cost of acquisition;
b) current value of like properties;
c) nature of land;
d) actual use;
f) sworn valuation by the landowner;
g) tax declaration;
h) assessment by government assessors;
i) social and economic benefits contributed by farmers and farmworkers and by the government; and
j) non-payment of taxes or loans secured from government financing institutions on land.
The provisions of RA 6657 on just compensation do not provide hard-and-fast rules which must be strictly adhered to by DAR and the LBP in determining just compensation.
Notably, while Section 17 provides that the factors/criteria mentioned therein "shall be considered" in determining just compensation, it does not expressly state that only these factors/criteria, and no others, shall be considered.
. . . The factors/criteria set forth in Section 17, and in Section 18 and other pertinent provisions for that matter, should be deemed as mere standards to guide the proper officials in determining just compensation, but should in no case control or limit such determination, the ultimate consideration being that the compensation be the "full and fair equivalent of the property taken from its owner by the expropriator".
. . . In every case, what should control is the "just-ness" of the proposal taking into account the "revolutionary" nature of the expropriation under the CARL. (DOJ Opinion No. 109 (1991))."
Valuation or Computation
The basic formula for the valuation of lands covered by Voluntary Offer to Sell and Compulsory Acquisition is:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where : LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula is used if all the three (3) factors are present, relevant, and applicable (DAR Admin. O. No. 5 ). In any case, the resulting figure in the equation is always multiplied to the number of area or hectarage of land valued for just compensation.
To illustrate the formula wherein all of the factors above mentioned are present:
Area : 3 hectares Capitalized Net Income : P24,900
Market Value : P10,000 Comparable Sales : P 5,000
The land value is : LV = (24,900 x 0.6) + (5,000 x 0.3) + (10,000 x 0.1)
= (14,940) + (1,500) + (1,000)
= (17,440) x (3 hectares)
= P 52,320
Computation of land value
Whenever one of the factors in the general formula is not available, the computation of land value will be any of the three (3) computations or formulae:
LV = (CNI x 0.9) + (MV x 0.1)
[if the comparable sales factor is missing]
LV = (CS x 0.9 ) + (MV x 0.1)
[if the capitalized net income is unavailable]
LV = MV x 2
[if only the market value factor is available]
In case the comparable sales factor (CS) is relevant or applicable, the land value is computed in accordance with the general formula where MV is based on the lowest productivity classification of the land.
In every case, the value of idle land using the formula MV x 2 should not exceed the lowest value of land within the same estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of claimfolder (DAR Admin. O. No. 5 ).
Computation of land value under certain conditions
Valuation of lands planted to permanent but not yet fruit-bearing crops
There are times when the land being valued is planted to permanent crops which are not yet productive or not yet fruit-bearing at the time of the Field Investigation (FI) of the land. The land value is equivalent to the value of the land plus the cumulative development cost (CDC) of the crop from land preparation up to the time of FI. In equation form, the land value can be computed as:
LV = (MV x 2) + CDC
a) The market value (MV) to be used is the applicable unit market value (UMV) classification of idle land.
b) The cumulative development cost (CDC) is grossed-up from the date of FI up to the date of LBP Claim Folder (CF) receipt for processing but in no case should the grossed-up CDC exceed the current CDC data based on industry.
In case the CDC data provided by the landowner could not be verified, DAR and LBP should secure the said data from concerned agency/ies or, in the absence thereof, should establish the same.
However, the resulting land value should not exceed the value of productive land similar in terms of crop and plant density within the estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of CF (DAR Admin. O. No. 5 ).
Lands with permanent but not yet productive crops introduced by farmer-beneficiaries
When the permanent but not yet fruit-bearing crops are introduced by the farmer-beneficiaries, the land valuation formula used is the same as if only the MV is available provided the MV used is the applicable UMV classification of idle land. In equation form:
LV = MV x 2
In any case, the resulting land value should not exceed the value of productive land similar in terms of crop and plant density within the estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of CF. And in case the CS is relevant or applicable, the land value is computed in accordance with the general formula where MV is based on the applicable classification of the land (DAR Admin. O. No. 5 ).
Use of Salvage Value on valuation of lands planted to permanent but no longer productive or ready for cutting crops
When lands being valued are planted to permanent but no longer productive or the crops are ready for cutting, the computation considers the applicable UMV classification of idle land plus the salvage value of the standing trees at the time of the FI. In equation form:
LV = (MV x 2) + Salvage Value
But the resulting land value should not exceed the value of productive land similar in terms of crop and plant density within the estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of CF. In case where CS is relevant or applicable, the land value is computed in accordance with the general formula where MV is based on the lowest productivity classification of the land (DAR Admin. O. No. 5 ).
Land value under Voluntary Offer to Sell
In VOS, the computed value using the applicable formula should not exceed the landowner's offer. The landowner's offer is grossed up from the date of the offer up to the date of receipt of CF by LBP from DAR for processing. The date of receipt of CF by LBP from DAR means the date when the CF is determined by the LBP-LVLCO to be complete with all the required documents and valuation inputs duly verified and validated, and ready for final computation/processing.
Factors of Land Value
Computation of Capitalized Net Income
Capitalized Net Income refers to the difference between the product of the gross sales and selling prices (AGP x SP) and total cost of operations (CO) capitalized at 12%.
Expressed in equation form:
(AGP x SP) - CO
CNI = ———————————
Where: CNI = Capitalized Net Income
AGP = Annual Gross Production corresponding to the latest available 12-months' gross production immediately preceding the date of FI.
SP = (selling prices) The average of the latest available 12-months' selling prices prior to the date of receipt of the CF by LBP for processing, such prices to be secured from the Department of Agriculture (DA) and other appropriate regulatory bodies or, in their absence, from the Bureau of Agricultural Statistics. If possible, SP data is gathered from the barangay or municipality where the property is located. In the absence thereof, selling prices may be secured within the province or region.
CO = Cost of Operations
Whenever the cost of operations could not be obtained or verified, an assumed net income rate (NIR) of 20% is used. Landholdings planted to coconut which are productive at the time of FI will continue to use the assumed NIR of 70%. DAR and LBP will continue to conduct joint industry studies to establish the applicable NIR for each crop covered under CARP.
0.12 = Capitalization Rate
To illustrate the computation of capitalized net income:
Number of coconut trees : 95 trees/hectare
Selling Prices : P6.74/kg.
AGP = 95 trees/ha. x 30 nuts/tree 4.5 nuts/kg. = 633.33 kg.
CNI = 633.33 kg. x 6.74/kg. x 70% NIR for coconut land
Comparable sales refers to any one or the average of all the applicable sub-factors, namely sales transactions (ST), acquisition cost (AC) and market value based on mortgage (MVM):
Where: ST = (Peso Value of Sales Transactions)
The criteria in the selection of the comparable sales transaction (ST) shall be as follows:
a) When the required number of STs is not available at the barangay level, additional STs may be secured from the municipality where the land being offered/covered is situated to complete the required three comparable STs. In case there are more STs available than what is required at the municipal level, the most recent transactions shall be considered. The same rule applies at the provincial level when no STs are available at the municipal level. In all cases, the combination of STs sourced from the barangay, municipality and province should not exceed three transactions.
b) The land subject of acquisition as well as those subject of comparable sales transactions should be similar in topography, land use, i.e., planted to the same crop. Furthermore, in case of permanent crops, the subject properties should be more or less comparable in terms of their stages of productivity and plant density.
c) The comparable sales transactions should have been executed within the period 1 January 1985 to 15 June 988, and registered within the period 1 January 1985 to 13 September 1988.
d) STs are grossed up from the date of registration up to the date of receipt of CF by LBP from DAR for processing.
AC or Acquisition Cost is deemed relevant when the property subject of acquisition was acquired through purchase or exchange with another property within the period 1 January 1985 to 15 June 1988 and registered within the period 1 January 1985 to 13 September 1988, and the condition of said property is still substantially similar from the date of purchase or exchange to the date of FI.
AC is grossed up from the date of registration of the deed of sale/exchange up to the date of receipt of CF by LBP from DAR for processing.
MVM or Market Value Based on Mortgage. For MVM to be relevant or applicable, the property subject of acquisition should have been mortgaged as of 15 June 1988 and the condition of the property is still substantially similar up to the date of FI. MVM refers to the latest available appraised value of the property (DAR Admin. O. No. 5 ).
MV or Market Value per Tax Declaration is the latest Tax Declaration (TD) and Schedule of Unit Market Value (SUMV) issued prior to receipt of CF by LBP. The Unit Market Value (UMV) is grossed-up from the date of its effectivity up to the date of receipt of CF by LBP from DAR processing.
Formula in Grossing-Up of Valuation Inputs
The basic formula in the grossing-up of valuation inputs such as LO's Offer, Sales Transaction (ST), Acquisition Cost (AC), Market Value Based on Mortgage (MVM) and Market Value per Tax Declaration (MV) is:
Valuation Input = Valuation Input x Regional Consumer
Price Index (RCPI) Adjustment Factor
The various valuation inputs are multiplied with the RCPI Adjustment Factor. The RCPI Adjustment Factor refers to the ratio of the most recent available RCPI for the month issued by the National Statistics Office as of the date when the CF was received by LBP from DAR for processing and the RCPI for the month as of the date/effectivity/registration of the valuation input. Expressed in equation form:
Most Recent RCPI for the Month as of the Date
of Receipt of CF by LBP from DAR
RCPI Adjustment Factor = —————————————————
RCPI for the Month Issued as of the Date/
Effectivity/Registration of the Valuation Input
(DAR Admin. O. No. 5 )
Valuation of deferred commercial farms
The formulae provided under DAR AO 5 (1998) are used in the computation of valuation for deferred commercial farms (DAR Adm. O. No. 9 ).
Valuation of lands of corporate farms
Agricultural lands owned by corporate farms are valued by considering the following factors:
a) factors for the determination of just compensation; and
Valuation of lands planted to sugarcane
There is a different computation for valuation of lands planted to sugarcane because of the so-called "ratooning". In the valuation of lands planted to sugar, the effects of ratooning are considered. Ratooning is the cutting of the straw close to the ground at harvesting time after all the standing water has been drained out to allow the young tillers to sprout out of the rootstocks and develop into mature normal bearing plants in three or four months with the aid of fertilizer, manure or compost (Rep. Act No. 1199 , sec. 5, par. [g-2]).
The method of ratooning affects land valuation of the property. Majority of sugar planters practice at least up to two (2) ratoons. This method reduces the cost of production for sugar planters. Hence, the computation of the land value is adjusted.
The applicable guideline in the valuation of lands planted to sugarcane is the Joint DAR-LBP MC 15 (1999).
Valuation of rubber plantations
Under the old rubber land valuation guideline or the Land Valuation Guidelines No. 6 (1990), the recognized income of rubber plantations is based on processed crumb rubber. Under one of the latest guidelines, the standard income approach to valuation, measures the net income or productivity of the land based on the farm produce (in their raw forms) and not on the entire agri-business income enhanced by the added value of farm products due to processing. It appropriately determines the Capitalized Net Income of rubber plantations based on the actual yield and farm gate prices of raw products (field latex and cuplump) and the corresponding cost of production.
Furthermore, the growing market for old rubber trees which was not considered in the old LVG is now considered.
There are also other several situations which are considered in the computation of just compensation for rubber plantations. There are rubber claims pending with the Department of Agrarian Reform Adjudication Board (DARAB) for reasons such as landowner's rejection of the valuation but the plantation remains under the management of the landowner. Due to the time gap between the original date of FI and the date of DARAB's order to recompute the property (during which period, the age and productivity of the trees change), the valuation should be made on the basis of the age and productivity of the trees at the time of recomputation (Joint DAR-LBP Memo. Circ. No. 8, ).
Compensation for Mt. Pinatubo areas
Under Joint DAR-LBP AO 3 (1994), agricultural lands affected by the Mt. Pinatubo eruptions have been classified into three categories based on the NEDA Region III Geographic Information System Database, to wit:
Under the Category I, are those areas actually affected by the lahar and pyroclastic deposits, including those areas which have become silted, eroded or continuously flooded for an indefinite period of time.
Under the Category II, are those areas not yet affected but have the possibility of being actually affected.
Under the Category III, are those areas actually covered or affected by ashfall but which remain productive.
The general rule is, lands under Category III shall be acquired and landowners shall be compensated. While compensation of lands under Categories I and II shall be effected under the following conditions:
a) Claims have been approved by the LBP and:
• Landowner has executed a Deed of Assignment, Warranty and Undertaking on or before the issuance of the Joint DAR-LBP Administrative Order No. 3, Series of 1994; or
• Transfer Certificate of Title was already registered in the name of RP on or before the issuance of the same administrative order; or
• Partial payment was already effected.
b) Emancipation Patents/Certificates of Land Ownership Award have been registered on or before 12 June 1991 regardless of whether or not the claimfolder is with the LBP.
Summary Administrative Proceedings
Land Bank of the Philippines
The Land Bank of the Philippines is primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under either the voluntary offer to sell or compulsory acquisition arrangement as governed by RA 6657. The DAR makes use of the determination of the land valuation and compensation by the LBP, in the performance of its functions (Exec. Order. No. 405 , sec. 1).
There are several provisions of laws which encourage public participation in the determination of land valuation, namely:
a) Sec. 3 of EO 129-A states:
. . . partnership between government and organization of farmers and farmworkers in agrarian reform policy formulation, program implementation and evaluation shall be institutionalized . . .
b) Sec. 18 of RA 6657 provides:
The LBP shall compensate the landowners in such amount as may be agreed upon by the landowner and the DAR and the LBP . . .
c) DAR AO 14 (1990) emphasizes Sec. 47 of RA 6657 on BARC's assistance in the initial determination of the value of the land.
Preliminary determination of just compensation cases
The summary administrative proceeding is conducted before the Provincial Agrarian Reform Adjudicator if the compensation offered does not exceed two (2) million pesos; or before the Regional Agrarian Reform Adjudicator if the government's offer is more than two (2) million pesos but does not exceed five (5) million pesos; or before the Department of Agrarian reform Adjudication Board if the offer is more than five (5) million pesos (DAR Adm. Order No. 8 ).
Under DAR MC 1 (1995), valuation cases involving PD 27 lands are cognizable only by the Secretary of DAR (reiterating Sec. 12 of PD 946 ). But in the recent case of Land Bank of the Phils. vs. CA, G.R. No. 128557, 29 December 1999, the Supreme Court declared that it was an error for the Secretary of Agrarian Reform to issue DAR MC 1 (1995) directing the DARAB to refrain from hearing valuation cases involving PD 27 lands. It is the DARAB which has the authority to determine the initial valuation of lands involving agrarian reform pursuant to Sec 1 (b), Rule II, 1994 Revised Rule of the DARAB although such valuation may only be considered preliminary as the final determination of just compensation is vested in the courts.
The PARAD's, RARAD's, or DARAB's summary administrative proceeding is merely a preliminary determination of the just compensation due to the landowner. The landowner has the right to question such preliminary determination of the Adjudication Board before the Special Agrarian Courts.
"The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts of justice will still have the right to review with finality the said determination in the exercise of what is admittedly a judicial function" (Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 345 , at p. 382).
The Regional Trial Courts have not been completely divested of jurisdiction over agrarian reform matters. Section 56 of RA 6657, on the other hand, confers "special jurisdiction" on "Special Agrarian Courts", which are Regional Trial Courts designated by the Supreme Court — at least one (1) branch within each province — to act as such. These Regional Trial Courts qua Special Agrarian Courts have, according to Section 57 of the same law, original and exclusive jurisdiction over: 1) "all petitions for the determination of just compensation to land-owners," and 2) "the prosecution of all criminal offenses under . . . (the) Act (at 890). Vda. de Tangub vs. CA, 191 SCRA 885 (1990)
Although the proceedings are described as summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit evidence on the real value of the property. But more importantly, such determination of just compensation by the DAR, as earlier stated is by no means final and conclusive upon the landowner or any other interested party for Section 16 (f) clearly provides: "Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation" Magana vs. Estrella, 201 SCRA 536 (1991).
In Phil. Veterans Bank vs. Court of Appeals, G.R. No. 132767, 18 January 2000, petitioner Bank argued that the DAR Adjudicators have no jurisdiction to determine just compensation for the taking of lands under CARP because such jurisdiction is vested in Regional Trial Courts designated as Special Agrarian Courts. Hence, Petitioner could file its petition with the RTC beyond the 15-day period of appeal from the decision of the DAR Adjudicator. The RTC dismissed the petition of Petitioner for being filed beyond the 15-day period for appeal. The Supreme Court reiterated its ruling in Republic vs. Court of Appeals, supra, and said:
. . . this rule is an acknowledgment by the DARAB that the power to decide just compensation cases for the taking of lands under R.A. No. 6657 is vested in the courts. It is error to think that, because of Rule XIII, S 11, the original and exclusive jurisdiction given to the courts to decide petitions for determination of just compensation has already been transformed into an appellate jurisdiction. It only means that, in accordance with settled principles of administrative law, primary jurisdiction is vested in the DAR as an administrative agency to determine in a preliminary manner the reasonable compensation to be paid for the lands taken under the Comprehensive Agrarian Reform Program, but such determination is subject to challenge in the courts.
The jurisdiction of the Regional Trial Courts is not any less "original and exclusive" because the question is first passed upon by the DAR, as the judicial proceedings are not a continuation of the administrative determination. For the matter, the law may provide that the decision of the DAR is final and unappealable. Nevertheless, resort to courts cannot be foreclosed on the theory that courts are the guarantors of the legality of administrative action.
Valuation of PD 27 Lands
Under Sec. 2 of EO 228, land valuation shall be based on the Average Gross Production (AGP) as determined by the Barangay Committee on Land Production (BCLP). The formula is:
Rice Lands LV = AGP x 2.5 x P 35 *
Corn Lands LV = AGP x 2.5 x P 31**
* government support price for one cavan of 50 kilos of palay on October 21, 1972
** government support price for one cavan of 50 kilos of corn on October 21, 1972
Lease rentals paid to the landowner by the farmer-beneficiary after 21 October 1972 shall be considered as advance payment for the land.
The factor of government support price provided under EO 228 does not undervalue PD 27 lands. Under DAR AO 13 (1994), an increment of 6% yearly interest compounded annually on lands covered by PD 27 and EO 228 is granted. The formula is:
(Computed land value using the original formula) x (1.06)n
where : n = number of years from date of tenancy up to effectivity date
The landowners qualified to receive the compensation based on the increment formula are:
a) Those whose lands are actually tenanted as of October 21, 1972 or thereafter and Operation Land Transfer (OLT) covered;
b) Those who opted for government financing thru LBP as the mode of compensation; and
c) Those who have not yet been paid for the value of the land.
For those who were partially paid, the yearly increment of 6% compounded annually shall only be applied to the unpaid balance. According to the above mentioned administrative issuance, the said grant of increment is reckoned from the effectivity date of PD 27 or date when the land was actually tenanted up to the effectivity date of DAR AO 13 (1994) or up to 27 October 1994 only. It seems the grant of increment cannot be applied after this effectivity date even if the actual payment can be had after 27 October 1994.
In the case of Benosa vs. CA, G.R. No. 122231, 27 November 1995, on the issue of granting interest to the landowner, it was held:
It is settled that the landowners are entitled to legal interest on the amount payable from the time the property was taken until full payment is made (National Power Corporation vs. Angas, 208 SCRA 542; Commissioner of Public Highways vs. Burgos, supra; Ortula vs. Republic, 22 SCRA 477; Republic vs. Delente, supra). DAR Administrative Order No. 13, series of 1994 which grants increment of 6% yearly interest compounded annually on lands covered by P.D. No. 27 and E.O. No. 228, squarely recognizes the above rule and thus applies to the private respondents.
In LBP vs. CA, supra, the Supreme Court decided not to apply the 6% increment to the valuation because the Court of Appeals affirmed the PARAD's use of the 1992 Gross Selling Price in the valuation of the private respondent's land (following the ruling in the Court of Appeals case of Galeon vs. Pastoral, CA-G.R. No. 23168; Rollo, p. 36)
Mode of Compensation
Landowners may be paid in cash or in kind. Payment in kind is justified in the case of Association of Small Landowners of the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343 (1989) as follows:
It cannot be denied from these cases that the traditional medium for the payment of just compensation is money and no other. And so, conformably, has just compensation been paid in the past solely in that medium. However, we do not deal here with the traditional exercise of the power of eminent domain. This is not an ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner for a specific and perhaps local purpose. What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands wherever found and of whatever kind as long as they are in excess of the maximum retention limits allowed their owners. This kind of expropriation is intended for the benefit not only of a particular community or of a small segment of the population but of the entire Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted owner. Its purpose does not cover only the whole territory of this country but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision and the sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program as we are today, . . . .
Accepting the theory that payment of the just compensation is not always required to be made fully in money, we find further that the proportion of cash payment to the other things of value constituting the total payment, as determined on the basis of the areas of the lands expropriated, is not unduly oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily because the small landowner will be needing it more than the big landowners, who can afford a bigger balance in bonds and other things of value. No less importantly, the government financial instruments making up the balance of the payment are "negotiable at any time". The other modes, which are likewise available to the landowner at his option, are also not unreasonable because payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and other things of value equivalent to the amount of just compensation.
The recognized rule indeed, is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions" (at 386, 388 and 389).
Under Sec. 18 of RA 6657, the proportion of payment in cash, dependent on the area/hectarage of the land valued is subject to the following:
a) above 50 hectares, insofar as the excess hectarage is concerned = 25% cash
b) above 24 hectares and up to 50 hectares = 30% cash
c) 24 hectares and below = 35% cash
For voluntary offer to sell, the cash portion is increased by 5%.
Payment in kind
Landowners may be paid with:
a) Shares of stock in government owned or controlled corporation, LBP preferred shares, physical assets or other qualified investments.
b) Tax credits; or
c) LBP bonds
Features of LBP bonds
The new ten (10)-year LBP bonds have attractive features which are more acceptable and marketable than the other investment instruments. As provided under Sec. 18 of RA 6657, these features are:
1) Its market interest rates are aligned with 91-day treasury bill rates, net of applicable final withholding tax, payable twice a year — six months from date of issue and every six months thereafter.
2) One-tenth of the bond's face value matures every year from date of issue up to the tenth year.
3) The bond is fully guaranteed by the national government.
4) The bond is non-denominated. Upon request, it can be split according to amounts desired by the bondholder.
5) The bonds are highly transferable and negotiable. Such LBP bonds may be used by the landowner, his successors in interest or his assigns, up to the amount of their face value, for any of the following:
a) Acquisition of land or other real properties of the government, including assets under the Asset Privatization Program and other assets foreclosed by government financial institutions in the same province or region where the lands for which the bonds were paid are situated;
b) Acquisition of shares of stock of government-owned or controlled corporations or shares of stock owned by the government in private corporations;
c) Substitution for surety or bail bonds for the provisional release of accused persons, or performance bonds;
d) Security for loans with any government financial institution, provided the proceeds of the loans shall be invested in an economic enterprise, preferably in a small-and medium-scale industry, in the same province or region as the land for which the bonds are paid;
e) Payment for various taxes and fees to government; Provided, That the use of these bonds for these purposes will be limited to a certain percentage of the outstanding balance of the financial instruments: Provided, further, That the PARC shall determine the percentage mentioned above;
f) Payment for tuition fees of the immediate family of the original bondholder in government universities, colleges, trade schools, and other institutions;
g) Payment for fees of the immediate family of the original bondholder in government hospitals; and
h) Such other uses as the PARC may from time to time allow.
The 100% face value and negotiability of LBP bonds are well described in the case of Gonzales vs. GSIS, 107 SCRA 492 (1981). Petitioner filed a petition for mandamus to compel the respondent Government Service Insurance System (GSIS) to accept 6% interest-bearing bonds issued by the Land Bank of the Philippines at their par or face value as payment for petitioners' outstanding housing loan. The act of the GSIS in discounting the LBP bonds was found invalid. The Court ruled:
Land Bank bonds are certificates of indebtedness, approved by the Monetary Board of the Central Bank, fully tax-exempt both as to principal and income, and bear interest at the rate of 6% per annum redeemable at the option of the Land Bank at or before maturity, which in no case shall exceed 25 years. They are fully negotiable and unconditionally guaranteed by the Government of the Republic of the Philippines. These bonds are deemed contracts and the obligations resulting therefrom fall within the purview of the non-impairment clause of the Constitution, and any impairment thereof may take any encroachment in any respect upon the obligation and cannot be permitted. Thus, the value of these bonds cannot be diminished by any direct or indirect act, particularly, since said bonds are fully guaranteed by the Government of the Republic of the Philippines. They are issued not in the open market nor for the captive market of landowners and to facilitate the speedy transfer of lands to the tenant-farmers in support of the land reform program of the Government. They are not ordinary commercial paper in that sense subject to discounting (at 498, 499 and 502).
Mode of Payment for PD 27 Landowners
The landowners shall be paid in any of the following modes, at their option (Exec. Order No. 228 , sec. 3):
a) Bond payment over ten (10) years, with ten percent (10%) of the value of the land payable immediately in cash, and the balance in the form of LBP bonds bearing market rates of interest that are aligned with 90-day treasury bills rates, net of applicable final withholding tax. One-tenth of the face value of the bonds shall mature every year from the date of issuance until the tenth year.
The LBP bonds issued hereunder shall be eligible for the purchase of government assets to be privatized.
b) Direct payment in cash or in kind by the farmer-beneficiaries with the terms to be mutually agreed upon by the beneficiaries and landowners and subject to the approval of the DAR; and
c) Other modes of payment as may be prescribed or approved by the PARC.
Under Sec. 9 of EO 229, landowners who voluntarily offer to sell their lands are given the same incentive given to PD 27 landowners under EO 228, which is the exemption from the payment of capital gains tax and other taxes and fees.
Qualified Agrarian Reform Beneficiaries Under CARP
Section 22 of RA 6657 enumerates the groups of farmers and tillers who are qualified to become beneficiaries of the Comprehensive Agrarian Reform Program. They are the following:
(a) Children of landowners, who qualify under Section 6 of R.A. 6657;
(b) Agricultural lessees and share tenants;
(c) Regular farmworkers;
(d) Seasonal farmworkers;
(e) Other farmworkers;
(f) Actual tillers or occupants of public lands;
(g) Collectives or cooperatives of the above beneficiaries; and
(h) Others directly working on the land.
Section 22 also provides that "[t]he lands covered by the CARP shall be distributed as much as possible to landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality", following the order of priority quoted above.
Qualifications of Agrarian Reform Beneficiary
According to Section 22 of RA 6657, to qualify as an agrarian reform beneficiary, one must:
(a) be landless;
(b) be at least 15 years old or head of a family at the time the property was transferred in the name of the Republic of the Philippines; and
(c) have the willingness, ability, and aptitude to cultivate the land and make it as productive as possible.
The requirements enumerated in Section 22 are the minimum or basic qualifications for a farmer to become a beneficiary of land under the agrarian reform program.
Qualifications of landowner's children as preferred beneficiaries
As provided in Section 6, three (3) hectares of agricultural land may be awarded to each child of the landowner, on the condition that he is at least 15 years of age at the time of the award, and that he is actually tilling the land or directly managing the farm. "Directly managing the farm" refers to the cultivation of the land through personal supervision under the system of labor administration.
Children of landowners are classified as preferred beneficiaries, and the land awarded to them does not form part of the retention right of the parent-landowners. The transfer of the land to them is effected by the issuance of CLOAs.
The rules on payment for the value of the land by the Land Bank and the payment of amortizations by the beneficiary do not apply in the case of preferred beneficiaries, unless there has been a tenancy relationship between the parent-landowners and the children. In the latter case, the Land Bank shall finance the acquisition of the property.
The rights and obligations of landowners' children as preferred beneficiaries are governed by Memorandum Circular No. 4, Series of 1994.
"Landless Persons" Under CARL
Section 25 of RA 6657 provides that a landless person is one who owns less than three (3) hectares of agricultural land. Section 7 also provides that an owner-tiller may still be awarded another parcel of agricultural land under the program, provided that he is actually cultivating that land, and only to the extent of the difference between the area of the land he owns and the award ceiling of three (3) hectares. A tenant who owns one hectare of agricultural land may still qualify as a beneficiary for two more hectares.
Persons Disqualified as Agrarian Reform Beneficiaries
The following persons are disqualified from becoming agrarian reform beneficiaries:
a) Those who are not included in the enumeration in Section 22;
b) Those who fail to meet the qualifications prescribed under Section 22;
c) Those who have culpably sold, disposed of, or abandoned their land received under CARP or P.D. 27;
d) Those whose land has been foreclosed by the Land Bank, or repossessed by the landowner in case of Voluntary Land Transfer/Direct Payment Scheme, for non-payment of an aggregate of three annual amortizations;
e) Those who have converted their land to non-agricultural use without prior approval by DAR; and
f) Those guilty of negligence or misuse of the land or any support extended to him (Sec. 22).
Grounds for disqualification of beneficiary
Under DAR Memorandum Circular No. 19 (1996), the following violations will result in the disqualification of a farmer from being a beneficiary or from continuing as such under the agrarian reform program:
(a) Misuse or diversion of financial and support services extended to the beneficiary;
(b) Misuse of the land;
(e) Continuous neglect or abandonment of the awarded land over a period of two calendar years as determined by the Secretary or his authorized representative;
(f) Failure to pay an aggregate of three (3) consecutive amortizations to the Land Bank or to the landowner, except in cases of fortuitous events;
(g) Illegal conversion of the land by the beneficiary;
(h) Waiver of rights to awarded lands;
(i) Beneficiary's surrender of awarded land to landowner or other non-beneficiary; and
(j) Other acts or omissions that circumvent laws related to the implementation of the agrarian reform program.
A separate chapter on prohibited acts, supra., discusses these violations in detail.
Squatters disqualified to become CARP beneficiaries
In the case Central Mindanao University vs. DARAB, G.R. No. 100091, October 22, 1992, the university entered into a contract with members of the faculty and staff for an experimental rice project, under which the latter were given tracts of land for cultivation. It was expressly stipulated in the contract that no landlord-tenant relationship arose between the parties. After the term of the project has expired, the university served notices to vacate on the occupants of the land. The occupants refused to vacate the land, claiming that they are now entitled to be awarded the land they are tilling pursuant to the land reform program.
The Supreme Court held that squatters are disqualified from becoming CARP beneficiaries because they are "guilty of committing prohibited acts of forcible entry or illegal detainer, [and therefore] do not qualify as beneficiaries of and may not avail themselves of the rights and benefits of agrarian reform".
The Supreme Court also ruled that "a person entering upon the lands of another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue of some agreement with the owner or with one whom he believes holds title to the land, is a squatter. Squatters cannot enter the land of another surreptitiously or by stealth, and under the umbrella of the CARP, claim rights to said property as landless peasants." (Emphasis supplied.)
Selection of Beneficiaries
The Municipal Agrarian Reform Officer or the Agrarian Reform Program Technologist, with the participation of the BARC, screens the beneficiaries.
A farmer who claims priority over those who have been identified by the MARO as beneficiaries should file a written protest with the MARO or the PARO who is processing the claim folder. Once the protest is filed, the MARO/PARO shall comment on the protest and submit the same to the Regional Director who shall rule on the protest. If the parties disagree with the RD's decision, they can file a written motion for reconsideration. If the motion is denied, the farmers can appeal to the Secretary.
Landowner not entitled to select beneficiaries
It is not the landowner who distributes his land, so he does not have the right to select who the transferees. Land acquisition and land distribution are two different transactions. It is the government which buys the land from the landowner and then sells it to the beneficiaries. It is not a direct transaction between the landowner and the beneficiaries.
This rule also applies to voluntary land transfer/direct payment scheme. Even under this scheme, it is not the landowner who determines who will be the beneficiaries. The beneficiaries must qualify under the law, and it is still the MARO and the BARC who do the screening.
A farmworker is defined by Section 3 (g), R.A. 6657 as a natural person who renders service for value as an employee or laborer in an agricultural enterprise or farm regardless of whether his/her companion is paid on a daily, weekly, monthly, or "pakyaw" basis. The term includes an individual whose work has ceased because of a pending agrarian dispute and who has not obtained a substantially equivalent and regular farm employment.
Special qualifications for farmworkers in commercial farms
Aside from the minimum qualifications in Section 22 of R.A. 6657, Section 4 of Administrative Order No. 9, Series of 1998, provides for special qualifications for farmworkers in commercial farms, which are as follows:
(a) they must be at least 18 years old upon filing of application as agrarian reform beneficiary;
(b) they must have the willingness, aptitude, and ability to cultivate and make the land productive; and
(c) they must have been employed in the commercial farm between June 15, 1988 and June 15, 1998 or upon expiration or termination of the deferment.
Farmworkers who have worked longest on the land continuously shall be given priority.
Specific disqualifications for commercial farmworkers
Section 5 of Administrative Order No. 9, Series of 1998, provides that the following shall be grounds for the disqualification of potential beneficiaries:
a) Mandatory retirement;
b) Optional retirement or resignation, provided that the farmworker has not filed any case questioning such retirement or resignation;
c) Dismissal for cause by final judgment;
d) Waiver or refusal to be a beneficiary; and
e) Violation of agrarian reform laws and regulations as determined with finality by the proper tribunal or agency.
Questions have been raised on whether dismissal for cause distinguishes between just and authorized causes as these two categories are defined in Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines.
"Just cause" may consist in serious misconduct, willful disobedience of reasonable and lawful orders of the employer, gross neglect and abandonment of duties, dishonesty and loss of confidence of the employer in the employee, commission of crime or offense by the employee against the person or immediate family of the employer, and analogous cases (see LABOR CODE, Article 282).
"Authorized cause", on the other hand, may be one of the following: introduction of labor-saving devices, redundancy, retrenchment due to legitimate business losses, closure of business, and ailment or disease of the employee (see LABOR CODE, Article 283).
Just cause is distinguished from authorized cause in the Labor Code because while just causes have something to do with the moral depravity and fault of the employee, termination for authorized causes is due to circumstances beyond the control of the employee.
It is evident from the history of the provision of the administrative issuances on qualified farmworkers that the intention is to distinguish between just and authorized causes. For one, the list of qualifications in Section 4, Administrative Order No. 9, Series of 1998 provides that the potential beneficiary "must have been employed in the commercial farm between June 15, 1988 and June 15, 1998 or upon expiration or termination of the deferment". This new provision makes the qualifications encompass even those whose services have been terminated by the commercial farm as of the time the deferment period expires.
Secondly, the original rules governing the acquisition of commercial farms, Administrative Order No. 6, Series of 1998, in item (b), no. 2, letter M, Part IV thereof, provides for dismissal from service for cause as a ground for disqualification. Retrenchment as a ground for disqualification is listed as a separate item, namely, item (d). This shows that item (b) refers only to dismissal for just causes, and does not include dismissal for authorized causes.
Administrative Order No. 6, Series of 1998 was eventually superseded by Administrative Order No. 9, Series of 1998. The latter administrative order removed retrenchment as a ground for disqualification. Only dismissal for cause (meaning just cause) has been retained.
Thirdly, Administrative Order No. 9, Series of 1998, item (h), Section 6, Article II, which provides for the prioritization of beneficiaries, still includes retrenched workers among the potential beneficiaries. The provision states:
The Beneficiary Screening Committee shall prioritize the potential ARBs pursuant to Section 22 of R.A. 6657. They shall be ranked according to the length of their continuous service in the commercial farm reckoned from June 15, 1988 up to the expiration of the deferment period; residency, i.e. whether residing in the same barangay or municipality; whether they have been validly retrenched, i.e. with approval of the Dept. of Labor and Employment; the nature of their work, i.e. whether directly related to farm activities, and such other factors as the Committee may deem appropriate. (Underscoring supplied.)
Different Categories of Farmworkers
Section 3, R.A. 6657 identifies these categories as follows:
(a) Regular farmworker is a natural person who is employed on a permanent basis by an agricultural enterprise or farm.
(b) Seasonal farmworker is a natural person who is employed on a recurrent, periodic, or intermittent basis by an agricultural enterprise or farm, whether as a permanent or a non-permanent laborer, such as "dumaan" and "sacada".
(c) Other farmworker is a farmworker who is neither a regular nor a seasonal farmworker, such as a farmworker who performs farm activities but is not paid for his or her labor.
DAR A.O. No. 9, Series of 1998, on the other hand, identifies two more categories:
(a) Technical farmworker is a natural person employed by an agricultural enterprise or farm, who is highly educated and trained and performs functions in scientific, engineering, medical, teaching, and other fields, but who is not vested with managerial or supervisory functions, such as chemists, agronomists, veterinarians, and soil analysts.
(b) Managerial or supervisory farmworker is a natural person who is employed by an agricultural enterprise or farm vested with powers and prerogatives (1) to lay down and execute management policies; (2) to hire, transfer, suspend, layoff, recall, discharge, assign, or discipline employees; and/or (3) to effectively recommend such managerial actions.
Categories of farmworkers qualified to become beneficiaries under CARP
Farmworkers who are directly working on the land at the time DAR conducts actual investigation and documentation of the agricultural enterprise, whether as regular, seasonal, or other farmworkers are qualified beneficiaries. Under A.O. No. 9, Series of 1998, however, other farmworkers who are directly employed by the agri-business enterprise or corporation may be considered as beneficiaries, provided they meet the basic qualifications prescribed in Section 22.
Selection of Beneficiaries of Commercial Farms
Under A.O. No. 9, Series of 1998, there is a Beneficiary Screening Committee responsible for the qualification, identification, and selection of agrarian reform beneficiaries for acquired commercial farms. The Committee is composed of the following:
(1) The Provincial Agrarian Reform Officer, as Chairman;
(2) The Municipal Agrarian Reform Officer;
(3) The Provincial Agrarian Reform Coordinating Committee (PARCCOM) Chairman or his duly authorized representative;
(4) The Barangay Agrarian Reform Council (BARC) Chairman or his duly authorized representative from each of the barangays where the subject commercial farm is situated; and
(5) The Barangay Chairman or his duly-authorized representative, from each of the barangays where the subject commercial plantation is situated; as members.
The Committee comes up with a master list of qualified beneficiaries, and a waiting list of those who possess the minimum qualifications and none of the disqualifications, but who could not otherwise be accommodated in the updated master list.
Remedy of farmworker excluded from master list
A farmworker who is excluded from the masterlist may file a written protest with the Beneficiary Screening Committee. The Committee Chairman shall furnish a copy of the protest to the beneficiaries whose inclusion in the list is being questioned. The protestees shall file their answer or comment on the protest, and the Chairman shall transmit the records to the Regional Director for the latter's decision. The Regional Director shall resolve the protest based on substantial evidence showing the qualification or disqualification of the beneficiary subject of the protest. No motion for reconsideration of the decision of the Regional Director shall be allowed, but such decision may be appealed to the Office of the Undersecretary for Field Operations and Support Services, whose decision shall be final and executory. Notwithstanding the appeal, the decision of the Regional Director shall not be stayed.
Managerial and supervisory farmworkers
Managerial and supervisory farmworkers may qualify as CARP beneficiaries provided that they have been identified as qualified beneficiaries prior to their promotion, and that they give up their managerial or supervisory positions (see A.O. No. 9, Series of 1998). In the case, however, of supervisory or managerial employees whose responsibilities do not actually conform to the definition of supervisory or managerial farmworkers, there are two views on the matter. One holds that supervisory and managerial employees of commercial farms are disqualified from becoming beneficiaries since the laws and regulations specify the rank and not the job description. The other view is that they are qualified so long as they are directly working on the land, and possess all the qualifications and none of the disqualifications for becoming an agrarian reform beneficiary.
It is our opinion that these so called "supervisory or managerial" employees can qualify as beneficiaries. The definition of supervisory or managerial farmworkers in A.O. No. 9, Series of 1998, provides that to be considered a supervisor or a manager, the farmworker must be vested with the power to formulate and implement management policies; to hire, fire, assign, and discipline employees; and/or to effectively recommend such managerial actions.
Jurisprudence supports the view that this power is essential before an employee may be considered as supervisory or managerial. In Franklin Baker Company vs. Trajano, G.R. No. 75039, January 28, 1988, it was held:
To make one a supervisor, the power to recommend must not be merely routinary or clerical in nature but requires the use of independent judgment. In other words, the recommendation is (1) discretionary or judgmental, not clerical; (2) independent, not a dictation of someone else; and (3) effectively considered in the management decision. If these qualities are lacking or, worse, if the power to recommend is absent, then the person is not really a supervisor but a rank-and-file employee.
There are instances when the position of a farmworker is denominated "managerial" or "supervisory" even when he is not performing the functions enumerated in the definition. Hence, it is our view that the functions performed, rather than the rank, should be determinative of the status of the farmworker. They should still qualify as beneficiaries, provided they meet all the qualifications and possess none of the disqualifications, subject to the rules on prioritization set down under the law.
Section 22 includes seasonal farmworkers among the beneficiaries qualified to receive land under R.A. 6657, following the order of priority set forth in the law.
There is a view that seasonal farmworkers are entitled "only to a just share of the fruits of the land", but not to own land. This view finds support in Fortich vs. Corona, G.R. No. 131457, August 19, 1999, wherein the Supreme Court said:
Again, as expressed in the opinion of Mr. Martin, intervenors, who are admittedly not regular but seasonal farmworkers, have no legal or actual and substantive interest over the subject land inasmuch as they have no right to own land. Rather, their right is limited only to a just share of the fruits of the land.
The Court based its observation on Article XIII, Section 4 of the Constitution, which provides:
The State shall, by law, undertake an agrarian reform program founded on the rights 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.
It is our view, however, that the fact that seasonal farmworkers may not have been given a constitutional right does not mean that they do not have a statutory right. Congress, in interpreting and implementing Article XIII, Section 4 of the Constitution enacted Section 22 of RA 6657 which explicitly includes seasonal farmworkers among the qualified beneficiaries. Moreover, the observation made by the Supreme Court is only an obiter dictum and cannot be made the basis for the loss or acquisition of legal rights. Moreover, even a collective or cooperative of, among others, "seasonal farmworkers" and "other farmworkers" may be awarded lands under the agrarian reform program.
Collectives or Cooperatives as Qualified Beneficiaries
A collective or cooperative composed of the beneficiaries listed in Sec. 22 (a) to (e) of R.A. 6657, to wit: agricultural lessees and share tenants, regular farmworkers, seasonal farmworkers, other farmworkers, and actual tillers or occupants of public lands, can, by itself, be an awardee of land under CARP. Sec. 25 of R.A. 6657, in fact, provides that "(t)he beneficiaries may opt for collective ownership, such as co-ownership or farmers cooperative or some other form of collective organization".
Cooperatives refer to "organizations composed primarily of small agricultural producers, farmers, farmworkers, or other agrarian reform beneficiaries who voluntarily organize themselves for the purpose of pooling land, human, technological, financial, or other economic resources, and operated on the principle of one member, one vote. A juridical person may be a member of a cooperative, with the same rights and duties as a natural person." (Section 3 [k] of R.A 6657).
The aggregate size of land that may be awarded to an association or a cooperative shall not exceed the total number of members multiplied by the award ceiling of three hectares, except where the Presidential Agrarian Reform Council (PARC) approves the award of an area exceeding this limit. Thus, a cooperative composed of 25 members, for instance, can receive a maximum award of 75 hectares. (see Sec. 25, R.A 6657)
Inclusion of names of members of collective or cooperative not mandatory
Memorandum Circular No. 24, Series of 1996, Memorandum Circular No. 14, Series of 1994, and Administrative Order No. 3, Series of 1993, governing the issuance of collective CLOAs, expressly require the listing of the names of all members in the CLOA issued to a collective or cooperative. The purpose of this requirement is to "protect a farmer-member from possible summary and unjust separation by the cooperative or association" (Part IV-A-1).
It is our view that inclusion in the CLOA of the names of all the members of a collective or cooperative is not necessary in all cases. Where the CLOA is under co-ownership, the names of all the co-owners (i.e. individual farmer-beneficiaries) should be listed in the collective CLOA. However, where the CLOA is awarded in the name of the association or cooperative, there is no need to include the names of the individual members thereof in the collective CLOA. Sec. 25 of R.A. 6657, in fact, provides that "(t)itle to the property shall be issued in the name of the co-owners or the cooperative or collective organization as the case may be." (Underscoring supplied)
Women as Beneficiaries under CARP
Women are qualified to become agrarian reform beneficiaries in their own right, not only as spouses of agrarian reform beneficiaries. For as long as a female farmer's rights have vested and have been established separately from her husband's or her father's, she is entitled to receive land under the program.
The term "vested right" has been defined in the case of Balboa vs. Farrales, G.R. No. 27059, February 14, 1928, as some right or interest in property which has become fixed and established and is no longer open to doubt or controversy". The Supreme Court, citing American cases, explained that "rights are vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest".
Involved in the Balboa case was an application for homestead patent. During the pendency of his application, however, the law granting him the right to such patent was repealed. The Supreme Court upheld his claim, stating that at the time the law was repealed, the applicant has complied with all the requirements for the issuance of a patent, hence, his right to the patent has vested. "At least on that date," said the Court, "his right to the land, as owner, ripened into a vested right. It was no longer expectant as depending on some events or the performance of some conditions."
Other rights as beneficiaries have been granted to women through other DAR administrative issuances. Under Memorandum Circular No. 10, Series of 1986, support services in terms of loan assistance in an amount not to exceed three thousand pesos (P3,000.00) has been guaranteed for qualified rural women's pre-cooperative groups. Under Memorandum Circular No. 4, Series of 1992, a budget has been allocated for support services that will empower women beneficiaries.
Under Part II.D of Administrative Order No. 2, Series of 1993, farmworkers who are husband and wife may be separately entitled to three (3) hectares each provided that their vested rights to the land have been duly established. Each of the spouses shall be issued a separate CLOA.
Requirement for separate cultivation by spouses of beneficiaries
Under Memorandum Circular No. 18, Series of 1996, women who are spouses of agrarian reform beneficiaries are required to also cultivate the land, aside from the cultivation undertaken by her husband. We are of the opinion that separate cultivation must be required of women only where they are recipients of land in their own right, and should no longer be required of women whose spouses receive land under the program.
To require separate cultivation by spouses of male agrarian reform beneficiaries would work against, rather than protect, the interests of women. This requirement fails to recognize the role of women in the rural household, particularly in agrarian areas. Women are usually given reproductive tasks, such as upbringing of children, household chores, and other work having to do with the maintenance of the home. An additional burden of cultivating the land would be harshly onerous upon women who are spouses of beneficiaries.
The Civil Code and the Family Code recognize that the role of women in traditional families is the maintenance of the household. In both Codes, maintenance of the home is recognized as the wife's contribution to the conjugal partnership of gains or to the absolute community of property as to entitle her to one-half share of the marital partnership property. As long as the wife works in the home, all properties received or acquired during the subsistence of the marriage is considered part of the conjugal partnership of gains or of the absolute community of property. There is no reason for R.A. 6657 to be given a different interpretation as regards the rights of women to land awarded to their spouses under the Comprehensive Agrarian Reform Program.
Modes of Distribution: Individual vs. Collective Ownership
It is the policy of the CARP to establish owner-cultivatorship of economic-sized farms as basis of Philippine agriculture. In line with this is the award of three hectares to the individual beneficiaries as the distribution limit. With a view of equitable land distribution and ownership, DAR is mandated to distribute agricultural lands to as many tenants and farmworkers as possible. Furthermore, the distribution of land shall be made directly to individual beneficiaries.
In general, lands shall be distributed directly to the individual worker beneficiaries. In case it is not economically feasible and sound to divide the land then it shall be collectively owned by the worker — beneficiaries who shall form into a worker cooperative or association which will deal with the corporation or business association. [Rep. Act No. 6657 (1988) Sec. 29; DAR A.O. No. 10 (1990), II (B)]
The beneficiaries may opt for collective ownership such as co-ownership or farmer's cooperative or some other form of collective organization. The total area that may be awarded under a collective CLOA shall not exceed the total number of co-owners or members of the cooperative or collective organization multiplied by the award limit of three hectares except in meritorious cases as determined by the PARC, pursuant to Section 25 of R.A. No. 6657. Collective co-ownership CLOAs may be issued to cover any CARPable lands whether private lands or public lands within proclaimed DAR settlement projects or public lands turned over to the DAR by other government agencies and institutions pursuant to E.O. No. 407 as amended. [Rep. Act No. 6657 (1988), sec. 25.]
Lands covered by collective CLOAs on a co-ownership basis shall be subdivided in accordance with the actual occupancy of the ARBs, provided it does not exceed three (3) hectares. Landholding covered by CLOAs in the name of cooperative or farmer's organization, may, at the option of the organization, also be subdivided based on the share of each member provided that the subdivision as determined by the DAR shall be economically feasible. [DAR A. O. No. 03 (1993), III (E).] Subdivision of lands under collective CLOA is governed by A.O. No. 03, Series of 1993.
Factors Considered in Land Distribution
In the equitable distribution of lands subject of CARP, actual occupancy of a tenant shall be the basis of the award, provided it does not exceed three hectares. For untenanted lands, all the farmworkers therein shall be considered as potential beneficiaries in the estate; provided that the proportional share of each will not exceed three (3) hectares; otherwise, additional ARBS, shall be considered. For unoccupied lands, each identified ARB may be allowed the award ceiling of three hectares, provided that there are enough lands for distribution under CARP in the barangay to accommodate others who are equally qualified but who may not have been considered as awardees in such land under acquisition. In all cases, the aggregate award to an ARB shall not exceed the limit of three hectares and his total land ownership as a result of the award shall not exceed three (3) hectares. (DAR A.O. No. 10 , II [D])
The MARO, upon completion of land acquisition, validates the list of qualified beneficiaries who were identified during the acquisition phase who are still present and qualified to receive the land. Through a letter or CARP Beneficiary Certificate (CBC), the identified ARBs are formally notified by the MARO that they have qualified to receive the land. The ARBs are consulted by the MARO as to their preferred mode of distribution . Thereafter the Land Distribution Folders are prepared and based on the ARBs preference and submitted to the PARO.
Upon transmittal, the PARO reviews all documents and generates the Certificates of Land Ownership Award (CLOAs). If the ARBs prefer individual parcels, the PARO requests the DENR to conduct subdivision survey. The PARO then submits the CLOAs to the DAR Regional Office which causes them to be signed by the Secretary. Lastly, the PARO registers the CLOAs with the Register of Deeds and forwards the same to the MARO for distribution. (DAR A.O. No. 19 ).
A compelling issue in respect to land distribution is the matter of physical possession by DAR as a necessary prerequisite to its distribution to the ARBs. It is submitted that physical possession is not necessary for land to be distributed. Nothing in R.A. No. 6657 requires DAR to take physical possession as a precondition for redistributing lands subject of acquisition. What is required is "immediate possession" under Section 16 or "actual possession" under Section 24. Actual possession of the land consists in the manifestation of acts of dominion over it of such a nature as a party would naturally exercise over his own property. (Ramos vs. Dir. of Lands [39 Phil 175 ). In issuing the CLOA, the Republic of the Philippines, which became the registered owner of subject property, acting through DAR, exercised an act of dominion over the landholding as redistribution involves disposition or alienation. Having manifested its dominion over the land, the Republic of the Philippines through DAR, is deemed to be, for all legal intents and purposes, in actual possession thereof. Redistribution is not limited to the installation of farmers in the landholding. The generation and distribution of CLOAs is embraced within the concept of redistribution.
Distribution of Homelots
A homelot refers to a parcel of agricultural land used by the ARB as the site of his permanent dwelling including the area utilized for raising vegetables, poultry, pigs and other animals and engaging in minor industries. The area of the homelot may not exceed 1,000 square meters. It is an integral part of the farm and an indispensable factor in farm operations. The procedure for the acquisition and distribution of farmlots likewise apply to homelots. If the homelot of a tenant-beneficiary falls within the retained area of the landowner, the beneficiary may be made to transfer his dwelling to his farmlot or other area to be designated for his homelot which shall be mutually agreed upon by the parties. Provided that the landowner shoulders the cost of the transfer of his dwelling and the agreed cost of other improvements introduced by the tenant-beneficiary on said homelot. [DAR A.O. No. 12 , II [C])
Distribution of Commercial Farms and Facilities
Commercial farms may be distributed collectively or individually. Qualified beneficiaries shall be awarded a maximum of three (3) hectares or a minimum of one (1) hectare each in case the land is not sufficient to accommodate them.
To expedite the acquisition, the commercial farms shall be initially distributed collectively or under co-ownership. In the case the beneficiaries desire to partition the land, DAR shall first determine whether it is economically feasible to divide the land, in coordination with the Department of Agriculture and other concerned agencies. Thereafter, the beneficiaries may, by majority vote, decide whether to proceed with the partition or not. In the event the beneficiaries decide to partition, the land shall be allocated to the individual beneficiaries by drawing lots in the presence of DAR Representatives. (Section 17 DAR A.O. No. 2-1998)
Facilities and improvements acquired shall be distributed collectively, through a Deed of Transfer which shall specify the names of the ARBs and duly annotated in the CLOAs generated over the subject landholding where said facilities and improvements are found. Areas where the facilities and landholdings are found are deemed common areas and shall not be partitioned individually. (Section 28 DAR A.O. No. 02-98)
Collective CLOAS shall be generated within thirty (30) days upon receipt by the PARO of the certified copy of the certificate of title in the name of the Republic of the Philippines.
In individual CLOAs shall be generated within thirty (30) days upon receipt of the approved Segregation Plan (ASP). However in the case of individual distribution and considering the time and financial constraints particularly in the conduct of individual surveys, a collective CLOA may be generated in the interim over the subject landholding (Section 18, DAR A.O. No. 02-1998)
CLOAs shall be registered immediately upon generation. (Section 20 DAR A.O. No. 02-98)
Distribution of Corporate Farms
The general rule is that corporate farms are distributed directly to the individual worker-beneficiaries. However, in case it is not economically feasible and sound to divide the land, corporate farms shall be owned collectively by the worker-beneficiaries who shall form a cooperative or association which will deal with the corporation or business association. In the latter case, the individual members of the cooperatives or corporations shall have homelots and small farmlots for family use, to be taken from the land owned by the cooperative or corporation. (Rep. Act No. 6657 , sec. 29).
Corporate farms owning or operating under lease or management contract
Pending final land transfer, corporate farms that own or operate under lease or management contract and realize gross sales in excess of P5 million are mandated to execute a production and profit sharing (PPS) plan provided under DAR AO No. 8 (1988). The PPS plan is imposed in order to allow the farmworkers in corporate farms to realize an improvement in their farm income pending final transfer of the farm.
All farmworkers in a corporate farm, whether classified as regular, seasonal, technical or other farmworkers are entitled to PPS. On the other hand, managerial and supervisory employees are excluded from entitlement to PPS. (DAR Adm. O. No. 8 )
PPS are distributed to farmworkers, over and above the compensation they are currently receiving, based on the following schedules:
1. Three (3%) of Annual Gross Sales from 15 June 1988 until final land or corporate stock transfer to the farmworker-beneficiaries is effected, provided that the employer is not obligated to pay more than 100% of the regular annual compensation of the farmworker-beneficiaries;
2. In addition, 10% of net profit after tax, provided that in cases where the retention right is allowed, the amount to be distributed shall be reduced by an amount equivalent to the proportion of the retained area to the total land area. (DAR Adm. O. No. )
To ensure that corporate farm employers comply with the PPS provisions, the Secretary of DAR or his authorized representatives shall have the power to order and administer compliance with the PPS provisions and to require submission of reports, compel the production of books and documents, compel answers to interrogatories, issue subpoena and subpoena duces tecum, and enforce its writs through Sheriffs or other duly deputized officers. Moreover, Sections 73 and 74 of RA 6657 regarding prohibited acts and omissions and the penalties therefor, are applicable to any person or entity found to be violating any PPS provision. (DAR Adm. O. No. 8 )
Proof of Ownership of Awarded Lands
The Certificate of Land Ownership Award evidences the ARB's ownership in respect to private agricultural lands covered under R.A. No. 6657 (Rep. Act No. 6657 , sec. 24). Ownership of public lands, upon the other hand, are evidenced by Free Patents. Emancipation Patents is the ARBs proof of ownership of lands awarded under Operation Land Transfer. Discussing the nature of an Emancipation Patent, the Supreme Court ruled in the case of Vinzons-Magana vs. Estrella (201 SCRA 536 ) that it is only compliance with the prescribed conditions which entitles the farmer/grantee to an emancipation patent by which he acquires the vested right of absolute ownership in the landholding — a right which has become fixed and established and is no longer open to doubt and controversy.
The pronouncement of the court respecting the impregnable character of an Emancipation Patent should be qualified. The mere issuance of an Emancipation Patent does not put the ownership of the ARB beyond attack and scrutiny. It must be noted that P.D. No. 946 vests the Court of Agrarian Relations (now the DAR Adjudication Board) jurisdiction over cases involving the cancellation of emancipation patents issued under P.D. No. 266 (Pres. Decree , sec. 12 [g]). This only goes to show that ownership of awarded lands covered by Emancipation Patents may be challenged. The aforecited Supreme Court ruling presupposes that the issuance of emancipation patents to the ARB is not tainted with any irregularity such that it acquires the character of indefeasiblity. The Vinzons- Magana ruling must be appreciated in this context.
Rights and Obligations of Beneficiaries
Once a Certificate of Land Ownership Award has been issued to a beneficiary and registered in his name, it serves as an evidence of title to the land, entitling the beneficiary to occupy the land, cultivate it, and maintain possession of the same. cSIADH
An agrarian reform beneficiary is obliged to exercise the diligence of a good father of a family in the use, cultivation, and preservation of the land and the improvements thereon. His rights to the land, as well as to support services to which he may be entitled as a beneficiary shall be forfeited in the event that he neglects, abandons, misuses, or sells the land.
The beneficiary is also obliged to keep the land awarded to him intact, and he may not subdivide the land in favor of his children or heirs. The three hectares have been identified as an economic-sized family farm which must be preserved as a single operating unit to promote the farm's economic viability. Even if the beneficiary dies, his heirs are not allowed to divide the land into smaller units.
However, such heirs are entitled to receive the land by way of hereditary succession. This means that the land may be transferred either to the spouse of the beneficiary, or in his or her absence or incapacity, to the eldest child who meets the qualifications to be a CARP beneficiary, particularly the requirement of willingness, aptitude, and ability to cultivate the land and make it productive. The heir who succeeds to the land is under obligation to pay the other heirs their legal shares in the property of the deceased beneficiary. In the absence of qualified heirs or children, he land shall revert to the DAR, which shall identify a new beneficiary the land.
A beneficiary is likewise obliged to comply with the provisions of R.A. 6657. Memorandum Circular No. 19, Series of 1996, supra., provides for the grounds for perpetual disqualification of agrarian reform beneficiaries. The grounds enumerated in this Memorandum Circular are violations of various provisions of R.A. 6657 and administrative rules and regulations issued pursuant to this law.
Protection of Rights of Member-Beneficiaries
The protection of rights of member-beneficiaries may be ensured in the articles of incorporation and in the by-laws of the organization, which the member-beneficiaries themselves enact and approve. Restrictions in the transfer of shares or membership rights, by providing that such transfer shall be valid only if made in favor of another qualified beneficiary, may be adopted. The contract of membership may likewise contain provisions ensuring that the rights of member-beneficiaries to ownership or other privileges as members are protected.
The interests of farmer-members may also be adequately protected according to the exit provisions in Republic Act No. 6938, otherwise known as the Cooperative Code. Articles 31 and 32 of the Code provides:
Art. 31. Termination of Membership. — (1) A member of a cooperative may, for any reason, withdraw his membership from the cooperative by giving a sixty (60)-day notice to the board of directors. The withdrawing member shall be entitled to a refund of his share capital contribution and all other interests in the cooperative: Provided, That such refund shall not be made if upon such payment the value of the assets of the cooperative would be less than the aggregate amount of its debts and liabilities exclusive of his share capital contribution.
(2) The death, insanity, insolvency or dissolution of a member shall be considered an automatic termination of membership.
(3) A member may be terminated by a vote of the majority of all the members of the board of directors for any of the following causes:
(a) When a member has not patronized the services of the cooperative for an unreasonable period of time as may be fixed by the board of directors;
(b) When a member has continuously failed to comply with his obligations;
(c) When a member has acted in violation of the by-laws and the rules of the cooperative; and
(d) For any act or omission injurious or prejudicial to the interest or the welfare of the cooperative.
A member whose membership the board of directors may wish to terminate shall be informed of such intended action in writing and shall be given an opportunity to be heard before the said board makes its decision. The decision of the board shall be in writing and shall be communicated in person or by registered mail to the member and shall be appealable, within thirty (30) days after the decision is promulgated, to the general assembly whose decision therein, whether in a general or special session, shall be final. Pending a decision by the general assembly, the membership remains in force.
Art. 32. Refund of Interests. — All sums computed in accordance with the bylaws to be due from a cooperative to a former member shall be paid to him either by the cooperative or by the approved transferee, as the case may be, in accordance with this Code.
Transferability of Awarded Lands
Section 27 prohibits the sale, transfer, or conveyance of lands acquired by beneficiaries under R.A. 6657 within ten (10) years from the date of award. This restriction on the transferability of the land is annotated on the certificate of title in the Register of Deeds. Lands awarded pursuant to E.O. 228 and P.D. No. 27 may be alienated only upon full payment of amortizations on the purchase price.
However, the lands acquired under CARP may be alienated through hereditary succession, or in favor of the government, the Land Bank, or other qualified beneficiaries even before the expiration of the ten-year period. This provision presumes that the land to be alienated has been fully paid for by the beneficiaries.
If the land has not yet been fully paid for, only the rights to the land may be sold, transferred, or conveyed, and with prior approval of the DAR, and only to the heirs of the beneficiary or to another beneficiary.
The buyer of agricultural land alienated under this section is still subject to the aggregate ownership ceiling of five (5) hectares.
Mortgage of awarded land not equivalent to sale, disposition, or conveyance
Mortgage is a land transaction allowed by the law, and hence is not a sale, disposition, or conveyance contemplated by the prohibition. The governing administrative issuance on land transactions is DAR Administrative Order No. 1, Series of 1989. Section II.3.d provides:
The following are not prohibited transactions and may be registered by the Register of Deeds without prior clearance from DAR:
d. Deed of real estate mortgage executed by the . . . beneficiary.
Since mortgage is not a prohibited transaction, it follows that it is not tantamount to selling, disposing of, or conveying the awarded land, which are prohibited transactions. Moreover, the framers of the law, in not expressly prohibiting mortgage, may have anticipated circumstances in which the farmer-beneficiary is left with no alternative but to mortgage his land in order to respond to emergency situations such as sickness in the family (see Torres vs. Ventura, 187 SCRA 96, at 103).
Farmer-beneficiary may alienate even without complete payment of amortizations
The second paragraph of Section 27 of R.A. 6657 allows a farmer-beneficiary to transfer or convey his rights to the land, provided that prior approval of the DAR has been obtained, to any qualified heir of the beneficiary or to any other beneficiary. An essential condition of such transfer or conveyance is that the transferee shall cultivate the land himself and maintain its productivity as agricultural land. The failure to comply with this condition shall result in the availability of the land for distribution to another qualified agrarian reform beneficiary.
Disqualification of beneficiary who sold or transferred right to awarded land
Section 73 (f) provides that the sale, transfer, or conveyance by a farmer-beneficiary of the right to use or any usufructuary right over the land must be made "in order to circumvent the provisions" of R.A. 6657. This must be harmonized with Section 27, which allows the farmer-beneficiary to transfer or convey the land or his rights to the land, provided that it is with the prior approval of DAR. Administrative Order No. 8, Series of 1995, governs the procedure for obtaining this consent.
Administrative Order No. 10, Series of 1989 provides that beneficiaries who have sold the land they received under R.A. 6657 or P.D. 27 are no longer qualified to receive land under R.A. 6657, without any qualification on the manner of disposition.
We believe, however, that the law intends to preserve the land in the hands of the beneficiary and to make him benefit from the land for as long a time as feasible. The administrative issuances regarding the obtention of consent to convey the land merely exempt the vendor from criminal prosecution for circumventing R.A. 6657, and cannot be construed to give the farmer-beneficiary license to convey the land without forfeiting his right to become a beneficiary again.
Manner of Payment by Beneficiaries
For lands acquired by DAR through the compulsory acquisition scheme or through voluntary offer to sell, Section 26 provides that lands awarded to beneficiaries shall be paid for by the farmers in thirty (30) annual amortizations at six per cent (6%) interest per annum. These are regular annual amortizations, payable to the Land Bank of the Philippines.
For lands acquired under the VLT/DPS scheme, Section 21 provides that payment shall be made directly by the farmer-beneficiaries to the landowner under the terms and conditions mutually agreed upon by the parties. Such terms and conditions shall be subject to the approval by the DAR.
Pursuant to Section 20, the DAR is mandated to ensure that these terms and conditions are not less favorable to the farmer-beneficiary than those which would have prevailed had the DAR acquired the land under the compulsory acquisition scheme.
If the landowner and the farmer cannot agree on the price of the land, Section 21 provides that the land shall be subject to compulsory acquisition, following the procedure under Section 16.
Payment by the beneficiaries, in any case, shall start one year from the date of the registration of the CLOA with the Register of Deeds. Joint DAR-LBP Memorandum Circular No. 30, Series of 1997 states that in case occupancy of the land occurred before the date the CLOA is registered, then the basis for the amortization schedule would be the date of CLOA registration. If the occupancy date occurred after the date of CLOA registration, then the occupancy date would be the basis for the amortization schedule.
Computation of amount of amortizations
Under Administrative Order No. 2, Series of 1998, the basis of computation shall be the cost of the land and the permanent improvements thereon.
Pursuant to the mandate of the law that the payments shall be made affordable to the beneficiaries, however, Administrative Order No. 2, Series of 1998 provides that the amortizations may be reduced to:
(1) 2.5% of annual gross production (AGP) for the first three years
(2) 5% of the AGP for the fourth and fifth years
(3) 10% of the AGP for the sixth to thirtieth years, if this amortization ceiling is lower than the regular amortization.
The annual gross production is defined as the peso value of the annual yield/produce per hectare of the land awarded to farmer-beneficiaries, which is reflected in the valuation portion of the Claim Valuation and Processing Form.
In the case of VLT/DPS, for the purposes of computing the regular amortization, the AGP shall be that agreed upon by the parties during the proceedings for the determination of just compensation, and shall not be changed throughout the period for payment of the value of the land.
The ceiling on the payments for lands voluntarily offered or compulsorily acquired shall be the same. This is pursuant to the provision that, although the terms and conditions of the VLT/DPS shall be mutually agreed upon by the landowners and the farmer-beneficiaries, these should not be less favorable to the ARB that those that would prevail had the land been acquired by the government compulsorily (see Section 20 [b], R.A. 6657).
Effect of default in payment by beneficiary
In the case of land acquired under the VLT/DPS scheme, the land may be repossessed in case the beneficiary fails to pay an aggregate of three (3) consecutive annual amortizations from the date of receipt of the amortization schedule, except if loss of crops occurs due to fortuitous event or force majeure. Section 19 (c) provides that the voluntary agreement entered into by the landowners and the beneficiaries under VLT/DPS shall include sanctions for non-compliance by either party, subject to the approval by the DAR.
In the case of land voluntarily offered for sale or compulsorily acquired, the failure of the beneficiary to pay at least three (3) annual amortizations to the Land Bank gives the bank the right to foreclose the land, with the exception of loss of crops due to force majeure. In both cases, the beneficiary shall be permanently disqualified from becoming a beneficiary again.
Failure to pay due to fortuitous event
If the default is occasioned by natural calamity and/or force majeure, or any other instance when the failure to produce is not due to the fault of the farmer, the scheduled amortization payment is limited to the maximum amount of 10% of the annual gross production (see Section IV, A.O. No. 2, Series of 1992). The default due to fortuitous event shall not result in the permanent disqualification of the beneficiary.
Effect of higher valuation
The amount of regular annual amortization is not affected in case the landowner is granted by the courts a higher valuation than that pegged by the DAR/LBP/BARC during the valuation process. The only effect of this change is to increase government assistance or subsidy.
Repossessed land does not revert to former landowner
In case awarded land is repossessed by the government, the DAR shall cancel the CLOA issued to the beneficiary, and transfer the land to either of the following:
a) A qualified heir of the beneficiary who shall assume the balance of the value of the land; or
b) In the absence of a qualified heir, a new qualified beneficiary who, as a condition for such transfer, is willing to abide by the terms of the existing VLT/DPS agreement, and who will pay for the entire value of the land.
Beneficiary in default will not forfeit payments
If the land is sold to a new beneficiary other than an heir of the former beneficiary, the landowner shall refund the payments to the latter, in one lump sum or in installments, and shall pay for the improvements made by the former beneficiary, less the lease rentals for the duration of his use of the land and other charges allowed by law.
Assistance to farmer-beneficiaries in making payments
Administrative Order No. 2, Series of 1998 defines "assistance to farmers" as follows:
(a) The difference between the regular annual amortization (based on the amount paid or approved for payment to the landowner) and the affordable amount during the first five (5) years after the award of the land to the ARBs where the affordable amount is lower that the regular amortization;
(b) The difference between the regular annual amortization and ten percent (10%) of the AGP during the 6th to 30th year, whenever such 10% AGP is lower that the regular amortization; and
(c) Rebate of 2% of interest in case the beneficiary makes an early payment.
Production and Profit Sharing
Under Sections 13 and 32 of RA 6657, individuals or entities owning agricultural lands and operating under lease or management contract are required to execute production and profit-sharing plan with their farmworkers or farmworkers' organization, pending final distribution of the land or implementation of the stock distribution scheme. The provisions under AO 8 (1988) governs production and profit sharing plan under RA 6657.
A production and profit-sharing plan is required in order to improve the income of farmworkers pending final land transfer or stock distribution or full control in the case of deferred commercial farms and lease-back arrangements.
The following employers are required to execute production and profit-sharing plan provided that their annual gross sales exceed P5 million:
1) Any enterprise owning or operating agricultural lands under lease, management contract, production venture or other similar arrangement;
2) Multinational corporations engaged in agricultural activities; and
3) Commercial farms devoted to aquaculture including salt beds, fishponds and prawn ponds, fruit farms, orchards, vegetable and cut-flower farms, and cacao, coffee and rubber plantation.
All farmworkers of covered employers, regardless of duration, who are directly working on the land of the corporation or other entities, whether classified as regular, seasonal, technical or other farmworkers are covered in the mandated production and profit-sharing plan. To qualify, however, said employees must not own more than three (3) hectares of agricultural land.
Covered employers are required to pay the following, over and above the compensation currently received by the farmworkers:
1) Three (3%) of Annual Gross Sales from 15 June 1988 until final land or corporate stock transfer to the farmworker-beneficiaries is effected, provided that the employer is not obligated to pay more than 100% of the regular annual compensation of the farmworker-beneficiaries.
2) In addition, 10% of net profit after tax, provided that in cases where the retention right is allowed, the amount to be distributed shall be reduced by an amount equivalent to the proportion of the retained area to the total land area. [AO 8 (1988)]
Existing production and profit-sharing granted prior to the effectivity of CARP shall be credited as compliance with the mandated production and profit-sharing plan. However, where the benefits received are less than what is provided under RA 6657, covered employers shall pay the difference to the farmworkers.
Non-compliance with the provisions on production and profit-sharing is a violation covered by the provisions on prohibited acts and omissions and the penalties therein under Sections 73 and 74 of RA 6657.
The enforce the above mandate, DAR through its Secretary or authorized representatives has the following powers:
1) To order and administer compliance with the Production and Profit-Sharing provisions of RA 6657;
2) To require covered employers to submit report on the distributed production and profit shares;
3) To compel the production of books and other relevant documents of covered employers;
4) To compel answers to questions needing clarifications to shed light on problems encountered in the implementation of the plan;
5) To issue subpoena; and
6) To enforce its writs through sheriffs or other duly deputized officers.
Transfers of ownership under R.A. No. 6657 are tax exempt as provided in Section 66 thereof, as follows:
Transactions under this Act involving transfer of ownership, whether from natural or juridical person, shall be exempted from taxes arising form capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof; Provided, That all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled.
It is submitted that tax-exempt transactions contemplated in the above-quoted provision only involve lands placed under the coverage of the CARP and acquired through any of the modes of acquisition provided under the law, i.e., compulsory acquisition, voluntary offer to sell, voluntary land transfer or direct payment scheme for the purposes of transferring these to the beneficiaries. Hence, transfer of homelots to farmers as disturbance compensation in the case of lands already exempted from CARP coverage is taxable. This is so since the farmer-transferees in this case did not acquire the land as agrarian reform beneficiaries within the context of R.A. No. 6657. It must be emphasized that tax exemptions are to be strictly construed against the taxpayer. Therefore, any transaction not expressly enumerated in Section 66 of R.A. No. 6657 should be construed as not included in the tax-exempt provision of the law. (Memorandum of Asst. Sec. Peñaflor for the Secretary, 06 April 2000)
Section 28 provides that the landowner is entitled to retain his or her share in the standing crops unharvested at the time the DAR shall take possession of the land under the compulsory acquisition scheme, and shall be given reasonable time to harvest the same to the extent of the share pertaining to him/her.
Standing crops refer only to those crops existing at the time DAR takes possession of the land.
In the case of sugarlands, the term shall include the original crop only, excluding future harvests from ratoons, if what is existing at the time the DAR takes possession of the land is the original crop. If what is existing at the time of possession is already the first or second crop, the landowner shall be entitled to harvest his/her share in that ratoon crop.
Agrarian reform involves not only land redistribution, but also the totality of factors and support services designed to uplift the economic status of the beneficiaries and all other arrangements which will allow the beneficiaries to receive a just share of the fruits of the lands they work. (Section 3 (a) R.A. No. 6657). To address the latter, the Office of Support Services was created to provide general support and coordinative services in the implementation of the program. (Section 35, R.A. No. 6657). Notwithstanding the enactment of R.A. No. 7905 otherwise known as "An Act to Strengthen the Implementation of the Comprehensive Agrarian Program and for other Purposes" support services by the government remained limited because of fiscal constraints. Only 370,000 beneficiaries within the Agrarian Reform Communities (ARCs) out of 3.34 million as of 1998 are reached by such services. (CARP Annual Report, 1998, PARC Secretariat). Thus, the Department saw the need to mobilize the private sector to ensure adequate support services. It is within this framework that Joint Economic Enterprises was conceived. Joint Economic Enterprises refer to partnerships or arrangements between beneficiaries and investors to implement an agribusiness enterprise in agrarian reform areas. The arrangement finds legal basis in Section 35 and 44 of R.A. No. 6657, as amended by R.A. No 7905, as follows:
There is hereby created the Office of Support Services under the DAR to be headed by an Undersecretary. . . . This Office shall provide general support and coordinative services in the implementation of the program. Particularly in carrying out the provisions of the following services to farmer beneficiaries and affected landowners: . . . (2) Infrastructure development and public works projects in areas and settlements that come under agrarian reform . . . . For the purpose of providing the aforecited infrastructure and facilities, the DAR is authorized to enter into contracts with interested private parties on long term basis or through joint venture agreements or build-operate-transfer schemes, . . . (10) Assistance in the identification of ready markets for agricultural produce and training in other various aspects of marketing . . .
The PARCCOM shall coordinate and monitor the implementation of the CARP in the province . . ., in addition, it shall recommend to the PARC the following: . . . 3) continuous processing of applications for lease back agreements, joint venture agreements and other schemes that will optimize the operating size for agricultural production and also promote both security of income to farmer beneficiaries; Provided that lease back arrangements should be the last resort. (Underscoring supplied)
Joint Economic Enterprises
The parties to a joint economic enterprise are the agrarian reform beneficiaries and investors who may either be private individuals, partnerships or corporations; non-government organizations; cooperatives or associations of beneficiaries; government-owned or controlled corporations and other entities (Section 6 DAR A. O. No. 2-1999) It must be noted that the beneficiaries referred to include holders of Emancipation Patents (EPs) of Certificates of Land Ownership Awards (CLOAs). Qualified beneficiaries of agricultural lands for distribution under the agrarian reform program may also avail of the same provided that the land is distributed to the beneficiaries before an agribusiness agreement is executed. Small landowners may engage in joint economic enterprises involving their retained areas. (Section 4, DAR A.O. No. 2-1999)
In a joint economic enterprise, ownership of land remains with the beneficiaries. Only the use thereof, where necessary, is conveyed. The purposes for which a joint economic enterprise is to be established are production, processing and marketing of products, or introduction, maintenance, rehabilitation or upgrading of agricultural capital assets, infrastructure or facilities, or provision of management expertise, technology, equipment and other services to beneficiaries. The equity and interest of the parties to a joint economic enterprise depend on the nature of enterprise and extent of participation. Parties hall exercise shared responsibility and co-determination on matters affecting the viability of land and income of beneficiaries. The parties shall agree on the period and cause the annotation of the agreement on the titles of the properties. (Section 6, DAR A.O. No. 2-99)
Types of Joint Economic Enterprises
In a joint venture, the beneficiaries contribute use of the land together with the facilities and improvement while the investor provides capital and technology for production, processing and marketing of goods, or for construction, rehabilitation, upgrading of agricultural capital assets, infrastructure and facilities. The joint venture has a personality separate and distinct from the parties. The equity of beneficiaries in a joint venture depends on the value of use of land and improvements at the minimum, equal to lease rental. The equity of the beneficiaries is not subject to dilution. The joint venture is to be managed jointly by the investors and the ARBs. The beneficiaries are given a fixed number of seats in its board of directors corresponding to their equity interest. The beneficiaries and/or their dependents are to be given preference for employment in the joint venture.
Production, Processing and Marketing Agreement
In a production, processing and marketing agreement, the beneficiaries engage in production and processing of agricultural products and directly sell them to the investor who provides loans and technology. Incorporated in said agreement is a price review mechanism taking into consideration industry practice, prevailing market prices and other appropriate factors.
Build Operate Transfer Scheme
In a build-operate-transfer scheme, the investor builds or rehabilitates facilities and improvements necessary to make the lands productive and directly operates the same for a certain period. The facilities and improvements are constructed at the investor's own expense, and he shall not be allowed to access, for this purpose, government funds that would, otherwise be available as financing or capital for beneficiaries. In said scheme, the beneficiaries receive reasonable rent for the use of land. Upon expiration of the agreed period, ownership of the facilities and other improvements is consolidated in the name of the beneficiaries.
In a management contract beneficiaries hire the services of a contractor with managerial skills and capability to manage and operate the farm in exchange for a fixed wage and/or commission. The beneficiaries, in turn provide labor. All income from the operation of the farm accrue exclusively to the ARBs. In this arrangement, a human resource development program for the members of the cooperative, association or federation is to be implemented to facilitate transfer of technology and management techniques to enable them to directly manage and operate the farm.
In a service contract, beneficiaries engage for a fee the services of a contractor for mechanized land preparation, cultivation, harvesting, post-harvest operations and other activities. The service contractors may include other ARBs with necessary equipment and facilities for mechanized farm operations. Beneficiaries who wish to engage in service contracting but with limited financial capability may avail of loan facilities or credits pursuant to Section 35 of R.A. No. 6657 as amended.
In a lease contract, beneficiaries bind themselves to give investor enjoyment or use of their land for a price certain and for a definite period. In this arrangement, the investor provides capital to operate the farm, construct facilities and other improvements, process and market agricultural products. The lessee may either be a former landowner or other investors. However, under Section 44 of R.A. No. 6657, as amended by R.A. No. 7905, leaseback arrangements should be the last resort. This means that the ARBs and the investor (former landowner) must first consider other types of agribusiness arrangements before deciding on a lease. The lessee/investor is to give priority to qualified and willing ARBs and their dependents for employment in the enterprise. In such cases, the ARBs are to be treated as employees of the lessee/investor and are entitled to the mandated minimum wage and other economic benefits granted under the Labor Code and other existing laws.
Combinations or Phased Arrangements
Combinations or phased arrangements combine the features of any or all of the preceding forms of agribusiness enterprises, or provide for a phased implementation thereof. For instance, production and processing of agricultural corps may be covered by contract growing, while marketing may be under a joint venture. Small growers may engage production, while a corporation may undertake processing and marketing. Initially, the arrangement may provide for leaseback, followed by a contract growing, and finally, joint venture.
Other schemes refer to other agribusiness arrangements or schemes that optimize the operating size of distributed lands for agricultural production consistent with existing laws and regulations. (Section 7, DAR A.O. No. 2-99)
Adjudication of Agrarian Reform Matters
Jurisdiction of DAR
Sec. 50 of RA 6657 provides that the DAR is vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the DA and the DENR. In the exercise of its jurisdiction, DAR shall not be bound by technical rules of procedure and evidence but shall proceed to hear and decide all cases, disputes or controversies in a more expeditious manner, employing all reasonable means to ascertain the facts of every case in accordance with justice and equity and the merits of the case.
Adjudication of agrarian reform matters involves the exercise by the DAR Secretary of its exclusive jurisdiction over agrarian law implementation (ALI) cases or the exercise by the DAR Adjudication Board (DARAB) of its jurisdiction under the 1994 DARAB Revised Rules of Procedure. Petitions for the determination of just compensation to landowners and the prosecution of all criminal offenses under RA 6657 falls within the original and exclusive jurisdiction of the Special Agrarian Courts (SACs).
Restraining orders or injunctions issued by regular courts
Any restraining order or injunction issued by courts against DAR pursuant to the implementation of CARP is null and void as it violates the express provisions of Sec. 55 and 68 of RA 6657. Sec. 55 provides that no court in the Philippines shall have jurisdiction to issue any restraining order or writ of preliminary injunction against the PARC or any of its duly authorized or designated agencies in any case, dispute or controversy arising from, necessary to, or in connection with the application, implementation, enforcement, or interpretation of agrarian laws. On the other hand, Sec. 68 states that no injunction, restraining order, prohibition or mandamus shall be issued by the lower courts against DAR, DA, DENR and DOJ in their implementation of CARP.
Under DAR AO 6 (2000), ALI cases refer to those agrarian cases falling under the exclusive jurisdiction of the DAR Secretary. These cases strictly involve the administrative implementation of RA 6657 and other agrarian laws, rules and regulations. These cases include the following:
a) Classification and identification of landholdings for coverage under CARP, including protests or oppositions thereto and petitions for lifting of coverage;
b) Identification, qualification or disqualification of potential farmer-beneficiaries;
c) Subdivision surveys of lands under CARP;
d) Issuance, recall or cancellation of Certificates of Land Transfer (CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the purview of PD 816, including the issuance, recall or cancellation of EPs or CLOAs not yet registered with the Register of Deeds;
e) Exercise of the right of retention by the landowner;
h) Application for exemption under DAR AO No. 9 (1993);
j) Issuance of certificate of exemption for lands subject of VOS and CA found unsuitable for agricultural purposes pursuant to DAR MC 34 (1997);
k) Application for conversion of agricultural lands to residential, commercial, industrial or other non-agricultural uses including protests or opposition thereto;
l) Right of the ARBs to homelots;
m) Disposition of excess area of the FBs landholdings;
n) Transfer, surrender or abandonment by the FBs of his farmholding and its disposition;
o) Increase of awarded area awarded by the farmer-beneficiary;
p) Conflict of claims in landed estates and settlements; and
q) Such other matters not mentioned above but strictly involving the administrative implementation of RA 6657 and other agrarian laws, rules and regulations as determined by the Secretary. (DAR Adm. O. No. 6 , sec. 2).
In the adjudication of ALI cases, the Secretary or his authorized representative may exercise quasi-judicial powers granted under Section 50 of RA 6657. He or his authorized representative shall have the power to summon witnesses, administer oaths, take testimony, require submission of reports, compel the production of books and documents and answers to interrogatories and issue subpoena, and subpoena duces tecum and to enforce its writs through sheriffs or other duly deputized officers. He or his authorized representative shall likewise have the power to punish direct and indirect contempts in the same manner and subject to the same penalties as provided in the Rules of Court.
Likewise, the Regional Director or the DAR official having jurisdiction over the case, shall, motu propio or at the instance of a party, have the authority to issue a Cease and Desist Order or Status Quo Order pending the resolution of the case in the following instances:
a) where grave or irreparable damage will result to the parties;
b) where the doing or continuance of certain acts will render the case moot and academic; or
c) where there is a need to maintain peace and order and prevent injury or loss of life or property.
In this regard, the issuing authority may request the assistance of law enforcement agencies to implement the order. (Sec. 17, DAR Adm. O. 6 )
Moreover, the DAR shall not take cognizance of any agrarian controversy unless a certification from the BARC has been submitted stating that the dispute underwent mediation and conciliation without any success of settlement. However, if no certification is issued by the BARC within thirty (30) days after a matter or issue is submitted to it for mediation or conciliation the case or dispute may be brought before the PARC. (Rep. Act No. 6657 , sec. 53)
Jurisdiction over ALI Cases
The Secretary shall have exclusive original jurisdiction over all ALI cases. However, this jurisdiction may be delegated to certain DAR officials in accordance with existing rules and regulations (DAR Adm. O. No. 6 , sec. 6).
Protest/Petition for Lifting of Notice of Coverage/Application for Exemption or Exclusion
Under Sec. 7 of DAR AO 6 (2000), the Regional Director shall exercise primary jurisdiction over protests or petitions for lifting of notice of coverage.
The Secretary shall exercise exclusive jurisdiction for application for the issuance of exemption clearance under DAR AO 6 (1994) involving lands with an area of more than five (5) hectares. For lands with an area of five (5) hectares and below, the issuance of such clearance is delegated to the Regional Directors (DAR Adm. O. No. 6 , sec. 8 [a]).
Applications for exemption or exclusion under DAR AO 13 (1990), DAR AO 9 (1993), DAR AO 3 (1995) and DAR MC 34 (1997) and other pertinent rules and regulations, shall be under the jurisdiction of the concerned DAR officials identified therein, except those involving lands five (5) hectares and below situated within the provinces of Cavite, Laguna, Batangas, Rizal and Quezon (CALABARZON) which are now delegated to the concerned Regional Director. 1
Jurisdiction over applications for conversion shall pertain to the DAR officials authorized to approve or disapprove applications for conversion of agricultural lands to non-agricultural uses pursuant to Sec. 22 of DAR AO 1 (1999) (DAR Adm. O. No. 6 , sec. 9).
Other ALI Cases
The jurisdiction over other ALI cases shall generally pertain to the Regional Directors, except those cases specifically delegated to other DAR officials under existing rules and regulations, or those that may subsequently be promulgated by the Secretary (DAR Adm. O. No. 6 , sec. 11).
Flashpoint cases are ALI cases which fall within the jurisdiction of the Regional Director or the Director of the Bureau of Agrarian Legal Assistance (BALA) and determined or certified by the Secretary or the Head Executive Assistant which (a) threatens to disrupt the status quo in a particular area and endanger life and limb as a result of the use of force from either the landowners' side or farmer-beneficiaries' side or other parties; (b) are the subject of massive pickets or which may immediately result in concerted mass actions either in the DAR Central Office or in the field offices or at the site of the conflict; or (c) are of such nature that the Secretary may assign for immediate resolution. (DAR Memo. Circ. No. 13 )
The following are the procedure in the resolution of flashpoint cases:
a) Once a case has been certified as a flashpoint case by the HEA or the Secretary, the Director of the Special Concerns Staff (SCS) shall issue an Order directing the Head of Office/Unit concerned where the case is pending to transmit the entire case records, together with his comments or recommendations, to the Office of the SCS Director within 48 hours from notice of the directive.
b) Within 24 hours from receipt of the case records, the SCS Director shall issue a directive to all concerned parties to submit their respective position papers and such other documentary evidence within ten (10) days from notice. A clarificatory hearing, dialogue/conciliation/mediation or ocular inspection may be conducted when appropriate.
c) Within five (5) working days from the conclusion of the investigation/review/evaluation, the SCS Director shall rule on the case or submit his recommendation for the resolution of the case.
d) An aggrieved party may file a notice of appeal, together with the appeal memorandum, to the Assistant Secretary for Policy, Planning and Legal Affairs Office (PPLAO). The latter office shall forward the records, together with the evaluation on appeal made and proposed resolution, to the Office of the Secretary.
e) The Secretary shall have five (5) working days to decide on the appeal. The decision rendered by the Secretary shall be immediately executory notwithstanding any duly perfected appeal. (DAR Memo. Circ. No. 13 )
However, a certification that a case is considered flashpoint shall merely serve to accord utmost priority to the resolution thereof but shall not divest the concerned DAR official of the authority to resolve such cases, unless specifically directed in the national interest, or the Secretary himself has assumed jurisdiction over the case. (Adm. O. No. 6 , sec. 11)
Resolution of Disputes in Joint Economic Enterprises (JEE)
The following are the hierarchy of dispute resolution methods involving joint economic enterprises:
1) voluntary methods;
2) mediation or conciliation by trained mediators or conciliators;
3) arbitration; and
4) To any of the following depending on the principal cause of action:
a) DAR Adjudication Board (DARAB) if it involves interpretation of an agribusiness agreement or an agrarian dispute as defined in Sec. 3 (d) of RA 6657;
b) Securities and Exchange Commission (SEC) if it involves an intra-corporate dispute;
c) Cooperative Development Authority (CDA) if it involves an intra-cooperative dispute; or
d) National Labor Relations Commission (NLRC) if it involves employer-employee relations. (DAR Adm. O. No. 2 )
In this regard, the Secretary may issue such writs or orders, as may be appropriate, to maintain the status quo and preserve peace and order in the farm subject of a JEE, in the following cases:
a) where there is clear and imminent threat to life or property;
b) where the dispute will cause serious and irreparable damage to either party or to the agribusiness enterprise; or
c) where, in his judgment, there is an urgent need to protect the national interest. (DAR Adm. O. No. 2 )
Sec. 14 of DAR AO 6 (2000) provides that the filing of an application for exemption, exclusion, conversion, retention or protest against coverage shall have the following effects in so far as land acquisition and distribution are concerned:
a) If the application or petition is filed before the issuance of the notice of coverage, the notice of coverage shall not be issued until the application or petition is finally resolved;
b) If the application, protest or petition is filed after issuance of the notice of coverage, the DAR may proceed with the processing of the claimfolder notwithstanding the pendency of the application, protest or petition in accordance with the activities outlined under DAR AO 2 (1996), as amended. The processing of the claimfolder may be suspended by the PARO if upon proper review and evaluation of the Field Investigation Report (FIR) submitted by the MARO, and upon personal verification of the allegations in the application, protest or petition, it is determined that the subject landholding is in fact exempted or excluded from CARP coverage. Otherwise, the PARO may forward the claimfolder to the LBP for further processing.
c) In case the application, protest or petition is filed while the claimfolder is pending with LBP, or where the claimfolder has been forwarded by the PARO notwithstanding such application, protest or petition, the LBP shall continue with the processing of the land compensation claim, except that the Certification of Deposit (COD) shall not be issued to the PARO until the application, protest or petition is finally resolved.
Period in filing actions
Under Sec. 13 of DAR AO 6 (2000), petitions for lifting of notice of coverage shall be filed within thirty (30) days from receipt of the Notice of Coverage by the affected party. Failure by the affected party to file the protest or petition within the prescribed period shall be deemed a waiver of his right thereto. If the action is filed after the expiration of the thirty (30)-day period, the protest or petition shall no longer be entertained or shall be summarily dismissed by the MARO or the PARO, except in the following instances:
a) the protest or petition is based on allegations that subject landholding is exempted from CARP coverage under DAR AO 6 (1994); or
b) upon evaluation of pertinent documents and based on the physical conditions obtaining in the property, it is determined by DAR that the subject landholding is exempted from CARP coverage pursuant to DAR AO 13 (1990), DAR AO 9 (1993), DAR AO 3 (1995) and DAR MC 34 (1997) notwithstanding the issuance of the Notice of Coverage.
DAR Adjudication Board (DARAB)
The creation of DARAB was mandated under EO 129-A (1987) which aims at reorganizing and strengthening the DAR. The DARAB was created under the Office of the Secretary of the DAR and is given the powers and functions to adjudicate specific agrarian reform cases.
Before the creation of the DARAB, the Courts of Agrarian Relations (CAR) had the original and exclusive jurisdiction over agrarian reform matters. PD 946 (1976) entitled "Reorganizing the Courts of Agrarian Relations, Streamlining their Procedures and for Other Purposes," gave the CARs original and exclusive jurisdiction over agrarian reform matters, except those that fall under the jurisdiction of the Secretary of the DAR. With the passage of BP 129 (1980) or the Judiciary Reorganization Act, the CARs were integrated into the RTCs and the jurisdiction of the former was vested in the latter courts. However, with the promulgation of EO 229 (1987), entitled "Providing the Mechanisms for the Implementation of the Comprehensive Agrarian Reform Program (CARP)," the RTCs were divested of their special jurisdiction to try agrarian reform matters.
Under EO 229 (1987), the DAR is vested with primary jurisdiction to determine and adjudicate agrarian reform matters and has the exclusive jurisdiction over all matters involving the implementation of agrarian reform, except those that fall under the exclusive jurisdiction of the DA and the DENR. This is also clearly provided in Sec. 50 of RA 6657.
In Machete vs. Court of Appeals 250 SCRA 176 (1995), private respondent Celestino Villalon filed a complaint for collection of back rentals and damages before the Regional Trial Court against the petitioners. The complaint alleged that the parties entered into a leasehold agreement with respect to the private respondent's landholdings in Bohol. Petitioners moved to dismiss the complaint on the ground of lack of jurisdiction of RTC over the subject matter. Petitioners alleged that the subject matter of the complaint falls squarely within the jurisdiction of the DAR in the exercise of its quasi-judicial powers. The Supreme Court declared the dispute to be agrarian in nature and therefore outside the jurisdiction of the RTC. The Supreme Court held that:
Section 17 of EO 229 vested the DAR with quasi-judicial powers to determine and adjudicate agrarian reform matters as well as exclusive original jurisdiction over all matters involving implementation of agrarian reform except those falling under the exclusive original jurisdiction of the Department of Agriculture and the Department of Environment and Natural Resources in accordance with law. Executive Order 129-A, while in the process of reorganizing and strengthening the DAR, created the Department of Agrarian Reform Adjudication Board (DARAB) to assume the powers and functions with respect to the adjudication of agrarian reform cases" (at 179, 180).
In an earlier case, Quismundo vs. CA, 201 SCRA 609 (1991), the Supreme Court explained in detail the purpose for the creation of the quasi-judicial body, to wit:
Executive Order No. 229, which provides for the mechanism for the implementation of the Comprehensive Agrarian Reform Program instituted by Proclamation No. 131, dated July 22, 1987, vests in the Department of Agrarian Reform quasi-judicial powers to determine and adjudicate agrarian reform matters.
However, with the enactment of Executive Order No. 229, which took effect on August 29, 1987, fifteen (15) days after its release for publication in the Official Gazette, the regional trial courts were divested of their general jurisdiction to try agrarian reform matters. The said jurisdiction is now vested in the Department of Agrarian Reform.
The foregoing holding is further sustained by the passage of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, which took effect on June 15, 1988. The said law contains provisions which evince and support the intention of the legislature to vest in the Department of Agrarian Reform exclusive jurisdiction over all agrarian reform matters.
The resolution by the DAR is to the best advantage of the parties since it is in a better position to resolve agrarian disputes, being the administrative agency presumably possessing the necessary expertise on the matter. Further, the proceedings therein are summary in nature and the department is not bound by the technical rules of procedure and evidence, to the end that agrarian reform disputes and other issues will be adjudicated in a just, expeditious and inexpensive proceeding" (at 613, 614, 615).
Powers and Functions of DARAB
DARAB is composed of seven (7) members with the DAR Secretary as its Chairman. The members are: two (2) Undersecretaries designated by the Secretary, the Assistant Secretary for Legal Affairs, and three (3) Assistant Secretaries appointed by the President upon the recommendation of the Secretary. A Secretariat is also constituted to support the Board (Exec. Order No. 129-A , sec. 13).
Under Sec. 13 of EO 129-A (1987), the Board is empowered to delegate its powers and functions to the regional offices of the Department in accordance with the rules and regulations it has promulgated. With the implementing authority of the Secretary under Sec. 34 of the same EO and Sec. 49 of RA 6657, the Board promulgated the present Rules and Procedures of DARAB whereby adjudicators are specifically designated to adjudicate agrarian reform cases in the regions and provinces.
As earlier noted, the DARAB was created under the Office of the Secretary of the Department (Exec. Order No. 129-A , sec. 13). It was established to strengthen the Department (Exec. Order No. 229 ). However, DARAB has no jurisdiction on matters which strictly involve the administrative implementation of RA 6657 and other agrarian laws. Those are within the exclusive jurisdiction of the Secretary of DAR. Under DAR MC 13 (1997), the DAR Secretary has the authority to certify as flashpoint or urgent case, only ALI cases but not cases within the jurisdiction of DARAB.
With respect to the regular courts, Supreme Court Administrative Circular No. 3 (1992) provides:
The Court reiterates to all court judges the need for a careful consideration of the proper application of the CARL (RA 6657) to avoid conflict of jurisdiction with the DARAB. The trial court judges are directed to take note of the rulings in Vda. de Tangub vs. CA, 191 SCRA 885 and Quismundo vs. CA, 201 SCRA 609.
In Ualat vs. Judge Ramos, 265 SCRA 345 (1996), the respondent judge of MTC was fined P20,000.00 with stern warning from the Supreme Court for gross ignorance of law for taking cognizance of an ejectment case despite allegations of tenancy between the parties.
Ualat vs. Judge Ramos
265 SCRA 345 (1996)
Complainants filed an administrative case against respondent Judge Ramos for taking cognizance of the illegal detainer case filed by their landowner against them. It was shown that the respondent judge had knowledge of a previously filed DARAB case and the fact that the illegal detainer case falls within the exclusive jurisdiction of the DAR. Despite the separate affidavits of the complainants containing allegation of landlord-tenant relationship, the respondent judge took cognizance of the illegal detainer case.
Was the action of Judge Ramos proper?
The Supreme Court in finding the respondent Judge liable for ignorance of the law opined: "As can be readily seen from the answer filed by complainants Sabio and Ualat in the civil case, they alleged the existence of an agrarian tenancy relationship between themselves and the landowner. Additionally, in the proceedings before respondent Judge, complainants were even represented by a lawyer from the DAR. These matters should have been sufficient to put respondent Judge on notice that complainants were claiming protection under our agrarian laws. At that point, he ought to have realized that there existed a genuine issue involving agricultural tenancy among the parties with respect to the subject property. Knowledge of existing agrarian legislation and prevailing jurisprudence on the subject, together with an ordinary degree of prudence would have prompted respondent Judge to refer the case to the DAR for preliminary determination of the real nature of the parties' relationship, as required by law" (at 357).
However, DARAB has no jurisdiction with respect to agrarian matters involving the prosecution of all criminal offenses under RA 6657 and the determination of just compensation for landowners (Rep. Act No. 6657 , sec. 57). Jurisdiction over said matters are lodged with the Special Agrarian Courts (SACs). The Court of Appeals and Supreme Court maintain their appellate jurisdiction over agrarian cases decided by DARAB.
In this regard, the Supreme Court in the case of Vda. de Tangub vs. CA, 191 SCRA 885 (1990) held that:
The Regional Trial Courts have not, however, been completely divested of jurisdiction over agrarian reform matters. Section 56 of RA 6657, on the other hand, confers "special jurisdiction" on "Special Agrarian Courts", which are Regional Trial Courts designated by the Supreme Court — at least one (1) branch within each province — to act as such. These Regional Trial Courts qua Special Agrarian Courts have, according to Section 57 of the same law, original and exclusive jurisdiction over: 1) "all petitions for the determination of just compensation to land-owners," and 2) "the prosecution of all criminal offenses under . . . (the) Act" (at 890).
Barangay Agrarian Reform Committee (BARC)
This is originally the Barangay Agrarian Reform Council created under EO 229 (1987). RA 6657 changed the nomenclature of BARC from "council" to "committee" and expanded its scope of functions. It is through the organization of the BARCs that the implementation of CARP is envisioned to be truly community based where the public can participate in decision-making and resolution of agrarian reform disputes.
This committee is composed of the following:
a) Representative/s of farmer and farmworker beneficiaries;
b) Representative/s of farmer and farmworker non-beneficiaries;
c) Representative/s of agricultural cooperatives;
d) Representative/s of other farmer organizations;
e) Representative/s of the Barangay Council;
f) Representative/s of non-government organizations (NGOs);
g) Representative/s of Landowners;
h) DA Official assigned to the area;
i) DENR Official assigned to the area;
j) DAR Agrarian Reform Technologist assigned to the area who shall act as the Secretary; and
k) Land Bank of the Philippines representative (Exec. Order No. 229 , sec. 19).
Sec. 46 and 47 of RA 6657 defined the BARC functions in addition to those provided under Sec. 19 of EO 229. DAR AO 14 (1990) provides for the guidelines in the formation, organization and strengthening of the BARCs.
Primary and Exclusive Original and Appellate Jurisdiction of DARAB
Sec. 1, Rule II of the DARAB Revised Rules and Procedures provides that the Board has primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian cases including but not limited to the following:
a) All agrarian disputes involving the implementation of the CARP under RA 6657, EOs 228, 229, and 129-A, RA 3844 as amended by RA 6389, PD 27 and other agrarian laws and their implementing rules and regulations;
b) Cases involving rights and obligations of persons, whether natural or juridical, engaged in the management, cultivation and use of all agricultural lands covered by the CARP and other agrarian laws;
c) Cases involving the valuation of land, and the preliminary determination and payment of just compensation, fixing and collection of lease rentals, disturbance compensation, amortization payments and similar disputes concerning the functions of the LBP;
d) Cases involving the annulment or cancellation of lease contracts or deeds of sale or their amendments involving lands under the administration and disposition of the DAR or LBP;
e) Cases arising from or connected with membership or representation in compact farms, farmers' cooperative and other registered farmers' associations or organizations, related to lands covered by the CARP and other agrarian laws;
f) Cases involving the sale, alienation, mortgage, foreclosure, preemption and redemption of agricultural lands under the coverage of the CARP or other agrarian laws;
g) Cases involving the issuance, correction and cancellation of Certificates of Landownership Award (CLOAs) and Emancipation Patents (EPs) which are registered with the Land Registration Authority;
i) And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR.
DARAB's Jurisdiction over Agrarian Disputes
The Supreme Court, in several cases, had the occasion to explain what is an agrarian dispute case for DARAB to try and adjudicate.
In the case of Machete vs. CA, 250 SCRA 176 (1995), the private respondents asked for collection of back rentals and damages before the RTC while the petitioners moved for the dismissal of the case because of lack of jurisdiction. The Court ordered the transmittal of the case to DARAB and ruled that:
Section 3, par. (d), of RA 6657 defines the term "agrarian dispute" as referring to any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farm workers' associations or representation of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements (at 182).
In the case of Central Mindanao University vs. DARAB, 215 SCRA 86 (1992), on the issue of jurisdiction of the DARAB in ordering the petitioner to segregate its 400 hectares land and including it under the CARP for distribution to qualified beneficiaries, the Court opined:
Under Section 4 and Section 10 of RA 6657, it is crystal clear that the jurisdiction of the DARAB is limited only to matters involving the implementation of CARP. More specifically, it is restricted to agrarian cases and controversies involving lands falling within the coverage of the aforementioned program. It does not include those which are actually, directly and exclusively used and found to be necessary for, among such purposes, school sites and campuses for setting up experimental farm stations, research and pilot production centers, etc. (at 99). Sec. 17 of EO 129-A is merely a repetition of Sec. 50 of RA 6657. There is no doubt that the DARAB has jurisdiction to try and decide any agrarian dispute in the implementation of the CARP. An agrarian dispute is defined by the same law as any controversy relating to tenurial rights whether leasehold, tenancy, stewardship or otherwise over lands devoted to agriculture (at 100).
In Isidro vs. CA, 228 SCRA 503, one of the issues raised is the jurisdiction of the MTC in taking cognizance of a case involving an agricultural land. The petitioner refused to vacate the land despite the demand of the private respondent. The Supreme Court held that there exists no tenurial relations between the parties, to wit:
An agrarian dispute refers to any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farmworkers associations or representation of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements. It includes any controversy relating to compensation of lands acquired under RA 6657 and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee (at 510).
Cases under the Court of Agrarian Relations
DARAB has jurisdiction over cases previously falling under the original and exclusive jurisdiction of the defunct Court of Agrarian Relations under PD 946 (1976), except sub-paragraph (Q) thereof and PD 815 (1975). The sub-paragraph (Q) exception under this cited provision refers only to cases involving violations of the penal provisions of RA 1199, as amended. Hence, the other provisions of RA 1199, as amended, still fall within the jurisdiction of DARAB. Included in DARAB's jurisdiction is Section 21 of RA 1199, as amended, which provides that:
Section 21. Ejectment; Violation; Jurisdiction. — All cases involving the dispossession of a tenant by the landholder or by a third party . . . .
The 'third party' mentioned in the said sec. 21 should be construed to mean a person who is neither landholder or tenant, but who acts for, openly, secretly, or factually for the landholder. For instance, a sheriff enforcing an execution sale against the landholder; or a purchaser or transferee of the land, or a mere dummy of the landowner (De Luna v. CA, 221 SCRA 703 ).
Jurisdiction of the Regional Adjudicator (RARAD) and the Provincial Adjudicator (PARAD)
Sec. 2, Rule II of the DARAB Revised Rules and Procedures provides that the RARAD and the PARAD has concurrent original jurisdiction with the Board to hear, determine and adjudicate all agrarian cases and disputes, and incidents in connection therewith, arising with their assigned territorial jurisdiction.
The RARAD is the Executive Adjudicator in his/her region directly responsible to the Board. He/she shall:
1) Direct supervision over the PARADs;
2) Recommend to the Board the territorial assignments and the disciplinary measures appropriate to the PARADs;
3) Adjudicate agrarian disputes and land valuation cases;
4) Hear and handle other cases which cannot be handled by the PARADs:
a) by reason of PARADs disqualification or inhibition;
b) PARADs cannot handle the case properly;
c) because of the complexity and sensitivity of the case;
d) delegated just compensation cases;
e) and those assigned by the Board.
The RARAD has concurrent original jurisdiction with the PARAD.
Appellate Jurisdiction of the Board
Under Sec. 5, Rule II of the DARAB Revised Rules and Procedures, the Board has the jurisdiction to review all the decisions of the Adjudicators. However, under DAR MC 7 (1991), reiterating Sec. 1, par. (c) of the Revised DARAB Rules and Procedures, it is emphasized that DARAB has no jurisdiction over cases involving annulment or cancellation of orders and decisions of the Secretary.
Not all decisions or orders of the PARAD and RARAD are reviewable by the Board. Under DAR AO 8 (1993), the PARADs, RARADs and DARAB has original and exclusive jurisdiction in the preliminary determination of just compensation cases which are appealable only to the Special Agrarian Courts.
Mediation/Conciliation at Barangay Level
The BARC does not function as an adjudicator at the barangay level. The BARC is mandated to mediate and conciliate agrarian disputes at the barangay level. In a mediation/conciliation, BARC's objective is to persuade the contending parties to settle their dispute amicably. The BARC does not act as an adjudicator.
It is the responsibility of the BARC to promote a speedy and cost-free administration of justice, prevent a dispute from going out of the barangay level to DARAB level, and help the landowners and farmer-beneficiaries commit themselves in complying with their agreements. This in turn is envisioned to help in the efficient and successful implementation of the CARP.
Where the land in dispute straddles two (2) or more barangays or the parties involved reside in different barangays, the BARC of the barangay where the biggest portion of the property lies, shall have the authority to conduct the mediation or conciliation proceedings, unless for convenience and accessibility and upon agreement of parties such proceedings should be held in another barangay within the municipality or adjacent municipality where the land in dispute is located (DARAB Revised Rules and Procedures  Rule III, sec. 3)
Under the DARAB Revised Rules and Procedures, DARAB can take cognizance of an agrarian dispute even without the BARC Certification if:
1) The dispute does not involve any of the following:
a) Valuation lands to determine just compensation for landowners;
b) One of the parties is a public or private corporation, partnership, association or juridical person, or a public officer/employee wherein the dispute relates to the performance of his official functions;
c) Issue involved is an administrative implementation of agrarian laws and policies; and
d) Cases determined by the Secretary as beyond the ambit mediation/conciliation or compromise.
2) The required certification cannot be complied with for valid reasons like the non-existence or non-organization of the BARC or the impossibility of convening it. The PARO shall conduct mediation and conciliation proceedings and issue a certification to that effect.
3) It involves resolving and disposing of preliminary incidents related to the case, such as motion for the issuance of status quo orders, temporary restraining orders, preliminary injunctions and such similar motions necessitating immediate action (DARAB Revised Rules and Procedures , Rule III, secs. 1 and 2).
The lack of a BARC certification is not a ground for dismissal of an action. A complainant is given every opportunity to secure said certification.
Powers and Duties of DARAB
Under the DARAB Revised Rules and Procedures, the powers and duties of the Adjudicators include but are not limited to the following:
a) Personally conduct a hearing, take control of the proceedings, employ reasonable means to ascertain the facts of the case, determine the real parties in interest, define and simplify the issues of the case, and thresh out preliminary matters.
b) To subpoena, summon witnesses, examine witnesses, may limit the right of parties/counsels to ask questions to clarify the points of law at issue or of facts involved, may limit the presentation of evidence to matters relevant to the issues, and endeavor to settle the case amicably/approve compromise agreements.
c) To hold a party in contempt, to issue writs and interlocutory orders, and may award actual, compensatory, exemplary and moral damages and attorney's fees.
Special Agrarian Courts (SACs)
Special agrarian courts are Regional Trial Courts within each province designated by the Supreme Court to exercise special jurisdiction in addition to its regular jurisdiction. The Supreme Court may designate more branches to constitute such additional SACs as may be necessary to cope with the number of agrarian cases in each province. (Rep. Act No. 6657 , sec. 56)
Sec. 57 of RA 6657 provides that the SACs shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners and the prosecution of all criminal offenses under RA 6657.
In Republic vs. Court of Appeals, 758 SCRA 263 (1996), the Supreme Court held that "any effort to transfer the original and exclusive jurisdiction to the DAR adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Section 57 of RA 6657 and therefore would be void."
Orders or Decisions of DAR Secretary
The decisions of the DAR Secretary in ALI cases may be appealed to the Office of the President or the Court of Appeals, at the option of the appellant.
Sec. 54 of RA 6657 states that any decision, order, award or ruling of the DAR on any agrarian dispute or on any matter pertaining to the application, implementation, enforcement, or interpretation of this Act and other pertinent laws on agrarian reform may be brought to the Court of Appeals by certiorari. On the other hand, Sec. 15 and 20, Book VII of EO 292 (1987) or the Administrative Code of 1987, as implemented by DAR MC 3 (1994) provides that an appeal from the decision/order issued by DAR shall be perfected within fifteen (15) days after receipt of a copy of the decision/order complained of by the party adversely affected. Said appeal shall be perfected by filing with the DAR a notice of appeal, serving copies thereof upon the prevailing party and the Office of the President and paying the required fees. The DAR shall upon perfection of the appeal transmit the records of the case to the Office of the President.
Any decision, order, resolution, award or ruling of DARAB on any agrarian dispute or on any matter pertaining to the application, implementation, enforcement, interpretation of agrarian reform laws or rules and regulations promulgated thereunder, may be brought within fifteen (15) days from receipt of a copy thereof, to the Court of Appeals by certiorari. (Rep. Act No. 6657 , sec. 54; Revised DARAB Rules , Rule XIV, sec. 1)
Decisions of Special Agrarian Courts
An appeal may be taken from the decision of the Special Agrarian Courts by filing a petition for review with the Court of Appeals within fifteen (15) days from receipt of notice of the decision. (Rep. Act No. 6657 , sec. 60)
1. The transfer of jurisdiction over applications for CALABARZON areas from the Center for Land Use Policy, Planning and Implementation (CLUPPI) – 2 to the Regional Director shall take effect upon implementation of the DAR reorganization, or as directed by the Secretary (DAR Admin. O. No. 6 , sec. 36)
Land Use Conversion
DAR AO 1 (1999), entitled "Revised Rules and Regulations on the Conversion of Agricultural Lands to Non-agricultural Uses," defines "land use conversion" as "the act or process of changing the current use of a piece of agricultural land into some other use as approved by DAR." (Sec. 2(k)). Pursuant to the Memorandum of the President dated 16 April 1999, this administrative order serves as the primary guidelines on the conversion of agricultural lands to non-agricultural uses.
RA 8435 (1997), also known as the "Agriculture and Fisheries Modernization Act of 1997," provides for a similar definition: "agricultural land use conversion refers to the process of changing the use of agricultural land to non-agricultural uses." (Sec. 4).
Conversion versus Reclassification
DAR's conversion authority is most often seen as synonymous with the power of local government units (LGUs) to reclassify lands within their territorial jurisdiction. This misconception has resulted in a lot of conflicts and confusion not only between the two agencies but among other concerned sectors.
"Reclassification" refers to the "act of specifying how agricultural lands shall be utilized for non-agricultural uses such as residential, industrial, commercial, as embodied in the land use plan, subject to the requirements and procedures for conversion. It also includes the reversion of non-agricultural lands to agricultural use." (Joint HLURB, DAR, DA, DILG Memo. Circular Prescribing the Guidelines to Implement MC 54, , sec. 2[2.3]). On the other hand, conversion is defined by the same Memorandum Circular as the "act of changing the current use of a piece of agricultural land into some other use." [Id., sec. 2[2.2])
Under section 20 of RA 7160 (1991) or the "Local Government Code of 1991," a city or municipality may authorize the reclassification of agricultural lands and provide for the manner of their utilization or disposition under the following circumstances:
a) when the land ceases to be economically feasible and sound for agricultural purposes as determined by the DA; or
b) where the land shall have substantially greater economic value for residential, commercial, or industrial purposes, as determined by the sanggunian concerned.
Said Act mandates that the reclassification should be made after conducting public hearing and that it shall be limited to the following percentage of the total agricultural land area at the time of the passage of the ordinance: (a) for highly urbanized and independent component cities, fifteen percent (15%); (b) for component cities and third class municipalities, ten percent (10%); and (c) for fourth to sixth class municipalities, five percent (5%): Provided, further, that agricultural lands distributed to agrarian reform beneficiaries pursuant to RA 6657 shall not be affected by the said reclassification and the conversion of such lands into other purposes shall be governed by Section 65 of said Act. This percentage ceiling on the land area which the LGUs can reclassify is not absolute. The President may, when public interest so requires and upon recommendation of the National Economic and Development Authority (NEDA), authorize a city or municipality to reclassify lands in excess of the limits cited above (Rep. Act No. 7160 , sec. 20 [b]).
Also, LGUs are mandated to exercise such authority in accordance with MC 54 (1993) of the Office of the President entitled "Prescribing the Guidelines Governing Section 20 of RA 7160, otherwise known as the Local Government Code of 1991, Authorizing Cities and Municipalities to Reclassify Agricultural Lands Into Non-agricultural Uses." Under these Guidelines, the following types of agricultural lands shall not be covered:
a) Agricultural lands distributed to agrarian reform beneficiaries subject to Sec. 65 of RA 6657;
b) Agricultural lands already issued a notice of coverage or voluntarily offered for coverage under CARP;
c) Agricultural lands identified under AO 20 (1992), as non-negotiable for conversion.
On the other hand, the power of the DAR to approve or disapprove land use conversion applications is exclusive (Exec. Order No. 129-A , sec. 5[e]; see OP Memorandum Circular No. 54, Sec. 4,  Book IV, Title XI, Chapter 1, sec. 3 ; RA 6657 [1988[, sec. 65). It is distinct from the power of LGUs to reclassify agricultural land under Section 20 of the Local Government Code.
This is evident in Sec. 20 (e) of RA 7160 which provides: "Nothing in this Section shall be construed as repealing, amending or modifying in any manner the provisions of RA 6657." In his commentary, Sen. Aquilino Q. Pimentel, principal author of the Local Government Code of 1991, stated as follows:
Sanggunian Power to Reclassify Not to Convert. This is one section of the Code which evoked a lot of discussion among the members of the Conference Committee. The proposal to allow local governments to reclassify land and provide for the manner of their utilization or disposition was made by Congressman Pablo Garcia of Cebu, who argued that the central government has no business dictating to the local governments how to classify land within their jurisdiction. Some legislators, however, felt that to allow local governments to reclassify land may open the door to a nationwide frustration of the goals of the agrarian reform law.
Congressman Garcia disputed the argument by pointing out that the power he had sought to invest the local governments with was not to convert land for any purpose contrary to the provisions of the Comprehensive Agrarian Reform Law but merely to "reclassify" land. (A.Q. Pimentel, Jr., The Local Government Code of 1991, The Key to National Development 111).
DAR's role in the reclassification process is the issuance of a certification that the lands sought to be reclassified are not distributed or not covered by a notice of coverage or not voluntarily offered for coverage under CARP. This certification must be secured by the sanggunian concerned prior to the enactment of an ordinance reclassifying the agricultural land (OP Memorandum Circular No. 54, , sec. 2 (b) (2)).
After the reclassification by the LGU, a DAR conversion clearance shall still be required prior to actual change of use of the land as explicitly provided in OP Memorandum Circular No. 54 (1993), to wit:
"actions on applications for land use conversion shall remain as the responsibility of DAR". (Sec. 4; Underscoring supplied.)
The case of Fortich, et al. v. Corona, et al., G.R. No. 131457 (19 August 1999) illustrates the confusion between reclassification and conversion. In said case, a statement was made that LGUs have authority to convert or reclassify agricultural lands without DAR approval. The Supreme Court resolved two (2) separate motions for reconsideration filed by respondents and intervenors of the Court's resolution dated 17 November 1998 as well as their motion to refer the case to the Court en banc. The Supreme Court stated that "(t)he crux of the controversy is the validity of the "Win-Win" Resolution dated 7 November 1997 of the Office of the President which is "void and of no legal effect considering that the March 29, 1996 decision of the Office of the President had already become final and executory even prior to the filing of the motion for reconsideration which became the basis of the said "Win-Win" Resolution." (at 5).
The DAR clarified its position on this issue through a Memorandum of the DAR Secretary dated 13 October 1999, to wit:
It should be stressed that the motions in Fortich were denied on the ground that the "win-win" resolution is void and has no legal effect because the decision approving the conversion has already become final and executory. This is the ratio decidendi or reason of the decision. The statement that LGUs have authority to convert or reclassify agricultural lands without DAR approval is merely a dictum or expression of the individual views of the ponente or writer of the Resolution of August 19, 1999. It does not embody the Court's determination and is not binding.
Expropriated Lands Not Subject to DAR Conversion Clearance
Agricultural lands expropriated by LGUs pursuant to the power of eminent domain need not be subject of DAR conversion clearance prior to change in use. This was the Court's pronouncement in Province of Camarines Sur vs. CA, 222 SCRA 173 (1993).
Province of Camarines Sur vs. Court of Appeals
222 SCRA 173 (1993)
The Governor of Camarines Sur filed two (2) separate cases for expropriation against Ernesto and Efren San Joaquin pursuant to Sangguniang Panlalawigan Resolution No. 129 authorizing the Governor to purchase or expropriate properties owned by the San Joaquins for the establishment of a pilot farm for non-food and non-traditional agricultural crops and a housing project for provincial government employees. The San Joaquins moved to dismiss the complaints on the ground of inadequacy of the price offered. The motion was denied and a writ of possession was issued in favor of the province. On appeal with the CA, the San Joaquins asked the appellate court to, among others, nullify the resolution issued by the Sanggunian. The CA asked the Office of the Solicitor General to comment to the petition. The Solicitor General stated that the approval of the Office of the President is not needed but the province must first secure the approval of the DAR of the plan to expropriate the lands of petitioners. The CA set aside the order of the trial court allowing the province to take possession and ordered the suspension of the expropriation proceedings until after the submission of the DAR approval to convert the property.
Is DAR approval still necessary before an LGU can expropriate agricultural lands for conversion to non-agricultural use?
It is true that local government units have no inherent power of eminent domain and can exercise it only when expressly authorized by the legislature (City of Cincinnati v. Vester, 281 US 439, 74 L.ed. 950, 50 S Ct. 360). It is also true that in delegating the power to expropriate, the legislature may retain certain control or impose certain restraints on the exercise thereof by the local governments (Joslin Mfg. Co. v. Providence, 262 US 668 67 L. ed. 1167, 43 S Ct. 684). While such delegated power may be a limited authority, it is complete within its limits. Moreover, the limitations on the exercise of the delegated power must be clearly expressed, either in the law conferring the power or in other legislation.
Resolution No. 129  was promulgated pursuant to Section 9 of B.P. Blg. 337, the Local Government Code, which provides: . . .
Section 9 of B.P. Blg. 337 does not intimate in the least that local government units must first secure the approval of the Department of Land Reform for the conversion of lands from agricultural to non-agricultural use, before they can institute the necessary expropriation proceedings. Likewise, there is no provision in the Comprehensive Agrarian Reform Law which expressly subjects the expropriation of agricultural lands by local government units to the control of the Department of Agrarian Reform. The closest provision of law that the Court of Appeal could cite to justify the intervention of the Department of Agrarian Reform in expropriation matters is Section 65 of the Comprehensive Agrarian Reform Law, which reads: . . .
The opening, adverbial phrase of the provision sends signals that it applies to lands previously placed under the agrarian reform program as it speaks of "the lapse of five (5) years from its award."
The rules on conversion of agricultural lands found in Section 4 (k) and 5(l) of Executive Order No. 129-A, Series of 1987, cannot be the source of the authority of the Department of Agrarian Reform to determine the suitability of a parcel of agricultural land for the purpose to which it would be devoted by the expropriating authority. While those rules vest on the Department of Agrarian Reform the exclusive authority to approve or disapprove conversions of agricultural lands for residential, commercial or industrial uses, such authority is limited to the applications for reclassifications submitted by the land owners or tenant beneficiaries..
Statutes conferring the power of eminent domain to political subdivisions cannot be broadened or constricted by implication (Schulman v. People, 10 N.Y. 2d. 249, 176 N.E. 2d. 817, 219 NYS 2d. 41).
To sustain the Court of Appeals would mean that the local government units can no longer expropriate agricultural lands needed for the construction of roads, bridges, schools, hospitals, etc., without first applying for conversion of the use of the lands with the Department of Agrarian Reform, because all of these projects would naturally involve a change in the land use. In effect, it would then be the Department of Agrarian Reform to scrutinize whether the expropriation is for a public purpose or public use. (at 179-181; underscoring supplied).
Authority to Approve/Disapprove Conversion
Under Sec. 4 and 5 of EO 129-A (1987), the DAR is mandated to "approve or disapprove the conversion, restructuring or readjustment of agricultural lands into non-agricultural uses." It authorizes DAR to "have exclusive authority to approve or disapprove conversion of agricultural land for residential, commercial, industrial, and other land uses as may be provided for by law." Also, Sec. 4 of OP MC 54 (1993), provides that "action on application for land use conversion on individual landholdings shall remain as the responsibility of the DAR, . . . , pursuant to RA No. 6657 and EO 129-A."
Moreover, RA 6657 provides:
Section 65. Conversion of Lands. — After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, if the locality has become urbanized and the land will have greater economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorized the reclassification or conversion of the land and its disposition; Provided, That the beneficiary shall have fully paid his obligations.
In the case of Roxas v. CA, G.R. No. 127876, 16 December 1999, the authority of the DAR to approve or disapprove conversion was reiterated by the Court:
Respondent DAR's failure to observe due process in the acquisition of petitioner's landholdings does not ipso facto give this Court the power to adjudicate over petitioner's application for conversion of its haciendas from agricultural to non-agricultural. The agency charged with the mandate of approving or disapproving applications for conversion is the DAR." (at 45-46; underscoring supplied). The Court further stated that, "(t)he DAR's mandate over applications for conversion was first laid down in Section 4 (j) and Section 5 (l) of Executive Order No. 129-A, Series of 1987 and reiterated in the CARL and Memorandum Circular No. 54, Series of 1993 of the Office of the President. (at 46).
DAR's authority to allow conversion is not limited only to lands awarded under CARP. As stated in DOJ Opinion No. 44 (1990):
Being vested with exclusive original jurisdiction over all matters involving the implementation of agrarian reform, it is believed to be the agrarian reform law's intention that any conversion of a private agricultural land to non-agricultural uses should be cleared before hand by the DAR. True, the DAR's express power over land use conversion is limited to cases in which agricultural lands already awarded have, after five years, ceased to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes. But to suggest that these are the only instances when the DAR can require conversion clearances would open a loophole in R.A. No. 6657, which every landowner may use to evade compliance with the agrarian reform program. Hence, it should logically follow from the said department's express duty and function to execute and enforce the said statute that any commercial or industrial property should first be cleared by the DAR.
xxx xxx xxx
Based on the foregoing premises, we reiterate the view that with respect to conversions of agricultural lands covered by RA No. 6657 to non-agricultural uses, the authority of DAR to approve such conversion may be exercised from the date of the law's effectivity on June 15, 1988. This conclusion is based on a liberal interpretation of R.A. No. 6657 in the light of DAR's mandate and the extensive coverage of the agrarian reform program. (Underscoring supplied.)
DAR Officials Authorized to Issue Conversion Orders
Under Sec. 22 (a) of DAR AO 1 (1999), the following DAR officials shall approve or disapprove applications for land use conversion:
a) The Regional Director for areas of not more than five (5) hectares;
b) The duly authorized Undersecretary for areas above five (5) hectares but not more than fifty (50) hectares;
c) The Secretary for areas of more than fifty (50) hectares, except for those highly restricted from conversion which shall be subject to his approval regardless of the area.
For purposes of determining the appropriate approving authority, the total area for conversion shall refer to the aggregate area of all applications regardless of the number of applications and the nature of the proposed project where (a) the properties are owned by the same person or entity or the owners of which are represented by the same person or entity; and (b) the properties are located in the same barangay or adjacent barangays within the same municipality/ies or city/ies. In case the subject land is adjacent to an area previously issued with conversion order, the foregoing test shall be applied to determine the appropriate approving authority (DAR Adm. O. No. 1 , sec. 22 [b] and [c]).
Scope of Land Use Conversion
Under DAR AO 1 (1999), the following agricultural lands are subject to DAR's conversion authority:
a) Those to be converted to residential, commercial, industrial, institutional and other non-agricultural purposes;
b) Those to be devoted to another type of agricultural activity such as livestock, poultry, and fishpond the effect of which is to exempt the land from CARP coverage;
c) Those to be converted to non-agricultural use other than that previously authorized; and
d) Those reclassified to residential, commercial, industrial, or other non-agricultural uses on or after the effectivity of RA 6657 on June 15, 1988 pursuant to the Local Government Code.
Sec. 3 (b) of DAR AO 1 (1999) states that the change in use of land from one agricultural activity to another use which would exempt the land from CARP coverage under Sec. 10 of RA 6657 and DOJ Opinion No. 44  requires conversion clearance. Hence, landowners of agricultural lands devoted to coconuts must first secure a conversion clearance from DAR if they want to convert the same to poultry farm or fishpond.
Also, DAR AO 1 (1990) requires landowners to secure another conversion clearance if the change that will be undertaken is not what has been authorized in a previous conversion order. In short, if DAR issues a conversion order authorizing the landowner to change the use of the property from agricultural use, e.g. coconut plantation to a memorial park, the owner cannot develop the property into a residential subdivision without getting another conversion clearance specifically allowing the residential use of the land.
Agricultural lands outside DAR's conversion authority
The following lands do not require DAR conversion clearance or are not subject to conversion:
a) Agricultural lands reclassified to non-agricultural uses prior to 15 June 1988 (DAR Adm. O. No. 1 , sec. 3 (d) and DOJ Opinion No. 44, ). (These lands are subject to DAR exemption clearance);
b) Agricultural lands considered non-negotiable for conversion (DAR Adm. O. No. 1 , sec. 4);
c) Lands within the Strategic Agriculture and Fisheries Development Zones (SAFDZs) which are subject to the five (5) year moratorium period beginning 10 February 1998 up to 9 February 2003 (Rep. Act No. 8435 , sec. 9; DA Adm. O. No. 6 , rule 9). (Except as to 5% thereof).
Areas highly restricted from conversion
Under Sec. 2 (b) and 5 of DAR AO 1 (1999), areas highly restricted from conversion refer to the following:
a) Irrigable lands not covered by irrigation projects with firm funding commitment;
b) Agro-industrial croplands, or lands presently planted to industrial crops that support the economic viability of existing agricultural infrastructure and agro-based enterprises;
c) Highlands or areas located in elevations of 500 meters or above and have the potential for growing semi-temperate and usually high-value crops;
d) Lands issued with notice of land valuation and acquisition, or subject of a perfected agreement between the landowner and the beneficiaries under the voluntary land transfer/direct payment scheme;
e) Environmentally critical areas as determined by the DENR in accordance with law.
The conversion of these areas, if at all, shall undergo a more stringent process and the applicant must clearly show that conversion is far more beneficial to the community and the public at large. Applications involving areas highly restricted from conversion are deliberated upon by the PARC Land Use Technical Committee and subject to the Secretary's approval regardless of the area. The applicant is also required to submit the following additional requirements: (a) a project feasibility study; and (b) environmental compliance certificate, if within environmentally critical area.
Lands non-negotiable for conversion
Under Sec. 4 of DAR AO 1 (1999), areas non-negotiable for conversion are not eligible for conversion. Applications for conversion involving these areas shall not be given due course, regardless of whether all or some portions thereof are within areas highly restricted from conversion or within priority development areas for conversion. These lands include the following:
a) Agricultural lands within protected areas designated as such under the National Integrated Protected Areas System including watershed and recharged acquifers, as determined by the DENR;
b) All irrigated lands, as delineated by the DA and/or NIA, where water is available to support rice and other crop production;
c) All irrigated lands where water is not available for rice and other crop production but are within areas programmed for irrigation facility rehabilitation by the DA and/or NIA; and
d) All agricultural lands with irrigation facilities operated by private organizations.
Conversion moratorium under RA 8435
Under RA 8435, the following lands within the SAFDZs are not eligible for conversion for a period of five (5) years starting on 10 February 1998 until 9 February 2003:
a) All irrigated lands;
b) Irrigable lands already covered by irrigation projects with firm funding commitments; and
c) Lands with existing or having the potential for growing high-value crops.
The 5-year conversion moratorium is not absolute. Five percent (5%) of said lands within SAFDZs may be converted upon compliance with existing laws, rules and regulations. DAR and DA, upon the recommendation of the Regional and National SAFDZ Committees, shall jointly determine the maximum 5% equivalent to the total area of land eligible for conversion. (DAR Adm. O. No. 1 , sec. 7 (b), (c ); DA Adm. O. No. 6, , rule 9.5.2).
Upon expiration of the moratorium, conversion may be allowed, if at all, on a case to case basis, subject to existing laws, rules and regulations on land use conversion (DAR Adm. O. No. 1 , sec. 7 [d]).
Lands within SAFDZs
SAFDZs refer to Strategic Agriculture and Fisheries Development Zones. They are areas within the Network of Protected Areas for Agricultural and Agro-industrial Development (NPAAAD) identified for production, agro-processing and marketing activities to help develop and modernize, with the support of the government, the agriculture and fisheries sectors in an environmentally and socio-culturally sound manner (Rep. Act No. 8435 , sec. 4). Lands within SAFDZs shall be identified by the DA on the basis of the criteria prescribed in RA 8435.
Priority development areas for conversion
Under Sec. 6 of DAR AO 1 (1999), the following are priority development areas for conversion:
a) Specific sites in regional agri-industrial centers/regional industrial centers identified by the Department of Trade and Industry and the DA;
b) Tourism development areas identified by the Department of Tourism as indicated in the current Medium Term Philippine Development Plan;
c) Sites identified and proposed to be developed by LGUs into socialized housing projects which are presently used for agricultural purposes;
d) Sites intended for socialized housing projects under EO 184, series of 1994;
e) Agricultural areas intended for ECOZONE projects pursuant to RA 7916.
Conversion of agricultural lands within priority development areas requires DAR clearance. However, the period within which to process and evaluate applications involving lands within these areas is shorter. Processing of applications is conducted within 13 days from submission of complete set of documentary requirements. Also, an environmental compliance certificate is not a pre-condition to the approval of the conversion application; instead, it forms part of the conditions of the order of conversion where applicable.
Under present guidelines, socialized housing projects are considered priority development areas. (DAR Memo. Circular No. 9 , sec. 1 [1.6].)
Under DAR AO 2 (2000), Mass Housing Desks shall be created at the CLUPPI which shall be responsible for the receipt, processing and disposition of all applications for conversion for socialized and low-cost housing projects.
Applicants for conversion involving socialized and low-cost housing projects are exempt from the posting of cash bond, submission of Certification of Eligibility for Conversion from DA and Environmental Compliance Certificate from DENR. (DAR Adm. O. No. 2 , sec. 3)
Likewise, applications for conversion involving socialized and low-cost housing projects shall be processed for a period of thirteen (13) working days upon receipt of the completed application pursuant to Sec. 1 of EO 258 (2000). (DAR Adm. O. No. 2 , sec. 4)
Criteria for Conversion
Under Sec. 8 of DAR AO 1 (1999), the following criteria shall guide the resolution of applications for conversion:
1) Conversion may be allowed if the land subject of application is not among those considered non-negotiable for conversion;
2) Conversion may be allowed under the following cases, in accordance with Section 65 of RA 6657:
a) when the land has ceased to be economically feasible and sound for agricultural purposes; or
b) the locality has become urbanized and the land will have greater economic value for residential, commercial, industrial or other non-agricultural purposes.
3) Conversion of lands within SAFDZs shall take into consideration the following factors:
a) The conversion is consistent with the natural expansion of the municipality or locality, as contained in the approved physical framework and land use plan;
b) The area to be converted is not the only remaining food production area of the community;
c) The conversion shall not hamper the availability of irrigation to nearby farmlands;
d) Areas with low productivity will be accorded priority for conversion; and
e) Sufficient disturbance compensation shall be given to the farmers whose livelihoods are negatively affected by the conversion.
4) Conversion may be allowed when the environmental impact assessment or initial environmental examination, as may be appropriate, shall have determined that it shall not adversely affect air and water quality and the ecological stability of the area.
Under the previous guidelines, conversion may be allowed if the land has been reclassified by the LGUs to non-agricultural uses, but said criterion has been deleted under the present guidelines. That the land has been reclassified to non-agricultural use as per zoning certification remains one of the factors to consider in resolving whether to approve or disapprove an application for conversion. It is not an indispensable condition, however, for the approval of the application. Thus, conversion may be allowed even if the property has not yet been reclassified to non-agricultural use if the conditions under RA 6657 or RA 8435 warrant the same.
It is evident that the thrust of DAR conversion guidelines is to give the department sole and exclusive prerogative to decide on conversion applications. Certifications issued by other agencies are given persuasive effect but the final determination belongs to the DAR.
Bonds and Disturbance Compensation
Under the present guidelines, applicants are required to post two (2) kinds of bonds: cash bond and performance bond. They are also required to pay disturbance compensation in appropriate cases.
Cash bond is posted by the applicant upon filing of the application equivalent to two point five percent (2.5%) of the total zonal value of the land. It is refundable upon issuance of the order of conversion or convertible into performance bond at the option of the applicant (DAR Adm. O. No. 1 , sec. 15).
The cash bond is forfeited in favor of the government in the event actual conversion activities are undertaken by the applicant prior to approval of the application for conversion (DAR Adm. O. No. 1 , sec. 15).
Performance bond is posted in favor of DAR to guarantee the payment of the amount of security as penalty in the event it is established that the applicant/developer is in default of their obligations under the order of conversion. It shall be effective for the duration of the project approved under the conversion order. The performance bond shall be in the form of either of the following:
a) Cash, manager's check, cashier's check, irrevocable letter of credit, bank draft equivalent to 2.5% of the total zonal value of the land; or
b) Bank guarantee equivalent to 5% of the total zonal value of the land; or
c) Surety equivalent to 15% of the total zonal value of the land (DAR Adm. O. No. 1 , sec. 15 [c).
The performance bond shall be forfeited in favor of the government in case of violation of the conditions of the conversion order such as non-payment of disturbance compensation, failure to develop or complete the project within the period prescribed, etc. (DAR Adm. O. No. 1 , sec. 15, last par.)
Under RA 3844, disturbance compensation is given only to de jure tenants. However, under the present conversion guidelines, tenants, farmworkers, or bona fide occupants who will be affected by the conversion of the property to non-agricultural uses are all entitled to disturbance compensation (DAR Adm. O. No. 1 , sec. 15 [a]).
Disturbance compensation, in cash or in kind or both, shall be paid by the landowner or developer, as may be appropriate, in such amounts or under such terms as may be mutually agreed upon between the affected tenants, farmworkers or occupants and the landowner or developer but it should not be less than five (5) times the average of the gross harvests on their landholding during the last five (5) preceding calendar years. Any agreement for the payment between them shall be subject to DAR's approval and compliance monitoring (DAR Adm. O. No. 1 , sec. 15 (a)).
Payment of disturbance compensation or compliance with the terms and conditions of the approved agreement must be made within sixty (60) days from the date of approval of the application for conversion (DAR Adm. O. No. 1 , sec. 15 [b]).
In case of disagreement between the parties, the issue on disturbance compensation may be brought by either of them before the DAR Adjudication Board for resolution (DAR Adm. O. No. 1 , sec. 15 [c]).
Protests and Oppositions
Sec. 21 of DAR AO 1 (1999) states that the DAR admits protest or opposition against any application for conversion which is resolved by the approving authority simultaneously with the application. It may be filed by any person who will be displaced or directly affected by the proposed land use conversion such as occupants, tenants, farmworkers, identified beneficiaries, bona fide residents of adjoining properties or communities against the application with the DAR Regional Office or Central Office, as appropriate (DAR Adm. O. No. 1 , sec. 18 and 19).
The protest must be in writing and filed within fifteen (15) days from the date of posting of the Notice of Application. However, if the oppositor is an identified beneficiary under the agrarian reform program of the land applied for and who failed to file a written protest within the said period due to fraud, accident, mistake or excusable neglect, he shall have the right to intervene at any time during the pendency of the application.
Protests or oppositions may be filed on the following grounds:
a) The area applied for is non-negotiable for conversion;
b) The adverse effects or the displacement to be caused by the proposed conversion far outweigh the social and economic benefits to the affected communities;
c) Misrepresentation or concealment of material facts;
d) Illegal/premature conversion;
e) Existence of proof that conversion was resorted to as a means to evade CARP coverage and to dispossess the tenant farmers of the land tilled by them. (DAR Adm. O. No. 1 , sec. 20)
Effects of Approval of Conversion Application
An order of conversion is generally subject to the following conditions:
a) Payment of disturbance compensation within 60 days from issuance of the order;
b) Posting of a notice of conversion in a conspicuous place;
c) Development of the land within a specific period;
d) Withdrawal or cancellation of the order for misrepresentation of facts integral to its issuance or for violation of the rules and regulations on land use conversion.
Sec. 23 of DAR AO 1 (1999) also provides for the following effects:
First, the conversion of an agricultural land to non-agricultural uses is limited to the specific use of the land authorized in the order. In case the landowner decides to use the land for purposes other than that authorized, a new application must be filed which must go through the process of conversion again. Otherwise, he may be charged for unauthorized conversion (DAR Adm. O. No. 1 , sec. 40 (d) and 2 [y]).
Second, all conversion orders are subject to the schedule indicated in the detailed site development plan and work and financial plan submitted by the applicant. The rules, however, require that the period of development should not extend beyond five (5) years from the issuance of the order except as authorized by the Secretary or the approving official on meritorious grounds.
Third, the conditions of the order are binding not only upon the applicant but also upon successors-in-interest of the property.
Fourth, duly authorized representatives of DAR should be allowed free and unhampered access to the property subject of the conversion order for compliance monitoring purposes.
Fifth, the use authorized in the order of conversion shall be annotated on the title of the subject property.
Sixth, the order is without prejudice to ancestral domain claims of indigenous peoples pursuant to RA 8371.
Effect on tenants, farmworkers or occupants of property
Upon payment of disturbance compensation or compliance with the terms and conditions of the agreement for disturbance compensation, the tenants, farmworkers or occupants are expected to give up all their rights over the land such as possession, tenancy, etc., in favor of the landowner or developer.
In Gonzales v. CA, 174 SCRA 398, it was held that an agricultural leasehold cannot be established on land which has been converted to residential use.
Grounds for Revocation/Withdrawal/Cancellation of Conversion Order
Under Sec. 35 of DAR AO 1 (1999), a petition for cancellation/revocation/withdrawal of the order of conversion may be filed at the instance of DAR or any aggrieved party on the following grounds:
a) Misrepresentation or concealment of facts or circumstances material to the grant of conversion;
b) Non-compliance with the conditions of the order of conversion;
c) Lack of jurisdiction of the approving authority;
d) Non-compliance with the agreement on disturbance compensation;
e) Conversion to use other than that authorized in the conversion order; and/or
f) Any other violation of relevant rules and regulations of DAR.
The period within which to file the petition varies depending on the ground raised by the petitioner:
a) The petition must be filed before the approving authority within 90 days from discovery of facts which would warrant such cancellation but not more than one year from issuance of the order if the basis is misrepresentation or concealment, or non-compliance with the agreement on disturbance compensation;
b) The petition must be filed with 90 days from discovery of such facts but not beyond the period for development stipulated in the order if the basis is non-compliance with the conditions of the order, conversion to use other than that authorized, or any other violation of relevant rules and regulations of DAR;
c) Where the ground is lack of jurisdiction, the petition shall be filed with the Secretary at any time.
In the event the conversion order is cancelled or withdrawn, the land subject thereof shall revert to the status of agricultural lands and shall be subject to CARP coverage as circumstances may warrant. (Sec. 37, AO 1 (1999)).
Prohibited Acts and Omissions
RA 6657, RA 8435 and RA 3844 are the primary sources of prohibited acts and omissions under the agrarian reform program which are criminal in nature and punishable with fine and imprisonment, or both. As a rule, the prosecution of these acts does not preclude the DAR from pursuing administrative cases against the offenders for the same acts or on the basis of the same facts.
Other acts and omissions in violation of agrarian laws are also administratively sanctioned. As the principal agency tasked with the implementation of CARP, the DAR is vested with the power to establish and promulgate operational policies, rules and regulations for agrarian reform implementation (see Exec. Order No. 129-A (1987), sec. 4 [c]). Moreover, Sec. 50 of RA 6657 vests DAR with the primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform.
Prohibited Acts and Omissions by Landowners under RA 6657
Sec. 73 of RA 6657 enumerates acts and omissions which are criminally punishable. Other provisions of RA 6657 proscribing certain acts and omissions not included in Sec. 73 are subject to administrative regulation or sanctions.
1. Ownership and Possession of Land Beyond Allowable Limits
Sec. 73 (a) of RA 6657 prohibits "The ownership or possession, for the purpose of circumventing the provisions of this Act, of agricultural lands in excess of the total retention limits or award ceilings by any person, natural or juridical, except those under collective ownership by farmer-beneficiaries."
a) Offender is any person, natural or juridical;
b) Person owns or possess agricultural lands in excess of retention limit or award ceilings, except in the case of collective ownership by farmer beneficiaries; and
c) The purpose of ownership or possession is to circumvent the provisions of RA 6657;
2) Prohibited Sale, Transfer, Conveyance or Change in the Nature of the Land
Sec. 73(e) of RA 6657 also prohibits "The sale, transfer, conveyance or change of the nature of lands outside urban centers and city limits either in whole or in part after the effectivity of this Act. The date of the registration of the deed of conveyance in the Register of Deeds with respect to titled lands and the date of the issuance of the tax declaration to the transferee of the property with respect to unregistered lands, as the case may be, shall be conclusive for the purpose of this Act." CIHTac
a) The offender is any person;
b) The person either effects the
i. sale, transfer or conveyance of the land; or
ii. change the nature of the land.
c) The land must be outside of urban centers and city limits;
d) The transaction or the change of the nature of the land may be of the whole or a portion of the land; and
e) The transaction or the change of the nature of the land was effected after 15 June 1988.
DAR AO 1 (1989) provides for administrative sanctions for the sale, transfer, conveyance of lands outside urban centers. The elements of the administrative offense is similar to that defined under Sec. 73 (e). Sec. 6 of RA 6657 also provides that the sale, disposition, lease, management contract or transfer of possession of private lands executed by the original owner in violation of RA 6657 shall be null and void. The sale or disposition, however, is not totally void. Part I (B) of DAR AO (1989) provides that the sale or disposition of agricultural land is valid to the extent that the total landholding of the transferee as a result of the said acquisition does not exceed the landholding ceiling.
3. Illegal/Premature/Unauthorized Conversions
Sec. 73 (c) of RA 6657 penalizes "The conversion by any landowner of his agricultural land into any non-agricultural use with intent to avoid the application of this Act to his landholdings and to dispossess his tenant farmers of the land tilled by them."
a) The land is agricultural land;
b) The offender is the landowner;
c) There are acts committed converting the use of the land into non-agricultural use; and
d) The intent is to:
i. avoid the application of RA 6657; and
ii. to dispossess tenant farmers tilling the land.
DAR AO 1 (1999) provides a more expansive definition of illegal conversion. Sec. 2 (g) of DAR AO 1 (1999) defines illegal conversion as "the conversion by any landowner of his agricultural land into any non-agricultural use with intent to avoid the application of RA 6657 to his landholding and to dispossess his tenant farmers of the land tilled by them; or the change of the nature of lands outside urban centers and city limits either in whole or in part after the effectivity of RA 6657, as provided in Sec. 73 (c) and (e) respectively, of the said Act." Thus, under the administrative rule, there are two (2) ways of committing illegal conversion.
Elements of the First Type:
a) Offender is the land owner;
b) He/she converts his/her agricultural land into any non-agricultural use without authority or DAR clearance;
c) The intention of the conversion is to
i. avoid the application of RA 6657; and
ii. to dispossess the farmers of the land tilled by them;
Elements of the Second Type:
a) Offender is the landowner or any other person;
b) He/she changes the nature of the agricultural land, in whole or in part;
c) Land is located outside urban centers and city limits; and
d) Act was committed after 15 June 1988.
Sec. 11 of RA 8435 penalizes ". . . the undertaking of any development activity, the results of which modify or alter the physical characteristics of the agricultural lands to render them suitable for non-agricultural purposes without an approved order of conversion from the DAR."
a) The land is agricultural land;
b) The offender may be any person;
c) Actual development activity is undertaken on the land;
d) The development activity modifies or alters the physical characteristics of the land;
e) The land development renders the land suitable for non-agricultural purposes; and
f) There is no approved order of conversion from the DAR.
Unlike illegal and premature conversions, unauthorized conversion is not a criminal act but is merely administratively sanctioned.
Sec. 2 (w) of DAR AO 1 (1999) defines unauthorized conversion as "the act of changing the current use of the land from agricultural (e.g. riceland) to another agricultural use (e.g. livestock) without an order of conversion from DAR, or changing the use of the land other than that allowed under the order of conversion issued by DAR." There are, thus, two (2) ways to commit unauthorized conversion.
Elements of the First Type:
a) Offender is any person, i.e., landowner, developer or any other person;
b) The person changes the current use of an agricultural land into another agricultural purpose; and
c) The change of use was done without an order of conversion from DAR.
Elements of the Second Type:
a) Offender is any person, i.e., landowner, developer, or any other person;
b) The subject land is granted an order of conversion for its commitment to non-agricultural purposes; and
c) The person commits the land to a purpose other than that allowed under the order of conversion.
In addition to the foregoing, Sec. 35 of DAR AO 1 (1999) also provides for administrative sanctions against certain acts in connection with the grant of conversion application by landowners or their duly authorized representatives. These include the following:
a) Misrepresentation or concealment of material facts in conversion application;
b) Non-compliance with the conditions set forth in the conversion order; and
c) Non-compliance with the agreement on disturbance compensation.
Prohibited Acts and Omissions by Beneficiaries under RA 6657
1. Sale, Transfer, Conveyance of Rights Acquired as a Beneficiary
Sec. 73 (f) of RA 6657 prohibits "The sale, transfer or conveyance by a beneficiary of the right to use or any other usufructuary right over the land he acquired by virtue of being a beneficiary, in order to circumvent the provisions of this Act."
a) The offender is an agrarian reform beneficiary;
b) Offender sells, transfers or conveys the right to use or any other usufructuary right over his land;
c) The subject land was acquired by him/her by virtue of being a beneficiary; and
d) The act is motivated by the design to circumvent the provisions of R.A. 6657.
Relatedly, Part I (4) of DAR MC 19 (1996) provides that the "[s]ale, transfer, lease and other forms of conveyance by beneficiary of the rights to use or any other usufructuary right over the land acquired by virtue of being a beneficiary, in circumvention of the provisions of Sec. 73 of RA 6657, PD 27 and other agrarian law" is a prohibited act. However, if the lands has been acquired under PD 27/EO 228, ownership may be transferred upon full payment of amortization by the beneficiary.
a) The offender is an agrarian reform beneficiary;
b) He/she sells, transfers or conveys the right to use or any other usufructuary right over his land without legal basis;
c) The subject land was acquired by him/her by virtue of being a beneficiary under RA 6657 or PD 27/EO 228; Provided that lands acquired under PD 27/EO 228 can be transferred upon full payment of amortizations. In the case of lands awarded under CARP, the land can be transferred ten (10) years after the registration of the CLOA; and
2. Misuse or Diversion of Financial Aid and Support Services
Sec. 37 of RA 6657 provides that the "misuse or diversion of the financial and support services provided the beneficiary shall result in sanction against the beneficiary guilty thereof, including the forfeiture of the land transferred to him or lesser sanctions as may be provided by the PARC without prejudice to criminal prosecution." This is reflected in Item A, No. 1 of DAR MC 19 (1996).
a) The beneficiary was granted financial aid and other support services;
b) The beneficiary either:
i. misuses the financial aid and support services; or
ii. diverts such aid or services for other purposes.
3. Misuse of the Land
Par. 4, Sec. 22 of RA 6657 provides that any beneficiary guilty of negligence or misuse of the land or any support extended to him shall forfeit his right to continue as such beneficiary. Misuse of the land is administratively sanctioned under DAR MC 19 (1996).
Part III, Item (A) of DAR AO 2 (1994) defines misuse of the land as "any act causing substantial and unreasonable damage on the land, and causing the deterioration and depletion of the soil fertility and improvements thereon. It also includes the act of knowingly planting, growing, raising of any plant which is the source of a dangerous drug, as defined under PD 1683 (1980)." Under the definition, there are two ways of committing this offense.
Elements of the First Type:
a) Offender is a grantee of land awarded through CLOA or EP;
b) Offender commits acts which cause substantial and unreasonable damage to the land; and
c) Such act causes the deterioration and depletion of the soil fertility and improvements thereon.
Elements of the Second Type:
a) Offender is a grantee of land awarded through a CLOA or EP; and
b) He knowingly plants, grows or raises any plant which is the source of dangerous drug as defined in PD 1683.
4. Continuous Neglect or Abandonment of Awarded Lands
Sec. 22 of RA 6657 provides that any beneficiary who is guilty of negligence of the land extended to him shall forfeit his right to continue as such beneficiary. Part I, A (5) of DAR MC 19 (1996) provides that "continuous neglect or abandonment of the awarded lands over a period of two (2) years as determined by the Secretary or his authorized representative" is subject to administrative sanctions.
Part III, Item (B) of DAR AO 2 (1994) defines neglect or abandonment as the "willful failure of the ARB, together with his farm household, to cultivate, till, or develop his land to produce any crop, or to use the land for any specific economic purpose continuously for a period of two calendar years."
a) The offender is an agrarian reform beneficiary;
b) The beneficiary willfully fails or refuses to cultivate, till or develop to produce any crop the land awarded him; and
c) Such failure or refusal continue for a period of two (2) calendar years.
5. Material Misrepresentation of Qualifications
a) The offender is a beneficiary;
b) Offender intentionally made false statements respecting a matter of fact in his application for qualification as an ARB under RA 6657 or any other agrarian laws; and
c) The misrepresented fact was material to the determination of his qualification to become a beneficiary.
6. Default and Failure in the Payment of Amortization to Landowner
Part I, item A(1) of DAR MC 19 (1996) provides that "default in the obligation of the ARBs to pay the aggregate of three (3) consecutive amortizations to the landowner in the case of awarded lands under voluntary land transfer/direct payment scheme, except in cases of fortuitous events and force majeure" is administratively sanctioned. The administrative rule is based on Sec. 26, RA 6657 which states that a beneficiary whose land has been foreclosed shall thereafter be permanently disqualified from becoming a beneficiary.
a) Offender is an ARB;
b) The beneficiary acquired the land by virtue of Voluntary Land Transfer or Direct Payment Scheme;
c) The beneficiary fails to pay the landowner amortization for three (3) consecutive months; and
d) Failure is due to reasons other than force majeure or fortuitous events.
7. Failure to Pay Amortizations to LBP
Similarly, the failure to pay amortizations to LBP is penalized under DAR MC 19 (1996) which states that "[f]ailure of the ARBs to pay at least three (3) annual amortizations to the LBP in the case of awarded lands under the Compulsory Acquisition (CA) or Voluntary Offer to Sell (VOS), except in the case of fortuitous events and force majeure."
a) The beneficiary is an awardee of a land acquired through the Compulsory Acquisition or Voluntary Offer to Sell;
b) The beneficiary fails to pay the LBP at least three (3) annual amortization; and
c) Failure is due to reasons other than force majeure or fortuitous events.
8. Waiver of Rights to Awarded Lands
Part I, item A, no. 9 of MC 19 (1996) treats the waiver of rights to awarded lands by a beneficiary as an administrative offense.
a) Offender is a beneficiary; and
b) The beneficiary has expressly or impliedly waived his rights over the land.
9. FB's Surrender of Awarded Lands to Landowner or Other Non ARBs.
The surrender by a beneficiary of his awarded lands to landowner or other non-ARBs is penalized under part I, item A (10) of MC 19 (1996).
a) Offender is a beneficiary;
b) Offender surrenders land awarded him to the landowner or other non-beneficiaries; and
c) Such surrender is without legal authority or clearance from DAR.
Prohibited Acts and Omissions by Other Persons under RA 6657
1. Forcible Entry and Unlawful Detainer
Sec. 73 (b) of RA 6657 provides that "The forcible entry or illegal detainer by persons who are not qualified beneficiaries under this Act to avail themselves of the rights and benefits of the Agrarian Reform Program" is a prohibited act that is criminally punishable.
a) Offender is any person who is not qualified to become an agrarian reform beneficiaries;
b) He/she deprives the owner, or legal representatives or any assigns of the said owner, the right of possession thereof either through the following acts:
i. by entering the land of another by force, intimidation, threat, strategy, or stealth; or
ii. unlawfully refusing to vacate the land after the right to hold possession thereof has expired;
c) The intention of the acts is to avail themselves of the rights and benefits of the Agrarian Reform Program.
2. Obstruction and Prevention of CARP Implementation
Sec. 73 (d) of RA 6657 penalized the "[w]illful prevention or obstruction by any association or entity of the implementation of the CARP."
a) Offender may be a landowner, beneficiary or any other person, natural or juridical; and
b) The person commits acts to prevent or obstructs the implementation of the CARP.
Prohibited Acts by Agricultural Lessees and Lessor under RA 3844
RA 3844 enumerates the criminal acts and omissions by agricultural lessees and lessors.
By Agricultural Lessor
1. Unlawful Recording of Sale in the Registry of Property Subject to Right of Redemption
Sec. 13 of RA 3844 states that "[n]o deed of sale of agricultural land under cultivation by an agricultural lessee or lessees shall be recorded in the Registry of Property unless accompanied by an affidavit of the vendor that he has given the written notice required in Section eleven of this Chapter or that the land is not worked by an agricultural lessee." Failure to comply with this provision is criminally punishable under Sec. 167(1) of RA 3844.
a) The offender is the landowner or agricultural lessor, or in case of juridical persons, the manager or person who has charge of the management or management of the property or in his default, the person acting in his stead;
b) He effects the recording of the sale of the land subject of an agricultural lease; and
c) Such recording was effected without the necessary Affidavit by vendor that he has given prior written notice of the sale to the agricultural lessor as required by Sec. 7 of RA 3844.
2. Unlawful Disposition of Lessee
Sec. 31(1) of RA 3844 provides that it shall be unlawful for the agricultural lessor to "dispossess the agricultural lessee of his landholding except upon authorization by the Court under Section thirty-six. Should the agricultural lessee be dispossessed of his landholding without authorization from the Court, the agricultural lessor shall be liable for damages suffered by the agricultural lessee in addition to the fine or imprisonment prescribed in this Code for unauthorized dispossession." Sec. 167(1) of RA 3844 penalizes the commission by an agricultural lessor of the act defined under Sec. 31 of RA 3844.
a) Offender is an agricultural lessor;
b) Offender dispossess the agricultural lessee of his landholding; and
c) Dispossession is without authorization from the Court.
3. Inducement to Execute or Enter into a Share Tenancy Contract
Sec. 167(2) of RA 3844 provides that "Any person, natural or juridical, who induces another, as tenant, to execute or enter into a share tenancy contract with himself or with another in violation of this Code shall be punished by a fine not exceeding five thousand pesos with subsidiary imprisonment in accordance with the Revised Penal Code: Provided, That the execution of a share tenancy contract shall be considered prima facie evidence of such inducement as to the owner, civil law lessee, usufructuary or legal possessor. In case of juridical persons, the manager or the person who has charge of the management or administration of the property or, in his default, the person acting in his stead, shall be liable under this Section."
a) Offender is any person, natural or juridical. In case of juridical persons, the manager or the person who has charge of the management or administration of the property, or in his default, the person acting in his stead shall be liable; and
b) Offender induces another person, as tenant, to execute or enter into a share tenancy contract with himself or another in violation of RA 3844.
4. Making Untruthful Statements in Affidavit Required under Sec. 13, RA 3844
Sec. 167(2) of RA 3844 provides "Any person who executes an affidavit as required by Section thirteen of Chapter I, knowing the contents thereof to be false, shall be punished by a fine not exceeding one thousand pesos or imprisonment of not more than one year, or both, in the discretion of the court."
Sec. 13 of RA 3844 requires that prior to the registration of the sale or transfer of land in the Registry of Property, the landowner must execute an affidavit that written notice of the sale or transfer was made to the agricultural lessor as required under Sec. 7 of RA 3844.
a) Offender is the landowner, agricultural lessor or any person; and
b) He/she knowingly makes untruthful statements on a material matter in an affidavit required for the registration of a sale of land subject to right of pre-emption as required under Sec. 13 of RA 3844.
5. Acts Violating Farmworker's Rights to Self-Organization and to Engage in Other Concerted Activities
Sec. 167 (4) of RA 3844 penalizes "Any person who willfully violates the provisions of Sections forty and forty-one of this Code shall be punished by a fine of not less than one hundred pesos nor more than one thousand pesos or by imprisonment of not less than one month nor more than one year, or both such fine and imprisonment, in the discretion of the court. If any violation of Sections forty and forty-one of this Code is committed by a corporation, partnership or association, the manager or, in his default, the person acting as such when the violation took place shall be criminally responsible." CDHSac
Sec. 40 of RA 3844 recognizes the farmworkers' right to self-organization, and provides that "the farm workers shall have the right to self-organization and to form, join or assist farm workers' organizations of their own choosing for the purpose of collective bargaining through representatives of their own choosing: Provided, That this right shall be exercised in a manner as will not unduly interfere with the normal farm operations. Individuals employed as supervisors shall not be eligible for membership in farm workers' organizations under their supervision but may form separate organizations of their own."
Sec. 41 of RA 3844 likewise recognizes the right of farmworkers to engage in concerted activities, to wit: "The farm workers shall also have the right to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. For the purpose of this and the preceding Section, it shall be the duty of the farm employer or manager to allow the farm workers, labor leaders, organizers, advisers and helpers complete freedom to enter and leave the farm, plantation or compound at the portion of same where said farm workers live or stay permanently or temporarily."
a) Offender is the landowner, agricultural lessor or any person;
b) Offender commits acts which impair or prevent the exercise of
i. the right of farmworkers to self-organization under Sec. 40 of RA 3844; or
ii. the right to engage in concerted activities as defined under Sec. 41 of RA 3844.
6. Acts Violative of the Right of Farmworkers to a Minimum Wage
Sec. 167 (5) of RA 3844 provides "Any person who willfully violates the provisions of Section forty-two of this Code shall, upon conviction thereof, be subject to a fine of not more than two thousand pesos, or upon second conviction, to imprisonment of not more than one year or both such fine and imprisonment, in the discretion of the court. If any violation of the provisions of Section forty-two of this Code is committed by a corporation, partnership or association, the manager or, in his default, the person acting as such when the violation took place shall be criminally responsible."
Sec. 42 of RA 3844 protects the farmworkers right to a minimum wage and provides that "[n]otwithstanding any provision of law or contract to the contrary, farm workers in farm enterprises shall be entitled to at least P3.50 a day for eight hours' work: Provided, That this wage may, however, be increased by the Minimum Wage Board as provided for in Republic Act Numbered Six hundred and two."
a) Offender is a landowner or any other person; and
b) Offender fails or refuses to pay the farmworker the minimum daily wage as set in Sec. 43, RA 3844 or determined by the Minimum Wage Board.
By Agricultural Lessees
1. Cultivation of Another Farmland without Consent of Lessor
Sec. 27 (1) of RA 3844 provides that it shall be unlawful for an agricultural lessee "[t]o contract to work additional landholdings belonging to a different agricultural lessor or to acquire and personally cultivate an economic family-size farm, without the knowledge and consent of the agricultural lessor with whom he had first entered into household, if the first landholding is of sufficient size to make him and the members of his immediate farm household fully occupied in its cultivation."
a) Offender is an agricultural lessee;
b) The land leased by him is of sufficient size to make him and the members of his immediate farm household fully occupied in its production;
c) He contracts to work another landholdings belonging to a different agricultural lessor or acquires and personally cultivate an economic family-size farm; and
d) The cultivation of the other landholding is without the consent of his first lessor.
2. Unlawful Sublease of Leased Land by Lessor
Sec. 27 (b) of RA 3844 declares that it shall be unlawful for an agricultural lessee "[t]o employ a sub-lessee on his landholding: Provided, however, That in the case of illness or temporary incapacity, he may employ laborers whose services on his landholdings shall be on his account." This prohibition is reiterated in Item B(1), part VI of DAR AO 5 (1997).
a) Offender is an agricultural lessee;
b) That he employs as sublessee on his landholdings; and
c) The reason for the sub-contracting is other than illness or temporary incapacity.
Penalties for Violation
The penalties for the prohibited acts and omissions which are criminal in nature are as follows:
Act or Omission Penalty
Prohibited Acts or Omissions Imprisonment of not less than one (1) month to not
under RA 6657 more than three (3) years or a fine of not less than one
thousand pesos (1,000.00) and not more than fifteen
thousand pesos (P15,000.00), or both, at the discretion
of the court. (Sec. 74, RA 6657)
Premature Conversion Imprisonment of two (2) to six (6) years, or a fine
under RA 8435 equivalent to one hundred percent (100%) of the
government's investment cost, or both, at the
discretion of the court, and an accessory penalty of
forfeiture of the land and any improvement thereof.
(Sec. 11, RA 8435)
Violation of Sec. 13, Sec. 27, Fine not exceeding one thousand pesos or
and 31 (1) of RA 3844 imprisonment not exceeding one year or both in the
discretion of the court (RA 3844, Sec. 167 (1).)
Inducement to Execute Fine not exceeding five thousand pesos with
or Enter into a Share subsidiary imprisonment in accordance with the
Tenancy Contract Revised Penal Code (Sec. 167 , RA 3844)
(Sec. 167 , RA 3844)
Making untruthful statements Fine not exceeding one thousand pesos or
in affidavit required under imprisonment of not more than one year, or both, in
Sec. 13, RA 3844 the discretion of the Court (Sec. 167 (3), RA 3844)
(Sec. 167 (3), RA 3844)
Acts Violating Farmworker's Fine of not less than one hundred pesos nor more than
Rights to Self-organization one thousand pesos or by imprisonment of not less
and to Engage in Other than one month nor more than one year, or both such
Concerted Activities fine and imprisonment, in the discretion of the court
(Sec. 167, RA 6657) (Sec. 167 , RA 6657).
Acts Violative of the Right Fine of not more than two thousand pesos, or upon
of Farmworkers to a second conviction, to imprisonment of not more than
Minimum Wage (Sec. one year or both such fine and imprisonment, in the
167, RA 3844) discretion of the court (Sec. 167 , RA 3844).
Upon the other hand, the penalties for prohibited acts and omissions which are administrative in nature are as follows:
Acts or Omissions Administrative Sanction
Under MC 19 (1996) Cancellation of EPs/CLOAs and perpetual disqualification of Agrarian Reform Beneficiaries (see MC 19 s. 1996, Part I).
Under AO 1 (1999) 1. Cancellation or withdrawal of the authorization for the land use conversion;
2. Blacklisting of the applicant, developer, or representative;
3. Automatic disapproval of pending subsequent conversion applications that the offender may file with the DAR;
4. Issuance of cease and desist order (CDO); and/or
5. Forfeiture of cash bond in accordance with Sec. 16 hereof. (A.O. 1 s. 1999, Sec. 49)
Jurisdiction Over Violation of Agrarian Laws
With respect to administrative offenses, the DAR shall have jurisdiction over the same by virtue of its express primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform.