G.R. No.

170018, September 23, 2013 - DEPARTMENT OF AGRARIAN REFORM,

REPRESENTED BY OIC-SECRETARY NASSER C. PANGANDAMAN, Petitioner, v.
THE COURT OF APPEALS AND BASILAN AGRICULTURAL TRADING CORPORATION
(BATCO), Respondents.:

G.R. No. 170018, September 23, 2013 - DEPARTMENT OF AGRARIAN REFORM,

REPRESENTED BY OIC-SECRETARY NASSER C. PANGANDAMAN, Petitioner, v.
THE COURT OF APPEALS AND BASILAN AGRICULTURAL TRADING CORPORATION
(BATCO), Respondents.

SECOND DIVISION

G.R. No. 170018, September 23, 2013

DEPARTMENT OF AGRARIAN REFORM, REPRESENTED BY OIC-SECRETARY

NASSER C. PANGANDAMAN, Petitioner, v. THE COURT OF APPEALS AND
BASILAN AGRICULTURAL TRADING CORPORATION
(BATCO), Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 is the Decision2 dated September 6, 2005

of the Court of Appeals (CA) in CA-G.R. SP No. 55377 which: (a) reversed and
set aside the Order3 dated February 25, 1999 of the Secretary of the Department
of Agrarian Reform (DAR); (b) cancelled Transfer Certificates of Title (TCT) Nos.
T-1012,4 T-1013,5 and T-10146 in the name of Malo-ong Canal Farmers Agrarian
Reform Multi-Purpose Cooperative (MCFARMCO); and (c) directed the Registry of
Deeds of the Province of Basilan (Basilan RD) to issue a new set of titles in favor
of private respondent Basilan Agricultural Trading Corporation (BATCO).

The Facts

BATCO was the owner of several parcels of agricultural land, with an aggregate
area of 206.5694 hectares (has.), situated in Malo-ong 7 Canal, Lamitan, Province
of Basilan (Basilan) and covered by TCT Nos. T-7454, 8 T-7455,9 and T-
745610 (subject lands).11 On September 20, 1989, the aforesaid lands were
voluntarily offered for sale (VOS) to the government pursuant to Section 19 12 of
Republic Act No. (RA) 6657,13 otherwise known as the “Comprehensive Agrarian
Reform Law of 1988,” for a consideration of P12,360,000.00. 14 In 1992, BATCO
was notified15 that the 153.8801 hectare portion of the subject lands (subject
portion), consisting of Lot Nos. 3, 4, and 5, was being placed under the
compulsory acquisition scheme by the DAR. 16 cralaw virtualaw library

On January 6, 1993, BATCO reiterated its offer to sell the entire 206.5694 has.
of the subject lands, but this time to include the improvements thereon, and for
a higher consideration of P32,000,000.00.17 On May 6, 1997, BATCO received a
Notice of Land Valuation and Acquisition18 dated April 15, 1997 from the DAR
Provincial Agrarian Reform Officer (PARO), offering it the amount of
P7,501,228.39 for the subject portion.19 BATCO rejected20 the valuation and
opposed the same before the DAR Adjudication Board (DARAB). 21 In view of
BATCO’s rejection, the DAR – following the procedure under Section 16(e) 22 of
RA 6657 – directed the Land Bank of the Philippines (LBP) to deposit the
compensation in cash and in agrarian reform bonds23 and thereafter
requested24 the Basilan RD to issue TCTs in the name of the Republic of the
Philippines (Republic). In the meantime, the subject portion was surveyed and
the beneficiaries were accordingly identified. After which, DAR Regional Director
Rogelio E. Tamin (Director Tamin) directed the PARO to generate and issue the
corresponding Certificates of Land Ownership (CLOAs) in favor of the identified
beneficiaries even over BATCO's protest. 25 cralaw virtualaw library

On February 9, 1998, then DAR Secretary Ernesto Garilao directed Director

Tamin and the PARO to proceed with the registration and distribution of the
CLOAs to the said identified beneficiaries. 26 cralaw virtualaw library

In a letter dated March 2, 1998 to Director Tamin, 27 BATCO requested for the
exemption of the subject portion, citing the case of Luz Farms v. DAR
Secretary28 (Luz Farms) and DAR Administrative Order No. (AO) 09, Series of
199329 (DAR AO 09-93).30 On May 6, 1998, BATCO filed before the DAR Regional
Office a petition31 for the exemption of the subject portion from the coverage of
the government's Comprehensive Agrarian Reform Program (CARP). It alleged
that almost all of the entire subject lands have been devoted to cattle and
livestock production since their acquisition in 1987, 32 warranting their exemption
from CARP coverage in accordance with the ruling in Luz Farms and the
provisions of DAR AO 09-93. It claimed that as of March 15, 1998, there were
150 heads of cattle, 50 heads of swine, and 50 heads of goats in the subject
portion.33 Meanwhile, BATCO's certificates of title over the foregoing were
cancelled and new titles were issued in the name of the Republic on July 17,
1998.34cralaw virtualaw library

The DAR Regional Director’s Ruling

On August 12, 1998, Director Tamin issued an Order 35 (August 12, 1998 Order)
dismissing BATCO's petition, holding that based on the DAR's ocular
inspection/investigation, the subject portion was “not exclusively, directly and
actually used for livestock, poultry, and swine raising as of June 15, 1988[,] the
date of effectivity of RA 6657, and contrary to the spirit and intent of [DAR AO
09-93].”36 Hence, the subject portion is not exempt from CARP coverage.
Moreover, under DAR AO 09, Series of 1990, VOS of lands to the government,
with the exception of lands within the retention limits, may no longer be
withdrawn.37 cralaw virtualaw library

BATCO appealed38 to the Office of the DAR Secretary, reiterating 39 its claim that
the subject portion was devoted to cattle production prior to June 15, 1988 as
evidenced by the appended certificates of ownership of large cattle (certificates
of livestock ownership) which, according to it, “should have been the major basis
in the determination of whether or not a particular landholding is devoted to
such production, as claimed.”40 cralaw virtualaw library

In the interim, the Republic's certificates of title were cancelled on October 6,

1998 with the registration of the CLOAs in the name of MCFARMCO for the
benefit of its 54 members. Accordingly, new certificates of title, 41i.e., TCT Nos. T-
1012, T-1013, and T-1014, were issued in favor of MCFARMCO.

The DAR Secretary’s Ruling

On February 25, 1999, then DAR Secretary Horacio R. Morales, Jr. (Secretary
Morales) issued an Order42 (February 25, 1999 Order), denying the appeal on the
ground that BATCO failed: 1) to present substantial evidence to show that the
subject portion was exclusively, directly and actually used for livestock, poultry,
and swine raising prior to June 15, 1988; and 2) to comply with the livestock and
infrastructure requirements under DAR AO 09-93.43 Secretary Morales observed
that: (a) none of the certificates of livestock ownership appended to the records
predates the effectivity of RA 6657;44 (b) more than half45 of the cattle “was
registered and presumably brought into the property only on March 13, 1998
onwards, barely three months before [BATCO] filed [its] application for
exemption with the DAR Provincial Office on May 6, 1998”; 46 and (c) BATCO's act
of submitting the subject lands (including the subject portion) under the VOS
scheme is an admission that they were subject to CARP coverage. 47 Finding that
the act of changing or converting the lands to livestock, poultry and swine
raising after June 15, 1988 was without an approved conversion, Secretary
Morales directed the Municipal Agrarian Reform Officer concerned to conduct an
investigation48 for possible violations of Section 73(c) and (e) of RA 6657. 49cralaw virtualaw library

BATCO filed a motion for reconsideration 50 and a supplemental motion,51 averring

that prior to its acquisition of the subject lands from the Marcelo Mendoza
Development Corporation (Mendoza Plantation) on February 4, 1987, the latter
was already engaged in livestock raising and had facilities such as shade/barn,
feed storage, corals and gates, which BATCO subsequently improved and
developed.52 BATCO further admitted that only a portion (about 100 has.) of the
subject lands was devoted to livestock raising, for which the corresponding
exemption was prayed.53 It explained that the necessary documents were in the
possession of the previous owner, hence, it was unable to produce the same
before the DAR Regional Director.54 In support of the foregoing motions, BATCO
submitted,55 among others, Certificates of Ownership of Large Cattle Nos. B-
3144051 to B-314415056 dated between July 10, 1987 to August 15, 1987, 57 and
the Joint Affidavit58 of barangay officials of Barangays Tumakid, Maloong San
Jose, Maloong Canal, and Buahan, all in Lamitan, Basilan declaring that BATCO is
engaged in large cattle raising. Nonetheless, BATCO affirmed that it is still
offering 100 has. of the subject lands for the CARP. 59 cralaw virtualaw library

On August 31, 1999, Secretary Morales issued an Order 60 denying BATCO's

motion for reconsideration. He gave no credence to the certificates of livestock
ownership belatedly submitted by BATCO, observing that the absence of a
sufficient justification for its failure to present such certificates earlier casts
doubt to their veracity and genuineness.61 Further, he held that laches had set
in, especially considering that the petition was filed only in 1998, or long after
the orders for coverage were issued in 1992. 62 Finally, he pointed out that
BATCO failed to present proof that it has met the infrastructure requirements
under DAR AO 09-93.63 cralaw virtualaw library

The Proceedings Before the CA

BATCO's appeal was initially dismissed64 but subsequently reinstated by the

CA.65cralaw virtualaw library

On September 6, 2005, the CA issued a Decision66 reversing and setting aside

Secretary Morales’ February 25, 1999 Order. It ruled that estoppel does not lie
against BATCO considering that the pertinent law and regulations did not provide
for a prescriptive period for the filing of exemption from CARP
coverage.67 Moreover, in the light of Luz Farms, a petition for exemption is not
even necessary so long as the landholdings are devoted to livestock, poultry, and
swine raising, thus, rendering DAR AO 09-93 ineffective and inconsequential. 68 cralaw virtualaw library

The CA gave credence to BATCO's documentary evidence to support its claim of

the existence and presence of livestock in the lands in question starting the year
1987 consisting of: (a) the Certification69 dated March 26, 1998 of the Municipal
Agriculturist of Lamitan, Basilan (Municipal Agriculturist Certification) as to the
number of cattle found in the area; (b) the photographs70 of the livestock therein
allegedly taken on May 31, 2001 and July 5, 2005; and (c) the affidavits71 of
former municipal mayors72 of Lamitan, Basilan – namely, Wilfrido C. Furigay and
Ramon Garcia, Jr. – attesting to the existence and presence of livestock in the
subject lands starting the year 1987. The CA likewise condemned the
cancellation of BATCO's certificates of title prior to full payment of the
compensation and prior to the decision on the petition for exemption as violative
of BATCO's right to procedural and substantive due process.73 Corollarily, the CA
cancelled TCT Nos. T-1012, T-1013 and T-1014 in the name of MCFARMCO and
directed the Basilan RD to issue a new set of titles in BATCO's favor. 74 cralaw virtualaw library

The Issue Before the Court

The essential issue in this case is whether or not the CA gravely abused its
discretion in excluding/exempting the subject lands from CARP coverage despite
BATCO's admission that only a portion thereof was devoted to livestock raising
and considering its previous voluntary offer of the lands to the government
under the VOS scheme.

The Court's Ruling

The petition is meritorious.

Under RA 6657, the CARP shall cover all public and private agricultural lands,
including other lands of the public domain suitable for agriculture, regardless of
tenurial arrangement and commodity produced.75 Section 3(c) thereof defines
“agricultural land” as land devoted to agricultural activity and not classified as
mineral, forest, residential, commercial or industrial land. Lands devoted to
livestock, poultry, and swine raising are classified as industrial, not agricultural
lands and, thus, exempt from agrarian reform. As such, the DAR has no power to
regulate livestock farms.76cralaw virtualaw library

Nevertheless, the determination of the land’s classification as either an

agricultural or industrial land – and, in turn, whether or not the land falls under
agrarian reform exemption – must be preliminarily threshed out before the DAR,
particularly, before the DAR Secretary. Verily, issues of exclusion or exemption
partake the nature of Agrarian Law Implementation (ALI) cases which are well
within the competence and jurisdiction of the DAR Secretary. 77 Towards this end,
the latter is ordained to exercise his legal mandate of excluding or exempting a
property from CARP coverage based on the factual circumstances of each case
and in accordance with the law and applicable jurisprudence. 78 Thus, considering
too his technical expertise on the matter, courts cannot simply brush aside his
pronouncements regarding the status of the land in dispute, i.e., as to whether
or not it falls under CARP coverage. As held in DAR v. Oroville Development
Corp.:79
We cannot simply brush aside the DAR’s pronouncements regarding the
status of the subject property as not exempt from CARP coverage
considering that the DAR has unquestionable technical expertise on
these matters. Factual findings of administrative agencies are generally
accorded respect and even finality by this Court, if such findings are supported
by substantial evidence, a situation that obtains in this case. The factual
findings of the Secretary of Agrarian Reform who, by reason of his
official position, has acquired expertise in specific matters within his
jurisdiction, deserve full respect and, without justifiable reason, ought
not to be altered, modified or reversed. (Emphases supplied)
It is settled that in order to be entitled to exclusion/exemption, it must be shown
that the land is exclusively devoted to livestock, swine or poultry raising. 80 The
land must be shown to have been used for such purposes as of the effectivity of
RA 6657, or on June 15, 1988,81 in order to prevent any fraudulent declaration of
areas supposedly used for these purposes as well as to protect the rights of
agrarian beneficiaries therein. This is in consonance with Section 73(c) of RA
6657 which prohibits 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 landholdings and to dispossess his tenant farmers of the land tilled by them.

A thorough review of the records reveals no substantial evidence to show that

the entirety of the subject lands were exclusively devoted to livestock production
since June 15, 1988 so as to warrant their exclusion/exemption from CARP
coverage and the consequent cancellation of MCFARMCO's certificates of title. In
fact, contrary to its original submission that almost all of the entire 206.5694
has. landholding has been devoted to cattle and livestock production since their
acquisition in 1987,82 BATCO subsequently admitted in its Supplemental Motion
for Reconsideration of the Order dated 25 February 1999 83 (supplemental motion
for reconsideration) that only a portion of the subject lands was actually devoted
to livestock raising, for which the exemption of not less than 100 has. was
sought.84 On this score alone, the CA gravely abused its discretion in declaring
the subject lands as exempt from CARP coverage and ordering the cancellation
of MCFARMCO's certificates of title and the issuance of new titles in BATCO's
favor.

It must be further pointed out that the subject lands were offered by BATCO to
the government under the VOS scheme on September 20, 1989, 85 which offer
was reiterated on January 6, 199386 without any claim of exemption,
notwithstanding the existence of the Luz Farms ruling (which was promulgated
on December 4, 1990). In fact, the subject portion was acquired by the
government in 1992 and still BATCO never sought exemption under Luz Farms.
While it protested the valuation of the DAR87 during its VOS, it did not, at that
time, seek any exemption from CARP coverage. BATCO only raised the claimed
exemption when it filed the petition for exemption before the DAR Regional
Director on May 6, 1998. However, the petition was filed on the basis of DAR AO
09-93,88 and accordingly denied by the DAR Regional Director 89 and the DAR
Secretary90 for failing to meet the requirements set forth therein. While the Court
struck down DAR AO 09-93 as unconstitutional in the case of DAR v.
Sutton91 (Sutton) on October 19, 2005, the DAR Decisions and even the CA
Decision dated September 6, 2005 in CA-G.R. SP No. 55377 were all rendered at
the time that the said AO was still subsisting and in full force and effect.
Consequently, in view of the prospectivity principle of judicial decisions 92 and the
operative fact doctrine,93 the petition for exemption must be resolved under the
provisions of the said AO.

Under DAR AO 09-93, in order to be entitled to exemption, the applicant must

prove that: (a) the land sought to be excluded from CARP coverage is
exclusively, directly and actually used for livestock, poultry and swine raising as
of June 15, 1988; (b) there should be one head of cattle per hectare of land and
seven heads of goat per hectare of land; and (c) there should be 21 heads of
cattle for every 1.7815 has. of infrastructure, 147 heads of goat or sheep for
every 0.7205 hectare of infrastructure, and 21 heads of swine for every 0.5126
hectare of infrastructure. Consistent with the prohibition under Section 73(c) of
RA 6657, DAR AO 09-93 likewise provided that “[a]ny act of a landowner to
change or convert his agricultural land to livestock, poultry and swine raising
after [June 15, 1988], with the intent to avoid the application of [RA 6657] to his
landholdings, shall be considered invalid and illegal and shall not affect the
coverage of his landholding under CARP.”

It bears noting that the denial of the petition for exemption by the DAR Regional
Director was based on an ocular inspection/investigation conducted by the DAR
provincial personnel in Basilan.94 The rationale for the denial of the petition was
also clearly outlined in the February 25, 1999 Order 95 of the DAR Secretary who
observed that: (a) none of the 156 certificates of livestock ownership submitted
by BATCO predates the effectivity of RA 6657; 96 (b) more than half (80 out of
156)97 of the cattle was brought into the property only a few months before the
petition was filed; (c) the municipal agriculturist certified the presence of only
120 heads of cattle,98 which is short of the minimum requirement under DAR AO
09-93;99 and (d) no evidence was presented to prove the presence of hogs and
goats as well as of BATCO having met the infrastructure requirements under DAR
AO 09-93.100 There being no cogent reason to deviate from the foregoing, the
Court is impelled to sustain the DAR Secretary’s findings.

To note, in denying BATCO's motion for reconsideration, the DAR Secretary also
observed that, contrary to BATCO's claim that the additional certificates of
livestock ownership it undertook to produce further were in the name of the
Mendoza Plantation from which it purchased the subject lands in 1987, the
certificates eventually submitted with its supplemental motion for
reconsideration were actually under its name. Accordingly, the DAR Secretary
cannot be faulted for not giving credence to the same.

In fact, even if the Court were to apply Sutton retroactively and disregard DAR

AO 09-93, the pieces of evidence relied upon by the CA actually failed to
establish the theory that the entirety of the subject lands or specific portions
thereof are exclusively devoted to the raising of cattle, swine and goat as of June
15, 1988. The Court notes that the Municipal Agriculturist Certification 101 dated
March 26, 1998, which the CA appreciated in favor of BATCO, merely stated that
the subject lands are “suitable for cattle production since before it was acquired
and transferred to BATCO PLANTATION.” 102 On the other hand, the Affidavits103 of
former municipal mayors confirming their issuance of several certificates of
livestock ownership during their respective terms were only presented before the
CA and were not backed up by copies of the certificates themselves. Moreover,
while the former municipal mayors attested to the existence and presence of
livestock in the subject lands starting the year 1987, they commonly described
the subject lands as a vast tract of land principally devoted to coconut
production, which was extensively inter-cropped with coffee, rubber, black
pepper, and cacao trees after BATCO's acquisition. 104 These descriptions are
insufficient to establish BATCO’s claimed exemption as what is required is
exclusive devotion of the lands to the raising of cattle, swine and goat as of June
15, 1988.

More pertinently, the Court further notes that contrary to BATCO's

representations in its petition for exemption, the primary land use of the subject
lands105 as declared by BATCO itself in its landowner's reply to notice of land
valuation and acquisition106 (landowners reply) dated May 6, 1997, negates its
own claim that the said lands were exclusively devoted for the raising of cattle,
swine and goat, viz.:chanrobles virtua1aw 1ibrary

Lot Land Use Area Acq'd  

     
3 Cocoland 8.9917
  Cocoland/Coffee 10.0000
  Sub-total 18.9917
   
4 Cocoland 44.4733
  Coco/Coffee 8.0000
  Coco/Rubber 1.5000
  Coco/Black Pepper 1.5000
Coco/Black
  1.5000
Pepper/Rubber
  Sub-total 56.9733
   
5 Cocoland 10.0000
  Cocoland/Coffee 67.9151
  Sub-total 77.9151
  GRAND TOTAL 153.8801107
In this accord, the Court finds that BATCO's claim of a different land use in its
petition for exemption was only a mere afterthought which, therefore, cannot be
countenanced.

Finally, the Court cannot give credence to BATCO's claim of denial of due process
when its certificates of title were cancelled and new ones were issued in favor of
the Republic prior to the issuance of the DAR Regional Director's August 12,
1998 Order. While the final resolution of petitions for exemption, as a rule,
should precede the placing of the property under the CARP and the issuance of
the CLOA to the beneficiaries,108 it bears stressing that the subject lands had
already been placed under the CARP coverage in 1992, or long before the
petition for exemption was filed by BATCO on May 6, 1998. In the meantime, the
actions undertaken by BATCO such as the VOS on January 6, 1993, 109 the
counter-offer of valuation for the subject lands according to their declared land
uses as contained in the afore-mentioned landowner’s reply 110 dated May 6,
1997, the letter-protest dated May 23, 1997 (which challenged the survey of the
lands), and the identification of the beneficiaries grounded on its alleged failure
to choose the retention area,111 all affirmed the coverage of the subject lands
under the CARP. Considering further that the claim of denial of due process was
never raised in the proceedings before the DAR but belatedly brought up only in
its Memorandum112 dated July 28, 2005 filed before the CA113 and in the absence
of showing that the same prevented it from presenting its case before the DAR
officials, it cannot be said that BATCO was denied due process. Neither was it
deprived of its properties without just compensation given that after it rejected
the DAR's valuation on May 6, 1997, the DAR immediately caused the deposit of
the compensation in cash and in agrarian reform bonds on June 11, 1997. 114 All
told, the denial of BATCO’s petition for exemption was proper. In view of its
contrary ruling, and the absence of any substantial bases therefor, the Court
finds that the CA gravely abused its discretion in reversing the DAR Secretary's
February 25, 1999 Order.

WHEREFORE, the petition is GRANTED. The Decision dated September 6, 2005

of the Court of Appeals in CA-G.R. SP No. 55377 is hereby REVERSED AND SET
ASIDE and a new judgment is rendered REINSTATING the Order dated
February 25, 1999 of the Department of Agrarian Reform Secretary dismissing
private respondent Basilan Agricultural Trading Corporation's petition for
exemption. chanroblesvirtualawlibrary

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo, and Perez, JJ., concur.