Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 103302 August 12, 1993

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners,
vs.
DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO LEANO, DAR REGION
IV, respondents.

Lino M. Patajo for petitioners.

The Solicitor General for respondents.

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the Housing and Land Use Regulatory Board
and its precursor agencies1 prior to 15 June 1988,2 covered by R.A. 6657, otherwise known as the Comprehensive Agrarian Reform
Law of 1988? This is the pivotal issue in this petition for certiorari assailing the Notice of Coverage3 of the Department of Agrarian
Reform over parcels of land already reserved as townsite areas before the enactment of the law.

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

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

Since private landowners were allowed to develop their properties into low-cost housing subdivisions within the reservation, petitioner
Estate Developers and Investors Corporation (EDIC, for brevity), as developer of NATALIA properties, applied for and was granted
preliminary approval and locational clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of
the subdivision project, which consisted of 13.2371 hectares, was issued sometime in 1982; 4 for Phase II, with an area of 80,000
hectares, on 13 October 1983;5 and for Phase III, which consisted of the remaining 31.7707 hectares, on 25 April 1986. 6 Petitioner were
likewise issued development permits7 after complying with the requirements. Thus the NATALIA properties later became the Antipolo
Hills Subdivision.

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

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

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA, for the brevity), filed a complaint
against NATALIA and EDIC before the DAR Regional Adjudicator to restrain petitioners from developing areas under cultivation by
SAMBA members.8 The Regional Adjudicator temporarily restrained petitioners from proceeding with the development of the
subdivision. Petitioners then moved to dismiss the complaint; it was denied. Instead, the Regional Adjudicator issued on 5 March 1991
a Writ of Preliminary Injunction.

Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication Board (DARAB); however, on 16 December 1991 the
DARAB merely remanded the case to the Regional Adjudicator for further proceedings. 9
In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set aside the Notice of Coverage.
Neither respondent Secretary nor respondent Director took action on the protest-letters, thus compelling petitioners to institute this
proceeding more than a year thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including undedeveloped portions of the Antipolo Hills
Subdivision within the coverage of the CARL. They argue that NATALIA properties already ceased to be agricultural lands when they
were included in the areas reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain that the permits granted petitioners
were not valid and binding because they did not comply with the implementing Standards, Rules and Regulations of P.D. 957,
otherwise known as "The Subdivision and Condominium Buyers Protective Decree," in that no application for conversion of the
NATALIA lands from agricultural residential was ever filed with the DAR. In other words, there was no valid conversion. Moreover,
public respondents allege that the instant petition was prematurely filed because the case instituted by SAMBA against petitioners
before the DAR Regional Adjudicator has not yet terminated. Respondents conclude, as a consequence, that petitioners failed to fully
exhaust administrative remedies available to them before coming to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational Clearances as well as the
Development Permits granted petitioners for Phases I, II and III of the Antipolo Hills Subdivision reveals that contrary to the claim of
public respondents, petitioners NATALIA and EDIC did in fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development Corporation, the agency tasked to
oversee the implementation of the development of the townsite reservation, before applying for the necessary permits from the Human
Settlements Regulatory
Commission. 10 And, in all permits granted to petitioners, the Commission
stated invariably therein that the applications were in "conformance" 11 or "conformity" 12 or "conforming" 13 with the implementing
Standards, Rules and Regulations of P.D. 957. Hence, the argument of public respondents that not all of the requirements were
complied with cannot be sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval from DAR. The NATALIA properties
were within the areas set aside for the Lungsod Silangan Reservation. Since Presidential Proclamation No. 1637 created the townsite
reservation for the purpose of providing additional housing to the burgeoning population of Metro Manila, it in effect converted for
residential use what were erstwhile agricultural lands provided all requisites were met. And, in the case at bar, there was compliance
with all relevant rules and requirements. Even in their applications for the development of the Antipolo Hills Subdivision, the
predecessor agency of HLURB noted that petitioners NATALIA and EDIC complied with all the requirements prescribed by P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and condominiums in general. On the other
hand, Presidential Proclamation No. 1637 referred only to the Lungsod Silangan Reservation, which makes it a special law. It is a basic
tenet in statutory construction that between a general law and a special law, the latter prevails. 14

Interestingly, the Office of the Solicitor General does not contest the conversion of portions of the Antipolo Hills Subdivision which have
already been developed. 15 Of course, this is contrary to its earlier position that there was no valid conversion. The applications for the
developed and undeveloped portions of subject subdivision were similarly situated. Consequently, both did not need prior DAR
approval.

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides that the CARL shall "cover,
regardless of tenurial arrangement and commodity produced, all public and private agricultural lands." As to what constitutes
"agricultural land," it is referred to as "land devoted to agricultural activity as defined in this Act and not classified as mineral, forest,
residential, commercial or industrial land." 16 The deliberations of the Constitutional Commission confirm this limitation. "Agricultural
lands" are only those lands which are "arable and suitable agricultural lands" and "do not include commercial, industrial and residential
lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision cannot in any language be considered
as "agricultural lands." These lots were intended for residential use. They ceased to be agricultural lands upon approval of their
inclusion in the Lungsod Silangan Reservation. Even today, the areas in question continued to be developed as a low-cost housing
subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that SAMBA members even instituted an action to restrain
petitioners from continuing with such development. The enormity of the resources needed for developing a subdivision may have
delayed its completion but this does not detract from the fact that these lands are still residential lands and outside the ambit of the
CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include lands previously converted to non-
agricultural uses prior to the effectivity of CARL by government agencies other than respondent DAR. In its Revised Rules and
Regulations Governing Conversion of Private Agricultural Lands to Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus
—
 . . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A. 6657 and not classified as
mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies,
and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory Board
(HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such conversion. It was therefore error to
include the undeveloped portions of the Antipolo Hills Subdivision within the coverage of CARL.

Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform, noted in an Opinion 19 that lands
covered by Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part, having been reserved for townsite
purposes "to be developed as human settlements by the proper land and housing agency," are "not deemed 'agricultural lands' within
the meaning and intent of Section 3 (c) of R.A. No. 6657. " Not being deemed "agricultural lands," they are outside the coverage of
CARL.

Anent the argument that there was failure to exhaust administrative remedies in the instant petition, suffice it to say that the issues
raised in the case filed by SAMBA members differ from those of petitioners. The former involve possession; the latter, the propriety of
including under the operation of CARL lands already converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter-protests, this after sitting it out for almost a
year. Given the official indifference, which under the circumstances could have continued forever, petitioners had to act to assert and
protect their interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in issuing the assailed Notice of
Coverage of 22 November 1990 by of lands over which they no longer have jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November 1990 by virtue of which undeveloped
portions of the Antipolo Hills Subdivision were placed under CARL coverage is hereby SET ASIDE.

SO ORDERED.

Republic of the Philippines

THIRD DIVISION

G.R. No. 178895 January 10, 2011

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF AGRARIAN REFORM, through the HON. SECRETARY
NASSER C. PANGANDAMAN, Petitioner,
vs.
SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR., President and General
Manager, Respondent.

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

G.R. No. 179071

SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR., President and General
Manager, Petitioner,
vs.
DEPARTMENT OF AGRARIAN REFORM, through the Honorable Secretary, Respondent.

DECISION

SERENO, J.:
Before us are two Rule 45 Petitions1 filed separately by the Department of Agrarian Reform (DAR), through the Office of the Solicitor
General, and by the Salvador N. Lopez Agri-Business Corp. (SNLABC). Each Petition partially assails the Court of Appeals Decision
dated 30 June 20062 with respect to the application for exemption of four parcels of land - located in Mati, Davao Oriental and owned by
SNLABC - from Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL).

There is little dispute as to the facts of the case, as succinctly discussed by the Court of Appeals and adopted herein by the Court, to
wit:

Subject of this petition are four (4) parcels of land with an aggregate area of 160.1161 hectares registered in the name of Salvador N.
Lopez Agri-Business Corporation. Said parcels of land are hereinafter described as follows:

1avvphi1
Title No. Area Location
TCT No. T-12635 (Lot 1454-A & 1296) 49.5706 has. Bo. Limot, Mati, Davao Oriental
TCT No. T-12637 (Lot 1298) 42.6822 has. Bo. Don Enrique Lopez, Mati, Dvo. Or.
TCT No. T-12639 (Lot 1293-B) 67.8633 has. Bo. Don Enrique Lopez, Mati, Dvo. Or.

On August 2, 1991, Municipal Agrarian Reform Officer (MARO) Socorro C. Salga issued a Notice of Coverage to petitioner with regards
(sic) to the aforementioned landholdings which were subsequently placed under Compulsory Acquisition pursuant to R.A. 6657
(Comprehensive Agrarian Reform Law).

On December 10, 1992, petitioner filed with the Provincial Agrarian Reform Office (PARO), Davao Oriental, an Application for
Exemption of the lots covered by TCT No. T-12637 and T-12639 from CARP coverage. It alleged that pursuant to the case of Luz
Farms v. DAR Secretary said parcels of land are exempted from coverage as the said parcels of land with a total area of 110.5455
hectares are used for grazing and habitat of petitioner’s 105 heads of cattle, 5 carabaos, 11 horses, 9 heads of goats and 18 heads of
swine, prior to the effectivity of the Comprehensive Agrarian Reform Law (CARL).

On December 13, 1992 and March 1, 1993, the MARO conducted an onsite investigation on the two parcels of land confirming the
presence of the livestock as enumerated. The Investigation Report dated March 9, 1993 stated:

That there are at least 2[5] to 30 heads of cows that farrow every year and if the trend of farrowing persist (sic), then the cattle shall
become overcrowded and will result to scarcity of grasses for the cattle to graze;

That during the week cycle, the herds are being moved to the different adjacent lots owned by the corporation. It even reached Lot
1454-A and Lot 1296. Thereafter, the herds are returned to their respective night chute corrals which are constructed under Lot 1293-B
and Lot 1298.

xxx

That the age of coconut trees planted in the area are already 40 to 50 years and have been affected by the recent drought that hit the
locality.

That the presence of livestocks (sic) have already existed in the area prior to the Supreme Court decision on LUZ FARMS vs. Secretary
of Agrarian Reform. We were surprised however, why the management of the corporation did not apply for Commercial Farm
Deferment (CFD) before, when the two years reglamentary (sic) period which the landowner was given the chance to file their
application pursuant to R.A. 6657, implementing Administrative Order No. 16, Series of 1989;

However, with regards to what venture comes (sic) first, coconut or livestocks (sic), majority of the farmworkers including the overseer
affirmed that the coconut trees and livestocks (sic) were (sic) simultaneously and all of these were inherited by his (applicant) parent. In
addition, the financial statement showed 80% of its annual income is derived from the livestocks (sic) and only 20% from the coconut
industry.

Cognitive thereto, we are favorably recommending for the exemption from the coverage of CARP based on LUZ FARMS as enunciated
by the Supreme Court the herein Lot No. 1293-B Psd-65835 under TCT No. T-12639 except Lot No. 1298, Cad. 286 of TCT No. T-
12637 which is already covered under the Compulsory Acquisition (CA) Scheme and had already been valued by the Land Valuation
Office, Land Bank of the Philippines.

On June 24, 1993, TCT No. T-12635 covering Lots 1454-A & 1296 was cancelled and a new one issued in the name of the Republic of
the Philippines under RP T-16356. On February 7, 1994, petitioner through its President, Salvador N. Lopez, Jr., executed a letter-
affidavit addressed to the respondent-Secretary requesting for the exclusion from CARP coverage of Lots 1454-A and 1296 on the
ground that they needed the additional area for its livestock business. On March 28, 1995, petitioner filed before the DAR Regional
Director of Davao City an application for the exemption from CARP coverage of Lots 1454-A and 1296 stating that it has been operating
grazing lands even prior to June 15, 1988 and that the said two (2) lots form an integral part of its grazing land.

The DAR Regional Director, after inspecting the properties, issued an Order dated March 5, 1997 denying the application for exemption
of Lots 1454-A and 1296 on the ground that it was not clearly shown that the same were actually, directly and exclusively used for
livestock raising since in its application, petitioner itself admitted that it needs the lots for additional grazing area. The application for
exemption, however of the other two (2) parcels of land was approved.

On its partial motion for reconsideration, petitioner argued that Lots 1454-A & 1296 were taken beyond the operation of the CARP
pursuant to its reclassification to a Pollutive Industrial District (Heavy Industry) per Resolution No. 39 of the Sangguniang Bayan of Mati,
Davao Oriental, enacted on April 7, 1992. The DAR Regional Director denied the Motion through an Order dated September 4, 1997,
ratiocinating that the reclassification does not affect agricultural lands already issued a Notice of Coverage as provided in Memorandum
Circular No. 54-93: Prescribing the Guidelines Governing Section 20 of R.A. 7160.

Undaunted, petitioner appealed the Regional Director’s Orders to respondent DAR. On June 10, 1998, the latter issued its assailed
Order affirming the Regional Director’s ruling on Lots 1454-A & 1296 and further declared Lots 1298 and 1293-B as covered by the
CARP. Respondent ruled in this wise considering the documentary evidence presented by petitioner such as the Business Permit to
engage in livestock, the certification of ownership of large cattle and the Corporate Income Tax Returns, which were issued during the
effectivity of the Agrarian Reform Law thereby debunking petitioner’s claim that it has been engaged in livestock farming since the
1960s. Respondent further ruled that the incorporation by the Lopez family on February 12, 1988 or four (4) months before the
effectivity of R.A. 6657 was an attempt to evade the noble purposes of the said law.

On October 17, 2002, petitioner’s Motion for Reconsideration was denied by respondent prompting the former to file the instant
petition.3

In the assailed Decision dated 30 June 2006, 4 the Court of Appeals partially granted the SNLABC Petition and excluded the two (2)
parcels of land (Transfer Certificate of Title [TCT] Nos. T-12637 and T-12639) located in Barrio Don Enrique Lopez (the "Lopez lands")
from coverage of the CARL.
However, it upheld the Decisions of the Regional Director 5 and the DAR6 Secretary denying the application for exemption with respect
to Lots 1454-A and 1296 (previously under TCT No. T-12635) in Barrio Limot (the "Limot lands"). These lots were already covered by a
new title under the name of the Republic of the Philippines (RP T-16356).

The DAR and SNLABC separately sought a partial reconsideration of the assailed Decision of the Court of Appeals, but their motions
for reconsideration were subsequently denied in the Court of Appeals Resolution dated 08 June 2007.7

The DAR and SNLABC elevated the matter to this Court by filing separate Rule 45 Petitions (docketed as G.R. No. 178895 8 and
179071,9 respectively), which were subsequently ordered consolidated by the Court.

The main issue for resolution by the Court is whether the Lopez and Limot lands of SNLABC can be considered grazing lands for its
livestock business and are thus exempted from the coverage of the CARL under the Court’s ruling in Luz Farms v. DAR. 10 The DAR
questions the disposition of the Court of Appeals, insofar as the latter allowed the exemption of the Lopez lands, while SNLABC assails
the inclusion of the Limot lands within the coverage of the CARL.

The Court finds no reversible error in the Decision of the Court of Appeals and dismisses the Petitions of DAR and SNLABC.

Preliminarily, in a petition for review on certiorari filed under Rule 45, the issues that can be raised are, as a general rule, limited to
questions of law.11 However, as pointed out by both the DAR and SNLABC, there are several recognized exceptions wherein the Court
has found it appropriate to re-examine the evidence presented.12 In this case, the factual findings of the DAR Regional Director, the
DAR Secretary and the CA are contrary to one another with respect to the following issue: whether the Lopez lands were actually,
directly and exclusively used for SNLABC’s livestock business; and whether there was intent to evade coverage from the
Comprehensive Agrarian Reform Program (CARP) based on the documentary evidence. On the other hand, SNLABC argues that
these authorities misapprehended and overlooked certain relevant and undisputed facts as regards the inclusion of the Limot lands
under the CARL. These circumstances fall within the recognized exceptions and, thus, the Court is persuaded to review the facts and
evidence on record in the disposition of these present Petitions.

The Lopez lands of SNLABC are actually and directly being used for livestock and are thus exempted from the coverage of the CARL.

Briefly stated, the DAR questions the object or autoptic evidence relied upon by the DAR Regional Director in concluding that the Lopez
lands were actually, directly and exclusively being used for SNLABC’s livestock business prior to the enactment of the CARL.

In Luz Farms v. Secretary of the Department of Agrarian Reform, 13 the Court declared unconstitutional the CARL provisions14 that
included lands devoted to livestock under the coverage of the CARP. The transcripts of the deliberations of the Constitutional
Commission of 1986 on the meaning of the word "agricultural" showed that it was never the intention of the framers of the Constitution
to include the livestock and poultry industry in the coverage of the constitutionally mandated agrarian reform program of the
government.15 Thus, lands devoted to the raising of livestock, poultry and swine have been classified as industrial, not agricultural, and
thus exempt from agrarian reform.16

Under the rules then prevailing, it was the Municipal Agrarian Reform Officer (MARO) who was primarily responsible for investigating
the legal status, type and areas of the land sought to be excluded; 17 and for ascertaining whether the area subject of the application for
exemption had been devoted to livestock-raising as of 15 June 1988.18 The MARO’s authority to investigate has subsequently been
replicated in the current DAR guidelines regarding lands that are actually, directly and exclusively used for livestock raising. 19 As the
primary official in charge of investigating the land sought to be exempted as livestock land, the MARO’s findings on the use and nature
of the land, if supported by substantial evidence on record, are to be accorded greater weight, if not finality.

Verily, factual findings of administrative officials and agencies that have acquired expertise in the performance of their official duties and
the exercise of their primary jurisdiction are generally accorded not only respect but, at times, even finality if such findings are
supported by substantial evidence.20 The Court generally accords great respect, if not finality, to factual findings of administrative
agencies because of their special knowledge and expertise over matters falling under their jurisdiction.21

In the instant case, the MARO in its ocular inspection 22 found on the Lopez lands several heads of cattle, carabaos, horses, goats and
pigs, some of which were covered by several certificates of ownership. There were likewise structures on the Lopez lands used for its
livestock business, structures consisting of two chutes where the livestock were kept during nighttime. The existence of the cattle prior
to the enactment of the CARL was positively affirmed by the farm workers and the overseer who were interviewed by the MARO.
Considering these factual findings and the fact that the lands were in fact being used for SNLABC’s livestock business even prior to 15
June 1988, the DAR Regional Director ordered the exemption of the Lopez lands from CARP coverage. The Court gives great
probative value to the actual, on-site investigation made by the MARO as affirmed by the DAR Regional Director. The Court finds that
the Lopez lands were in fact actually, directly and exclusively being used as industrial lands for livestock-raising.

Simply because the on-site investigation was belatedly conducted three or four years after the effectivity of the CARL does not perforce
make it unworthy of belief or unfit to be offered as substantial evidence in this case. Contrary to DAR’s claims, the lack of information as
regards the initial breeders and the specific date when the cattle were first introduced in the MARO’s Report does not conclusively
demonstrate that there was no livestock-raising on the Lopez lands prior to the CARL. Although information as to these facts are
significant, their non-appearance in the reports does not leave the MARO without any other means to ascertain the duration of
livestock-raising on the Lopez lands, such as interviews with farm workers, the presence of livestock infrastructure, and evidence of
sales of cattle – all of which should have formed part of the MARO’s Investigation Report.

Hence, the Court looks with favor on the expertise of the MARO in determining whether livestock-raising on the Lopez lands has only
been recently conducted or has been a going concern for several years already. Absent any clear showing of grave abuse of discretion
or bias, the findings of the MARO - as affirmed by the DAR Regional Director - are to be accorded great probative value, owing to the
presumption of regularity in the performance of his official duties.23

The DAR, however, insisted in its Petition24 on giving greater weight to the inconsistencies appearing in the documentary evidence
presented, and noted by the DAR Secretary, in order to defeat SNLABC’s claim of exemption over the Lopez lands. The Court is not so
persuaded.

In the Petition, the DAR argued that that the tax declarations covering the Lopez lands characterized them as agricultural lands and,
thus, detracted from the claim that they were used for livestock purposes. The Court has since held that "there is no law or
jurisprudence that holds that the land classification embodied in the tax declarations is conclusive and final nor would proscribe any
further inquiry"; hence, "tax declarations are clearly not the sole basis of the classification of a land."25 Applying the foregoing principles,
the tax declarations of the Lopez lands as agricultural lands are not conclusive or final, so as to prevent their exclusion from CARP
coverage as lands devoted to livestock-raising. Indeed, the MARO’s on-site inspection and actual investigation showing that the Lopez
lands were being used for livestock-grazing are more convincing in the determination of the nature of those [Link]

Neither can the DAR in the instant case assail the timing of the incorporation of SNLABC and the latter’s operation shortly before the
enactment of the CARL. That persons employ tactics to precipitously convert their lands from agricultural use to industrial livestock is
not unheard of; they even exploit the creation of a new corporate vehicle to operate the livestock business to substantiate the deceitful
conversion in the hopes of evading CARP coverage. Exemption from CARP, however, is directly a function of the land’s usage, and not
of the identity of the entity operating it. Otherwise stated, lands actually, directly and exclusively used for livestock are exempt from
CARP coverage, regardless of the change of owner.26 In the instant case, whether SNLABC was incorporated prior to the CARL is
immaterial, since the Lopez lands were already being used for livestock-grazing purposes prior to the enactment of the CARL, as found
by the MARO. Although the managing entity had been changed, the business interest of raising livestock on the Lopez lands still
remained without any indication that it was initiated after the effectivity of the CARL.

As stated by SNLABC, the Lopez lands were the legacy of Don Salvador Lopez, Sr. The ownership of these lands was passed from
Don Salvador Lopez, Sr., to Salvador N. Lopez, Jr., and subsequently to the latter’s children before being registered under the name of
SNLABC. Significantly, SNLABC was incorporated by the same members of the Lopez family, which had previously owned the lands
and managed the livestock business.27 In all these past years, despite the change in ownership, the Lopez lands have been used for
purposes of grazing and pasturing cattle, horses, carabaos and goats. Simply put, SNLABC was chosen as the entity to take over the
reins of the livestock business of the Lopez family. Absent any other compelling evidence, the inopportune timing of the incorporation of
the SNLABC prior to the enactment of the CARL was not by itself a categorical manifestation of an intent to avoid CARP coverage.
Furthermore, the presence of coconut trees, although an indicia that the lands may be agricultural, must be placed within the context of
how they figure in the actual, direct and exclusive use of the subject lands. The DAR failed to demonstrate that the Lopez lands were
actually and primarily agricultural lands planted with coconut trees. This is in fact contradicted by the findings of its own official, the
MARO. Indeed, the DAR did not adduce any proof to show that the coconut trees on the Lopez lands were used for agricultural
business, as required by the Court in DAR v. Uy,28 wherein we ruled thus:

It is not uncommon for an enormous landholding to be intermittently planted with trees, and this would not necessarily detract it from the
purpose of livestock farming and be immediately considered as an agricultural land. It would be surprising if there were no trees on the
land. Also, petitioner did not adduce any proof to show that the coconut trees were planted by respondent and used for agricultural
business or were already existing when the land was purchased in 1979. In the present case, the area planted with coconut trees bears
an insignificant value to the area used for the cattle and other livestock-raising, including the infrastructure needed for the business.
There can be no presumption, other than that the "coconut area" is indeed used for shade and to augment the supply of fodder during
the warm months; any other use would be only be incidental to livestock farming. The substantial quantity of livestock heads could only
mean that respondent is engaged in farming for this purpose. The single conclusion gathered here is that the land is entirely devoted to
livestock farming and exempted from the CARP.

On the assumption that five thousand five hundred forty-eight (5,548) coconut trees were existing on the Lopez land (TCT No. T-
12637), the DAR did not refute the findings of the MARO that these coconut trees were merely incidental. Given the number of livestock
heads of SNLABC, it is not surprising that the areas planted with coconut trees on the Lopez lands where forage grass grew were being
used as grazing areas for the livestock. It was never sufficiently adduced that SNLABC was primarily engaged in agricultural business
on the Lopez lands, specifically, coconut-harvesting. Indeed, the substantial quantity of SNLABC’s livestock amounting to a little over
one hundred forty (140) livestock heads, if measured against the combined 110.5455 hectares of land and applying the DAR-
formulated ratio, leads to no other conclusion than that the Lopez lands were exclusively devoted to livestock farming. 29

In any case, the inconsistencies appearing in the documentation presented (albeit sufficiently explained) pale in comparison to the
positive assertion made by the MARO in its on-site, actual investigation - that the Lopez lands were being used actually, directly and
exclusively for its livestock-raising business. The Court affirms the findings of the DAR Regional Director and the Court of Appeals that
the Lopez lands were actually, directly and exclusively being used for SNLABC’s livestock business and, thus, are exempt from CARP
coverage.

The Limot lands of SNLABC are not actually and directly being used for livestock and should thus be covered by the CARL.

In contrast, the Limot lands were found to be agricultural lands devoted to coconut trees and rubber and are thus not subject to
exemption from CARP coverage.

In the Report dated 06 April 1994, the team that conducted the inspection found that the entire Limot lands were devoted to coconuts
(41.5706 hectares) and rubber (8.000 hectares) and recommended the denial of the application for exemption. 30 Verily, the Limot lands
were actually, directly and exclusively used for agricultural activities, a fact that necessarily makes them subject to the CARP. These
findings of the inspection team were given credence by the DAR Regional Director who denied the application, and were even
subsequently affirmed by the DAR Secretary and the Court of Appeals.

SNLABC argues that the Court of Appeals misapprehended the factual circumstances and overlooked certain relevant facts, which
deserve a second look. SNLABC’s arguments fail to convince the Court to reverse the rulings of the Court of Appeals.

In the 07 February 1994 Letter-Affidavit addressed to the DAR Secretary, SNLABC requested the exemption of the Limot lands on the
ground that the corporation needed the additional area for its livestock business. As pointed out by the DAR Regional Director, this
Letter-Affidavit is a clear indication that the Limot lands were not directly, actually and exclusively used for livestock raising. SNLABC
casually dismisses the clear import of their Letter-Affidavit as a "poor choice of words." Unfortunately, the semantics of the declarations
of SNLABC in its application for exemption are corroborated by the other attendant factual circumstances and indicate its treatment of
the subject properties as non-livestock.

Verily, the MARO itself, in the Investigation Report cited by no less than SNLABC, found that the livestock were only moved to the
Limot lands sporadically and were not permanently designated there. The DAR Secretary even described SNLABC’s use of the area as
a "seasonal extension of the applicant’s ‘grazing lands’ during the summer." Therefore, the Limot lands cannot be claimed to have been
actually, directly and exclusively used for SNLABC’s livestock business, especially since these were only intermittently and secondarily
used as grazing areas. The said lands are more suitable -- and are in fact actually, directly and exclusively being used -- for agricultural
purposes.

SNLABC’s treatment of the land for non-livestock purposes is highlighted by its undue delay in filing the application for exemption of the
Limot lands. SNLABC filed the application only on 07 February 1994, or three years after the Notice of Coverage was issued; two years
after it filed the first application for the Lopez lands; and a year after the titles to the Limot lands were transferred to the Republic. The
SNLABC slept on its rights and delayed asking for exemption of the Limot lands. The lands were undoubtedly being used for
agricultural purposes, not for its livestock business; thus, these lands are subject to CARP coverage. Had SNLABC indeed utilized the
Limot lands in conjunction with the livestock business it was conducting on the adjacent Lopez lands, there was nothing that would
have prevented it from simultaneously applying for a total exemption of all the lands necessary for its livestock.
The defense of SNLABC that it wanted to "save" first the Lopez lands where the corrals and chutes were located, before acting to save
the other properties does not help its cause. The piecemeal application for exemption of SNLABC speaks of the value or importance of
the Lopez lands, compared with the Limot lands, with respect to its livestock business. If the Lopez and the Limot lands were equally
significant to its operations and were actually being used for its livestock business, it would have been more reasonable for it to apply
for exemption for the entire lands. Indeed, the belated filing of the application for exemption was a mere afterthought on the part of
SNLABC, which wanted to increase the area of its landholdings to be exempted from CARP on the ground that these were being used
for its livestock business.

In any case, SNLABC admits that the title to the Limot lands has already been transferred to the Republic and subsequently awarded to
SNLABC’s farm workers.31 This fact only demonstrates that the land is indeed being used for agricultural activities and not for livestock
grazing.

The confluence of these factual circumstances leads to the logical conclusion that the Limot lands were not being used for livestock
grazing and, thus, do not qualify for exemption from CARP coverage. SNLABC’s belated filing of the application for exemption of the
Limot lands was a ruse to increase its retention of its landholdings and an attempt to "save" these from compulsory acquisition.

WHEREFORE, the Petitions of the Department of Agrarian Reform and the Salvador N. Lopez Agri-Business Corp. are DISMISSED,
and the rulings of the Court of Appeals and the DAR Regional Director are hereby AFFIRMED.

SO ORDERED.

EN BANC

[G.R. NO. 162070 October 19, 2005]

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE

DECISION

PUNO, J.:

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

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

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

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this Court ruled that
lands devoted to livestock and poultry-raising are not included in the definition of agricultural land. Hence, we
declared as unconstitutional certain provisions of the CARL insofar as they included livestock farms in the coverage of
agrarian reform.

In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw their VOS as
their landholding was devoted exclusively to cattle-raising and thus exempted from the coverage of the CARL.3

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected respondents' land and
found that it was devoted solely to cattle-raising and breeding. He recommended to the DAR Secretary that it be
exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and requested the return of
the supporting papers they submitted in connection therewith.4 Petitioner ignored their request.

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

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

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order7 partially granting the application of
respondents for exemption from the coverage of CARL. Applying the retention limits outlined in the DAR A.O. No. 9,
petitioner exempted 1,209 hectares of respondents' land for grazing purposes, and a maximum of 102.5635 hectares
for infrastructure. Petitioner ordered the rest of respondents' landholding to be segregated and placed under
Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be exempted as it is
devoted exclusively to cattle-raising. Their motion was denied.8 They filed a notice of appeal9 with the Office of the
President assailing: (1) the reasonableness and validity of DAR A.O. No. 9, s. 1993, which provided for a ratio
between land and livestock in determining the land area qualified for exclusion from the CARL, and (2) the
constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz Farms case which declared cattle-raising lands
excluded from the coverage of agrarian reform.

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

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s. 1993, void for being
contrary to the intent of the 1987 Constitutional Commission to exclude livestock farms from the land reform program
of the government. The dispositive portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is hereby DECLARED null and
void. The assailed order of the Office of the President dated 09 October 2001 in so far as it affirmed the Department
of Agrarian Reform's ruling that petitioners' landholding is covered by the agrarian reform program of the government
is REVERSED and SET ASIDE.

SO ORDERED.11

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which prescribes a
maximum retention limit for owners of lands devoted to livestock raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR A.O. No. 9 to limit
the area of livestock farm that may be retained by a landowner pursuant to its mandate to place all public and private
agricultural lands under the coverage of agrarian reform. Petitioner also contends that the A.O. seeks to remedy
reports that some unscrupulous landowners have converted their agricultural farms to livestock farms in order to
evade their coverage in the agrarian reform program.

Petitioner's arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules and regulations.
They have been granted by Congress with the authority to issue rules to regulate the implementation of a law
entrusted to them. Delegated rule-making has become a practical necessity in modern governance due to the
increasing complexity and variety of public functions. However, while administrative rules and regulations have the
force and effect of law, they are not immune from judicial review.12 They may be properly challenged before the
courts to ensure that they do not violate the Constitution and no grave abuse of administrative discretion is
committed by the administrative body concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and regulations must be
issued by authority of a law and must not contravene the provisions of the Constitution.13 The rule-making
power of an administrative agency may not be used to abridge the authority given to it by Congress or by the
Constitution. Nor can it be used to enlarge the power of the administrative agency beyond the scope
intended. Constitutional and statutory provisions control with respect to what rules and regulations may
be promulgated by administrative agencies and the scope of their regulations.14

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O. sought to
regulate livestock farms by including them in the coverage of agrarian reform and prescribing a maximum retention
limit for their ownership. However, the deliberations of the 1987 Constitutional Commission show a clear
intent to exclude, inter alia, all lands exclusively devoted to livestock, swine and poultry - raising. The
Court clarified in the Luz Farms casethat livestock, swine and poultry-raising are industrial activities and do not fall
within the definition of "agriculture" or "agricultural activity." The raising of livestock, swine and poultry is different
from crop or tree farming. It is an industrial, not an agricultural, activity. A great portion of the investment in this
enterprise is in the form of industrial fixed assets, such as: animal housing structures and facilities, drainage, waterers
and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for
feeds and other supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and
concrete ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological appurtenances. 15

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed A.O.

The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case. In Natalia
Realty, the Court heldthat industrial, commercial and residential lands are not covered by the CARL. 17 We stressed
anew that while Section 4 of R.A. No. 6657 provides that the CARL shall cover all public and private
agricultural lands, the term "agricultural land" does not include lands classified as mineral, forest,
residential, commercial or industrial. Thus, in Natalia Realty, even portions of the Antipolo Hills Subdivision,
which are arable yet still undeveloped, could not be considered as agricultural lands subject to agrarian reform as
these lots were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock, poultry and
swine have been classified as industrial, not agricultural, lands and thus exempt from agrarian reform. Petitioner DAR
argues that, in issuing the impugned A.O., it was seeking to address the reports it has received that some
unscrupulous landowners have been converting their agricultural lands to livestock farms to avoid their coverage by
the agrarian reform. Again, we find neither merit nor logic in this contention. The undesirable scenario which
petitioner seeks to prevent with the issuance of the A.O. clearly does not apply in this case. Respondents'
family acquired their landholdings as early as 1948. They have long been in the business of breeding cattle in Masbate
which is popularly known as the cattle-breeding capital of the Philippines.18 Petitioner DAR does not dispute this fact.
Indeed, there is no evidence on record that respondents have just recently engaged in or converted to the business of
breeding cattle after the enactment of the CARL that may lead one to suspect that respondents intended to evade its
coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural lands for non-
agricultural purposes after the effectivity of the CARL. There has been no change of business interest in the
case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by Congress without
substantial change is an implied legislative approval and adoption of the previous law. On the other hand, by making a
new law, Congress seeks to supersede an earlier one.19 In the case at bar, after the passage of the 1988 CARL,
Congress enacted R.A. No. 788120 which amended certain provisions of the CARL. Specifically, the new law changed
the definition of the terms "agricultural activity" and "commercial farming" by dropping from its coverage
lands that are devoted to commercial livestock, poultry and swine-raising.21 With this significant
modification, Congress clearly sought to align the provisions of our agrarian laws with the intent of the
1987 Constitutional Commission to exclude livestock farms from the coverage of agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of the Constitution.
They cannot amend or extend the Constitution. To be valid, they must conform to and be consistent with the
Constitution. In case of conflict between an administrative order and the provisions of the Constitution, the latter
prevails.22 The assailed A.O. of petitioner DAR was properly stricken down as unconstitutional as it enlarges the
coverage of agrarian reform beyond the scope intended by the 1987 Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court of Appeals, dated
September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.