G.R. No.

229983

FARMER-BENEFICIARIES BELONGING TO THE SAMAHANG MAGBUBUKID NG

BAGUMBONG, JALAJALA,  RIZAL,  REPRESENTED BY THEIR PRESIDENT, TORIBIO
* *

M. MALABANAN, Petitioners
vs.
HEIRS OF JULIANA MARONILLA, REPRESENTED BY ATTY. RAMON M. MARONILLA,
Respondents

DECISION

PERLAS-BERNABE, J.:

Before the Court is a petition for review on certiorari  assailing the Decision  dated February
1 2

20, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 108543, which affirmed DARCO
Order No. EX-0808-372, Series of 2008  dated August 29, 2008 issued by the Department of
3

Agrarian Reform (DAR) Secretary, exempting a 447.4025-hectare (ha.) portion of the subject
lands from the coverage of the Comprehensive Agrarian Reform Program
(CARP),  conditioned on the payment of disturbance compensation to the affected tenants.
4

The Facts

Juliana Maronilla (Juliana) is the registered owner of a vast tract of land with a total area of
723.9428 has.  situated in Brgy. Bagumbong, Jalajala, Rizal and Brgy. Casinsin, Pakil,
5

Laguna, covered by Transfer Certificates of Title (TCT) Nos. 164410 to 164420  (inclusive)
6

and 164430  to 164432  (inclusive;  collectively, subject lands). Following the implementation
7 8 9

of Presidential Decree No. (PD) 27,  portions of the lands covered by TCT Nos. 164416 to
10

164420 (inclusive), 164430, and 164432 were placed under the government's Operation
Land Transfer (OLT) program, and thus, certificates of land transfer (CLTs) were issued in
favor of petitioners Farmer-Beneficiaries belonging to the Samahang Magbubukid
ng Bagumbong, Jalajala, Rizal (petitioners)  and other farmer-beneficiaries (FBs).
11

On January 14, 1986, the President of the Philippines issued a memorandum directing the
issuance of emancipation patents (EPs) to FBs of the OLT program.  Accordingly, EPs over
12

the subject lands were issued by the DAR in favor of the FBs, which were thereafter
registered (EP titles) with the Register of Deeds of Rizal (RD-Rizal) between October 24,
1988 and February 22, 1994 that partially cancelled Juliana's titles. 13

On March 13, 1989, Juliana voluntarily offered the subject lands (VOS) for sale to the DAR
pursuant to the CARP.  The DAR acquired the remaining portions undistributed under PD
14

27, and issued certificates of land ownership award (CLOAs) in favor of the FBs.  The 15

corresponding titles (CLOA titles) were issued in the latter's favor between December 15,
1993 and October 27, 1995, which partially cancelled Juliana's titles. 16

Sometime in March 1996, Juliana passed away.  On November 26, 1996, her heirs, herein
17

respondents, represented by Atty. Ramon M. Maronilla (respondents), filed an application for

retention  of a 60-ha. portion of the subject lands covered by TCT Nos. 164419 and 164420
18

located in Brgy. Casinsin, Pakil, Laguna.  The application was granted in an Order  dated
19 20

December 12, 1997. Petitioners sought the recall/revocation of the said Order insofar as the
parcels of land already apportioned to them, but the same was denied in an Order  dated 21

August 15, 2008 which, however, reduced the retention area from 60 to 52 has. Petitioners'
appeal to the Office of the President (O.P.), docketed as O.P. Case No. 08-K-440, was still
pending when the instant petition was filed. 22

Meanwhile, respondents filed an Application for Exemption Clearance from CARP Coverage
(exemption case) of a 476.5006-ha.  portion of the subject lands on the basis of Department
23

of Justice (DOJ) Opinion No. 44, Series of 1990,  as implemented by DAR Administrative
24

Order (AO) No. 6, Series of 1994.  They claimed that the lands had been classified as
25

mineral, forest, residential, institutional, commercial or agro-industrial as early as July 11,

1981 in the Land Use Plan (LUP) of the Municipality of Jalajala, and in accordance with
Zoning Ordinance No. 17,  approved on December 2, 1981 by the Human Settlements
26

Regulatory Commission (HSRC), precursor of the Housing and Land Use Regulatory Board
(HLURB), and as such, cannot be considered as agricultural lands within the contemplation
of Republic Act No. (RA) 6657  or PD 27.  In support of the application, respondents
27 28

submitted, among others, an HLURB Certification dated May 24, 1996, stating that per the
approved LUP of Jalajala, the subject lands are zoned as follows:

TCT No. Lot No. PSD No. Area [(Ha.)] Zoning/Lan

         

164410 1-A 56828 66.6220 Forest Con

164411 1-B 56828 59.1061 Forest Con

Tree/ Diver

164412 1-C 56828 56.4944 Forest Con

Tree/ Diver
       

164413 1-D 56828 66.8885 Forest Con

Diversified
       

164414 1-E 56828 53.0896 Forest Con

Agro-indus
        Riceland

164415 1-F 56828 50.2014 Forest Con

Agro-indus
        Diversified

164416 1-G 56828 52.2799 Riceland/ A

industrial/ R
        Institutiona

164417 1-H 56828 43.0780 Riceland/ A

industrial/ F
        Conservati
Residential
Institutiona

164418 1-I 56828 45.3631 Riceland/ R

Institutiona
       

164419 1-J 56828 49.7049 Riceland/ R

Institutiona
       

164420 1-K 56828 56.1463 Riceland/ R

       

(164430) 3-J 56828 61.7208 Agro-indus

Conservati
422059       Riceland

(164431) 3-K 56828 51.7113 Riceland/ A

industrial
422059

(164432) 3-L 56828 63.2478 Riceland/ R

M-13551      

Respondents likewise submitted a Certification dated June 17, 1996 from the National
Irrigation Administration (NIA) that the lands covered by TCT Nos. 164410 to 164413
(inclusive) are not: (a) irrigated by any national irrigation system; (b) covered by communal
irrigation system within the Province of Rizal; and (c) part of any NIA rehabilitation/expansion
of irrigation project, or any proposed NIA irrigation development/project with firm
financing.  The DAR Center for Land Use, Policy, Planning and Implementation conducted
30

an ocular inspection of the area,  accompanied by the Municipal Agrarian Reform Officer
31

and the representatives of the parties,  where the following were noted:
32

  TCT No. Lot No. Area Per Title Remarks

    (Ha.)  

1 164410 1-A 66.6220 Forest Con

Covered un
        Planted wit
crops, etc.

2 164411 1-B 59.1061 Forest Con

Covered un
        Planted wit
crops, bana

3 164412 1-C 56.4944 Forest Con

 Diversified
       

4 164413 1-D 66.8885 Forest Con

Diversified
       

5 164414 1-E 53.0896 Forest Con

with Agro-in
        Some porti
riceland. C
under VOS

6 164415 1-F 50.2014 Combinatio

Conservati
        industrial, T
Diversified
Covered un
and OLT.

7 164416 1-G 52.2799 Majority of

riceland wit
        portion of [A
industrial] a
Residential
under VOS

8 164417 1-H 43.0780 Riceland an

industrial. A
        portion of R
Covered un

9 164418 1-I 45.3631 Riceland w

canal. Cove
        OLT. Plant
banana, ma
crops like c
okra. With
grasses. So
is Resident

10 164419 1-J 49.7049 Riceland, m

Covered un
       
 

11 164420 1-K 56.1463 Riceland an

Residential
        under OLT
with banan
root crops l

 
12 (164430) 3-J 61.7208 Agro-indus
little portion
  422059     Covered un

13 (164431) 3-K [51.7113] Riceland. C

under OLT
  422059     Alta Tierra
Inc.
 

14 (164432) 3-L 63.2478 Riceland an

Residential
  M-13551     under VOS
mango tree
 

  723.9428 33

Petitioners intervened,  essentially averring that the zoning ordinance did not actually divest
34

the subject lands of their original classification as agricultural, both in actual use and their
nature; hence, they are not excluded or exempt from the operation of PD 27 or the
CARP.  They further averred that assuming that the zoning had the effect of reclassifying the
35

subject lands to non-agricultural lands, the same will not affect the coverage of the properties
under the OLT program, considering that they had been devoted to rice and corn since
October 21, 1972. 36

Subsequently, the Exemption Committee recommended the exemption of a 447.4025-ha.

portion of the subject lands from CARP coverage on the basis of HSRC Resolution No. 36,
Series of 1981, which provided the classification of the subject lands as tabularized
above.  It further recommended the cancellation of EPs  over the lands covered by TCT
37 38

Nos. 164410, 164414, and 164415, as the same were found to be: (a) classified as
Forest/Forest Conservation; (b) fully covered by forest trees with no traces of agricultural
activities; and (c) within the slopes of the mountain; hence, outside the coverage of PD 27
pursuant to which the EPs were issued.  However, it recommended the denial of the
39

application for exemption of a 29.0981  hectare portion of the lands covered by TCT Nos.
40

164417, (164430) M-10897, and (164432) M-13551 that were found to be ricelands already
covered by EPs.  Its findings are hereunder tabularized:
41

TCT No. Lot No. Area Per Title Area Applied (Ha.) Recommended for Base
(Ha.) Exemption (Ha.)
       
   

164410 1-A 66.6220 66.6220 66.6220 HSR

Reso
      36, S
1981

164411 1-B 59.1061 59.1061 59.1061 HSR

 Reso
      36, S
1981

164412 1-C 56.4944 56.4944 56.4944 HSR

Reso
          36, S
1981

164413 1-D 66.8885 66.8885 66.8885 HSR

Reso
      36, S
1981

164414 1-E 53.0896 44.8596 44.8596 HSR

Reso
          36, S
1981

164415 1-F 50.2014 41.6364 41.6364 HSR

Reso
          36, S
1981

164416 1-G 52.2799 3.7399 3.7399 HSR

Reso
          36, S
1981

164417 1-H 43.0780 17.2879 15.6938 1.594

ricela
          with
exem
HSR
Reso
36, S
1981

164418 1-I 45.3631 12.8800 12.8800 HSR

Reso
          36, S
1981

164419 1-J 49.7049 11.4575 11.4575 HSR

Reso
          36, S
1981

164420 1-K 56.1463 28.0450 28.0450 HSR

Reso
          36, S
1981

(164430) 422059 3-J 61.7208 49.7508 32.9549 16.79

 ricela
          with
exem
HSR
Reso
36, S
1981

(164432) 3-L 63.2478 17.7325 7.0244 10.20

ricela
M-13551         with
exem
  HSR
Reso
36, S
1981

723.9428 476.5006 447.4025 42

The DAR Secretary Ruling

On August 29, 2008, the DAR Secretary issued DARCO Order No. EX-0808-372, Series of
2008  (Exemption Order) adopting the recommendation of the Exemption Committee,
43

thereby: (a) granting exemption of a 447.4025-ha. portion of the subject lands (subject
portions) from CARP coverage, conditioned on the payment of disturbance compensation to
the affected tenants within sixty (60) days from notice of the Exemption Order; and (b)
denying the application for exemption of the remaining 29.0981 has. ricelands already
covered by EPs. 44

Petitioners moved for reconsideration,  which was denied in DARCO Order No. EX(MR)-
45

0904-107, Series of 2009  dated April 1, 2009.

46

Unperturbed, petitioners filed a petition for review  with the CA, docketed as CA-G.R. SP No.
47

108543, challenging, among others: (a) respondents' right to apply for CARP exemption as
Juliana had no more propriety right to the subject lands after voluntarily offering the same for
sale to the DAR for CARP purposes;  and (b) the jurisdiction of the DAR Secretary to nullify
48

petitioners' EP and CLOA titles on the ground that the same falls within the competence of
the Department of Agrarian Reform Adjudication Board (DARAB). 49

The CA Ruling

In a Decision  dated February 20, 2017, the CA upheld the jurisdiction of the DAR Secretary
50

to nullify petitioners' EP and CLOA titles in accordance with present DAR implementing
rules,  and affirmed the DAR Secretary's ruling that the lands covered by the Exemption
51

Order are outside the coverage of PD 27 and the CARP as they have been classified as
agro-industrial, residential, institutional, or forest/forest conservation. 52

The Issues Before the Court

The essential issues for the Court's resolution are whether or not the CA erred:

(1) in upholding the DAR Secretary's jurisdiction (a) to take cognizance of respondents'
application for CARP exemption, and (b) to nullify petitioners' EP and CLOA titles covering
the exempt portions; and

(2) in excluding the subject portions from CARP coverage.

The Court's Ruling

A. JURISDICTION OF THE DAR SECRETARY OVER APPLICATIONS FOR

EXEMPTION PURSUANT TO DOJ OPINION NO. 44, SERIES OF 1990.

It is settled that jurisdiction over the subject matter is conferred by law. The determination of
the land's classification as agricultural or non-agricultural (e.g., industrial, residential,
commercial, etc.) and, in turn, whether or not the land falls under agrarian reform exemption,
must be preliminarily threshed out before the DAR,  particularly, the DAR
53

Secretary,  pursuant to DAR AO No. 6, Series of 1994.  Verily, issues of exclusion or

54 55

exemption partake the nature of Agrarian Law Implementation (ALI) cases which are well
within the competence and jurisdiction of the DAR Secretary. Towards this end, the latter is
ordained t6 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. 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. 56

DAR AO No. 6, Series of 1994 vests in the DAR Secretary the authority to grant or deny the
issuance of exemption clearances on the basis of Section 3 (c) of RA 6657, as amended,
and DOJ Opinion No. 44, Series of 1990.

Section 3 (c) of RA 6657, as amended defines agricultural land, thus:

(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. (Underscoring
supplied)

On the other hand, DOJ Opinion No. 44, Series of 1990 provides that all lands that have
already been classified as commercial, industrial or residential before June 15, 1988 no
longer need any conversion clearance from the DAR in order to be exempt from CARP
coverage.  However, an exemption clearance from the DAR, pursuant to DAR AO No. 6,
57

Series of 1994, is still necessary to confirm or declare their exempt status.58

B. JURISDICTION OVER CASES INVOLVING THE CANCELLATION OF EPS,

CLOAS, AND OTHER AGRARIAN TITLES.

Petitioners argue that the pertinent DARAB Rules of Procedure in force at the time of the
filing of the exemption case provide that registered EPs and CLOAs may only be corrected
or cancelled by order of the (Provincial or Regional) Adjudicator of the DARAB;  hence, the
59

DAR Secretary has no jurisdiction to cancel their respective EP and CLOA titles.

The argument is untenable.

The fact that respondents sought the cancellation of petitioners' EPs and CLOAs does not
necessarily mean that the application for CARP exemption falls under the jurisdiction of the
DARAB. Verily, for the DARAB Adjudicator to acquire jurisdiction, the controversy must
relate to an agrarian dispute between the landowners and tenants in whose favor the EPs
and CLOAs have been issued by the DAR Secretary,  which is not extant here, An agrarian
60

dispute, as defined by Section 3 (d) of RA 6657, as amended, 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." 61

In this case, the consequent cancellation of the affected tenants' EP and CLOA titles does
not arise from a controversy relating to any tenurial arrangement between petitioners and
respondents in negotiating, fixing, maintaining, changing or seeking to arrange terms or
conditions of such tenurial arrangement, but from the fact that the lands involved are not
covered by the CARP in the first place, rendering the issuance of said titles unwarranted.
Thus, there exists no agrarian dispute nor any agrarian reform matter so as to situate the
jurisdiction with the DARAB Adjudicator. Indisputably, the controversy between the parties
herein is not agrarian in nature but merely involves the administrative implementation of the
agrarian reform program which is cognizable by the DAR Secretary. 62

Notably, while the DAR Secretary has the competence and jurisdiction over respondents'
application for CARP exemption as expressed in DOJ Opinion No. 44, Series of 1990, it
must be pointed out that a separate case should nonetheless still be filed by
respondents (also before the DAR)  for the purpose of cancelling the EP and CLOA
63

titles of the affected tenants. This is because "[a]grarian reform beneficiaries or identified

beneficiaries, or their heirs in case of death, and/or their associations are indispensable
parties in petitions for cancellation"  of the EPs/CLOAs, or other title issued to them under
64

any agrarian reform program. Here, the DAR Secretary, in taking cognizance of respondents'
application for CARP exemption, made neither a determination of the FBs' individual rights
nor any declaration that specific TCTs were thereby cancelled. His resolution, which was
affirmed by the CA, was limited to the determination of whether or not the subject portions
are excluded from the coverage of the agrarian laws. As such, this case must only be
confined to such matter, and that a separate proceeding must still be initiated impleading
individual FBs to establish that the lands awarded to them fall within the excluded areas,
warranting the cancellation of their respective EP or CLOA titles.

C. LANDS ALREADY CLASSIFIED FOR RESIDENTIAL, COMMERCIAL OR

INDUSTRIAL USE IN TOWN PLANS AND ZONING ORDINANCES AS APPROVED
BY THE HLURB AND ITS PRECURSOR AGENCIES PRIOR TO JUNE 15, 1988
ARE OUTSIDE THE COVERAGE OF THE AGRARIAN LAWS.

PD 27 covers private agricultural lands primarily devoted to rice and corn under a system of
sharecrop or lease-tenancy, whether classified as landed estate or not, while RA 6657
covers all public and private agricultural lands as provided in Proclamation No. 131 and
Executive Order No. (EO) 229,  including other lands of the public domain suitable for
65

agriculture, regardless of tenurial arrangement and commodity produced. Conversely, lands

not devoted to agricultural activity, including lands previously converted/reclassified to non-
agricultural uses prior to the effectivity of RA 6657 by government agencies other than the
DAR are outside the coverage of the agrarian laws,  subject to the qualification that such
66

conversion/ reclassification shall not operate to divest FBs of their rights over lands covered
by PD 27 that have vested prior to June 15, 1988. 67
DOJ Opinion No. 44, Series of 1990 recognized the authority of the HLURB, and its
precursor, the HSRC, to approve and/or promulgate zoning and other land use control
standards and guidelines which shall govern, among others, land use plans and zoning
ordinances of local government units. Thus, lands already classified as commercial,
industrial or residential before June 15, 1988 no longer need any conversion clearance
from the DAR in order to be exempt from CARP coverage.

D. AUTHORITY TO CLASSIFY LANDS.

Preliminarily, it must be pointed out that the classification of land as agricultural constitutes
a primary classification. Section 3,  Article XII of the Constitution provides for
68

the primary classification of lands of the public domain into agricultural, forest or timber,

mineral lands, and national parks. Under the Public Land Act, 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). By virtue of PD 705,  otherwise known as the "Revised
69 70

Forestry Code of the Philippines," the President delegated to the DENR Secretary, among
others, the power to classify unclassified lands of the public domain that are needed for
forest purposes as permanent forest to form part of the forest reserves. 71

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 lands is referred to as secondary classification. 72

The authority to reclassify agricultural lands into residential, commercial or industrial is

lodged, among others, in cities and municipalities  (hereinafter, LGUs). Prior to the passage
73

of the present Local Government Code of 1991, LGUs already have the power to reclassify
agricultural into non-agricultural lands pursuant to Section 3  of RA 2264,  otherwise known
74 75

as the "Local Autonomy Act of 1959," which empowered municipal and/or city councils to
adopt zoning and subdivision ordinances or regulations in consultation with the National
Planning Commission. When city/municipal councils approve an ordinance delineating an
area or district in their cities/municipalities as residential, commercial, or industrial zone
pursuant to the power granted to them under the aforesaid provision, they are, at the same
time, reclassifying any agricultural lands within the zone for non-agricultural use; hence,
ensuring the implementation of and compliance with their zoning ordinances.  Pursuant to
76

Letter of Instructions No. 729 dated August 9, 1978, LGUs were further required to submit
their existing land use plans, zoning ordinances, and enforcement systems and procedures
to the Ministry of Human Settlements for review, evaluation and approval, which functions
were eventually devolved upon the HSRC. 77

E. APPLICATION TO THE CASE AT BAR.

In this case, the DAR Secretary excluded portions of the lands covered by TCT Nos. 164410
to 164415 (inclusive), 164417, and (164430) 422059  from CARP coverage on the basis of
78

their reclassification as forest conservation zones pursuant to HSRC Resolution No. 36,

Series of 1981, approving the LUP of Jalajala. On the other hand, the rest of the areas
applied for exemption were excluded from the CARP on the basis of their HSRC-approved
reclassification to agro-industrial, residential and institutional  under the LUP of Jalajala,
79

save for the 29.0981-ha. riceland portions of TCT Nos. 164417,  (164430) M-10897,  and
80 81

(164432) M-13551  that were found to be ricelands already covered by EPs.

82 83
To recall, the CARP covers 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, regardless of tenurial arrangement and commodity produced. Section 3 (c) of RA
6657, as amended defines agricultural land as referring to "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest, residential commercial or
industrial land."  DAR AO No. 1, Series of 1990  clarified this definition  of "agricultural land"
84 85 86

as follows:

Agricultural land refers to those devoted to agricultural activity as defined in RA 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.  (Emphases supplied)
87

It is discernible from the foregoing definition that in order to be not considered agricultural
land, and hence, not covered under the CARP, the land must not have been classified: (a) as
mineral or forest by the DENR and its predecessor agencies; and (b) for residential,
commercial or industrial use in town plans and zoning ordinances as approved by the
HLURB and its preceding competent authorities prior to June 15, 1988. Therefore, the forest
land referred to in Section 3 (c) of RA 6657, as amended is to be understood as referring to
forest land declared to be such by the DENR, i.e., primary classification as forest,
and not its secondary classification by the LGUs. Consequently, reclassification by LGUs
of agricultural lands into "forest conservation zones," which is in the nature of a
secondary classification, does not have the effect of converting such lands into forest
lands as to be exempt from CARP coverage. 88

In this case, the portions of the lands covered by TCT Nos. 164410 to 164415 (inclusive),
164417, and (164430) 422059 had been reclassified as forest conservation zones under the
HSRC-approved LUP of the Municipality of Jalajala. Thus, being covered by a secondary,
and not a primary, classification as above-discussed, these lands cannot be deemed as
forest lands for purposes of CARP exemption under Section 3 (c) of RA 6657, as
amended.

Nonetheless, the Court cannot discount the possibility that the said lands classified as forest
conservation zones may fall within the exemptions and exclusions provided under
Section 10 (a) of RA 6657 if they are actually, directly and exclusively used for parks,
forest reserves,  reforestation  or watersheds.  The said provision reads:
89 90 91

Section 10. Exemptions and Exclusions. —

(a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves,
reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves shall be
exempt from the coverage of this Act. (Emphasis supplied)

Notably, DAR AO No. 13-90  provides for the rules and procedures governing exemption of
92

lands from CARP Coverage under Section 10 of RA 6657, as amended, and pertinently
states the guidelines to be observed in the application of the aforecited provision of law,
thus:

C. Lands which have been classified or proclaimed, and/or actually, directly and
exclusively used and found to be necessary for parks, wildlife, forest reserves, fish
sanctuaries and breeding grounds, and watersheds and mangroves shall be exempted
from the coverage of CARP until Congress, taking into account ecological, developmental
and equity considerations, shall have determined by law, the specific limits of public domain,
as provided for under Sec. 4 (a) of R.A. 6657, and a reclassification of the said areas or
portions thereof as alienable and disposable has been approved.

D. Lands which have been actually, directly and exclusively used and found to be necessary
for reforestation are likewise excluded and exempted from the coverage of the CARP,
provided that the areas or portions thereof occupied by qualified forest occupants
shall be included in the Integrated Social Forestry (ISF) program of DENR, if
suitable. (Emphases supplied)

Given that the status of the above-mentioned lands was not examined under the context of
Section 10 (a) of RA 6657, as amended, the Court finds that there is a need to refer  the 93

matter to the Office of the DAR Secretary  for the purpose of determining whether or not the
94

same are actually, directly and exclusively used for parks, forest reserves, reforestation, or
watersheds as to be exempt from CARP coverage in accordance with Section 10 (a) of RA
6657, as amended, pursuant to the guidelines set by DAR AO No. 13-90.

With respect to the lands covered by TCT Nos. 164414, 164415, 164416, 164417, and
(164430) 422059  which have been secondarily reclassified as agro-industrial, the Court
95

finds the DAR Secretary to have erred in excluding the same from the CARP pursuant to
Section 3 (c) of RA 6657, as amended. DOJ Opinion No. 67, Series of 2006  dated 96

September 25, 2006 provides that agro-industrial lands are within the ambit or coverage
of the definition of agricultural land under Section 3 (c) of RA 6657, as amended,
considering that: (a) they are neither included in the enumeration of exclusion provided in the
said definition nor mentioned under Section 10  of the same law to be exempt from CARP
97

coverage; and (b) the legislative intent to include agro-industrial land within the coverage of
the agrarian reform program was specifically documented in the records of the Philippine
Senate. 98

Moreover, Section 4 (d) of RA 6657, as amended provides that the law covers "[a]ll private
lands devoted to or suitable for agriculture regardless of the agricultural products raised or
that can be raised thereon." In Pasong Bayabas Farmers Association, Inc. v. CA,  it was 99

clarified that agricultural lands are only those lands which are arable or suitable lands
that do not include commercial, industrial, and residential lands. Thus, unless the agro-
industrial land is shown to be not arable, or is devoted to exempt activities such as
commercial livestock, poultry and swine raising,  fishpond and prawn farming,  cattle-
100 101

raising,  or other activities which do not involve the growing of crops and accordingly
102

reclassified therefor, the said land shall be within the coverage of the CARP.

Accordingly, only the exclusion of the portions of the lands covered by TCT Nos. 164416,
164417, 164418, 164419, 164420, and (164432) M-13551 which have been reclassified
as residential or institutional per the HSRC-approved LUP of Jalajala should be upheld since
lands reclassified as non-agricultural prior to the effectivity of RA 6657 by government
agencies other than the DAR are outside CARP coverage. 103

However, it bears to stress that while DAR AO No. 6, Series of 1994 declares that the
reclassification of lands to non-agricultural uses shall not operate to divest FBs of their rights
over lands covered by PD 27, such rights must have vested prior to June 15,
1988.  Notably, the reclassification of the subject lands in 1981 came prior to the issuance
104

and registration of EPs  and CLOAs  in favor of the FBs between October 24, 1988 and
105 106
October 27, 1995, and way before the issuance of the January 14, 1986 memorandum of the
President directing the issuance of EPs to the FBs of the OLT program pursuant to which
EPs were issued to individual FBs. Since the rights and responsibilities of beneficiaries
shall only commence from their receipt of duly registered EPs  or 107

CLOAs,  undeniably, no vested rights had accrued in favor of the concerned FBs prior to
108

the reclassification of the subject lands. Hence, the affected FBs cannot invoke the issuance
of EP and CLOA titles in their favor as a bar to the exemption case.

In sum, the Court finds that the CA committed reversible error in upholding the DAR
Secretary's ruling excluding: (a) portions of the lands covered by TCT Nos. 164410 to
164415 (inclusive), 164417 and (164430) 422059 on the basis of their HSRC-approved
reclassification as forest conservation zone since only forest lands primarily classified by the
DENR are exempt from CARP coverage pursuant to Section 3 (c) of RA 6657, as amended;
and (b) portions of the lands covered by TCT Nos. 164414, 164415, 164416, 164417, and
(164430) 422059 on the basis of their secondary reclassification as agro-industrial since
agro-industrial lands are within the ambit or coverage of the definition of agricultural land,
and as such, covered by the CARP. However, anent the lands in item (a), they may
nonetheless be exempt from CARP coverage if they are actually, directly and exclusively
used for parks, forest reserves, reforestation, or watersheds under Section 10 (a) of RA
6657, as amended upon determination of the Office of the DAR Secretary.

On the other hand, the Court finds the CA to have correctly affirmed the exclusion of the
portions of the lands covered by TCT Nos. 164416, 164417, 164418, 164419, 164420, and
(164432) M-13551 which have been reclassified as residential or institutional.

Nonetheless, before the application for exemption may be completely granted,

payment of disturbance compensation to any affected tenants of the properly
excluded portions — herein limited to the residential or institutional lands covered by TCT
Nos. 164416, 164417, 164418, 164419, 164420, and (164432) M-13551 per the HSRC-
approved LUP of Jalajala — must first be made.  This is because once a leasehold
109

relationship is established, the agricultural lessee is entitled to security of tenure and

acquires the right to continue working on the landholding until such leasehold relation is
extinguished,  and he/she is validly dispossessed thereof for cause, among others, the
110

reclassification of the land into residential, commercial, industrial or some other urban
purposes is upheld in a final and executory Court judgment, thereby entitling him to
disturbance compensation.  In addition, the usufructuary rights of the affected FBs over their
111

awarded lands shall not be diminished  pending the cancellation of their EP and CLOA titles
112

in the proper proceedings.

Finally, contrary to petitioners' claim, the fact that Juliana had previously voluntarily offered to
sell the subject lands to the DAR is inconsequential and is not a bar to the exemption case. It
is settled that lands previously converted to non-agricultural uses/reclassified as non-
agricultural prior to the effectivity of RA 6657 by government agencies other than the DAR
are outside CARP coverage. .The basis for the exemption is not the withdrawal of the
113

voluntary offer for sale (VOS) but the reclassification of the lands prior to June 15,
1988.  This being the case, Juliana's previous VOS was ineffective because the subject
114

lands cannot be the subject of the same, they being clearly beyond CARP
coverage.  While the DAR subsequently issued DAR AO No. 09-90[116] (now DAR AO No.
115

07-11 ), providing that "[a] 11 lands which are voluntarily offered for sale to the government,
117

except lands within the retention limits, may no longer be withdrawn and shall immediately
fall under Phase I, as provided for in Section 7 of RA 6657,"  the same was not yet in effect
118

at the time the VOS was made on March 13, 1989. 119
WHEREFORE, the petition is DENIED. The Decision dated February 20, 2017 of the Court
of Appeals in CA-G.R. SP No. 108543 is hereby MODIFIED, thereby PARTIALLY
APPROVING the Application for Exemption Clearance from CARP Coverage only with
respect to the portions of the parcels of land covered by Transfer Certificates of Title (TCT)
Nos. 164416, 164417, 164418, 164419, 164420, and (164432) M-13551 in the name of
Juliana Maronilla, located in Bagumbong, Jalajala, Rizal, which have been reclassified as
residential and institutional. The issuance of the Exemption Clearance from CARP Coverage
for the aforementioned lands is subject to the payment of disturbance compensation set by
the Secretary of the Department of Agrarian Reform (DAR) in accordance with existing DAR
administrative rules. Accordingly, the records of this case are hereby REMANDED to the
Office of the DAR Secretary for proper disposition in accordance with this Decision.

Meanwhile, the matter of determining whether or not the portions of the lands covered by
TCT Nos. 164410 to 164415 (inclusive), 164417, and (164430) 422059 are actually, directly
and exclusively used for parks, forest reserves, reforestation, or watersheds as to be
exempt/excluded from CARP coverage under Section 10 (a) of Republic Act No. 6657, as
amended, is REFERRED to the Office of the DAR Secretary for proper disposition in
accordance with DAR Administrative Order No. 13-90.

SO ORDERED.

Carpio (Chairperson), Caguioa, J. Reyes, Jr., and Lazaro-Javier, JJ., concur.

Footnotes