Title
Department of Agrarian Reform vs. Sarangani Agricultural Co., Inc.
Case
G.R. No. 165547
Decision Date
Jan 24, 2007
A dispute over land use conversion in Sarangani Province, involving local zoning ordinances, agrarian reform laws, and the DAR's denial of a 1,005-hectare application, ultimately upheld CARL's supremacy over local reclassification.

Case Summary (G.R. No. 82380)

Factual Background — Creation of Province, Municipal Planning and Reclassification

After the creation of the Province of Sarangani (R.A. No. 7228), the Municipality of Alabel was designated the provincial capital. Alabel adopted a Ten-Year Municipal Comprehensive Development Plan (1995–2005) and a land use plan. Pursuant to municipal resolutions and Municipal Zoning Ordinance No. 08, S. of 1997, parts of the municipality’s built-up areas were reclassified from agricultural to non-agricultural uses to accelerate urban development. A portion of respondents’ lands (376.5424 hectares) had earlier been covered by CARL’s commercial farm deferment scheme.

SACI’s Application for Land Use Conversion and Supporting Documents

On July 2, 1998 SACI applied for conversion of an aggregate of approximately 1,005 hectares across multiple titled and untitled parcels in Barangay Maribulan, Alabel. The application included the documents required under DAR Administrative Order No. 7, s. 1997 (certifications from the local planning offices, HLURB certification, NIA certification and field verifications, court clearance, and evidence of reclassification in the municipality’s land use plan).

Administrative Inspections, PLUTC Recommendations, and Conditions

A site inspection by HLURB Region XI and DAR field inspections took place. The Provincial Land Use Technical Committee (PLUTC) conducted inspections and, by memorandum and deliberations, recommended several preconditions and clarifications before any approval: submission of a development plan (five-year plan), missing documents, resurvey and segregation of property according to proposed uses, maps and technical descriptions attested by the Regional Director, and a manifesto or undertaking by SACI offering compensation and relocation for affected farm workers. The PLUTC also recommended disallowance of conversion for a specific 158.0672 hectares planted to bananas and coconuts on the ground that the area remained agriculturally viable, irrigated, and subject to Notice of Coverage and opposition from SARBAI.

Opposition by SARBAI and Contentions of SACI

SARBAI, representing agrarian reform beneficiaries/workers, filed letters and an urgent petition opposing SACI’s conversion application, asserting that waivers were obtained under coercion and that the commercial farm deferment period had expired on June 15, 1998. SACI countered that its development proposals were aligned with municipal needs; that displaced banana plantations would be converted into socialized housing available to displaced workers and low-income earners; that it would install utilities and undertake other development projects; and that no Notice of Coverage had been issued at the time of filing so DAR’s later coverage was irregular. SACI also argued that deferment should not bar conversion applications.

DAR’s Administrative Denial and Its Stated Basis

DAR Secretary Horacio R. Morales, Jr. denied SACI’s application by Order dated November 9, 2000, principally as to parcels planted to bananas and coconuts (aggregate ~154.62 hectares). The denial was grounded on findings that: (1) SACI failed to comply with documentary requirements and to submit a required oath/undertaking to pay disturbance compensation as required by DAR AO No. 01, s. 1999; (2) the PLUTC had recommended disapproval for the banana and coconut areas as they were still viable for agriculture, irrigated, covered by Notices of Coverage, and were subject to opposition by SARBAI; (3) SACI’s substitute undertakings were not representative of the majority of affected workers; and (4) the proposed replacement pomelo farm could not be confirmed as available for relocation because DAR Region XI had already identified other potential beneficiaries for that site. The DAR ordered the denial for the banana/coconut parcels and deferred action on the remainder pending submission of a revised five-year development plan and other delineations.

Administrative and Judicial Appeals up to the Court of Appeals

SACI sought reconsideration before DAR, then appealed to the Office of the President, which dismissed the appeal and affirmed DAR’s orders on June 30, 2003. SACI then filed a petition for certiorari and prohibition with the Court of Appeals, which on July 19, 2004 granted the petition and reversed DAR and the Office of the President as to the banana and coconut areas, ordering DAR to issue a conversion order and directing that DAR refrain from proceeding with compulsory distribution under CARP for those lands on the ground that DAR had failed to observe due process in issuing the June 16, 1998 Notice of Coverage. The CA also directed DAR Region XI to expedite processing for the remainder of the lands.

Issues Presented to the Supreme Court

DAR’s petition to the Supreme Court raised three broad contentions challenging the Court of Appeals’ ruling: (I) that the CA erred in ruling the June 16, 1998 Notice of Coverage illegal for lack of due process; (II) that the CA erred in holding that DAR must treat municipal comprehensive land use plans and ordinances as the primary reference so as not to defeat the LGU’s reclassification purpose; and (III) that the CA failed to properly apply the law on the preconditions for land conversion vis-à-vis the CARP mandate.

Supreme Court’s Conclusion on Due Process and the Legal Effect of Deferment/Notice of Coverage

The Supreme Court held that where the lands in question had been covered by CARL’s ten-year commercial farm deferment scheme and the deferment period had lapsed on June 15, 1998, DAR’s issuance of a separate Notice of Coverage was not an indispensable prerequisite to effect compulsory acquisition and distribution. The Court relied on Section 11 of R.A. No. 6657 (commercial farms subject to immediate compulsory acquisition after ten years from the Act’s effectivity or from commencement of commercial production) and DAR Administrative Order No. 9, s. 1998 (which provides that an Order of Deferment serves, upon expiration of the deferment period, as the Notice of Coverage supported by the original compliance documents). Because the deferment scheme itself and the administrative framework anticipated acquisition upon expiration, the Court found that the DAR did not commit legal error for treating the deferred commercial farm area as covered for acquisition and distribution. Consequently, DAR’s denial of conversion for the banana/coconut parcels (the 154.62 hectares) was affirmed.

Supreme Court’s Reasoning on the Role of Local Comprehensive Land Use Plans and DAR’s Authority on Conversion

The Court agreed with the Court of Appeals that DAR must utilize municipal comprehensive land use plans and the accompanying zoning ordinances of the local Sanggunian as primary references when evaluating land use conversion applications, as required by MC No. 54 and Executive Order No. 72. However, the Court emphasized that DAR’s evaluation is a distinct responsibility; DAR’s authority to approve or disapprove conversions is confined to ensuring compliance with statutory requirements and limitations (for example, allowable percentages for reclassification, protection of areas needed for food production, and environmentally critical areas). The Court clarified that DAR should not exercise its conversion authority in a manner that defeats the LGU’s legitimate social and economic objectives in reclassifying lands, but equally that local reclassification cannot override or repeal CARP provisions.

Interaction between CARP and LGU Reclassification — Which Controls

The Court concluded that reclassification by the Municipality of Alabel and the creation of the Province of Sarangani did not supersede CARL’s express provisions. Section 20 of the Local Government Code expressl

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