Title
Natalia Realty, Inc. vs. Department of Agrarian Reform
Case
G.R. No. 103302
Decision Date
Aug 12, 1993
NATALIA's lands, converted to residential use pre-CARL, excluded from agrarian reform; DAR's Notice of Coverage invalidated by SC.
agricultural lands
residential lands
townsite reservation

Case Summary (G.R. No. 103302)

Factual Background

The petitioners’ properties consisted of three contiguous parcels with areas of 120.9793 hectares, 1.3205 hectares, and 2.7080 hectares, for a total of 125.0078 hectares. These parcels lay within the area proclaimed under Presidential Proclamation No. 1637 for townsite reservation. Because private landowners were allowed to develop their properties into low-cost housing subdivisions within the townsite reservation, petitioner EDIC applied for and obtained preliminary approval and locational clearances from the Human Settlements Regulatory Commission.

Permits followed for the subdivision in phases: a permit for Phase I (covering 13.2371 hectares) was issued sometime in 1982; Phase II (covering 80.0000 hectares) received a permit on 13 October 1983; and Phase III (covering the remaining 31.7707 hectares) obtained a permit on 25 April 1986. Petitioners were also issued development permits after complying with the required conditions. As a result, the properties became known as the Antipolo Hills Subdivision.

On 15 June 1988, R.A. 6657 became effective. Thereafter, DAR issued the subject Notice of Coverage dated 22 November 1990, covering the undeveloped portions of the Antipolo Hills Subdivision, roughly 90.3307 hectares. Petitioners immediately registered objections, and EDIC protested to Dir. Wilfredo Leano and twice requested cancellation. In the meantime, on 17 January 1991, members of Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA) filed a complaint before the DAR Regional Adjudicator to restrain petitioners from developing areas under cultivation by SAMBA members. The Regional Adjudicator temporarily restrained petitioners, denied petitioners’ motion to dismiss, and on 5 March 1991 issued a Writ of Preliminary Injunction. Petitioners sought relief before the DARAB, which on 16 December 1991 remanded the case to the Regional Adjudicator for further proceedings.

While these proceedings were pending, petitioners continued to seek administrative action on their protest-letter requests, but neither the respondent Secretary nor the respondent Director acted. Petitioners therefore brought the present action for certiorari more than a year after the Notice of Coverage.

The Petitioners’ Theory: No CARL Coverage

Petitioners argued that DAR committed grave abuse of discretion in including the undeveloped portions of the Antipolo Hills Subdivision within CARL coverage. Their central contention was that the NATALIA properties “already ceased to be agricultural lands” once they were included in the area reserved by Presidential Proclamation No. 1637 for townsite purposes, and that the residential/commercial/industrial nature of the lands had been recognized and approved by the proper housing and land use authorities prior to the effectivity of R.A. 6657.

The Public Respondents’ Theory: No Valid Conversion and Prematurity

Respondents, through the Office of the Solicitor General, contested petitioners’ position on two fronts. First, respondents claimed that the subdivision permits did not constitute valid conversion because petitioners allegedly failed to comply with the implementing Standards, Rules and Regulations of P.D. 957 (the Subdivision and Condominium Buyers’ Protective Decree), particularly the requirement that an application for conversion of the NATALIA lands from agricultural to residential must have been filed with DAR. Respondents thus argued that there was “no valid conversion.”

Second, respondents argued that the petition was premature due to non-exhaustion of administrative remedies. They pointed to SAMBA’s earlier complaint before the DAR Regional Adjudicator, which they said had not yet terminated. On this basis, respondents maintained that petitioners should have awaited the outcome of that administrative case.

Compliance with Housing/Planning Requirements Under P.D. 957 and the Townsite Reservation

The Court rejected respondents’ assertion that petitioners failed to comply with the legal and regulatory requirements under P.D. 957. A review of the Preliminary Approval and Locational Clearances and the Development Permits for the subdivision’s phases showed that petitioners did, in fact, comply. The Court noted that petitioners first obtained favorable recommendations from the Lungsod Silangan Development Corporation, the agency tasked to oversee implementation of the townsite reservation, and then applied for permits from the Human Settlements Regulatory Commission.

In the permits issued to petitioners for the phases, the Commission stated that the applications were in “conformance,” “conformity,” or “conforming” with the implementing standards, rules, and regulations of P.D. 957. The Court therefore held that respondents’ claim that not all requirements had been satisfied could not stand.

The Court further ruled that DAR approval was not required for the conversion asserted by respondents. It reasoned that the NATALIA properties were within areas set aside for the Lungsod Silangan reservation. Because Presidential Proclamation No. 1637 created the townsite reservation to provide additional housing for the population overspill of Metro Manila, it effectively converted the land for residential use once the necessary requisites were met. The Court also treated Presidential Proclamation No. 1637 as a special law, contrasted with the general regulatory framework; invoking the statutory construction principle that when a general law and a special law conflict, the special law prevails, the Court held that the townsite reservation controlled.

The Court additionally observed that the Solicitor General did not contest the conversion of portions already developed. Yet the applications for the developed and undeveloped portions were similarly situated. Accordingly, the same treatment applied to both.

Statutory Coverage Under R.A. 6657: Meaning of “Agricultural Lands”

After resolving the issue of compliance and conversion, the Court addressed whether the subject lands were covered by CARL. It referred to Section 4 of R.A. 6657, which provides that CARL covers, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands. It then considered “agricultural land” as defined in Section 3(c) of R.A. 6657, which limits agricultural lands to those devoted to agricultural activity as defined by the Act and which are not classified as mineral, forest, residential, commercial, or industrial land.

The Court relied on constitutional convention deliberations to confirm the limitation: agricultural lands are those that are arable and suitable for agricultural use and exclude commercial, industrial, and residential lands. It concluded that the undeveloped portions of the Antipolo Hills Subdivision could not be considered agricultural lands in any language, because they were intended for residential use. The Court held that the lots ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan reservation.

The Court also found that the ongoing character of the project supported this view. Even if development proceeded at a slow pace due to the enormity of resources required, the lands continued to be developed as a low-cost housing subdivision. The fact that SAMBA members instituted an action to restrain petitioners from continuing development reinforced the conclusion that the subdivision was being pursued as a residential project. The Court emphasized that lands not devoted to agricultural activity are outside CARL coverage and cited DAR’s own position that agricultural lands exclude those classified in town plans and zoning ordinances approved by HLURB and its preceding competent authorities prior to 15 June 1988 for residential, commercial, or industrial use, as reflected in DAR Administrative Order No. 1, Series of 1990.

Binding Effect of Pre-15 June 1988 Conversion and DAR’s Jurisdiction

The Court treated the NATALIA lands as having been converted prior to 15 June 1988, given their inclusion in the Lungsod Silangan townsite reservation and the approvals for residential subdivision development by the housing and land use agencies before CARL’s effectivity. It therefore ruled that DAR was bound by such pre-effectivity conversion and erred in including the undeveloped portions within CARL coverage.

The Court also cited an opinion of the Secretary of Justice responding to a query by the Secretary of Agrarian Reform. It noted that lands covered by Presidential Proclamation No. 1637, reserved for townsite purposes and intended “to be developed as human settlements by the proper land and housing agency,” were “not deemed agricultural lands” within the meaning and intent of Section 3(c) of R.A. No. 6657. Not being deemed agricultural lands, they fell outside CARL’s scope.

Exhaustion of Administrative Remedies

As to respondents’ claim of non-exhaustion, the Court found no legal ground to deny the petition. It held that the issues raised in SAMBA’s complaint differed from those raised by petitioners. SAMBA’s complaint concerned possession, while petitioners’ action involved the propriety of including lands already converted for residential use prior to the effectivity of CARL.

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