Agrarian Reform Exclusion: Land Must Be Used Exclusively for Livestock Raising

The Supreme Court recently ruled on when a landholding may be excluded from the coverage of the Comprehensive Agrarian Reform Program (CARP) because it is devoted to livestock raising. In Bitanagan Farmers Agrarian Reform Beneficiaries Association v. Hacienda Bitanagan (G.R. No. 243310, August 15, 2022), the Court denied the exclusion sought by a cattle-raising hacienda, emphasizing that the land must be actually, directly, and exclusively used for livestock raising and that a landowner who acts in bad faith cannot invoke the operative fact doctrine to escape agrarian reform coverage.

The Facts

Hacienda Bitanagan owned three parcels of land in Davao Oriental with an aggregate area of 285.5785 hectares. In 1989, it applied for deferment from CARP coverage. The following year, the DAR Regional Director issued an Order of Deferment. Later, the hacienda was advised to apply for exemption or exclusion from CARP coverage instead.

In 1996, Hacienda Bitanagan filed an Application for Exclusion, claiming the lands were devoted to cattle raising. After an ocular inspection, a joint report recommended the exclusion of the entire landholding. However, in October 1996, the vehicle carrying the case records fell off a cliff, and the documents were lost.

The DAR asked Hacienda Bitanagan to reconstruct its application. It submitted reconstructed documents in June 2004 but withdrew them in October 2004, allegedly for safekeeping. In January 2006, the DAR published a Notice of CARP Coverage over the landholdings. Hacienda Bitanagan then filed a petition to lift the notice. In 2007, the DAR Regional Director ordered the reconstitution of the earlier application, and Hacienda Bitanagan filed its reconstituted Application for Exclusion in December 2007.

In 2010, the DAR Regional Director approved the application, ruling that the land was mainly devoted to cattle, goat, and poultry raising. A certificate of finality was issued in 2011. The Bitanagan Farmers Agrarian Reform Beneficiaries Association appealed, and the DAR Secretary reversed the Regional Director's order, denying the application for exclusion. The DAR Secretary found that the landholdings were not exclusively devoted to cattle raising, as copra selling was also part of the business operations. The Office of the President affirmed.

The Court of Appeals, however, partially granted Hacienda Bitanagan's petition, declaring the Regional Director's order valid as to one lot. On reconsideration, the appellate court exempted all the landholdings from CARP coverage. The farmers' association appealed to the Supreme Court.

The Issue

The central issues were: (1) whether the Court of Appeals erred in applying the effects of DAR Administrative Order No. 9, Series of 1993 — which had been declared unconstitutional — to the hacienda's reconstituted application; and (2) whether the landholdings were exempt from agrarian reform coverage.

The Ruling

The Supreme Court granted the farmers' association's petition and reversed the Court of Appeals.

First, the Court held that the operative fact doctrine did not apply. This doctrine allows the effects of an unconstitutional law to remain undisturbed when parties relied on it in good faith before its nullification. However, the Court found that Hacienda Bitanagan was not in good faith. It took advantage of the loss of its application folder, withdrew its reconstructed documents at a suspicious time, and strategically delayed the resolution of its application. As the Court explained, the operative fact doctrine "cannot be invoked to give unwarranted advantage to a landowner engaged in cattle farming who is not in good faith."

Second, since the reconstituted application was filed in 2007, it should be governed by DAR Administrative Order No. 1, Series of 2004, not the void Administrative Order No. 9, Series of 1993. Under the 2004 issuance, applications involving lands larger than five hectares must be filed with the DAR Central Office, and the DAR Secretary is the approving authority. Because the hacienda's landholdings exceeded this threshold, the Regional Director had no jurisdiction. His order was therefore void.

Third, even assuming the application could be considered, there was no showing that the landholdings qualified for exclusion under Administrative Order No. 1, Series of 2004. The Court reiterated that for a landholding to be excluded from CARP coverage because it is devoted to livestock raising, there must be a showing that the land is actually, directly, and exclusively used for that purpose as of June 15, 1988.

The Legal Framework

The 1987 Constitution mandates the State to undertake agrarian reform for the benefit of farmers and regular farmworkers. Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988, was enacted to promote social justice and rural development.

In Luz Farms v. Secretary of Department of Agrarian Reform (G.R. No. 86889, December 4, 1990), the Court held that livestock and poultry raising are industrial activities, not agricultural activities, and are therefore outside the coverage of agrarian reform. Congress later enacted Republic Act No. 7881, which removed "livestock, poultry, and swine raising" from the definition of agricultural activity.

In Department of Agrarian Reform v. Sutton (2005), the Court declared DAR Administrative Order No. 9, Series of 1993 unconstitutional in its entirety. The Court clarified that Sutton did not establish a new doctrine; it merely affirmed Luz Farms. Thus, the principle of prospectivity of judicial decisions did not apply.

Practical Takeaways

• For a landholding to be excluded from CARP coverage because it is devoted to livestock raising, the landowner must prove that the land is actually, directly, and exclusively used for that purpose as of June 15, 1988.
• The presence of other agricultural activities, such as copra selling or coconut harvesting, may defeat a claim for exclusion unless those activities are merely incidental to the livestock business.
• Applications for exclusion involving lands larger than five hectares must be filed with the DAR Central Office; the DAR Secretary, not the Regional Director, has jurisdiction over such applications.
• The operative fact doctrine protects only those who act in good faith. A landowner who delays proceedings or manipulates the rules cannot invoke it to escape agrarian reform coverage.
• Landowners should be aware that DAR Administrative Order No. 1, Series of 2004 governs applications filed after the nullification of Administrative Order No. 9, Series of 1993.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.