The Supreme Court ruled that the operative fact doctrine cannot favor landowners who aren’t acting in good faith when seeking to exclude their land from agrarian reform. The ruling emphasizes that before exclusion can be granted, landowners must prove the land is truly, directly, and exclusively used for livestock raising. This means any hint of agricultural activity, like copra production, could disqualify a landholding from exclusion. This decision reinforces the State’s commitment to agrarian reform, ensuring that land meant for landless farmers isn’t fraudulently converted for other uses.

From Cattle to Copra: When is a Hacienda Exempt from Agrarian Reform?

Hacienda Bitanagan sought to exclude its landholdings from the Comprehensive Agrarian Reform Program (CARP), claiming it was dedicated to cattle raising. The Department of Agrarian Reform (DAR) initially denied the application, pointing to evidence of copra sales and other agricultural activities on the property. The Court of Appeals, however, partially granted the exclusion, triggering a legal battle that ultimately reached the Supreme Court. The central question was whether the hacienda’s land use was exclusively for cattle raising, as required for exemption from agrarian reform.

The Supreme Court emphasized the Constitution’s mandate for agrarian reform, aimed at empowering landless farmers. Congress enacted Republic Act No. 6657, or the Comprehensive Agrarian Reform Law of 1988, to achieve social justice and rural development. Initially, the law included livestock farming within the definition of agricultural activity, but this inclusion was later declared unconstitutional in Luz Farms v. Secretary of Department of Agrarian Reform. This case established that livestock and poultry industries were not intended to be part of the agrarian reform program.

To prevent landowners from exploiting this exclusion by fraudulently converting agricultural lands to livestock raising, the DAR issued Administrative Order No. 9, Series of 1993. However, this administrative order was later declared unconstitutional in Department of Agrarian Reform v. Sutton, as it attempted to regulate livestock farms, a power the DAR did not possess. The legal landscape surrounding agrarian reform and livestock farming has been complex and contentious, requiring careful interpretation and application of relevant laws and regulations.

The Court of Appeals had applied the principle of prospectivity of judicial decisions, arguing that Hacienda Bitanagan relied on previous regulations in good faith. However, the Supreme Court disagreed, clarifying that Department of Agrarian Reform v. Sutton did not establish a new doctrine but merely affirmed the existing principle that livestock and poultry industries fall outside agrarian reform. Without a change in legal interpretation, the principle of prospectivity did not apply.

Building on this, the Supreme Court considered the operative fact doctrine, which allows for the validation of actions taken under a law later declared unconstitutional. For this doctrine to apply, the party invoking it must have acted in good faith. The Court found that Hacienda Bitanagan was at fault for delays in resolving its application for exclusion, as it withdrew its documents after being informed of the loss of its application. This cast doubt on their good faith and prevented the application of the operative fact doctrine.

According to the Court, an unconstitutional law is generally a nullity. However, the Court also recognized the operative fact doctrine, which provides an exception where the effects of a law or administrative issuance prior to the judicial declaration of its nullity may be left undisturbed. The rationale is that parties may have acted under it and changed their positions. In applying the doctrine, courts must closely examine the effects of the acts already done based on the unconstitutional law or administrative issuance and determine, on the basis of equity and fairness, if these effects should be allowed to stand.

Because the operative fact doctrine did not apply, the Supreme Court turned to Administrative Order No. 1, Series of 2004, which was in effect when Hacienda Bitanagan refiled its application. This administrative order stipulates that applications involving land areas larger than five hectares should be filed with the DAR Central Office, not the Regional Director. Because Hacienda Bitanagan’s landholdings exceeded this limit, the Regional Director’s approval of their exclusion application was deemed void for lack of jurisdiction.

Even if the application had been properly filed, the Supreme Court found that Hacienda Bitanagan failed to demonstrate that its land was exclusively used for cattle raising. Administrative Order No. 1, Series of 2004, requires proof of actual, exclusive, and direct use for cattle production prior to June 15, 1988, and continuous use for that purpose. The DAR Secretary’s findings revealed that Hacienda Bitanagan derived income from copra sales, indicating that its land was not exclusively dedicated to cattle raising.

The Supreme Court emphasized the importance of the phrase “actually, directly, and exclusively used” when determining whether a landholding is exempt from agrarian reform. In Department of Agrarian Reform v. Department of Education, Culture and Sports (DECS), the Court held that the use of the land itself, not its income, is the basis for exemption. Similarly, in Hospicio de San Jose de Barili, Cebu City v. Department of Agrarian Reform, the Court recognized the need for strict application of exceptions to agrarian reform to ensure its goals are achieved.

The Court rejected the Court of Appeals’ interpretation of Republic v. Salvador N. Lopez Agri-business Corporation, clarifying that the DAR need not prove that the applicant is engaged in agricultural business to deny exclusion. Instead, the burden lies with the applicant to demonstrate the actual, exclusive, direct, and continuous use of the land for cattle raising. Here, the presence of copra harvesting and income from copra sales indicated that Hacienda Bitanagan’s land was not exclusively used for cattle raising.

The Supreme Court sided with tenants who said only 60 to 70 cattle heads were present on the property. Additional cattle heads were also brought from a different Hacienda into the landholding whenever the DAR conducted its investigations or visited. The CLUPPI team also found that Lot No. 3-A-4 was predominantly planted with coconut trees and there is a copra dryer in the area. Based on these findings, the Supreme Court reversed the Court of Appeals’ decision and reinstated the DAR Secretary’s order denying Hacienda Bitanagan’s application for exclusion.

The Supreme Court’s decision underscores the importance of upholding the objectives of agrarian reform and preventing fraudulent attempts to circumvent the law. The ruling serves as a reminder that exclusion from agrarian reform requires strict compliance with the requirements of actual, exclusive, and direct use of the land for the stated purpose, ensuring that the rights of landless farmers are protected.

FAQs

What was the key issue in this case?	The central issue was whether Hacienda Bitanagan’s landholdings were exclusively used for cattle raising, thus exempting them from agrarian reform coverage under Republic Act No. 6657. The Court assessed whether the presence of other agricultural activities, like copra production, disqualified the land from exclusion.
What is the operative fact doctrine, and how does it relate to this case?	The operative fact doctrine allows for the validation of actions taken under a law later declared unconstitutional, provided the party invoking it acted in good faith. In this case, the Court found that Hacienda Bitanagan did not act in good faith, thus the doctrine did not apply.
What administrative order governed the application for exclusion?	The applicable administrative order was Administrative Order No. 1, Series of 2004, as the reconstituted application was filed during its effectivity. This issuance governs applications for exclusion from CARP coverage of private agricultural lands actually, exclusively, and directly used for cattle raising.
Why was the Regional Director’s approval of the exclusion application deemed void?	The Regional Director’s approval was deemed void because the landholdings involved exceeded five hectares, placing jurisdiction over the application with the DAR Central Office. Administrative Order No. 1, Series of 2004 specifies that the DAR Secretary is the approving authority for applications involving larger land areas.
What evidence did the DAR Secretary use to deny the exclusion application?	The DAR Secretary relied on Hacienda Bitanagan’s Articles of Incorporation, financial statements, and testimonies from residents and laborers. These revealed that the land was also used for copra production, indicating a lack of exclusive use for cattle raising.
What is the significance of the phrase “actually, directly, and exclusively used” in this context?	This phrase emphasizes that the land must be solely and genuinely used for the stated purpose (cattle raising) to qualify for exclusion. Any other agricultural activity, regardless of its scale, can disqualify the land from exemption, ensuring the integrity of agrarian reform.
What did the Court find regarding the presence of copra harvesting on the land?	The Court found that the presence of copra harvesting, along with income derived from copra sales, demonstrated that Hacienda Bitanagan’s land was not exclusively used for cattle raising. This directly contradicted the requirement for exclusion under Administrative Order No. 1, Series of 2004.
How did the Supreme Court view the intent behind the agrarian reform laws?	The Supreme Court emphasized that agrarian reform is a radical exercise of the State’s police power, designed to empower landless farmers. Strict application of the requirements for exclusion is necessary to prevent fraudulent attempts to circumvent the law and protect the rights of beneficiaries.

This ruling clarifies the stringent requirements for excluding land from agrarian reform based on livestock raising activities. It serves as a crucial reminder that landowners must demonstrate genuine and exclusive use of their land for livestock to qualify for exclusion, protecting the rights of landless farmers and upholding the goals of agrarian reform.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Bitanagan Farmers Agrarian Reform Beneficiaries Association, Etc., vs. Hacienda Bitanagan, Etc., G.R. No. 243310, August 15, 2022