A.Z. Arnaiz Realty, Inc. vs. Office of the President

Lands are excluded from the coverage of the Comprehensive Agrarian Reform Program on the ground that they are devoted to commercial livestock, poultry, or swine-raising only when the landowner proves by substantial evidence that the land is actually, directly, and exclusively used for such purpose at the time of the petition for exclusion. The constitutional exemption recognized in Luz Farms v. Secretary of Agrarian Reform and Department of Agrarian Reform v. Sutton does not attach upon a mere uncorroborated claim of past cattle-ranching; it requires a present, existing commercial livestock operation. Factual findings of the Department of Agrarian Reform and the Office of the President, affirmed by the Court of Appeals and supported by substantial evidence, are conclusive and entitled to great respect on review.

A.Z. Arnaiz Realty, Inc. owned three parcels of land in Barangay Asid, Sinalugan, Masbate, Masbate, covered by Transfer Certificate of Title Nos. T‑3543, T‑6929, and T‑3542, with an aggregate area of 843.3990 hectares. Petitioner claimed the lands had been devoted to cattle-ranching since time immemorial, were not tenanted, and had slopes exceeding 18%. In 1981, petitioner leased two of the parcels to Monterey Farms Corporation for a ten‑year period ending July 15, 1991. During the lease, petitioner sold its entire herd of cattle to Monterey Farms for ₱900,000.00. Before the lease expired, Monterey Farms offered to renew with a 10% rental increase, but petitioner refused and demanded that Monterey vacate. Petitioner subsequently sought exclusion of the properties from CARP coverage, contending they remained cattle‑ranch land and were therefore exempt.

• The Petition for Exclusion: Petitioner sought exclusion of three parcels from CARP coverage on grounds that the lands had always been devoted to cattle-ranching, were not tenanted, and had slopes of more than 18%.
• Lease and Sale of Cattle: In 1981, petitioner leased two of the parcels to Monterey Farms Corporation for ten years. During the lease, petitioner sold its entire cattle herd to Monterey Farms for ₱900,000.00. Monterey Farms offered to renew the lease with a 10% rental increase before expiration, but petitioner refused.
• Administrative Findings of Non‑Livestock Use: The DAR Regional Director found that the properties were not directly, actually, and exclusively used for pasture. There was no clear proof that petitioner intended to maintain the whole area for cattle ranching. Petitioner’s cattle ownership certificates were issued only in 1995 and 1996—after the petition for exclusion was filed—showing 78 one‑year‑old and 50 three‑year‑old heads, with some certificates in the names of other persons.
• Agricultural Character and Slope: A Field Investigation Report by the Municipal Agrarian Reform Officer and Land Bank of the Philippines indicated that Lot 3 of TCT No. T‑3543 was predominantly cultivated, below 18% slope, with only 44.2470 hectares above 18% slope. The area was planted with corn, coconut, and other crops. Nearly 150 farmers had occupied, cultivated, and planted upland crops on the property since May 1992.
• Claimed NPA Presence: Petitioner attributed the cessation of ranching to the peace and order situation caused by NPA rebels. The DAR found that this situation did not prevent Monterey Farms from offering to renew the lease and increase rentals, negating force majeure.
• Transfer of Ownership: The parcel previously covered by TCT No. T‑3542 had been transferred to Nuestra Señora del Carmen Marble, Inc., under a new title (T‑6930). Petitioner lacked authority to seek exclusion for that parcel.
• Consistent Denial at All Levels: The DAR Secretary, the Office of the President, and the Court of Appeals uniformly sustained the denial, holding that petitioner failed to establish that the lands were devoted to commercial livestock raising.

• Due Process: Petitioner argued that it was denied due process because the DAR Regional Director denied the petition for exclusion without a hearing, and its request for an ocular inspection—where it could have pointed out the properties’ topography and boundaries—was denied.
• Application of Luz Farms and Sutton: Petitioner maintained that under Luz Farms v. Secretary of Agrarian Reform and Department of Agrarian Reform v. Sutton, lands devoted to commercial livestock raising are constitutionally exempt from CARP, and its properties fell squarely within that exemption.
• Slope and Non-Tenancy: Petitioner contended that the subject lands have slopes of 18% or more, which, under R.A. No. 6657, are excluded from coverage. It further asserted that any occupants were armed NPA members, slash‑and‑burn farmers (kaingeros), or trespassers who had no intention of permanently tilling the land.

• Due Process Satisfied: Respondents countered that due process in administrative proceedings does not require a trial‑type hearing; petitioner was heard through pleadings, documentary evidence, and motions for reconsideration at every stage of the proceedings.
• No Proof of Livestock Use: Respondents argued that the factual findings, supported by substantial evidence, showed the lands were not directly, actually, and exclusively used for commercial livestock raising, and therefore the Luz Farms and Sutton doctrines did not apply.
• Agricultural Character and Slope: Respondents maintained that field investigation revealed only a small portion exceeded 18% slope and that the bulk of the area was cultivated agricultural land occupied by farmers, negating the claimed exemptions.

• Due Process: Whether petitioner was denied due process when the DAR Regional Director resolved the petition for exclusion without a formal hearing and when the request for ocular inspection was denied.
• Exemption under Luz Farms and Sutton: Whether the subject lands are exempt from CARP coverage under the constitutional exemption for lands exclusively devoted to commercial livestock, poultry, and swine-raising, as recognized in Luz Farms v. Secretary of Agrarian Reform and Department of Agrarian Reform v. Sutton.
• Slope Exclusion: Whether the lands should be excluded from CARP coverage on the ground that they have slopes of 18% or more and are unsuitable for agriculture.

• Due Process: Due process in administrative proceedings does not invariably require a trial‑type hearing. The essence of due process is an opportunity to be heard, which may be satisfied through pleadings, position papers, written explanations, and motions for reconsideration. Petitioner actively participated by filing the petition, submitting documentary evidence, and seeking reconsideration at every administrative and judicial tier. Any perceived defect was cured by the motions for reconsideration, which petitioner repeatedly availed of.
• Exemption under Luz Farms and Sutton: The constitutional exemption for lands devoted to commercial livestock, poultry, and swine-raising, as pronounced in Luz Farms and Sutton, applies only upon proof that the land is actually, directly, and exclusively used for such purpose. The consistent factual findings of the DAR, the Office of the President, and the Court of Appeals, which are entitled to great respect and finality, established that petitioner sold its cattle herd, failed to present evidence of an existing commercial livestock operation at the time of the exclusion petition, and that the lands were predominantly agricultural and cultivated. Petitioner’s newly acquired cattle in 1995‑1996 did not retroactively convert the properties into livestock land at the time of filing in 1994.
• Slope Exclusion: The field investigation report showed that only 44.2470 hectares out of the entire property had slopes above 18%, while the remainder was predominantly cultivated below that threshold and planted with corn, coconut, and other crops. The factual finding that the lands were not predominantly above 18% slope, and were in fact agricultural, negated the claimed slope exclusion, which applies only to areas that are truly unsuitable for agriculture.

• Due Process in Administrative Proceedings — The standard of due process in administrative tribunals is satisfied when parties are given the opportunity to explain their side through pleadings, position papers, or memoranda, and to seek reconsideration of an adverse ruling. A formal trial‑type hearing is not mandatory, and denial of due process cannot be successfully invoked by a party who has had the chance to be heard on a motion for reconsideration.
• Constitutional Exclusion of Livestock, Poultry, and Swine-Raising Lands — Pursuant to the deliberations of the 1987 Constitutional Commission, all lands exclusively devoted to livestock, swine, and poultry-raising are outside the ambit of agrarian reform. The invalidation of statutory provisions and administrative regulations that sought to include such activities in CARP coverage (Luz Farms and Sutton) is anchored on the factual predicate that the land is actually, directly, and exclusively used for commercial livestock or poultry operations. The burden of establishing this predicate rests on the landowner seeking exclusion, and failure to discharge that burden results in coverage.
• Finality of Administrative Factual Findings — Factual determinations of administrative agencies, especially when affirmed by the Court of Appeals and supported by substantial evidence on record, are accorded great respect and finality. These findings may be overturned only when not borne out by the records or when based on mere speculation.

• “Due process, as a constitutional precept, does not always, and in all situations, require a trial-type proceeding. Litigants may be heard through pleadings, written explanations, position papers, memoranda or oral arguments.”
• “The essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one’s side or an opportunity to seek for a reconsideration of the action or ruling complained of. … Denial of due process cannot be successfully invoked by a party who has had the opportunity to be heard on his motion for reconsideration.”
• “The Courts generally accord great respect, if not finality, to factual findings of administrative agencies, because of their special knowledge and expertise over matters falling under their jurisdiction.”

• Luz Farms v. Secretary of the Department of Agrarian Reform, G.R. No. 86889, December 4, 1990, 192 SCRA 51 — Invalidated the inclusion of private agricultural lands devoted to commercial livestock, poultry, and swine-raising in CARP coverage. Distinguished: petitioner failed to show that the subject lands were actually, directly, and exclusively used for livestock raising.
• Department of Agrarian Reform v. Sutton, G.R. No. 162070, October 19, 2005, 473 SCRA 392 — Struck down administrative orders imposing retention limits on livestock farms as contrary to the constitutional exemption. Distinguished on the same factual ground: the lands were not proven to be exclusively devoted to livestock.
• Padunan v. Department of Agrarian Reform Adjudication Board, G.R. No. 132163, January 28, 2003, 396 SCRA 196 — Applied for the principle that Court of Appeals factual findings coinciding with those of the DAR are final and conclusive.
• Samalio v. Court of Appeals, G.R. No. 140079, March 31, 2005, 454 SCRA 463 — Cited for the rule that denial of due process cannot be invoked by a party who had the opportunity to be heard on a motion for reconsideration.

• Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988), Sections 3(b), 11, 13, and 32 — These provisions, which included private agricultural lands devoted to commercial livestock, poultry, and swine-raising in the definition of “commercial farms,” were declared unconstitutional in Luz Farms. The exemption from CARP coverage therefore applies only when the land is actually, directly, and exclusively used for such exempt agro-industrial activities.
• 1987 Constitution, Article XIII (Agrarian Reform) — The intent of the Constitutional Commission to exclude lands exclusively devoted to livestock, swine, and poultry-raising from agrarian reform was recognized in Sutton. The Court relied on the administrative and appellate findings that the subject lands did not meet the factual predicate for the constitutional exemption.

Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Arturo D. Brion (designated additional member in lieu of Associate Justice Antonio Eduardo B. Nachura), Associate Justice Roberto A. Abad, Associate Justice Jose Catral Mendoza.