November 28, 1994
DAR OPINION NO. 91-94
MR. MANUEL Q. LIM, JR.
President
Hijo Plantation, Inc.
P.O. Box 80440
Davao City
Dear Mr. Lim:
This is in answer to your letter dated 21 November 1994 seeking the opinion of this Office relative to the following queries, to wit:
1. Eligibility of Beneficiaries
a. Are the rank-and-file workers of support departments included, e.g. accounting, purchasing, personnel, maintenance, and the like?
b. Are supervisory people also qualified? To what level?
c. What is the cut-off period for identifying eligibles?
d. Will they be identified individually, or should they be organized as well?
e. If they are organized, should there be only one organization?
f. What if there are eligibles who opt out?
g. Is being a beneficiary also a commitment to directly . . . (not legible) coming from support departments? What if because of higher labor productivity, or reduced land area, the working force is reduced? In any of the above cases do the beneficiaries who find themselves not tilling the land directly, or otherwise employed in the enterprise, lose their eligibility?
2. Organization
a. Will unpartitioned CLOAs be titled to beneficiary organizations or directly to the beneficiaries pro indiviso? If there is flexibility here, what is DAR's preference?
b. What is the preferred kind of organization? Would a simple association be acceptable?
c. In a situation where the land is titled directly in the names of the beneficiaries and a stock cooperative is organized by the beneficiaries/co-owners to manage the land, may the beneficiaries opt not to become members of the cooperative?
d. Where a beneficiary/co-owner opts out and the limit of 3 hectares per beneficiary is not consequently exceeded, do the other co-owners have the flexibility to accept a replacement or not? May they also decide on the manner of compensating the outgoing and charging the incoming co-owners?
3. Operation
a. Assuming a cooperative, may it farm out the operation to smaller groups of workers in order to accentuate the sense of proprietorship of the workers over the land they are directly tilling, and thus foster higher productivity for both land and tiller?
b. If so, would these smaller groups have to pay VAT and income tax? Or could they be considered by BIR simply as subdivisions of the cooperative whose incomes are indistinguishable from the cooperative's own income?
c. If BIR insists on taxability of the smaller groups, would it be feasible/advisable to organize them under the Kalakalan 20 law?
d. If Kalakalan 20 is not feasible/advisable, how about organizing them into primary cooperatives and converting the main cooperative into a federation?
4. Others
a. One of the hurdles to turning over the land to the beneficiaries is the payment of retirement and separation benefits to the employees. Would DAR support a request for LBP credit for such a purpose against receivables from LBP for acquisition of land and improvements? LBP may turn around and encourage the retirees-beneficiaries to turn in these payments, or portions of them, against their own payables to the bank for land purchase, thus reducing actual cash flow.
b. What is the procedure in valuing banana lands and improvements? Where will this take place?
1. a) Our answer to your first query must be qualified. If, the actual tillers on the farmholding involved have fixed farmlots, it is submitted that the rank-and-file employees will qualify as CARP beneficiaries only with respect to that portion of the landholding, if any, that will be left after the same has been apportioned in favor of the persons mentioned in Section 22 of RA 6657. Otherwise stated, the persons mentioned in Section 22 of CARL, including those falling under paragraph (g) thereof — others directly working on the land — enjoy priority over those not working thereon, such as the employees belonging to management. This interpretation is consistent with the intent of CARL to distribute to farmers and regular farmworkers the lands they till.
However, if the tillers have no fixed farmlots, the expanded concept of tiller shall apply and the entire landholding shall be treated as a collective tillage, in which case, the awardees shall include not only those engaged in actual cultivation of the land but also those involved in processing, administrative, operations, medical and technical work (technical farmworkers). This is based on the principle that all individuals on contribute to making the land productive are considered tillers.
b. Supervisory personnel are not qualified to be CARP awardees. However, identified worker-beneficiaries who are subsequently promoted to managerial or supervisory positions remain to be qualified awardees without giving up their positions.
c. To be qualified beneficiaries, they must have been in the landholding on or before 15 June 1988.
d. For identification purposes, there is no need for the farmers to be members of an organization.
e. Collective ownership may either be by option of the beneficiaries pursuant to Section 25 of CARL, or because DAR has determined that it is not economically feasible and sound to divide the land among the beneficiaries, as provided under Section 29 of the same Act. If by option of the beneficiaries, they themselves may determine if more than one organization is necessary/subject to DAR evaluation. In the other instance, it is the DAR that determines whether or not one organization would be sufficient.
f. Eligibles who opt out lose their right to be beneficiaries on the land because a basic qualification of a beneficiary under CARL is his willingness, aptitude, and ability to cultivate and make the land as productive as possible. This, of course, is without prejudice to his rights to payment of compensation pursuant to the Labor Code, if any.
g. Loss of employment does not automatically mean lass of status as an agrarian reform beneficiary nor loss of membership in the cooperative. Neither is retrenchment a ground for the delisting of beneficiaries.
2. a) Section 25 of CARL provides that title to the property owned collectively by the beneficiaries shall be issued in the name of the co-owner or the cooperative or collective organization, as the case may be.
b) DAR has no preference in the kind of organization to be established. As provided in Section 25 of CARL, it may either be a co-ownership, a cooperative, or some other form of farmers' collective organization. A simple association is acceptable.
c) If beneficiaries have already been awarded individual titles to their farmlots, they may opt not to become members of a cooperative established by other beneficiaries within the landholding.
d) The matter of replacement of beneficiaries who opt out shall be subject to DAR approval, as it is DAR that screens the qualified beneficiaries. The DAR is in the process of drafting the guidelines for this as well as the matter of compensation of the outgoing and charging of incoming beneficiaries.
3. It is the obligation of the beneficiaries themselves to make the land as productive as possible, hence farming out the operations to other workers would contravene this basic obligation.
4. a) DAR cannot support the request for an LBP credit to cover the retirement/separation benefits of employee-CARP beneficiaries because said benefits are due the employees under a separate law which requires a specific mode of payment.
b) DAR Administrative Order No. 6, Series of 1992 (as amended by DAR A.O. 11, Series of 1994) provides the basic formula for the valuation of lands covered by Voluntary Offer to Sell or Compulsory Acquisition pursuant to CARL. Under Executive Order No. 405, the Land Bank of the Philippines has the primary responsibility of determining the land valuation and compensation for all lands covered under R. A. 6657.
We hope to have clarified matters for you.
Very truly yours,
(SGD.) HECTOR D. SOLIMAN
Assistant Secretary
Legal Affairs Office