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Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R. No. 171101, July 5, 2011 DECISION VELASCO, JR., J.: THE FACTS In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas (Tabacalera) sold Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of the hacienda, to the Tarlac Development Corporation (Tadeco), then owned and controlled by the Jose Cojuangco Sr. Group. The Central Bank of the Philippines assisted Tadeco in obtaining a dollar loan from a US bank. Also, the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the peso price component of the sale, with the condition that the lots comprising the Hacienda Luisita be subdivided by the applicant-corporation and sold at cost to the tenants, should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act. Tadeco however did not comply with this condition. On May 7, 1980, the martial law administration filed a suit before the Manila RTC against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR) so that the land can be distributed to farmers at cost. Responding, Tadeco alleged that Hacienda Luisita does not have tenants, besides which sugar lands of which the hacienda consisted are not covered by existing agrarian reform legislations(PD 27-rice and corn). The Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the CA. On March 17, 1988, during the administration of President Corazon Cojuangco Aquino, the Office of the Solicitor General moved to withdraw the governments case against Tadeco, et al. The CA dismissed the case, subject to the PARCs approval of Tadecos proposed stock distribution plan (SDP) in favor of its farmworkers. [Under EO 229 (Sec10) and later RA 6657(Sec31), Tadeco had the option of availing stock distribution as an alternative modality to actual land transfer to the farmworkers.] On August 23, 1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock. On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally entered into by Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of HLIs SDP, which was eventually approved by the PARC after a follow-up referendum conducted by the DAR on October 14, 1989, in which 5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI. As may be gleaned from the SDOA, included as part of the distribution plan are: (a) productionsharing equivalent to three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to family-beneficiaries. The productionsharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the nature of dividends, as the term is ordinarily understood under corporation law. (5,117 out of 5315 = shares; 132 = land distribution) Prior to approval, DAR Secretary Miriam Defensor-Santiago proposed that the SDP be revised, along the following lines: 1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in the shares of stocks of individual [FWBs]; 2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time November 21, 1989 - the PARC, under then Sec. Defensor-Santiago, issued Resolution No. 8912-2, approving the SDP of Tadeco/HLI. From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs: (a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits (b) 59 million shares of stock distributed for free to the FWBs; (c) 150 million pesos (P150,000,000) representing 3% of the gross produce; (d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural land of Hacienda Luisita; (e) 240-square meter homelots distributed for free; (f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos (P80,000,000) for the SCTEX; (g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old age/death benefits and no interest bearing salary/educational loans and rice sugar accounts. Two separate groups subsequently contested this claim of HLI. (the petitions/protets) CONVERSION PROPER On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the application on August 14, 1996, subject to payment of three percent (3%) of the gross selling price to the FWBs and to HLIs continued compliance with its undertakings under the SDP, among other conditions. On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the latter. Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial Park Corporation (LIPCO), which used it in developing an industrial complex. From this area was carved out 2 parcels(180 has and 4 has), for which 2 separate titles were issued in the name of LIPCO. Later, LIPCO transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in payment of LIPCOs PhP431,695,732.10 loan obligations to RCBC(dacion en pago). LIPCOs titles were cancelled and new ones were issued to RCBC. The other 200 has was transferred to Luisita Realty Corporation (LRC) in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each. Apart from the 500 hectares, another 80.51 hectares were later detached from Hacienda Luisita and acquired by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI. Such, was the state of things when two separate petitions reached the DAR in the latter part of 2003. The first was filed by the Supervisory Group of HLI (Supervisory Group), praying for a renegotiation of the SDOA, or, in the alternative, its revocation. The second petition, praying for the revocation and nullification of the SDOA and the distribution of the lands in the hacienda, was filed by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA). The DAR then constituted a Special Task Force (STF) to attend to issues relating to the SDP of HLI. After

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investigation and evaluation, the STF found that HLI has not complied with its obligations under RA 6657 despite the implementation of the SDP, AND RECOMMENDED. On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that the subject lands be forthwith placed under the compulsory coverage or mandated land acquisition scheme of the CARP. From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI also filed a petition before the Supreme Court in light of what it considers as the DARs hasty placing of Hacienda Luisita under CARP even before PARC could rule or even read the motion for reconsideration. PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006. II. THE ISSUES (1) Does the PARC possess jurisdiction to recall or revoke HLIs SDP? (2) [Issue raised by intervenor FARM (group of farmworkers)] Is Sec. 31 of RA 6657, which allows stock transfer in lieu of outright land transfer, unconstitutional? (3) Is the revocation of the HLIs SDP valid? [Did PARC gravely abuse its discretion in revoking the subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution scheme?] (4) Should those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired by purchase be excluded from the coverage of the assailed PARC resolution? [Did the PARC gravely abuse its discretion when it included LIPCOs and RCBCs respective properties that once formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage?] III. THE RULING HLI: PARC has no authority to revoke the SDP; it has the power to disapprove, but not to recall its previous approval of the SDP. It is the court which has jurisdiction and authority to order the revocation or rescission of the PARC-approved SDP (1) YES, the PARC has jurisdiction to revoke HLIs SDP under the doctrine of necessary implication. Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to PARC. Contrary to petitioner HLIs posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC under the principle of necessary implication, a basic postulate that what is implied in a statute is as much a part of it as that which is expressed. Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan. To deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to impose sanctions for non-compliance with it. HLI: the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their rights, obligations and remedies. The Code should be the applicable law on the disposition of the agricultural land of HLI. SC: NO! the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP. It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity. (2) NO, Sec. 31 of RA 6657 is not unconstitutional. [The Court actually refused to pass upon the constitutional question because it was not raised at the earliest opportunity and because the resolution thereof is not the lis mota of the case. Moreover, the issue has been rendered moot and academic since SDO is no longer one of the modes of acquisition under RA 9700.] While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 31 of RA 6657 as early as November 21, 1989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter, and why its members received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional legal provision. The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. If some other grounds exist by which judgment can be made without touching the constitutionality of a law, such recourse is favored. The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously belonged) and the Supervisory Group, is the alleged noncompliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed.

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It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: [T]hat after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition. Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional should be a moot issue. qualified FWBs should be recorded in the stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme. the reason underpinning the 30-year accommodation does not apply to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time. Taking into account the above discussion, the revocation of the SDP by PARC should be upheld [because of violations of] DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied with. The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided.

(3) YES, the revocation of the HLIs SDP valid. [NO, the PARC did NOT gravely abuse its discretion in revoking the subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution scheme.] The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLIs stock distribution violate DAO 10 because the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of man days and the hiring of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is contrary to what Sec. 11 of DAO 10 prescribes. In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states: 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY. [I]t is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on man days or number of days worked by the FWB in a years time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of man days and the hiring of additional farmworkers. Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the

(4) YES, those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired by purchase should be excluded from the coverage of the assailed PARC resolution. [T]here are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys the property of another without notice that some other person has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another. It can rightfully be said that both LIPCO and RCBC are purchasers in good faith for value entitled to the benefits arising from such status. First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name of Centennary: the Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and residential use. The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million. To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP land acquisition after the lapse of five (5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes. Moreover, DAR notified all the

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affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian reform. The DAR conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP750 million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP431,695,732.10. In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed LIPCOs and RCBCs property which once formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage. [The Court went on to apply the operative fact doctrine to determine what should be done in the aftermath of its disposition of the above-enumerated issues: While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain operative facts that had occurred in the interim. Pertinently, the operative fact doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no longer without force and effect, undue harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights might have accrued in favor of natural or juridical persons and obligations justly incurred in the meantime. The actual existence of a statute or executive act is, prior to such a determination, an operative fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a new judicial declaration. While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005. On August 6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A matter best left to their own discretion.] The dissents in the July 5, 2011 decision The dissents of the minority justices were on the other fine points of the decision. Chief Justice Corona dissented insofar as the majority refused to declare Sec. 31 of RA 6657 unconstitutional. The provision grants to corporate landowners the option to give qualified FWBs the right to own capital stock of the corporation in lieu of actual land distribution. The Chief Justice was of the view that by allowing the distribution of capital stock, and not land, as compliance with agrarian reform, Sec. 31 of RA 6657 contravenes Sec. 4, Article XIII of the Constitution, which, he argued, requires that the law implementing the agrarian reform program should employ [actual] land redistribution mechanism. Under Sec. 31 of RA 6657, he noted, the corporate landowner remains to be the owner of the agricultural land. Qualified beneficiaries are given ownership only of shares of stock, not [of] the lands they till. He concluded that since an unconstitutional provision cannot be the basis of a constitutional act, the SDP of petitioner HLI based on Section 31 of RA 6657 is also unconstitutional. Justice Mendoza fully concurred with Chief Justice Coronas position that Sec. 31 of RA 6657 is unconstitutional. He however agreed with the majority that the FWBs be given the option to remain as shareholders of HLI. He also joined Justice Brions proposal that that the reckoning date for purposes of just compensation should be May 11, 1989, when the SDOA was executed by Tadeco, HLI and the FWBs. Finally, he averred that considering that more than 10 years have elapsed from May 11, 1989, the qualified FWBs, who can validly dispose of their due shares, may do so, in favor of LBP or other qualified beneficiaries. The 10-year period need not be counted from the issuance of the Emancipation Title (EP) or Certificate of Land Ownership Award CLOA) because, under the SDOA, shares, not land, were to be awarded and distributed. Justice Brions dissent centered on the consequences of the revocation of HLIs SDP/SDOA. He argued that that the operative fact doctrine only applies in considering the effects of a declaration of unconstitutionality of a statute or a rule issued by the Executive Department that is accorded the status of a statute. The SDOA/SDP is neither a statute nor an executive issuance but a contract between the FWBs and the landowners; hence, the operative fact doctrine is not applicable. A contract stands on a different plane than a statute or an executive issuance. When a contract is contrary to law, it is deemed void ab initio. It produces no legal effects whatsoever. Thus, Justice Brion questioned the option given by the majority to the FWBs to remain as stockholders in an almost-bankrupt corporation like HLI. He argued that the nullity of HLIs SDP/SDOA goes into its very existence, and the parties to it must generally revert to their respective situations prior to its execution. Restitution, he said, is therefore in order. With the SDP being void, the FWBs should return everything they are proven to have received pursuant to the terms of the SDOA/SDP. Justice Brion then proposed that all aspects of the implementation of the mandatory CARP coverage be determined by the DAR by starting with a clean slate from [May 11,] 1989, the point in time when the compulsory CARP coverage should start, and proceeding to adjust the relations of the parties with due regard to the events that intervened [thereafter]. He also held that the time of the taking (when the computation of just compensation shall be reckoned) shall be May 11, 1989, when the SDOA was executed by Tadeco, HLI and the FWBs. Justice Sereno dissented with respect to how the majority modified the questioned PARC Resolutions (i.e., no immediate land distribution, give first the original qualified FWBs the option to either remain as stockholders of HLI or choose actual land distribution) and the applicability of the operative fact doctrine. She would instead order the DAR to forthwith determine the area of Hacienda Luisita that must be covered by the compulsory coverage and monitor the land distribution to the qualified FWBs. Erroneous interpretation of the Courts decision The High Tribunal actually voted unanimously (11-0) to DISMISS/DENY the petition of HLI and to AFFIRM the PARC resolutions. This is contrary to media reports that the Court voted 6-4 to dismiss the HLI petition. The five (not four) minority justices (Chief Justice Corona, and Justices Brion, Villarama, Mendoza, and Sereno) only partially dissented from the decision of the majority

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of six (Justice Velasco Jr., Leonardo-De Castro, Bersamin, Del Castillo, Abad, and Perez). Justice Antonio Carpio took no part in the deliberations and in the voting, while Justice Diosdado Peralta was on official leave. The 14th and 15th seats in the Court were earlier vacated by the retirements of Justices Eduardo Antonio Nachura (June 13, 2011) and Conchita Carpio-Morales (June 19, 2011). Another misinterpretation came from no less than the Supreme Court administrator and spokesperson, Atty. Midas Marquez. In a press conference called after the promulgation of the Courts decision, Marquez initially used the term referendum in explaining the High Courts ruling. This created confusion among the parties and the interested public since a referendum implies that the FWBs will have to vote on a common mode by which to pursue their claims over Hacienda Luisita. The decision was thus met with cries of condemnation by the misinformed farmers and the various peoples organizations and militant groups supportive of their cause. Marquez would later correct himself in a subsequent press briefing. But since by then the parties had already filed their respective motions for reconsideration, he called upon everyone to just wait for the final resolution of the motion[s], which is forthcoming anyway. The resolution of the consolidated motions for reconsideration came relatively early on November 22, 2011, or less than five months from the promulgation of the decision.

ISSUES: (1) applicability of the operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory acquisition; (4) just compensation; (5) sale to third parties; (6) the violations of HLI; and (7) control over agricultural lands (revocation of SDP)

OPERATIVE FACT DOCTRINE (not much related) Bearing in mind that PARC Resolution No. 89-12-2 an executive actwas declared invalid in the instant case, the operative fact doctrine is clearly applicable. it should be recognized that SC, in its July 5, 2011 Decision, affirmed the revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP and DAO 10. By applying the doctrine, this Court merely gave the qualified FWBs the option to remain as stockholders of HLI and ruled that they will retain the homelots and other benefits which they received from HLI by virtue of the SDP. The application of the doctrine is favorable to the FWBs because not only were the FWBs allowed to retain the benefits and homelots they received under the stock distribution scheme, they were also given the option to choose for themselves whether they want to remain as stockholders of HLI or not. CONSTITUTIONALITY (Upheld previous ruling) FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest possible opportunity is clearly wanting. The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case.

G.R. No. 171101

November 22, 2011

(1) Motion for Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); - it is not proper to distribute the proceeds of the conversion sale to the FWBs the proceeds of the sale belong to the corporation for having sold its asset, and the distribution would be considered dissolution of HLI - the actual taking is NOT November 21, 1989, but should be reckoned from finality of the Decision of this Court, or at the very least, the reckoning period may be tacked to January 2, 2006, the date when the Notice of Coverage was issued by the DAR (2) Motion for Partial Reconsideration dated July 20, 2011 filed by PARC and DAR - Doctrine of Operative fact does not apply because no law was declared void. (3) Motion for Reconsideration dated July 19, 2011 filed by AMBALA - RA 6657 is unconstitutional - "operative fact doctrine" does not apply. the option given to the farmers to remain as stockholders of HLI is equivalent to an option for HLI to retain land in direct violation of the CARL, the SDP having been revoked. It should not apply if it would result to inequity - CA erred in holding that improving the economic status of FWBs is not among the legal obligations of HLI under the SDP and an imperative imposition by RA 6657 and DAO 10 - CA erred in holding that LIPCO and RCBC were purchasers for value (4) Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers Agrarian Reform Movement, Inc. (FARM); - same with AMBALA - issue of constitutionality is the lis mota of the case which must be decided upon (5) Motion for Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively referred to as "Mallari, et al."); and (6) Motion for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and

COVERAGE OF COMPULSORY ACQUISITION FARM argues that this Court ignored certain material facts when it limited the maximum area to be covered to 4,915.75 hectares, whereas the area that should, at the least, be covered is 6,443 hectares, which is the agricultural land allegedly covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco). We cannot subscribe to this view. Since what is put in issue before the Court is the propriety of the revocation of the SDP, which only involves 4,915.75 has. of agricultural land and not 6,443 has., then We are constrained to rule only as regards the 4,915.75 has. of agricultural land. DAR, however, contends that the declaration of the area to be awarded to each FWB is too restrictive. It stresses that in agricultural landholdings like Hacienda Luisita, there are roads, irrigation canals, and other portions of the land that are considered commonly-owned by farmworkers, and this may necessarily result in the decrease of the area size that may be awarded

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per FWB. DAR also argues that the July 5, 2011 Decision does not give it any leeway in adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs decreases. The argument is meritorious. In order to ensure the proper distribution of the agricultural lands of Hacienda Luisita per qualified FWB, and considering that matters involving strictly the administrative implementation and enforcement of agrarian reform laws are within the jurisdiction of the DAR, it is the latter which shall determine the area with which each qualified FWB will be awarded. 500 HECTARES RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. PROCEEDS OF SALE Considering that the 500-hectare converted land, as well as the 80.51-hectare SCTEX lot, should have been included in the compulsory coverage were it not for their conversion and valid transfers, then it is only but proper that the price received for the sale of these lots should be given to the qualified FWBs. In effect, the proceeds from the sale shall take the place of the lots. JUST COMPENSATION - TAKING In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs." We also ruled that the date of the "taking" is November 21, 1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2. Mallari, et al. argued that the valuation of the land cannot be based on November 21, 1989. Instead, they aver that the date of "taking" for valuation purposes is a factual issue best left to the determination of the trial courts. AMBALA alleged that HLI should no longer be paid just compensation for the agricultural land that will be distributed to the FWBs, since the RTC already rendered a decision ordering "the Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian Reform, which will distribute the land to small farmers after compensating the landowners P3.988 million." In the event, however, that this Court will rule that HLI is indeed entitled to compensation, AMBALA contended that it should be pegged at forty thousand pesos (PhP 40,000) per hectare, since this was the same value that Tadeco declared in 1989 to make sure that the farmers will not own the majority of its stocks. SC: the date of "taking" is November 21, 1989, the date when PARC approved HLIs SDP in view of the fact that this is the time that the FWBs were considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands became subject of the agrarian reform coverage through the stock distribution scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such approval is akin to a notice of coverage ordinarily issued under compulsory acquisition. Further, any doubt should be resolved in favor of the FWBs. qualified FWBs should already be allowed to sell these lands with respect to their land interests to third parties, including HLI, regardless of whether they have fully paid for the lands or not. The proposition is erroneous. If the land has not yet been fully paid by the beneficiary, the right to the land may be transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph. In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for the amounts the latter has already paid, together with the value of improvements he has made on the land. Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten (10) years from the issuance and registration of the emancipation patent (EP) or certificate of land ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in the instant case, the 10-year prohibitive period has not even started. Significantly, the reckoning point is the issuance of the EP or CLOA, and not the placing of the agricultural lands under CARP coverage. if We maintain the position that the qualified FWBs should be immediately allowed the option to sell or convey the agricultural lands in Hacienda Luisita, then all efforts at agrarian reform would be rendered nugatory by this Court, since, at the end of the day, these lands will just be transferred to persons not entitled to land distribution under CARP.

CONTROL OVER AGRICULTURAL LANDS SC realized that the FWBs will never have control over these agricultural lands for as long as they remain as stockholders of HLI. bearing in mind that with the revocation of the approval of the SDP, HLI will no longer be operating under SDP and will only be treated as an ordinary private corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary stockholders and will no longer be under the protective mantle of RA 6657. In addition to the foregoing, in view of the operative fact doctrine, all the benefits and homelots80 received by all the FWBs shall be respected with no obligation to refund or return them, since, as We have mentioned in our July 5, 2011 Decision, "the benefits x x x were received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the existing collective bargaining agreement with Tadeco." One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22 of RA 6657. With these, PARC/DARs, AMBALAs, and FARMs Motions GRANTED. The order giving option to the FWBs to choose whether or not to stay as shareholders was thereby recalled.

SALE TO THIRD PARTIES There is a view that since the agricultural lands in Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May 11, 1989, then the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10, 1999, and, consequently, the

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G.R. No. 171101 April 24, 2012 Before the Court are the Motion to Clarify and Reconsider Resolution of November 22, 2011 dated December 16, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI) and the Motion for Reconsideration/Clarification dated December 9, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita, Inc. and Windsor Andaya (collectively referred to as "Mallari, et al."). Basically, the issues raised by HLI and Mallari, et al. boil down to the following: (1) determination of the date of "taking"; (2) propriety of the revocation of the option on the part of the original FWBs to remain as stockholders of HLI; (3) propriety of distributing to the qualified FWBs the proceeds from the sale of the converted land and of the 80.51-hectare Subic-Clark-Tarlac Expressway (SCTEX ) land; and (4) just compensation for the homelots given to the FWBs. This claim is bereft of merit. UPHELD PREVIOUS RULING - were it not for the approval of the SDP by PARC, these large parcels of land would have been distributed and ownership transferred to the FWBs, subject to payment of just compensation, given that, as of 1989, the subject 4,915 hectares of Hacienda Luisita were already covered by CARP.

PAYMENT OF JUST COMPENSATION HLI contends that since the SDP is a modality which the agrarian reform law gives the landowner as alternative to compulsory coverage, then the FWBs cannot be considered as owners and possessors of the agricultural lands of Hacienda Luisita at the time the SDP was approved by PARC. It further claims that the approval of the SDP is not akin to a Notice of Coverage in compulsory coverage situations because stock distribution option and compulsory acquisition are two (2) different modalities with independent and separate rules and mechanisms. Concomitantly, HLI maintains that the Notice of Coverage issued on January 2, 2006 may, at the very least, be considered as the date of "taking" as this was the only time that the agricultural lands of Hacienda Luisita were placed under compulsory acquisition in view of its failure to perform certain obligations under the SDP. UPHELD PREVIOUS DECISION: taking was effected on November 21, 1989 What is notable, however, is that the divestment by Tadeco of the agricultural lands of Hacienda Luisita and the giving of the shares of stock for free is nothing but an enticement or incentive for the FWBs to agree with the stock distribution option scheme and not further push for land distribution. And the stubborn fact is that the "man days" scheme of HLI impelled the FWBs to work in the hacienda in exchange for such shares of stock. When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI in order to comply with CARP through the stock distribution option scheme, sealed with the imprimatur of PARC under PARC Resolution No. 89-12-2 dated November 21, 1989, Tadeco was consequently dispossessed of the afore-mentioned attributes of ownership. Notably, Tadeco and HLI are two different entities with separate and distinct legal personalities. Ownership by one cannot be considered as ownership by the other. Corollarily, it is the official act by the government, that is, the PARCs approval of the SDP, which should be considered as the reckoning point for the "taking" of the agricultural lands of Hacienda Luisita. Although the transfer of ownership over the agricultural lands was made prior to the SDPs approval, it is this Courts consistent view that these lands officially became subject of the agrarian reform coverage through the stock distribution scheme only upon the approval of the SDP. And as We have mentioned in Our November 22, 2011 Resolution, such approval is akin to a notice of coverage ordinarily issued under compulsory acquisition.

HOMELOTS In the present recourse, HLI also harps on the fact that since the homelots given to the FWBs do not form part of the 4,915.75 hectares covered by the SDP, then the value of these homelots should, with the revocation of the SDP, be paid to Tadeco as the landowner. We disagree. As We have explained in Our July 5, 2011 Decision, the distribution of homelots is required under RA 6657 only for corporations or business associations owning or operating farms which opted for land distribution. This is provided under Sec. 30 of RA 6657. Since none of the provisions made reference to corporations which opted for stock distribution under Sec. 31 of RA 6657, then it is apparent that said corporations are not obliged to provide for homelots. Nonetheless, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually resides." In fact, HLI was able to distribute homelots to some if not all of the FWBs. Thus, in our November 22, 2011 Resolution, We declared that the homelots already received by the FWBs shall be respected with no obligation to refund or to return them. However, since the SDP was already revoked with finality, the Court directs the government through the DAR to pay HLI the just compensation for said homelots in consonance with Sec. 4, Article XIII of the 1987 Constitution that the taking of land for use in the agrarian reform program is "subject to the payment of just compensation." To recapitulate, the Court voted on the following issues in this manner: 1) In determining the date of "taking," the Court voted 8-6 to maintain the ruling fixing November 21, 1989 as the date of "taking," the value of the affected lands to be determined by the LBP and the DAR; 2) On the propriety of the revocation of the option of the FWBs to remain as HLI stockholders, the Court, by unanimous vote, agreed to reiterate its ruling in its November 22, 2011 Resolution that the option granted to the FWBs stays revoked; 3) On the propriety of returning to the FWBs the proceeds of the sale of the 500-hectare converted land and of the 80.51-hectare SCTEX land, the Court unanimously voted to maintain its ruling to order the payment of the proceeds of the sale of the said land to the FWBs less the 3% share, taxes and expenses specified in the fallo of the November 22, 2011 Resolution; 4) On the payment of just compensation for the homelots to HLI, the Court, by unanimous vote, resolved to amend its July 5, 2011 Decision and November 22, 2011 Resolution by ordering the government, through the DAR, to pay to HLI the just compensation for the homelots thus distributed to the FWBS. the government, through DAR, is ordered to pay Hacienda Luisita, Inc. the just compensation for the 240-square meter homelots distributed to the FWBs.

FWBS ENTITLED TO PROCEEDS OF SALE HLI reiterates its claim over the proceeds of the sales of the 500 hectares and 80.51 hectares of the land as corporate owner and argues that the return of said proceeds to the FWBs is unfair and violative of the Corporation Code.