(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
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 threemonth 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.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the
cost of the land thus awarded them to make it less cumbersome for them to pay the government. To
be sure, 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.
(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 arebased on the above requirements
and with respect to the adverted transactions of the converted land in questionpurchasers 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 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.]
[WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated
December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of
HLIs SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are
hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the
option to remain as stockholders of HLI. DAR shall immediately schedule meetings with the said
6,296 FWBs and explain to them the effects, consequences and legal or practical implications of
their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the

ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed
names.]

The Hacienda Luisita Case Part I : How the Supreme Court Decided
on July 15, 2011
In its Decision in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform Council
(PARC), G.R. No. 171101, promulgated last July 5, 2011, the Supreme Court en banc DENIED the
petition filed by HLI andAFFIRMED the resolutions of the PARC revoking HLIs Stock Distribution
Plan (SDP) and placing the subject lands under compulsory coverage of the Comprehensive
Agrarian Reform Program (CARP) of the government.
[To read the FACTS of the case and a digest of the main opinion, please click here.]
The Court however MODIFIED the PARCs resolutions and did not order outright land
distribution. Noting that there are operative facts that occurred in the interim and which the Court
cannot validly ignore, the Court declared that the revocation of the SDP must, by application of the
operative fact principle, give way to the right of the original 6,296 qualified farmworkers-beneficiaries
(FWBs) to choose whether they want to remain as HLI stockholders or [choose actual land
distribution]. The Court said it cannot turn a blind eye to the fact that in 1989, 93% of the FWBs
agreed to the Stock Distribution Option Agreement (SDOA), which became the basis of the SDP
approved by PARC. It thus ordered the Department of Agrarian Reform (DAR) to immediately
schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and
legal or practical implications of their choice, after which the FWBs will be asked to manifest, in
secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks, as the
case may be, over their printed names.
The Court refused to pass upon the question on the constitutionality of Sec. 31 of RA 6657,
the legal basis for the stock distribution option exercised by Tadeco/HLI, 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. The Court also held that those portions of Hacienda Luisita
that have been validly converted to industrial use and have been acquired by intervenors Rizal
Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) should be
excluded from the coverage of the assailed PARC resolution since the said intervenors are innocent
purchasers for value. Finally, the Court held that in determining the just compensation to be paid to
HLI, the date of the taking was November 21, 1989, the time when PARC approved HLIs SDP.
Justice Presbitero Velasco wrote the majority opinion. Fully concurring with him were
Justices Teresita Leonardo-De Castro, Lucas Bersamin, Mariano Del Castillo, Roberto Abad, and
Jose Portugal Perez. Chief Justice Renato Corona wrote what he styled as Dissenting
Opinion.Justice Arturo Brion, with whom Justice Martin Villarama fully concurred, wrote
a Separate Concurring and Dissenting Opinion. Justice Jose Mendoza wrote a Separate
Opinion. Finally, Justice Sereno wrote her ownDissenting Opinion.
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 dissentedfrom the decision of the majority 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 14 th 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.

The Hacienda Luisita Case Part II : The November 22, 2011 Supreme
Court Resolution
Less than five months from the promulgation of its July 5, 2011Decision, the Court en banc
promulgated on November 22, 2011 itsResolution on the various motions for reconsideration filed
in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform Council (PARC), G.R.
No. 171101.
[To read the FACTS of the case and the digest of the decision, please click here. To read
a summary of the opinions in the July 5, 2011 decision, please click here.]
In its Resolution, the Court PARTIALLY GRANTED the motions for reconsideration of
respondents PARC, et al. with respect to the option granted to the original farmworkers-beneficiaries
(FWBs) of Hacienda Luisita to remain with petitioner HLI, which option the Court
thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified FWBs
should be given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs will
never gain control [over the subject lands] given the present proportion of shareholdings in HLI. The
Court noted that the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the
holders of this 33.296% unanimously vote to remain as HLI stockholders, which is unlikely, control
will never be in the hands of the FWBs. Control means the majority of [sic] 50% plus at least one
share of the common shares and other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the majority is 295,112,101 shares
(590,554,220 total HLI capital shares divided by 2 plus one [1] HLI share). The 118,391,976.85
shares subject to the SDP approved by PARC substantially fall short of the 295,112,101 shares
needed by the FWBs to acquire control over HLI.
Thus, the Court unanimously this time directed immediate land distribution to the
qualified FWBs. On the fine points, however, again the Court failed to have one voice.
The majority maintained its argument that the operative fact doctrine applies in this case
since, contrary to the suggestion of the minority, the doctrine is not limited only to invalid or
unconstitutional laws but also applies to decisions made by the President or the administrative
agencies that have the force and effect of laws. Prior to the nullification or recall of said decisions,

they may have produced acts and consequences that must be respected. It is on this score that the
operative fact doctrine should be applied to acts and consequences that resulted from the
implementation of the PARC Resolution approving the SDP of HLI. The majority stressed that the
application of the operative fact doctrine by the Court in its July 5, 2011 decision was in fact
favorable to the FWBs because not only were they 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.
The majority also maintained that the Court is NOT compelled to rule on the constitutionality
of Sec. 31 of RA 6657, reiterating that it was not raised at the earliest opportunity and that 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. The majority
clarified that in its July 5, 2011 decision, it made no ruling in favor of the constitutionality of Sec. 31
of RA 6657, but found nonetheless that there was no apparent grave violation of the Constitution that
may justify the resolution of the issue of constitutionality. On the other hand, the majority likewise
reiterated its holding that those portions of Hacienda Luisita that have been validly converted to
industrial use and have been acquired by intervenors Rizal Commercial Banking Corporation
(RCBC) and Luisita Industrial Park Corporation (LIPCO) should be excluded from the coverage of
the assailed PARC resolution since the said intervenors are innocent purchasers for value.
Finally, the majority maintained that for the purpose of determining just compensation, the
date of taking is November 21, 1989 (the date when PARC approved HLIs SDP) since 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, on November 21, 1989. Such
approval is akin to a notice of coverage ordinarily issued under compulsory acquisition. On the
contention of the minority (Justice Sereno) that the date of the notice of coverage [after PARCs
revocation of the SDP], that is, January 2, 2006, is determinative of the just compensation that HLI is
entitled to receive, the majority noted that none of the cases cited to justify this position involved the
stock distribution scheme. Thus, said cases do not squarely apply to the instant case. The foregoing
notwithstanding, it bears stressing that the DAR's land valuation is only preliminary and is not, by
any means, final and conclusive upon the landowner. The landowner can file an original action with
the RTC acting as a special agrarian court to determine just compensation. The court has the right to
review with finality the determination in the exercise of what is admittedly a judicial function.
The separate opinions in the resolution
While the Court is unanimous on the matter of the distribution of Hacienda Luisita to the
FWBs, the minority still disagreed with several aspects of the resolution of the majority.
Thus, Chief Justice Corona reiterated in his Dissenting Opinionthat Section 31 of RA 6657
is invalid and unconstitutional. Agrarian reforms underlying principle is the recognition of the rights
of farmers who are landless to own, directly or collectively, the lands they till. Under the Constitution,
actual land distribution to qualified agrarian reform beneficiaries is mandatory. Anything that
promises something other than land, such the stock distribution option in Sec. 31, must be struck
down for being unconstitutional.
Justice Bersamin, who fully concurred in the July 15, 2011 decision, wrote a Concurring and
Dissenting Opinion. He opined that (1) the reckoning date for purposes of determining just
compensation should be left to the DAR and Land Bank, and, ultimately, to the Special Agrarian
Court (SAC) to determine; and (2) the landowner should be compensated for the value of the
homelots granted to the farmworkers-beneficiaries (FWBs) pursuant to the discredited stock
distribution plan (SDP). According to Justice Bersamin, the determination of when the taking

occurred is an integral part of the determinationof just compensation. The nature and character of
land at the time of its taking are the principal criteria to determine just compensation to the
landowner; thus, the factual issue of when the taking had taken place should not be separated from
the determination of just compensation by DAR, Land Bank and SAC. On the other hand, it
appeared that the homelots granted to the FWBs under the SDP do not form part of the total area of
the agricultural lands to be turned over to DAR for distribution to the qualified FWBs for which the
landowner will be justly compensated. Should the landowner not be justly compensated for the value
of the homelots, the taking will be confiscatory and unconstitutional.
Justice Sereno this time wrote a Concurring and Dissenting Opinion. She disagreed
with the majoritys choice of November 21, 1989 as the reckoning date of the taking of the lands
ordered to be distributed for the purpose of eventually determining just compensation. Her thesis:
The taking of private lands under the agrarian reform program partakes of the nature of an
expropriation proceeding. For purposes of taking under the agrarian reform program, the owners of
the land should not receive less than the market value for their expropriated properties. There is
taking of private property by the State in expropriation proceedings when the owner is ousted from
his property and deprived of his beneficial enjoyment thereof. The time of taking is the moment
when landowners are deprived of the use and benefit of the property. No taking of agricultural lands
can thus be considered either at the time the SDOA was signed (May 11, 1989, as proposed by
Justice Brion) or at the time PARC approved it (November 21, 1989, as held by the majority) since
petitioner HLI retained full ownership and use of the lands thereafter. Despite the change in
stockholders, petitioner was never ousted from or deprived of the beneficial enjoyment of the
agricultural lands in Hacienda Luisita. Citing the rulings of the Court in agrarian reform cases,
Justice Sereno noted that the notice of coverage commences the process of acquiring private
agricultural lands covered by the CARP. The date of the notice of coverage January 2, 2006 is
therefore determinative of the just compensation that petitioner HLI is entitled to.

Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council

(PARC), et al., G.R. No. 171101, November 22, 2011

RESOLUTION
VELASCO, JR., J.:
I.

THE FACTS

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to DISMISS/DENY
the petition filed by HLI and AFFIRM with MODIFICATIONS the resolutions of the PARC revoking
HLIs Stock Distribution Plan (SDP) and placing the subject lands in Hacienda Luisita under
compulsory coverage of the Comprehensive Agrarian Reform Program (CARP) of the government.
The Court however did not order outright land distribution. Voting 6-5, the Court noted
that there are operative facts that occurred in the interim and which the Court cannot validly
ignore. Thus, the Court declared that the revocation of the SDP must, by application of the operative
fact principle, give way to the right of the original 6,296 qualified farmworkers-beneficiaries (FWBs)
to choose whether they want to remain as HLI stockholders or [choose actual land distribution] . It
thus ordered the Department of Agrarian Reform (DAR) to immediately schedule meetings with the

said 6,296 FWBs and explain to them the effects, consequences and legal or practical implications
of their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the
ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed
names.
The parties thereafter filed their respective motions for reconsideration of the Court decision.
II. THE ISSUES
(1) Is the operative fact doctrine available in this case?
(2) Is Sec. 31 of RA 6657 unconstitutional?
(3) Cant the Court order that DARs compulsory acquisition of Hacienda Lusita cover the full 6,443
hectares allegedly covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco), and not just the 4,915.75 hectares covered by HLIs SDP?
(4) Is the date of the taking (for purposes of determining the just compensation payable to HLI)
November 21, 1989, when PARC approved HLIs SDP?
(5) Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May
10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on
May 11, 1989), and thus the qualified FWBs should now be allowed to sell their land interests in
Hacienda Luisita to third parties, whether they have fully paid for the lands or not?
(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs be
given an option to remain as stockholders of HLI be reconsidered?
III. THE RULING
[The Court PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et
al. with respect to the option granted to the original farmworkers-beneficiaries (FWBs) of Hacienda
Luisita to remain with petitioner HLI, which option the Court thereby RECALLED and SET ASIDE.
It reconsidered its earlier decision that the qualified FWBs should be given an option to remain as
stockholders of HLI, and UNANIMOUSLY directed immediate land distribution to the qualified
FWBs.]
1. YES, the operative fact doctrine is applicable in this case.
[The Court maintained its stance that the operative fact doctrine is applicable in this case
since, contrary to the suggestion of the minority, the doctrine is not limited only to invalid or
unconstitutional laws but also applies to decisions made by the President or the administrative
agencies that have the force and effect of laws. Prior to the nullification or recall of said decisions,
they may have produced acts and consequences that must be respected. It is on this score that the
operative fact doctrine should be applied to acts and consequences that resulted from the
implementation of the PARC Resolution approving the SDP of HLI. The majority stressed that the
application of the operative fact doctrine by the Court in its July 5, 2011 decision was in fact
favorable to the FWBs because not only were they 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.]
2. NO, Sec. 31 of RA 6657 NOT unconstitutional.
[The Court maintained that the Court is NOT compelled to rule on the constitutionality of
Sec. 31 of RA 6657, reiterating that it was not raised at the earliest opportunity and that 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. The majority
clarified that in its July 5, 2011 decision, it made no ruling in favor of the constitutionality of Sec. 31

of RA 6657, but found nonetheless that there was no apparent grave violation of the Constitution
that may justify the resolution of the issue of constitutionality.]
3. NO, the Court CANNOT order that DARs compulsory acquisition of Hacienda Lusita cover the
full 6,443 hectares and not just the 4,915.75 hectares covered by HLIs SDP.
[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 the Court is
constrained to rule only as regards the 4,915.75 has. of agricultural land.Nonetheless, this should
not prevent the DAR, under its mandate under the agrarian reform law, from subsequently
subjecting to agrarian reform other agricultural lands originally held by Tadeco that were allegedly
not transferred to HLI but were supposedly covered by RA 6657.
However since the area to be awarded to each FWB in the July 5, 2011 Decision appears
too restrictive considering that there are roads, irrigation canals, and other portions of the land that
are considered commonly-owned by farmworkers, and these may necessarily result in the decrease
of the area size that may be awarded per FWB the Court reconsiders its Decision and resolves to
give the DAR leeway in adjusting the area that may be awarded per FWB in case the number of
actual qualified FWBs decreases. 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.
On the other hand, the majority likewise reiterated its holding that the 500-hectare portion of
Hacienda Luisita that have been validly converted to industrial use and have been acquired by
intervenors Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation
(LIPCO), as well as the separate 80.51-hectare SCTEX lot acquired by the government, should be
excluded from the coverage of the assailed PARC resolution. The Court however ordered that the
unused balance of the proceeds of the sale of the 500-hectare converted land and of the 80.51hectare land used for the SCTEX be distributed to the FWBs.]
4. YES, the date of taking is November 21, 1989, when PARC approved HLIs SDP.
[For the purpose of determining just compensation, the date of taking is November 21,
1989 (the date when PARC approved HLIs SDP) since 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, on November 21, 1989. Such approval is akin to a notice of coverage
ordinarily issued under compulsory acquisition. On the contention of the minority (Justice Sereno)
that the date of the notice of coverage [after PARCs revocation of the SDP], that is, January 2,
2006, is determinative of the just compensation that HLI is entitled to receive, the Court majority
noted that none of the cases cited to justify this position involved the stock distribution scheme.
Thus, said cases do not squarely apply to the instant case. The foregoing notwithstanding, it bears
stressing that the DAR's land valuation is only preliminary and is not, by any means, final and
conclusive upon the landowner. The landowner can file an original action with the RTC acting as a
special agrarian court to determine just compensation. The court has the right to review with finality
the determination in the exercise of what is admittedly a judicial function.]
5. NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has NOT
lapsed on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell their land
interests in Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after
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. Moreover, should the FWBs be immediately allowed the option to sell or
convey their interest in the subject lands, then all efforts at agrarian reform would be rendered
nugatory, since, at the end of the day, these lands will just be transferred to persons not entitled to
land distribution under CARP.]
6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to
remain as stockholders of HLI should be reconsidered.
[The Court reconsidered its earlier decision that the qualified FWBs should be given an
option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control
[over the subject lands] given the present proportion of shareholdings in HLI. The Court noted that
the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the holders of this
33.296% unanimously vote to remain as HLI stockholders, which is unlikely, control will never be in
the hands of the FWBs. Control means the majority of [sic] 50% plus at least one share of the
common shares and other voting shares. Applying the formula to the HLI stockholdings, the number
of shares that will constitute the majority is 295,112,101 shares (590,554,220 total HLI capital shares
divided by 2 plus one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by
PARC substantially fall short of the 295,112,101 shares needed by the FWBs to acquire control over
HLI.]