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 own Dissenting 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 slatefrom [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.