Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R.

No. 171101, November 22, 2011

I.

THE FACTS

On July 5, 2011, the Supreme Court en banc voted

DISMISS/DENY the petition filed by HLI and AFFIRM with
resolutions of the PARC revoking HLIs Stock Distribution Plan
subject lands in Hacienda Luisita under compulsory coverage
Agrarian Reform Program (CARP) of the government.

unanimously (11-0) to
MODIFICATIONS the
(SDP) and placing the
of the Comprehensive

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 farmworkersbeneficiaries (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,
andUNANIMOUSLY 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 500hectare 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 80.51-hectare 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.
Association of Small Landowners in the Philippines, Inc. vs Secretary of Agrarian
Reform
175 SCRA 343
These are four consolidated cases questioning the constitutionality of the
Comprehensive Agrarian Reform Act (R.A. No. 6657 and related laws i.e., Agrarian
Land Reform Code or R.A. No. 3844).
The Association of Small Landowners in the Philippines, Inc. sought exception from the
land distribution scheme provided for in R.A. 6657. The Association is comprised of
landowners of ricelands and cornlands whose landholdings do not exceed 7 hectares.
They invoke that since their landholdings are less than 7 hectares, they should not be
forced to distribute their land to their tenants under R.A. 6657 for they themselves have
shown willingness to till their own land. In short, they want to be exempted from agrarian
reform program because they claim to belong to a different class.

G.R. No. 79777: (Manaay vs Juico)

Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228,
and 229) on the ground that these laws already valuated their lands for the agrarian
reform program and that the specific amount must be determined by the Department of
Agrarian Reform (DAR). Manaay averred that this violated the principle in eminent
domain which provides that only courts can determine just compensation. This, for
Manaay, also violated due process for under the constitution, no property shall be taken
for public use without just compensation.
Manaay also questioned the provision which states that landowners may be paid for
their land in bonds and not necessarily in cash. Manaay averred that just compensation
has always been in the form of money and not in bonds.
G.R. No. 79744
The petitioner argues that E.O. Nos. 228 and 229 are violative of the constitutional
provision that no private property shall be taken without due process or just
compensation.
G.R. No. 78742
Petitioners claim they cannot eject their tenants and so are unable to enjoy their right of
retention because the Department of Agrarian Reform has so far not issued the
implementing rules required under the above-quoted decree.
ISSUE:
1. Whether or not there was a violation of the equal protection clause.
2. Whether or not there is a violation of due process.
3. Whether or not just compensation, under the agrarian reform program, must be in
terms of cash.

HELD:

1. No. The Association had not shown any proof that they belong to a different class
exempt from the agrarian reform program. Under the law, classification has been
defined as the grouping of persons or things similar to each other in certain particulars
and different from each other in these same particulars. To be valid, it must conform to
the following requirements:
(1) it must be based on substantial distinctions;
(2) it must be germane to the purposes of the law;
(3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class.
Equal protection simply means that all persons or things similarly situated must be
treated

alike

both

as to

the

rights

conferred

and

the

liabilities imposed.

The Association have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of other
properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that is
clearly visible except to those who will not see. There is no need to elaborate on this
matter. In any event, the Congress is allowed a wide leeway in providing for a valid
classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights. In the
contrary, it appears that Congress is right in classifying small landowners as part of the
agrarian reform program.
2. No. It is true that the determination of just compensation is a power lodged in the
courts. However, there is no law which prohibits administrative bodies like the DAR from
determining just compensation. In fact, just compensation can be that amount agreed
upon by the landowner and the government even without judicial intervention so long
as both parties agree. The DAR can determine just compensation through appraisers
and if the landowner agrees, then judicial intervention is not needed. What is
contemplated by law however is that, the just compensation determined by an
administrative body is merely preliminary. If the landowner does not agree with the
finding of just compensation by an administrative body, then it can go to court and the

determination of the latter shall be the final determination. This is even so provided by
RA 6657:
Section 16 (f): Any party who disagrees with the decision may bring the matter to the
court of proper jurisdiction for final determination of just compensation.
3. No. Money as [sole] payment for just compensation is merely a concept in traditional
exercise of eminent domain. The agrarian reform program is a revolutionary exercise of
eminent domain. The program will require billions of pesos in funds if all compensation
have to be made in cash if everything is in cash, then the government will not have
sufficient money hence, bonds, and other securities, i.e., shares of stocks, may be used
for just compensat

DECS vs. San Diego

G.R. No. 89572 December 21, 1989
The respondent failed to pass the National Medical Admission Test (NMAT) 3 times and
he was denied admission to take the test for another time by the petitioner under its rule
that a student is allowed only to take the NMAT 3 times and after 3 consecutive failures
a student shall not be allowed to take NMAT the 4th time. Respondent invoke his
constitutional rights on academic freedom and quality education in his petition for
mandamus before the court. Respondent judge rendered decision citing the admission
rule of the petitioner as an arbitrary exercise of police power, depriving respondent of
his right to pursue medical education thus this petition for review before the higher
court.
Issue : Whether or not the admission rule implemented by petitioner an arbitrary
exercise of police power.
Held : The court held that police power is validly exercised if (a) the interests of the
public generally, as distinguished from those of a particular class, require the
interference of the State, and (b) the means employed are reasonably necessary to the
attainment of the object sought to be accomplished and not unduly oppressive upon
individuals. The proper exercise of the police power requires the concurrence of a lawful
subject and a lawful method. The subject of the challenged regulation is certainly within
the ambit of the police power. It is the right and indeed the responsibility of the State to
insure that the medical profession is not infiltrated by incompetents to whom patients
may unwarily entrust their lives and health. The method employed by the challenged
regulation is not irrelevant to the purpose of the law nor is it arbitrary or oppressive. The

three-flunk rule is intended to insulate the medical schools and ultimately the medical
profession from the intrusion of those not qualified to be doctors. The State needs to
implement decisive steps to regulate system of education by directing students to the
course where he is best suited through initial tests and evaluation. The decision of the
respondent judge was reversed.