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CASE TITLE:

Hacienda Luisita, Inc. (HLI), petitioner,


Luisita Industrial Park Corp. (LIPCO) and Rizal
Commercial Banking Corporation (RCBC), petitioners-inintervention,
-versusPresidential Agrarian Reform Council (PARC); Secretary
Nasser Pangandaman of the Department of Agrarian
Reform (DAR); Alyansa ng mga Manggagawang Bukid ng
Hacienda Luisita (AMBALA), Rene Galang, Noel Mallari,
and Julio Suniga and his Supervisory Group of the HLI and
Windsor Andaya, respondents.
G.R. No. 171101. July 5, 2011
CASE:
This case is a SPECIAL CIVIL ACTION in the Supreme
Court. This involves a Petition for Certiorari and Prohibition
under Rule 65 with prayer for preliminary injunctive relief, HLI
seeking to question and reverse the PARC Resolutions issued on
December 22, 2005 and May 3, 2006, and the implementing
Notice of Coverage dated January 2, 2006.
FACTS:
In 1955, Land Reform Act [RA 1400] was passed which set
the expropriation of all tenanted estates.
In 1957, the Spanish owners of the Compaia General de
Tabacos de Filipinas (Tabacalera) sold to Tarlac Development
Corporation (TADECO) Hacienda Luisita and their controlling
interest in the sugar mill within the hacienda, the Central
Azucarera de Tarlac (CAT), to be paid in Philippine pesos and in
US dollars.
The Philippine Government, through the Central Bank of the
Philippines, aided the buyer to obtain a dollar loan from a US
bank. The GSIS Board of Trustees extended on November 27,
1957 a PhP 5.911M loan in favour of TADECO to pay the peso
price with a condition under GSIS Resolution No. 3203, later
amended by Resolution No. 356, Series of 1958, which states:
the lots comprising Hacienda Luisita shall 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.

On March 31, 1958, TADECO had fully paid the purchase


price for the acquisition of Hacienda Luisita.
On August 8, 1963, the Agricultural Land Reform Code (RA
3844) was enacted, abolishing share tenancy and converting it to
leasehold tenancy. It also created the Land Band of the
Philippines (LBP). However, the laws application was found to be
limited to specific areas in the Central Luzon.
Subsequently, Congress passed the Code of Agrarian
Reform (RA 6389) declaring the entire country a land reform
area and automatically converting tenancy to leasehold tenancy
in all areas and reducing the retention limit from 75 Ha to 7 Ha.
A month after the declaration of Martial Law in September
of 1972, President Marcos issued Presidential Decree No. 27
which allows tenant-farmers to purchase the land they tilled or to
change from shared-tenancy to fixed-rent leasehold tenancy, as a
way to go about the emancipation of the tillers from the
bondage of the soil.
On May 7, 1980, the Martial Law Administration filed a suit
before the RTC of Manila against TADECO to surrender
Hacienda Luisita to the Ministry of Agrarian Reform (now the
DAR) for its distribution to farmers. The RTC ordered TADECO to
surrender the hacienda to the MAR.
Then during the time of President Corazon C. Aquino, after
Marcos was ousted, Proclamation No. 131, Series of 1987, was
issued instituting a CARP.
On July 22, 1987, EO 229 was issued to provide for
mechanisms for CARP implementation. It also created the PARC
as its policy-making body.
On March 17, 1988, the OSG moved to withdraw the
governments case against TADECO, et al.
On May 18, 1988, the CA dismissed the case the Marcos
administration initially instituted and won against TADECO, et al.
However, the dismissal was conditioned that there be an
approval of a stock distribution plan (SDP) to be submitted,
approved by PARC, and implemented as an alternative mode of
land distribution, and failure to comply will cause the revival of
previous decision.
On June 15, 1988, the Comprehensive Agrarian Reform Law
of 1988 (RA 6657) took effect, providing a new process of land
classification, acquisition, and distribution. This tested the
application of the law in the current case of Hacienda Luisita.

On August 23, 1988, HLI was formed as a spin-off


corporation to facilitate the SDP.
On March 22, 1989, a TADECO, via a Deed of Assignment
and Conveyance, transferred and conveyed to HLI the titles over
the lot in question, valued at PhP 196.630,000.00 (33.296% of
the total asset of PhP 590,554,220.00). In line with
accommodating such transfer, the HLI increased its capital share
to PhP 400,000,000 at PhP1/share, PhP 150,000,000 of which
were to be issued only to qualified and registered beneficiaries of
the CARP, and the remaining PhP250,000,000 to any stockholder
of the corporation. (Obviously, the controlling shares of FWBs are
lower in this case.) HLI guaranteed to the qualified beneficiaries
of the SDP production-sharing that every year they will receive,
on top of their regular compensation, an amount that
approximates 3% of the total gross sale from the production of
the agricultural land, whether it is in the form of cash dividends
or incentive bonuses or both. The production sharing is payable
irrespective of whether HLI makes money or not. HLI also
assured each family beneficiary to be guaranteed a homelot of
not more than 240 sq. m. in the barrio or barangay where they
reside.
On May 9, 1989, about 93% of the FWBs accepted and
signed the proposed SDOP.
On May 11, 1989, SDOA was entered into by TADECO/HLI
and 5,848 qualified FWBs.
On October 14, 1989, the referendum conducted by DAR
showed that 5,177 FWBs out of 5,315 participants opted to
receive shares in the HLI (thats about 97.403575% of the
participants), and only 132 chose actual land distribution.
On November 6, 1989, the DAR Secretary Mirriam
Defensor-Santiago (now deceased) proposed the revision of the
SDP. On November 14, 1989, TADECO told DAR Sec. MDS that
the proposed revision were already in place in the SDP and MOA.
Hence, On November 21, 1989, a Resolution No. 89-12-2
approved the SDP of TADECO/HLI.
From 1989 to 2005, HLI claimed to have extended the
following benefits to FWBs:
(a) PhP 3 Billion worth of salaries, wages and fringe
benefits;
(b) 59 Million shares of stock distribution for free to
FWBs;
(c) PhP 150M, PhP 37.5M, PhP 2.4M, all representing 3%
of the gross produce, the sale of 500 Ha of converted

agricultural land of Hacienda Luisita, and the sale of 80


Ha at PhP 80M for SCTEX, respectively.
(d) 240 sq.m. homelots distributed for free;
(e) Social service benefits
On August 15, 1995, HLI applied for conversion of the 500
Ha land from agricultural to industrial, which was approved by
DAR Secretary Ernesto Garilao a year later, or on August 14,
1996, conditioned on the payment of 3% of gross selling price to
FWBs and HLIs continued compliance with its undertakings
under the SDP.
On December 13, 1996, HLI ceded 200 Ha to Luisita Realty
Corp. (LRC) at PhP 250 Million each in 1997 and 1998, and 300
Ha of its converted areas to Centennary Holdings, Inc.
(Centennary), who later sold the same to LIPCO for PhP 750
Million, the latter acquiring it for purpose of developing an
industrial complex.
On November 25, 2004, LIPCO transferred portion of the
lands acquired to RCBC by way of dation en pago in payment of
LIPCOs PhP 431,634,732.10 loan.
Another 80.51 Ha was later detached from Hacienda Luisita
and acquired by the government as part of the SCTEX complex.
About 4,335.75 Ha out of the 4,915 Ha remained of the original
area ceded by TADECO to HLI.
With the prevailing situation, earlier in 2003, DAR received
two petitions seeking to renegotiate, and/or revoke the SDOA for
violation by the HLI of the SDOAs terms.
In the first petition, Jose Julio Suniga and Windsor Andaya
(Supervisory Group of HLI) and 60 other supervisors alleged that
HLI failed to give their dividends, and their share in the gross
sales and proceeds of the sales of the converted area 500 Ha
area. They claimed that their lives have not improved contrary to
the guarantees of the SDOA.
In the second petition (Petisyon), they call for the revocation
and nullification of the SDOA and the distribution of the lands.
The Petisyon was filed by the AMBALA (composing about 80% of
the 5,339 FWBs of Hacienda Luisita).
DAR constituted a Special Task Force to attend to the issues
relating to the SDP of HLI and the latter found that HLI failed to
comply with their undertakings.
On December 22, 2005, PARC affirmed the recommendation
of DAR to recall/revoke the SDOP of TADECO/HLI and the land
be placed under compulsory coverage or mandated land
acquisition.

On January 2, 2006, HLI sought reconsideration. On the


same day, DAR issued a Notice of Coverage, which HLI received
2 days after.
On May 3, 2006, PARCs Resolution denied MR by HLI.
But on June 14, 2006, the Court, acting on HLIs motion,
issued a TRO, enjoining the implementation of PARCs Resolution
and the notice of coverage.
On December 2, 2006, Mallari filed a manisfestation and
motion, alleging that he broke up with AMBALA and formed
FARM with Renato Lalic, and thus prayed to be allowed to
intervene. In this moment, two factions were created due to shirt
and re-shift of allegiance, as Mallari would later return to create
an AMBALA-Noel Mallari faction, leaving Renato Lalic with the
rest of the members in FARM.
On October 30, 2007, RCBC and LIPCO intervened and
alleged that the assailed resolution effectively nullified the TCTs
under their respective names as the properties covered in the
TCTs were included in the January 2, 2006 Notice of Coverage.
They claim that the revocation of SDP cannot legally affect their
rights as innocent purchasers for value. They both asserted to
have acquired vested and indefeasible rights over certain
portions of the covered properties.
On August 31, 2010, the Court created a Mediation Panel in
a bid to resolve the dispute but no acceptable agreement was
reached.
ISSUES:
(1)
Whether
or
not
petitioners
for
the
revocation/nullification of SDOA (herein respondents) are
real party-in-interests;
(2)
Whether or not PARC has jurisdiction to recall or
revoke HLIs SDP;
(3)
Whether or not Section 31 of RA 6657 is constitutional;
(4)
Whether or not such recall or revocation is a valid or
proper action; and
(5)
Whether or not the terms and conditions of the SDP, as
embodied in the SDOA is valid.

RULINGS:
FIRST ISSUE:
YES. The Supreme Court held that Supervisory Group,
AMBALA and their respective leaders are real parties-in-interest.
The SDOA identifies the SDP qualified beneficiaries as
the farmworkers who appears in the annual payroll,
inclusive of the permanent and seasonal employees, who
are regularly or periodically employed by HLI. Galang and
the Supervisory group who were admittedly employed by HLI
comes within the definition of real party-in-interest under
Section 2, Rule 3 of the Rules of Court, as one benefited or
injured by the judgment in a suit, and thus, entitled to sue.
Assuming arguendo that they are not regular farmworkers,
Article XIII of the Constitution categorized them as other
farmworkers entitled to receive a just share of the fruits of the
land.
SECOND ISSUE:
YES. Although E0 229 expressly vested PARC with such
authority to approve plan for stock distribution, without explicitly
vesting it to revoke/recall an approved SDP, 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. To simply state it, every statutory grant of power,
right or privilege is deemed to include all incidental power, right,
or privilege. Following the said doctrine, it may be stated that
the conferment of express power to approve SDP of agricultural
land of corporate owners necessarily includes the power to
revoke or recall the approval of the plan, for to deny PARC of
such revocation power, as in this case, would reduce it into a
toothless agency of CARP.
On a related issue, HLI claimed that subjecting the
landholding to compulsory distribution after the approval of its
SDP results in the impairment of obligation and contract, and as
such, a breach of its terms and conditions is not a PARC
administrative matter, but one that gives rise to a cause of action
cognizable by regular courts. The Supreme Court stressed that
SDOA is a special contract imbued with public interest, entered
into pursuant to RA 6657 and subject to the approval and
administrative adjudication of its issuing authorityPARC.
Contrary to the view of HLI, the rights, obligations, and
remedies of the parties to the SDOA embodying the SDP are
governed by RA 6657 and not by the Corporation Code. HLI, as
pointed by the Court was made to comply with RA 6657, and not

to shield itself from the coverage of CARP and supplant or


circumvent the agrarian reform program. Also as between the
Corporation Code, a general law and RA 6657, a special law, the
latter prevails generalia specialibus non derogant. What private
respondents questioned before the Dar was the proper
implementation of SDP and HLIs compliance with RA 6657.
Evidently, RA 6657 was the applicable law in this case.
Also, contrary to the view of HLI that the inclusion of the
agricultural land of Hacienda Luisita under CARP coverage and
the eventual distribution of the land to FWBs amounts to the
dissolution of all corporate assets of HLI, and thus the
Corporation Code apply, the Court was not persuaded. The Court
said that such inclusion and eventual distribution will not
automatically trigger the dissolution of HLI since the value of
agricultural lands in relation to the total assets transferred and
conveyed by TADECO to HLI comprises only 33.296% (meaning
it does not hold the majority assets of the corporation to trigger
such dissolution).
THIRD ISSUE:
In this issue on constitutionality of Section 31 of RA 6657,
FARM seeks to invalidate the said provision of the law because it
allows corporations to use stock distribution as its mode of
distribution or transfer instead of an outright agricultural land
transfer, which they believe impairs the fundamental right of
farmers and farmworkers envisioned under Section 4, Article XIII
of the Constitution. HLI counters this matter by saying that
agrarian reform is not only about transfer of land ownership to
farmers and other qualified beneficiaries.
Accordingly, the challenge on the constitutionality of
Section 31 of RA 6657 and its counterpart provision in EO 229
failed.
The essential requisites for the exercise of its power of
judicial review include the following:
(1)
There is an actual case or controversy
(2)
That the constitutional question is raised at the earliest
possible opportunity by the proper party or one with locus
standi; and
(3)
The issue of constitutionality must be the very lis mota
of the case. [Garcia vs. Executive Secretary, 415 SCRA 44
(2009)]
The Supreme Court reasoned that the reason it failed was
because of failure of the intervenors to question its
constitutionality in the earliest opportunity, and instead, slept on
their rights and received benefits derived from the same. As

early as November 21, 1989 when PARC approved the SDP of


Hacienda Luisita or at least within a reasonable time thereafter,
its members received benefits from the SDP without so much
protest. It was only on December 4, 2003 or 14 years after
approval of the SDP via PARC Resolution No. 89-12-2 dated
November 21, 1989 that said plan and approving resolution was
sought to be revoked. Furthermore, AMBALA did NOT question
the constitutionality of said provision but focused on the flaws
and gaps in the subsequent implementation of the SDP. Even the
public respondent Sol. Gen. did not question it, and such
question was only raised on May 3, 2007 when it filed its
Supplemental Comment with the Court.
It has been stressed by the Supreme Court that the question
on constitutionality will not passed upon by the Court unless it is
raised at the first or earliest possible opportunity by the proper
party.
In terms of the lis mota of the case, the invalidity of the
provision was not alleged, but rather it is the alleged application
in the SDP that is flawed was raised.
The Supreme Court also noted that Section 5 of RA 9700
superseded Section 31 of RA 6657 vis--vis the stock distribution
component of said provision, where Section 5 of RA 9700
provides: That after June 30, 2009, the mode of acquisition
shall be limited to voluntary offer to sell and compulsory
acquisition. Thus, stock distribution is no longer an available
option under existing law. The issue has become moot and
academic.
The Supreme Court ruled that there appeared to have been
no breach of the fundamental law. Section 4, Article XIII of the
1987 Constitution reads:
The State shall, by law, undertake an agrarian reform program
founded on the right of the farmers and regular farmworkers,
who are landless, to OWN directly or COLLECTIVELY THE
LANDS THEY TILL or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations, and
subject to the payment of just compensation. In determining
retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for
voluntary land-sharing.

The law is clear farmers and regular farmworkers have a


right to OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY
TILL. The basic law allows two modes of land distributiondirect

and indirect ownership. No language is found in the 1987


Constitution that disqualifies or prohibits corporations or
cooperatives of farmers from being the legal entity through
which collective ownership can be exercised. The term
collectively is said to allow indirect ownership of land and not
just outright agricultural land transfer. This is in recognition of
the fact that land reform may become successful even if it is
done through the medium of juridical entities composed of
farmers.
Even in the definition of agrarian reform itself in RA 6657
allows stock distribution the redistribution of lands to
farmers and regular farmworkers who are landless to lift the
economic status of the beneficiaries and all other
arrangements alternative to physical redistribution of
land, such as production or profit sharing, labour management
and the distribution of shares of stock which allow
beneficiaries to receive a just share of the fruits of the land they
work.
The SC believed that Sec. 31 of RA 6657 is NOT
inconsistent with the States commitment to farmers and
farmworkers to advance their interests under the policy of social
justice. This is believed to be the modality of the legislature for
collective ownership by which the imperatives of social justice
may be approximated, if not achieved.
Also as contended by FARM that stock certificates do not
equate to land ownership, still, the Corporation Code is clear
that the FWB becomes a stockholder who acquires an equitable
interest in the assets of the corporation, which includes the
agricultural lands. A share of stock typifies an aliquot part of the
corporations property, or right to share in its proceeds to the
extent when distributed according to law and equity and that its
holder is not the owner of any part of the capital of the
corporation. However, the FWBs will ultimately own the
agricultural lands owned by the corporation when the latter is
eventually dissolved and liquidated.
The policy of agrarian reform is that control over the
agricultural land must always be in the hands of the farmers. The
Court also reasoned that there can be no guarantee of a
successful implementation of agrarian reform, whether there is
actual distribution or not. Accordingly, the principle of land to
the tiller and the old pastoral model of ownership were nonhuman juridical persons were prohibited from owning
agricultural lands are no longer realistic under existing
conditions.

FOURTH ISSUE:
On the determination of the propriety of such revocation or
recall of HLIs SDP by PARC for violating the agrarian reform
policy under Sec. 2 of RA 6657, as said plan fail to enhance the
dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands, the SC disagreed.
The SC reasoned that Section 2 of RA 6657 states that
improving the economic status of FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative
imposition by RA 6657 and DAO 10, a violation of which would
justify discarding the stock distribution option. Nothing in that
option agreement, law or department order indicates otherwise.
Also SC said that its a matter of common business sense
that no corporation could guarantee a profitable run all the time.
As such being the case, SDP cannot also guarantee, as indeed
the SDOA does not guarantee, a comfortable life for the FWBs.
The onerous condition of the FWBs economic status and
hardships can hardly be attributed to HLI and its SDP and
provide a valid ground for the plans revocation.
On the Conversion of Lands
In this issue of the conversion of 500 Ha to non-agricultural
uses as an infringement of Sec. 5 (a) of DAO 10, which reads: a.
that the continued operation of the corporation with its
agricultural land intact and unfragmented is viable with potential
for growth and increased profitability, the SC said that the
PARC is wrong.
Said Sec. 5 (a) of DAO 10 does not exact from the corporate
landowner-applicant the undertaking to keep the farm intact and
unfragmented ad infinitum (forever). What is required is viability
of the corporate operations with or without its corporate land
remaining intact or unfragmented.
On the 3% Production Share
On the matter of whether HLI complied with its undertaking
to give 3% shares of the gross production sales of the land, the
SC ruled that the Special Task Force was silent as to whether
HLI has failed to comply with the 3% production-sharing
obligation or the 3% of the gross selling price of the converted

land and the SCTEX lot, since some FWBs admits to have
received their share in the gross production of the sales and in
the sale of SCTEX lot while the others claimed otherwise. The
Court found this as a slight breach that would not justify
rescission of the contract.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required
only for corporations or other business associations owning or
operating farms which opted for land distribution, and not for
corporations which opted for stock distribution under Sec. 31 of
RA 6657. Concomitantly, said corporation are not obliged to
provide it, EXCEPT by stipulation, as in this case.
Under the SDP, HLI subdivided and allocated for free to
qualified family-beneficiaries 240 sq. m. homelots in the barrio or
barangay where they actually reside. The Court opined that 16
years have elapse from the time the SDP was approved by PARC,
and yet FWBs alleged that not all were afforded homelots.
Hence, SC ruled that HLI has not yet fully complied with its
undertaking to distribute homelots to FWBs under the SDP.
On Man Days and the Mechanics of Stock Distribution
The SC found that the SDOA violated two provisions of DAO
10.
In Par. 3 of the SDOA, the distribution of the shares of stock to
the FWBs is contigent on the number of days FWBs have worked
during the year. This deviates from Sec. 4, DAO 10, which
decrees the distribution of equal number of shares to the FWBs
as the minimum ratio of shares of stock for purposes of
compliance with Section 21 of RA 6657.
Accordingly, Section 4 of DAO 10 gives two sets of shares of
stocks which a qualified beneficiary can acquire from the
corporation under the SDP. The first one is the mandatory ratio
of equal number of shares of stocks to be distributed to the
FWBs which contemplates proportion of the capital stock of
the corporation that the agricultural land, actually devoted
to agricultural activities, bears in relation to the
companys total asset.
The second partakes a gratuitous extra grant or an
augmentation share/s that the corporate landowner may give

under an additional stock distribution scheme, taking into


account the rank, seniority, salary, position, and like factors
which the management, in the exercise of its sound discretion,
may deem desirable.
However, the Court found that by providing that number of
shares of the original 1989 FWBs to depend on the number of
man days, HLI violated the rule on stock distribution and
effectively deprived the FWBs of equal shares of stock in the
corporation notwithstanding the fact that these FWBs have given
up their right to the land that could have been distributed to
them instead of suffering such dilution regarding their due share
entitlement.
Each of the 6,296 original FWBs 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 share per beneficiary needs to work
at least 37 days in a fiscal year before the latter becomes entitled
to HLI shares. If it falls below 37 days, the FWB gets no 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. Worst is they even hired additional
farmworkers which reached a number of 10,502 which
eventually diluted the 18,804.32 shares as a result of the use of
man days and hiring additional farmworkers (as kahati in the
share obviously).
Another sub-issue pointed is the reliance of HLI to Section
26 of RA 6657 which suggests that land awarded shall be paid
to by the beneficiaries to the LBP in 30 annual amortizations. To
simply put it, the beneficiaries are the ones obliged to pay the
LBP (which would really make it impossible for them to own it)
and it is the HLI who is obliged to distribute the shares of stocks
among FWBs.
Exclusion from the coverage of land purchased by RCBC
and LIPCO (III)
On resolving the issue of whether the converted farm land
(allegedly) innocently purchased for value by RCBC and LIPCO
should be excluded from the PARC Resolution 2005-32-01, as
implemented by the DAR-issued Notice of Coverage dated
January 2, 2006, which called for a mandatory CARP acquisition

of the lands subject of the SDP, the SC opined that although


Section 44 of PD 1529 gives the principle that one need not look
at the four corners of the title and may rely on what appears on
it, the rule admits to some exceptions, as when the party had
knowledge of the facts and circumstances that would impel a
reasonably cautious man to make inquiry, or when the purchaser
has knowledge of the defect of lack of title, or sufficient facts to
make inquiry into the status of the title of the property in
litigation. Obviously, a higher level of care and diligence is
expected from banks, their business being impressed with public
interest.
But the Court ruled that facts prove that RCBC and LIPCO
cannot be claimed to have acted in bad faith to have acquired the
lots that were previously covered by SDP. The Court said that
RCBC and LIPCO honestly believed that the subject lots were
validly converted to commercial or industrial purposes and for
which said lots were taken out of the CARP coverage of PARC
Resolution No. 89-12-2 and hence, can be legally and validly
acquired by them, and since Section 65 of RA 6657 allows
conversion and disposition of agricultural lands previously
covered by CARP. Also DAR notified all affected parties,
especially the FWBs but the order became final and executory
after failure to interpose an appeal. Since RCBC and LIPCO
believed in good faith that the previous registered owners could
legally sell and convey the lot though these were previously
subject of CARP coverage. Ergo, RCBC and LIPCO acted in good
faith in acquiring the subject lots. This fact cannot be
disregarded by DAR, PARC, or even the SC.
As regards to the 80.51 ha land transferred to the
government for use as part of SCTEX, this is excluded from the
compulsory coverage considering that the transfer was made via
the governments power of eminent domain.
As to 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.
In this case, it is not the SDOA dated May 11, 1989 which
was revoked, but rather, it is the PARCs approval of the HLIs
Proposal for Stock Distribution under CARP which embodied the
SDP that was nullified. It is the SDP that gave legal force an

effect to the stock distribution scheme under PARC Resolution


No. 89-12-2 that gave it its validity, and not the SDOA which
merely gave its basis and mechanics.
On PARCs Resolutions
Hacienda Luisitas SDP (IV)

effectively

nullifying

the

The Court upheld the revocation of the questioned PARC


resolutions. The Court also recognized the rights of the original
6,296 qualified FWBs to choose whether they want to remain as
HLI stockholders or not. The Court reasoned that it cannot turn a
blind eye to the fact that the FWBs were said to have received
benefits from the said agreement. Also on August 6, 2010, HLI
and private respondents submitted a Compromise Agreement, in
which HLI gave the FWBs the option of acquiring a piece of
agricultural lands or remain as HLI stockholders, and which most
FWBs chose the latter.
With regards to the homelots already awarded, the FWBs
are not obliged to return it to HLI or pay for its value since it is
part of the SDPs benefit granted to them. However, for those
who did not receive the homelot as of the revocation of the SDP
on December 22, 2005 when PARC Resolution No. 2005-32-01
was issued, will no longer be entitled to homelots. In case of
distribution, the homelots would then not be deducted.
In terms of the 3% proceeds of the 500-ha land and 80.51
ha SCTEX lot to FWBs, DAR will move for the auditing of HLIs
books to determine if the proceeds where utilized fof legitimate
corporate purpose and the remaining balance from the proceeds
of the sale shall be distributed to the qualified beneficiaries.
In view of HLIs payment of rent to FWBs for the use of the
land from 1989, the Court said that this cannot be done as the
FWBs are also stockholders of HLI (a seemingly elite title), and
the benefits acquired by the corporation from its possession and
use of the land ultimately redounded to the FWBs benefit based
on its business operations in the form of salaries, and other
fringe benefits under the CBA. To allow payment of rent would
tantamount to double compensation.
HLI will continue to exist, not functioning under the SDP, as
the same was revoked already, but pursuant to the Corporation
Code as a private stock corporation.

HLI shall also be paid just compensation for the remaining


agricultural lands that will be transferred to DAR for land
distribution to the FWBs. The date of taking considered by the
SC is November 21, 1989, when PARC approved the HLIs SDP
per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP
for the determination of just compensation, and NOT May 11,
1989, when the SDOA was approved by PARC.
The petition is treated as pro hac vice (means for this case
only) in view of the peculiar facts and circumstances of the case.
THE INSTANT PETITION IS DENIED.
PARC Resolution No. 2005-32-01 dated December 22, 2005
(wherein PARC affirmed the recommendation of DAR to
recall/revoke the SDOP of TADECO/HLI and the land be placed
under compulsory coverage or mandated land acquisition) and
May 3, 2006 (wherein PARC denied MR by HLI) are AFFIRMED
with MODIFICATION that the original 6,296 qualified FWBs shall
have the option to remain as stockholders of HLI. Other FWBs
who do not belong to the said original qualified beneficiaries are
NOT entitled to land distribution and shall remain as HLI
stockholders. HLI is directed to pay the FWBs the
cconsiderations received from the 500 Ha converted land sale
and 80.51 ha SCTEX lot, wherein the 3% gross sales from the
production of agricultural land, including expenditures for
legitimate corporate purpose, such as taxes and title transfer
payments, shall be deducted from the total amount of PhP
1,330,511,500 (3 comas!). Any unspent or unused balance will be
distributed to the original FWBs.
HLI is entitled to just compensation for the agricultural land
that will be transferred to DAR to be reckoned from November
21, 1989 and LBP are ordered to determine the compensation
due to HLI.
DARs compliance report is ordered to be submitted six
months from finality of judgment. TRO is lifted.
DISSENTING OPINION
Corona, C.J.:
One of the nice points given by the late CJ Corona (ousted in
the PNoy Administration) states, to wit:

Agrarian reform is an essential element of social justice


under the 1987 Constitution. It mandates that farmers and
farmworkers have the right to own the land they till, individually
and collectively, through cooperative or similar organizations. It
aims to liberate farmers and farmworkers from bondage to the
soil, to ensure that they do not remain slaves of the land but
stewards thereof.
He also opined that unless there is land distribution, there
can be no agrarian reform. Any program that gives farmers or
farmworkers anything less than ownership of land fails to
conform to the mandate of the Constitution. In other words, a
program that gives qualified beneficiaries stock certificates
instead of land is not agrarian reform.
He believed that actual land distribution is the
essential characteristic of a constitutional agrarian reform
program. Accordingly, the polar star in land reform is that
the farmer has a right to the land he tills.
In the APRIL 24, 2012 RESOLUTION involving the same
Hacienda Luisita Case
On November 22, 2011, the Court recalled and set aside the
option to remain as stockholders of HLI, while maintaining that
all benefits received shall be respected with no obligation to
refund or return them.
On
December
9,
2011,
a
Motion
for
Reconsideration/Clarification by private respondents Mallari,
Suniga, Supervisory Group of HLI, and Andaya (Mallari, et al.
On December 16, 2011, a Motion to Clarify and Reconsider
Resolution of November 22, 2011 was filed by HLI.
HLI and Mallari, et al., invokes the following grounds:
A. WON SC erred in determining just compensation by
considering the date of taking as November 21, 1989
when PARC approved the SDP (already revoked) since the
Notice of Coverage of January 2, 2006 may be considered
as time FWBs owned and possess the agricultural lands
of Hacienda Luisita because it was the only time when
the latter was placed under Compulsory Acquisition in
view of failure to perform their obligations under the SDP,
or SDOA, when the owner is ACTUALLY deprived or

dispossessed of his property, and considering taking from


November 21, 1989 is a deprivation of landowners
property WITHOUT due process of law; and HLI is
entitled to be paid interest on the just compensation.
B. WON SC erred in reversing the decision of giving the
FWBs option to remain as stockholders or not since (1) it
has been decided; (2) that neither the Constitution nor
the CARL requires that FWBs should have control over
the agricultural lands; and (3) that the option is not
shown to be detrimental to FWBs, but rather found
beneficial by the SC.
C. The proprietary of distributing the proceeds from the sale
of the 500ha and 80.51 SCTEX lot cannot be retained by
HLI but returned to the FWBs and that HLI is using the
Corporation Code to avoid liability to the FWBs because:
(1) the proceeds belongs to the corporation and not to
either the HLI/TADECO or FWBs; and (2) to allow return
or proceeds to FWBs.
D. Just Compensation for the Homelots given to FWBs as it
does not form part of the 4,915.75 hectares covered by
the SDP, and hence, the value of these homelots should,
with the revocation of the SDP, be paid to Tadeco as the
landowner.
ON JUST COMPENSATION:
The Court stressed that just compensation has been
defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers
gain, but the owners loss. Hence, in determining just
compensation, the price or value of the property at the time it
was taken from the owner and appropriated by the government
shall be the basis. If the government takes possession of the land
before the institution of expropriation proceedings, the value
should be fixed as of the time of the taking of said possession,
not of the filing of the complaint.
The SC, citing Land Bank of the Philippines v. Livioc, said
that taking is when the landowner was deprived of the use and
benefit of his property, such as when the title is transferred to
the Republic. It also noted that
taking also occurs when
agricultural lands are voluntarily offered by a landowner and
approved by PARC for CARP coverage through the stock
distribution scheme, as in the case of HLI earlier decided. Thus,
HLI submitting its SDP for approval is an acknowledgment on its
part that the agricultural lands of Hacienda Luisita are covered

by CARP. However, the PARC approval should be considered as


the effective date of taking because it was only during that time
that the government officially confirmed the CARP coverage of
these lands.
Accordingly, Stock distribution and compulsory acquisition
are two modalities sharing the same end goal of having a more
equitable distribution of land ownership, without ignoring such
right to just compensation. Also, since it is only upon the
approval of the SDP that the agricultural lands actually came
under CARP coverage, such approval operates and takes the
place of a notice of coverage ordinarily issued under compulsory
acquisition.
What the SC found 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.
The Court ruled that taking only when the landowner is
deprived of the use and benefit of his property is not
incompatible with the earlier conclusion that taking took place
on November 21, 1989, and since even from the start, TADECO
seemed to already favour Stock Distribution Scheme when
complying with the CARP when it organized the HLI as its spinoff corporation
which facilitated stock acquisition of FWBs.
Tadeco assigned and conveyed 4,915.75 has to HLI the
agricultural lands of Hacienda Luisita. These agricultural lands
constituted as the capital contribution of the FWBs in HLI. This,
in effect, deprived TADECO itself of the ownership over these
lands when it transferred the same to HLI.
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 under PARC
Resolution No. 89-12-2 dated November 21, 1989, Tadeco was
consequently dispossessed of the ownership of the same.
Furthermore, adherence to the suggestion of HLI that the
Notice of Coverage issued on January 2, 2006 should be

considered as date of taking would


in effect penalize the
qualified FWBs twice for acceding to the Stock Distribution
Scheme, (1) depriving them of the agricultural lands they should
have gotten earlier, if it were not for this SDP and (2) making
them pay higher amortization for the agricultural lands that
should have been given to them decades ago.
The SC maintained that, as it has in fact already ruled on its
reckoning date, that is, November 21, 1989, the date of issuance
of PARC Resolution No. 89-12-2, based on the above-mentioned
disquisitions.
On side note, the SC added that even though the
compensation due to HLI will still be preliminarily determined by
DAR and LBP, subject to review by the RTC acting as a SAC, the
fact that the reckoning point of taking is already fixed at a
certain date should already hasten the proceedings and not
further cause undue hardship on the parties, especially the
qualified FWBs.
Option will not ensure control over agricultural lands
The Court agreed that the option given to the qualified
FWBs whether to remain as stockholders of HLI or opt for land
distribution is neither iniquitous nor prejudicial to the FWBs.
However, the Court is noted the policy on agrarian reform that
control over the agricultural land must always be in the hands of
the farmers. Contrary to the stance of HLI, both the Constitution
and RA 6657 intended the farmers, individually or collectively, to
have control over the agricultural lands of HLI; otherwise, all
these rhetoric about agrarian reform will be rendered for naught.
Sec. 4, Art. XIII of the 1987 Constitution provides:
Section 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular
farmworkers who are landless, to own directly or
collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities
and reasonable retention limits as the Congress may prescribe,
taking into account ecological, developmental, or equity
considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall
respect the right of small landowners. The State shall further
provide incentives for voluntary land-sharing. (Emphasis
supplied.)

Sec. 2 of RA 6657 also states:


SECTION 2. Declaration of Principles and Policies. - It is the
policy of the State to pursue a Comprehensive Agrarian Reform
Program (CARP). The welfare of the landless farmers and farm
workers will receive the highest consideration to promote social
justice and to move the nation towards sound rural development
and industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of Philippine
agriculture.
The agrarian reform program is founded on the right of
farmers and regular farm workers, who are landless, to
own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits
thereof.

As discussed by the SC, there is collective ownership as


long as there is a concerted group work by the farmers on the
land, regardless of whether the landowner is a cooperative,
association or corporation composed of farmers. However, the
definition of collective ownership should be read in light of the
clear policy of the law on agrarian reform, which is to
emancipate the tiller from the bondage of the soil and empower
the common people.
HLIs insistent view that control need not be in the
hands of the farmers translates to allowing it to run
roughshod against the very reason for the enactment of
agrarian reform laws and leave the farmers in their
shackles with sheer lip service to look forward to.
(quotable phrase)
FWBs Entitled to Proceeds of Sale
The proceeds realized from the sale should accrue for the
benefit of the FWBs, minus deductions of the 3% of the proceeds
of said transfers that were paid to the FWBs, the taxes and
expenses relating to the transfer of titles to the transferees, and
the expenditures incurred by HLI and Centennary Holdings, Inc.
for legitimate corporate purposes, as prescribed in our
November 22, 2011 Resolution.
HOMELOTS

The SC agreed to DISAGREE.


As reiterated in the earlier 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.
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 240 sq. m. of homelots to some, if not all of


the qualified beneficiaries.
The Supreme Court, by a unanimous vote, resolved to
maintain its ruling that the FWBs shall retain ownership of the
homelots given to them with no obligation to pay for the value of
said lots. Also, since the SDP was already revoked with finality in
th earlier discussion of the decision, 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.
The Motions of both parties were DENIED with
qualification. The July 5, 2011, Decision was modified by the
November 21, 2011 Resolution which ordered the government,
through the DAR, to pay just compensation for the 240 sq. m.
homelots distributed to FWBs. This RESOLUTION is now
declared FINAL and EXECUTORY.