Association of Small Landowners in the
Philippines, Inc. vs Secretary of Agrarian
Reform
November 6, 2010
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).
Brief background: Article XIII of the Constitution on
Social Justice and Human Rights includes a call for the
adoption by the State of an agrarian reform program.
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. RA 3844 was enacted in 1963. P.D. No. 27 was
promulgated in 1972 to provide for the compulsory
acquisition of private lands for distribution among
tenant-farmers and to specify maximum retention
limits for landowners. In 1987, President Corazon
Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of PD 27 and
providing for the valuation of still unvalued lands
covered by the decree as well as the manner of their
payment. In 1987, P.P. No. 131, instituting a
comprehensive agrarian reform program (CARP) was
enacted; later, E.O. No. 229, providing the mechanics
for its (PP131’s) implementation, was also enacted.
Afterwhich is the enactment of R.A. No. 6657,
Comprehensive Agrarian Reform Law in 1988. This
law, while considerably changing the earlier
mentioned enactments, nevertheless gives them
suppletory effect insofar as they are not inconsistent
with its provisions.
[Two of the consolidated cases are discussed below]
G.R. No. 78742: (Association of Small Landowners vs
Secretary)
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.
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 compensation.
Hacienda Luisita Inc. (HLI) v.
Presidential Agrarian Reform
Council (PARC), et al., G.R. No.
171101, November 22, 2011
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 HLI’s 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) Can’t the Court order that DAR’s 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 HLI’s
SDP?
(4) Is the date of the “taking” (for purposes of determining
the just compensation payable to HLI) November 21,
1989, when PARC approved HLI’s 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 DAR’s
compulsory acquisition of Hacienda Lusita cover
the full 6,443 hectares and not just the 4,915.75
hectares covered by HLI’s 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
80.51-hectare land used for the SCTEX be distributed
to the FWBs.]
4. YES, the date of “taking” is November 21, 1989,
when PARC approved HLI’s SDP.
[For the purpose of determining just
compensation, the date of “taking” is November 21,
1989 (the date when PARC approved HLI’s SDP) since
this is the time that the FWBs were considered to own
 and possess the agricultural lands in Hacienda Luisita. be in the hands of the FWBs. Control means the
To be precise, these lands became subject of the majority of [sic] 50% plus at least one share of the
agrarian reform coverage through the stock distribution common shares and other voting shares. Applying the
scheme only upon the approval of the SDP, that is, on formula to the HLI stockholdings, the number of shares
November 21, 1989. Such approval is akin to a notice that will constitute the majority is 295,112,101 shares
of coverage ordinarily issued under compulsory (590,554,220 total HLI capital shares divided by 2 plus
acquisition. On the contention of the minority (Justice one [1] HLI share). The 118,391,976.85 shares
Sereno) that the date of the notice of coverage [after subject to the SDP approved by PARC substantially fall
PARC’s revocation of the SDP], that is, January 2, short of the 295,112,101 shares needed by the FWBs
2006, is determinative of the just compensation that to acquire control over HLI.]
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