Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R. No.

171101, November 22, 2011

RESOLUTION

VELASCO, JR., J.:

I. THE FACTS

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to DISMISS/DENY
the petition filed by HLI and AFFIRM with MODIFICATIONS the resolutions of the PARC revoking
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. 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 PARC’s 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.]

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.

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.