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5-A. Hacienda Luisita Inc. (HLI) v. Presidential agrarian reform legislations(PD 27-rice and corn).
Agrarian Reform Council (PARC), et al., G.R. The Manila RTC rendered judgment ordering Tadeco
No. 171101, July 5, 2011 to surrender Hacienda Luisita to the MAR.
DECISION Therefrom, Tadeco appealed to the CA.

VELASCO, JR., J.: On March 17, 1988, during the administration of

I. THE FACTS President Corazon Cojuangco Aquino, the Office of
In 1958, the Spanish owners of Compañia General the Solicitor General moved to withdraw the
de Tabacos de Filipinas (Tabacalera) sold Hacienda government’s case against Tadeco, et al. The CA
Luisita and the Central Azucarera de Tarlac, the dismissed the case, subject to the PARC’s approval
s u g a r m i l l o f t h e h a c i e n d a , t o t h e Ta r l a c of Tadeco’s proposed stock distribution plan (SDP) in
Development Corporation (Tadeco), then owned and favor of its farmworkers. [Under EO 229 (Sec10)
controlled by the Jose Cojuangco Sr. Group. The and later RA 6657(Sec31), Tadeco had the option of
Central Bank of the Philippines assisted Tadeco in availing stock distribution as an alternative modality
obtaining a dollar loan from a US bank. Also, the to actual land transfer to the farmworkers.] On
GSIS extended a PhP5.911 million loan in favor of August 23, 1988, Tadeco organized a spin-off
Tadeco to pay the peso price component of the sale, corporation, herein petitioner HLI, as vehicle to
with the condition that “the lots comprising the facilitate stock acquisition by the farmworkers. For
Hacienda Luisita be subdivided by the applicant- this purpose, Tadeco conveyed to HLI the
corporation and sold at cost to the tenants, should agricultural land portion (4,915.75 hectares) and
there be any, and whenever conditions should exist other farm-related properties of Hacienda Luisita in
warranting such action under the provisions of the exchange for HLI shares of stock.
Land Tenure Act.” Tadeco however did not comply
with this condition. On May 9, 1989, some 93% of the then
farmworker-beneficiaries (FWBs) complement of
On May 7, 1980, the martial law administration filed Hacienda Luisita signified in a referendum their
a suit before the Manila RTC against Tadeco, et al., acceptance of the proposed HLI’s Stock Distribution
for them to surrender Hacienda Luisita to the then Option Plan (SODP). On May 11, 1989, the SDOA
Ministry of Agrarian Reform (MAR) so that the land was formally entered into by Tadeco, HLI, and the
can be distributed to farmers at cost. Responding, 5,848 qualified FWBs. This attested to by then DAR
Tadeco alleged that Hacienda Luisita does not have Secretary Philip Juico. The SDOA embodied the
tenants, besides which sugar lands – of which the basis and mechanics of HLI’s SDP, which was
hacienda consisted – are not covered by existing eventually approved by the PARC after a follow-up
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referendum conducted by the DAR on October 14, From 1989 to 2005, HLI claimed to have extended
1989, in which 5,117 FWBs, out of 5,315 who the following benefits to the FWBs:
participated, opted to receive shares in HLI. (a) 3 billion pesos (P3,000,000,000) worth of
As may be gleaned from the SDOA, included as part salaries, wages and fringe benefits
of the distribution plan are: (a) production-sharing (b) 59 million shares of stock distributed for free
equivalent to three percent (3%) of gross sales to the FWBs;
from the production of the agricultural land payable (c) 150 million pesos (P150,000,000)
to the FWBs in cash dividends or incentive bonus; representing 3% of the gross produce;
and (b) distribution of free homelots of not more (d) 37.5 million pesos (P37,500,000)
than 240 square meters each to family- representing 3% from the sale of 500 hectares of
beneficiaries. The production-sharing, as the SDP converted agricultural land of Hacienda Luisita;
indicated, is payable "irrespective of whether [HLI] (e) 240-square meter homelots distributed for
makes money or not," implying that the benefits do free;
not partake the nature of dividends, as the term is (f) 2.4 million pesos (P2,400,000) representing
ordinarily understood under corporation law. (5,117 3% from the sale of 80 hectares at 80 million
out of 5315 = shares; 132 = land distribution) pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not
Prior to approval, DAR Secretary Miriam Defensor- limited to free hospitalization/medical/maternity
Santiago proposed that the SDP be revised, along services, old age/death benefits and no interest
the following lines: bearing salary/educational loans and rice sugar
1. That over the implementation period of the accounts.
[SDP], [Tadeco]/HLI shall ensure that there will Two separate groups subsequently contested this
be no dilution in the shares of stocks of individual claim of HLI. (the petitions/protets)
[FWBs];
2. That a safeguard shall be provided by CONVERSION PROPER
[Tadeco]/HLI against the dilution of the On August 15, 1995, HLI applied for the conversion
percentage shareholdings of the [FWBs], i.e., of 500 hectares of land of the hacienda from
that the 33% shareholdings of the [FWBs] will be agricultural to industrial use, pursuant to Sec. 65 of
maintained at any given time RA 6657. The DAR approved the application on
November 21, 1989 - the PARC, under then Sec. August 14, 1996, subject to payment of three
Defensor-Santiago, issued Resolution No. percent (3%) of the gross selling price to the FWBs
89-12-2, approving the SDP of Tadeco/HLI. and to HLI’s continued compliance with its
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undertakings under the SDP, among other second petition, praying for the revocation and
conditions. nullification of the SDOA and the distribution of the
On December 13, 1996, HLI, in exchange for lands in the hacienda, was filed by Alyansa ng mga
subscription of 12,000,000 shares of stocks of Manggagawang Bukid ng Hacienda
Centennary Holdings, Inc. (Centennary), ceded 300 Luisita (AMBALA). The DAR then constituted a
hectares of the converted area to the latter. Special Task Force (STF) to attend to issues relating
Subsequently, Centennary sold the entire 300 to the SDP of HLI. After investigation and
hectares for PhP750 million to Luisita Industrial Park evaluation, the STF found that HLI has not complied
Corporation (LIPCO), which used it in developing an with its obligations under RA 6657 despite the
industrial complex. From this area was carved out 2 implementation of the SDP, AND RECOMMENDED.
parcels(180 has and 4 has), for which 2 separate On December 22, 2005, the PARC issued the
titles were issued in the name of LIPCO. Later, assailed Resolution No. 2005-32-01, recalling/
LIPCO transferred these 2 parcels to the Rizal revoking the SDO plan of Tadeco/HLI. It further
Commercial Banking Corporation (RCBC) in resolved that the subject lands be forthwith placed
payment of LIPCO’s PhP431,695,732.10 loan under the compulsory coverage or mandated land
obligations to RCBC(dacion en pago). LIPCO’s titles acquisition scheme of the CARP.
were cancelled and new ones were issued to RCBC.
The other 200 has was transferred to Luisita Realty From the foregoing resolution, HLI sought
Corporation (LRC) in two separate transactions in reconsideration. Its motion notwithstanding, HLI
1997 and 1998, both uniformly involving 100 also filed a petition before the Supreme Court in
hectares for PhP 250 million each. light of what it considers as the DAR’s hasty placing
Apart from the 500 hectares, another 80.51 of Hacienda Luisita under CARP even before PARC
hectares were later detached from Hacienda Luisita could rule or even read the motion for
and acquired by the government as part of the reconsideration. PARC would eventually deny HLI’s
Subic-Clark-Tarlac Expressway (SCTEX) complex. motion for reconsideration via Resolution No.
Thus, 4,335.75 hectares remained of the original 2006-34-01 dated May 3, 2006.
4,915 hectares Tadeco ceded to HLI.
II. THE ISSUES
Such, was the state of things when two separate (1) Does the PARC possess jurisdiction to recall or
petitions reached the DAR in the latter part of 2003. revoke HLI’s SDP?
The first was filed by the Supervisory Group of HLI (2) [Issue raised by intervenor FARM (group of
(Supervisory Group), praying for a renegotiation of farmworkers)] Is Sec. 31 of RA 6657, which allows
the SDOA, or, in the alternative, its revocation. The
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stock transfer in lieu of outright land transfer, 6657 or other executive issuances on agrarian
unconstitutional? reform do not explicitly vest the PARC with the
(3) Is the revocation of the HLI’s SDP valid? [Did power to revoke/recall an approved SDP. Such
PARC gravely abuse its discretion in revoking the power or authority, however, is deemed possessed
subject SDP and placing the hacienda under CARP’s by PARC under the principle of necessary
compulsory acquisition and distribution scheme?] implication, a basic postulate that what is implied in
(4) Should those portions of the converted land a statute is as much a part of it as that which is
within Hacienda Luisita that RCBC and LIPCO expressed.
acquired by purchase be excluded from the
coverage of the assailed PARC resolution? [Did the Following the doctrine of necessary implication, it
PARC gravely abuse its discretion when it included may be stated that the conferment of express
LIPCO’s and RCBC’s respective properties that once power to approve a plan for stock distribution of the
formed part of Hacienda Luisita under the CARP agricultural land of corporate owners necessarily
compulsory acquisition scheme via the assailed includes the power to revoke or recall the approval
Notice of Coverage?] of the plan. To deny PARC such revocatory power
would reduce it into a toothless agency of CARP,
III. THE RULING because the very same agency tasked to ensure
compliance by the corporate landowner with the
HLI: PARC has no authority to revoke the SDP; it approved SDP would be without authority to impose
has the power to disapprove, but not to recall its sanctions for non-compliance with it.
previous approval of the SDP. It is the court which
has jurisdiction and authority to order the
revocation or rescission of the PARC-approved SDP HLI: the parties to the SDOA should now look to the
(1) YES, the PARC has jurisdiction to Corporation Code, instead of to RA 6657, in
revoke HLI’s SDP under the doctrine of determining their rights, obligations and remedies.
necessary implication. The Code should be the applicable law on the
disposition of the agricultural land of HLI.
Under Sec. 31 of RA 6657, as implemented by DAO SC: NO! the rights, obligations and remedies of the
10, the authority to approve the plan for stock parties to the SDOA embodying the SDP are
distribution of the corporate landowner belongs to primarily governed by RA 6657. It should
PARC. Contrary to petitioner HLI’s posture, PARC abundantly be made clear that HLI was precisely
also has the power to revoke the SDP which it created in order to comply with RA 6657, which the
previously approved. It may be, as urged, that RA OSG aptly described as the "mother law" of the
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SDOA and the SDP. It is, thus, paradoxical for HLI to members formerly belonged to AMBALA, raised the
shield itself from the coverage of CARP by invoking constitutionality of Sec. 31 only on May 3, 2007
exclusive applicability of the Corporation Code under when it filed its Supplemental Comment with the
the guise of being a corporate entity. Court. Thus, it took FARM some eighteen (18) years
(2) NO, Sec. 31 of RA 6657 is not from November 21, 1989 before it challenged the
unconstitutional. [The Court actually refused to constitutionality of Sec. 31 of RA 6657 which is
pass upon the constitutional question because it was quite too late in the day. The FARM members slept
not raised at the earliest opportunity and on their rights and even accepted benefits from the
because the resolution thereof is not the lis mota SDP with nary a complaint on the alleged
of the case. Moreover, the issue has been rendered unconstitutionality of Sec. 31 upon which the
moot and academic since SDO is no longer one of benefits were derived. The Court cannot now be
the modes of acquisition under RA 9700.] goaded into resolving a constitutional issue that
FARM failed to assail after the lapse of a long period
While there is indeed an actual case or controversy, of time and the occurrence of numerous events and
intervenor FARM, composed of a small minority of activities which resulted from the application of an
27 farmers, has yet to explain its failure to alleged unconstitutional legal provision.
challenge the constitutionality of Sec. 31 of RA 6657
as early as November 21, 1989 when PARC The last but the most important requisite that the
approved the SDP of Hacienda Luisita or at least constitutional issue must be the very lis mota of the
within a reasonable time thereafter, and why its case does not likewise obtain. The lis mota aspect is
members received benefits from the SDP without so not present, the constitutional issue tendered not
much of a protest. It was only on December 4, 2003 being critical to the resolution of the case. If some
or 14 years after approval of the SDP that said plan other grounds exist by which judgment can be
and approving resolution were sought to be made without touching the constitutionality of a law,
revoked, but not, to stress, by FARM or any of its such recourse is favored.
members, but by petitioner AMBALA. Furthermore,
the AMBALA petition did NOT question the The lis mota in this case, proceeding from the basic
constitutionality of Sec. 31 of RA 6657, but positions originally taken by AMBALA (to which the
concentrated on the purported flaws and gaps in the FARM members previously belonged) and the
subsequent implementation of the SDP. Even the Supervisory Group, is the alleged non-compliance
public respondents, as represented by the Solicitor by HLI with the conditions of the SDP to support a
General, did not question the constitutionality of the plea for its revocation. And before the Court, the lis
provision. On the other hand, FARM, whose 27 mota is whether or not PARC acted in grave abuse
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of discretion when it ordered the recall of the SDP The revocation of the approval of the SDP is valid:
for such non-compliance and the fact that the SDP, (1) the mechanics and timelines of HLI’s stock
as couched and implemented, offends certain distribution violate DAO 10 because the minimum
constitutional and statutory provisions. To be sure, individual allocation of each original FWB of
any of these key issues may be resolved without 18,804.32 shares was diluted as a result of the use
plunging into the constitutionality of Sec. 31 of RA of “man days” and the hiring of additional
6657. Moreover, looking deeply into the underlying farmworkers; (2) the 30-year timeframe for HLI-to-
petitions of AMBALA, et al., it is not the said section FWBs stock transfer is contrary to what Sec. 11 of
per se that is invalid, but rather it is the alleged DAO 10 prescribes.
application of the said provision in the SDP that is
flawed. In our review and analysis of par. 3 of the SDOA on
the mechanics and timelines of stock distribution,
It may be well to note at this juncture that Sec. 5 of We find that it violates two (2) provisions of DAO
RA 9700, amending Sec. 7 of RA 6657, has all but 10. Par. 3 of the SDOA states:
superseded Sec. 31 of RA 6657 vis-à-vis the stock 3. At the end of each fiscal year, for a period of
distribution component of said Sec. 31. In its 30 years, the SECOND PARTY [HLI] shall arrange
pertinent part, Sec. 5 of RA 9700 provides: “[T]hat with the FIRST PARTY [TDC] the acquisition and
after June 30, 2009, the modes of acquisition distribution to the THIRD PARTY [FWBs] on the
shall be limited to voluntary offer to sell and basis of number of days worked and at no cost to
compulsory acquisition.” Thus, for all intents and them of one-thirtieth (1/30) of 118,391,976.85
purposes, the stock distribution scheme under Sec. shares of the capital stock of the SECOND PARTY
31 of RA 6657 is no longer an available option under that are presently owned and held by the FIRST
existing law. The question of whether or not it is PARTY, until such time as the entire block of
unconstitutional should be a moot issue. 1 1 8 , 3 9 1 , 9 7 6 . 8 5 s h a r e s s h a l l h a ve b e e n
completely acquired and distributed to the THIRD
PARTY.
(3) YES, the revocation of the HLI’s SDP
valid. [NO, the PARC did NOT gravely abuse its [I]t is clear as day that the original 6,296 FWBs,
discretion in revoking the subject SDP and who were qualified beneficiaries at the time of the
placing the hacienda under CARP’s compulsory approval of the SDP, suffered from watering down of
acquisition and distribution scheme.] shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs
got less than the guaranteed 18,804.32 HLI shares
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per beneficiary, because the acquisition and transfer of the shares of stock in the names of the
distribution of the HLI shares were based on “man qualified FWBs should be recorded in the stock and
days” or “number of days worked” by the FWB in a transfer books and must be submitted to the SEC
year’s time. As explained by HLI, a beneficiary within sixty (60) days from implementation.
needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If To the Court, there is a purpose, which is at once
it falls below 37 days, the FWB, unfortunately, does discernible as it is practical, for the three-month
not get any share at year end. The number of HLI threshold. Remove this timeline and the corporate
shares distributed varies depending on the number landowner can veritably evade compliance with
of days the FWBs were allowed to work in one agrarian reform by simply deferring to absurd limits
year. Worse, HLI hired farmworkers in addition to the implementation of the stock distribution
the original 6,296 FWBs, such that, as indicated in scheme. the reason underpinning the 30-year
the Compliance dated August 2, 2010 submitted by accommodation does not apply to corporate
HLI to the Court, the total number of farmworkers landowners in distributing shares of stock to the
of HLI as of said date stood at 10,502. All these qualified beneficiaries, as the shares may be issued
farmworkers, which include the original 6,296 in a much shorter period of time.
FWBs, were given shares out of the 118,931,976.85
HLI shares representing the 33.296% of the total Taking into account the above discussion, the
outstanding capital stock of HLI. Clearly, the revocation of the SDP by PARC should be upheld
minimum individual allocation of each original FWB [because of violations of] DAO 10. It bears stressing
of 18,804.32 shares was diluted as a result of the that under Sec. 49 of RA 6657, the PARC and the
use of “man days” and the hiring of additional DAR have the power to issue rules and regulations,
farmworkers. substantive or procedural. Being a product of such
rule-making power, DAO 10 has the force and effect
Going into another but related matter, par. 3 of the of law and must be duly complied with. The PARC is,
SDOA expressly providing for a 30-year timeframe t h e r e f o r e , c o r r e c t i n r e v o k i n g t h e S D P.
for HLI-to-FWBs stock transfer is an arrangement Consequently, the PARC Resolution No. 89-12-2
contrary to what Sec. 11 of DAO 10 dated November 21, l989 approving the HLI’s SDP is
prescribes. Said Sec. 11 provides for the nullified and voided.
implementation of the approved stock distribution
plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by (4) YES, those portions of the converted land
PARC. In fact, based on the said provision, the within Hacienda Luisita that RCBC and LIPCO
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acquired by purchase should be excluded from and the Real Estate Mortgage in favor of RCBC to
the coverage of the assailed PARC resolution. guarantee the payment of PhP 300 million.

[T]here are two (2) requirements before one may To be sure, intervenor RCBC and LIPCO knew that
be considered a purchaser in good faith, namely: the lots they bought were subjected to CARP
(1) that the purchaser buys the property of another coverage by means of a stock distribution plan, as
without notice that some other person has a right to the DAR conversion order was annotated at the
or interest in such property; and (2) that the back of the titles of the lots they
purchaser pays a full and fair price for the property acquired. However, they are of the honest belief
at the time of such purchase or before he or she has that the subject lots were validly converted to
notice of the claim of another. commercial or industrial purposes and for which
said lots were taken out of the CARP coverage
It can rightfully be said that both LIPCO and RCBC subject of PARC Resolution No. 89-12-2 and, hence,
are purchasers in good faith for value entitled to the can be legally and validly acquired by them. After
benefits arising from such status. all, Sec. 65 of RA 6657 explicitly allows conversion
First, at the time LIPCO purchased the entire three and disposition of agricultural lands previously
hundred (300) hectares of industrial land, there was covered by CARP land acquisition “after the lapse of
no notice of any supposed defect in the title of its five (5) years from its award when the land ceases
transferor, Centennary, or that any other person has to be economically feasible and sound for
a right to or interest in such property. In fact, at the agricultural purposes or the locality has become
time LIPCO acquired said parcels of land, only the urbanized and the land will have a greater economic
following annotations appeared on the TCT in the value for residential, commercial or industrial
name of Centennary: the Secretary’s Certificate in purposes.” Moreover, DAR notified all the affected
favor of Teresita Lopa, the Secretary’s Certificate in parties, more particularly the FWBs, and gave them
favor of Shintaro Murai, and the conversion of the the opportunity to comment or oppose the proposed
property from agricultural to industrial and conversion. DAR, after going through the necessary
residential use. processes, granted the conversion of 500 hectares
The same is true with respect to RCBC. At the time of Hacienda Luisita pursuant to its primary
it acquired portions of Hacienda Luisita, only the jurisdiction under Sec. 50 of RA 6657 to determine
following general annotations appeared on the TCTs and adjudicate agrarian reform matters and its
of LIPCO: the Deed of Restrictions, limiting its use original exclusive jurisdiction over all matters
solely as an industrial estate; the Secretary’s involving the implementation of agrarian
Certificate in favor of Koji Komai and Kyosuke Hori; reform. The DAR conversion order became final and
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executory after none of the FWBs interposed an aftermath of its disposition of the above-
appeal to the CA. In this factual setting, RCBC and enumerated issues:
LIPCO purchased the lots in question on their While We affirm the revocation of the SDP on
honest and well-founded belief that the previous Hacienda Luisita subject of PARC Resolution Nos.
registered owners could legally sell and convey the 2005-32-01 and 2006-34-01, the Court cannot
lots though these were previously subject of CARP close its eyes to certain “operative facts” that had
coverage. Ergo, RCBC and LIPCO acted in good occurred in the interim. Pertinently, the “operative
faith in acquiring the subject lots. fact” doctrine realizes that, in declaring
And second, both LIPCO and RCBC purchased a law or executive action null and void, or, by
portions of Hacienda Luisita for value. Undeniably, extension, no longer without force and effect, undue
LIPCO acquired 300 hectares of land from harshness and resulting unfairness must be
Centennary for the amount of PhP750 million avoided. This is as it should realistically be, since
pursuant to a Deed of Sale dated July 30, 1998. On rights might have accrued in favor of natural or
the other hand, in a Deed of Absolute Assignment juridical persons and obligations justly incurred in
dated November 25, 2004, LIPCO conveyed portions the meantime. The actual existence of a statute or
of Hacienda Luisita in favor of RCBC by way executive act is, prior to such a determination, an
of dacion en pago to pay for a loan of operative fact and may have consequences which
PhP431,695,732.10. cannot justly be ignored; the past cannot always be
In relying upon the above-mentioned approvals, erased by a new judicial declaration.
proclamation and conversion order, both RCBC and While the assailed PARC resolutions effectively
LIPCO cannot be considered at fault for believing nullifying the Hacienda Luisita SDP are upheld, the
that certain portions of Hacienda Luisita are revocation must, by application of the
industrial/commercial lands and are, thus, outside operative fact principle, give way to the right
the ambit of CARP. The PARC, and consequently of the original 6,296 qualified FWBs to choose
DAR, gravely abused its discretion when it whether they want to remain as HLI
placed LIPCO’s and RCBC’s property which stockholders or not. The Court cannot turn a
once formed part of Hacienda Luisita under the blind eye to the fact that in 1989, 93% of the FWBs
CARP compulsory acquisition scheme via the agreed to the SDOA (or the MOA), which became
assailed Notice of Coverage. the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989.
[The Court went on to apply the operative fact From 1989 to 2005, the FWBs were said to have
doctrine to determine what should be done in the received from HLI salaries and cash benefits,
hospital and medical benefits, 240-square meter
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homelots, 3% of the gross produce from agricultural be the owner of the agricultural land. Qualified
lands, and 3% of the proceeds of the sale of the beneficiaries are given ownership only of shares of
500-hectare converted land and the 80.51-hectare stock, not [of] the lands they till. He concluded that
lot sold to SCTEX. HLI shares totaling since an unconstitutional provision cannot be the
118,391,976.85 were distributed as of April 22, basis of a constitutional act, the SDP of petitioner
2005. On August 6, 20l0, HLI and private HLI based on Section 31 of RA 6657 is also
respondents submitted a Compromise Agreement, unconstitutional.
in which HLI gave the FWBs the option of acquiring Justice Mendoza fully concurred with Chief Justice
a piece of agricultural land or remain as HLI Corona’s position that Sec. 31 of RA 6657 is
stockholders, and as a matter of fact, most FWBs unconstitutional. He however agreed with the
indicated their choice of remaining as stockholders. majority that the FWBs be given the option to
These facts and circumstances tend to indicate that remain as shareholders of HLI. He also joined
some, if not all, of the FWBs may actually desire to Justice Brion’s proposal that that the reckoning date
continue as HLI shareholders. A matter best left to for purposes of just compensation should be May
their own discretion.] 11, 1989, when the SDOA was executed by Tadeco,
HLI and the FWBs. Finally, he averred that
The dissents in the July 5, 2011 decision considering that more than 10 years have elapsed
The dissents of the minority justices were on the from May 11, 1989, the qualified FWBs, who can
other fine points of the decision. validly dispose of their due shares, may do so, in
Chief Justice Corona dissented insofar as the favor of LBP or other qualified beneficiaries. The 10-
majority refused to declare Sec. 31 of RA 6657 year period need not be counted from the issuance
unconstitutional. The provision grants to corporate of the Emancipation Title (EP) or Certificate of Land
landowners the option to give qualified FWBs the Ownership Award CLOA) because, under the SDOA,
right to own capital stock of the corporation in lieu shares, not land, were to be awarded and
of actual land distribution. The Chief Justice was of distributed.
the view that by allowing the distribution of capital Justice Brion’s dissent centered on the
stock, and not land, as “compliance” with agrarian consequences of the revocation of HLI’s SDP/SDOA.
reform, Sec. 31 of RA 6657 contravenes Sec. 4, He argued that that the operative fact doctrine only
Article XIII of the Constitution, which, he argued, applies in considering the effects of a declaration of
requires that the law implementing the agrarian unconstitutionality of a statute or a rule issued by
reform program should employ [actual] land the Executive Department that is accorded the
redistribution mechanism. Under Sec. 31 of RA status of a statute. The SDOA/SDP is neither a
6657, he noted, the corporate landowner remains to statute nor an executive issuance but a contract
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between the FWBs and the landowners; hence, the fact doctrine. She would instead order the DAR to
operative fact doctrine is not applicable. A contract forthwith determine the area of Hacienda Luisita
stands on a different plane than a statute or an that must be covered by the compulsory coverage
executive issuance. When a contract is contrary to and monitor the land distribution to the qualified
law, it is deemed void ab initio. It produces no legal FWBs.
effects whatsoever. Thus, Justice Brion questioned Erroneous interpretation of the Court’s
the option given by the majority to the FWBs to decision
remain as stockholders in an almost-bankrupt The High Tribunal actually voted unanimously
corporation like HLI. He argued that the nullity of (11-0) to DISMISS/DENY the petition of HLI and to
HLI’s SDP/SDOA goes into its very existence, and AFFIRM the PARC resolutions. This is contrary to
the parties to it must generally revert to their media reports that the Court “voted 6-4” to dismiss
respective situations prior to its execution. the HLI petition. The five (not four) minority justices
Restitution, he said, is therefore in order. With the (Chief Justice Corona, and Justices Brion, Villarama,
SDP being void, the FWBs should return everything Mendoza, and Sereno) only partially dissented
they are proven to have received pursuant to the from the decision of the majority of six (Justice
terms of the SDOA/SDP. Justice Brion then proposed Velasco Jr., Leonardo-De Castro, Bersamin, Del
that all aspects of the implementation of the Castillo, Abad, and Perez). Justice Antonio Carpio
mandatory CARP coverage be determined by the took no part in the deliberations and in the voting,
DAR by starting with a clean slate from [May 11,] while Justice Diosdado Peralta was on official leave.
1989, the point in time when the compulsory CARP The 14th and 15th seats in the Court were earlier
coverage should start, and proceeding to adjust the vacated by the retirements of Justices Eduardo
relations of the parties with due regard to the Antonio Nachura (June 13, 2011) and Conchita
events that intervened [thereafter]. He also held Carpio-Morales (June 19, 2011).
that the time of the taking (when the computation Another misinterpretation came from no less than
of just compensation shall be reckoned) shall be the Supreme Court administrator and spokesperson,
May 11, 1989, when the SDOA was executed by Atty. Midas Marquez. In a press conference called
Tadeco, HLI and the FWBs. after the promulgation of the Court’s decision,
Justice Sereno dissented with respect to how the Marquez initially used the term “referendum” in
majority modified the questioned PARC Resolutions explaining the High Court’s ruling. This created
(i.e., no immediate land distribution, give first the confusion among the parties and the interested
original qualified FWBs the option to either remain public since a “referendum” implies that the FWBs
as stockholders of HLI or choose actual land will have to vote on a common mode by which to
distribution) and the applicability of the operative pursue their claims over Hacienda Luisita. The
 12

decision was thus met with cries of condemnation (2)Motion for Partial Reconsideration dated July 20,
by the misinformed farmers and the various 2011 filed by PARC and DAR
people’s organizations and militant groups - Doctrine of Operative fact does not apply
supportive of their cause. because no law was declared void.
Marquez would later correct himself in a subsequent (3)Motion for Reconsideration dated July 19, 2011
press briefing. But since by then the parties had filed by AMBALA
a l r e a d y f i l e d t h e i r r e s p e c t i ve m o t i o n s f o r - RA 6657 is unconstitutional
reconsideration, he called upon everyone to just - "operative fact doctrine" does not apply. the
“wait for the final resolution of the motion[s], which option given to the farmers to remain as
is forthcoming anyway.” The resolution of the stockholders of HLI is equivalent to an option
consolidated motions for reconsideration came for HLI to retain land in direct violation of the
relatively early on November 22, 2011, or less than CARL, the SDP having been revoked. It should
five months from the promulgation of the decision. not apply if it would result to inequity
- CA erred in holding that improving the economic
status of FWBs is not among the legal
obligations of HLI under the SDP and an
imperative imposition by RA 6657 and DAO 10
G.R. No. 171101 November 22, 2011 - CA erred in holding that LIPCO and RCBC were
purchasers for value
(1)M o t i o n f o r C l a r i f i c a t i o n a n d P a r t i a l (4)Motion for Reconsideration dated July 21, 2011
Reconsideration dated July 21, 2011 filed by filed by respondent-intervenor Farmworkers
petitioner Hacienda Luisita, Inc. (HLI); Agrarian Reform Movement, Inc. (FARM);
- it is not proper to distribute the proceeds of the - same with AMBALA
conversion sale to the FWBs the proceeds of the - issue of constitutionality is the lis mota of the
sale belong to the corporation for having sold its case which must be decided upon
asset, and the distribution would be considered (5)Motion for Reconsideration dated July 21, 2011
dissolution of HLI filed by private respondents Noel Mallari, Julio
- the actual taking is NOT November 21, 1989, but Suniga, Supervisory Group of Hacienda Luisita,
should be reckoned from finality of the Decision Inc. (Supervisory Group) and Windsor Andaya
of this Court, or at the very least, the reckoning (collectively referred to as "Mallari, et al."); and
period may be tacked to January 2, 2006, the (6)Motion for Reconsideration dated July 22, 2011
date when the Notice of Coverage was issued by filed by private respondents Rene Galang and
the DAR
 13

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.
ISSUES:
(1) applicability of the operative fact doctrine; CONSTITUTIONALITY
(2) constitutionality of Sec. 31 of RA 6657 or the (Upheld previous ruling)
Comprehensive Agrarian Reform Law of 1988; FARM is, therefore, remiss in belatedly questioning
(3) coverage of compulsory acquisition; the constitutionality of Sec. 31 of RA 6657. The
(4) just compensation; second requirement that the constitutional question
(5) sale to third parties; should be raised at the earliest possible opportunity
(6) the violations of HLI; and is clearly wanting.
(7) control over agricultural lands (revocation
of SDP) The last but the most important requisite that the
constitutional issue must be the very lis mota of the
case does not likewise obtain. The lis mota aspect is
OPERATIVE FACT DOCTRINE (not much related) not present, the constitutional issue tendered not
Bearing in mind that PARC Resolution No. 89-12-2 being critical to the resolution of the case.
––an executive act––was declared invalid in the
instant case, the operative fact doctrine is clearly
applicable. COVERAGE OF COMPULSORY ACQUISITION
FARM argues that this Court ignored certain material
it should be recognized that SC, in its July 5, 2011 facts when it limited the maximum area to be
Decision, affirmed the revocation of Resolution No. covered to 4,915.75 hectares, whereas the area
89-12-2 and ruled for the compulsory coverage of that should, at the least, be covered is 6,443
the agricultural lands of Hacienda Luisita in view of hectares, which is the agricultural land allegedly
HLI’s violation of the SDP and DAO 10. By applying covered by RA 6657 and previously held by Tarlac
the doctrine, this Court merely gave the qualified Development Corporation (Tadeco).
FWBs the option to remain as stockholders of HLI We cannot subscribe to this view. Since what is put
and ruled that they will retain the homelots and in issue before the Court is the propriety of the
other benefits which they received from HLI by revocation of the SDP, which only involves 4,915.75
virtue of the SDP. has. of agricultural land and not 6,443 has., then
The application of the doctrine is favorable to the We are constrained to rule only as regards the
FWBs because not only were the FWBs allowed to 4,915.75 has. of agricultural land.
retain the benefits and homelots they received
 14

DAR, however, contends that the declaration of the PROCEEDS OF SALE

area to be awarded to each FWB is too restrictive. It Considering that the 500-hectare converted land, as
stresses that in agricultural landholdings like well as the 80.51-hectare SCTEX lot, should have
Hacienda Luisita, there are roads, irrigation canals, been included in the compulsory coverage were it
and other portions of the land that are considered not for their conversion and valid transfers, then it
commonly-owned by farmworkers, and this may is only but proper that the price received for the
necessarily result in the decrease of the area size sale of these lots should be given to the qualified
that may be awarded per FWB. DAR also argues FWBs. In effect, the proceeds from the sale shall
that the July 5, 2011 Decision does not give it any take the place of the lots.
leeway in adjusting the area that may be awarded
per FWB in case the number of actual qualified JUST COMPENSATION - “TAKING”
FWBs decreases. In Our July 5, 2011 Decision, We stated that "HLI
The argument is meritorious. In order to ensure the shall be paid just compensation for the remaining
proper distribution of the agricultural lands of agricultural land that will be transferred to DAR for
Hacienda Luisita per qualified FWB, and considering land distribution to the FWBs." We also ruled that
that matters involving strictly the administrative the date of the "taking" is November 21, 1989,
implementation and enforcement of agrarian reform when PARC approved HLI’s SDP per PARC Resolution
laws are within the jurisdiction of the DAR, it is the No. 89-12-2.
latter which shall determine the area with which Mallari, et al. argued that the valuation of the land
each qualified FWB will be awarded. cannot be based on November 21, 1989. Instead,
they aver that the date of "taking" for valuation
500 HECTARES purposes is a factual issue best left to the
RCBC and LIPCO knew that the lots they bought determination of the trial courts.
were subjected to CARP coverage by means of a AMBALA alleged that HLI should no longer be paid
stock distribution plan, as the DAR conversion order just compensation for the agricultural land that will
was annotated at the back of the titles of the lots be distributed to the FWBs, since the RTC already
they acquired. However, they are of the honest rendered a decision ordering "the Cojuangcos to
belief that the subject lots were validly converted to transfer the control of Hacienda Luisita to the
commercial or industrial purposes and for which Ministry of Agrarian Reform, which will distribute the
said lots were taken out of the CARP coverage land to small farmers after compensating the
subject of PARC Resolution No. 89-12-2 and, hence, landowners P3.988 million." In the event, however,
can be legally and validly acquired by them. that this Court will rule that HLI is indeed entitled to
compensation, AMBALA contended that it should be
 15

pegged at forty thousand pesos (PhP 40,000) per approval of the DAR, to any heir of the beneficiary
hectare, since this was the same value that Tadeco or to any other beneficiary who, as a condition for
declared in 1989 to make sure that the farmers will such transfer or conveyance, shall cultivate the land
not own the majority of its stocks. himself. Failing compliance herewith, the land shall
SC: the date of "taking" is November 21, 1989, the be transferred to the LBP which shall give due notice
date when PARC approved HLI’s SDP in view of the of the availability of the land in the manner specified
fact that this is the time that the FWBs were in the immediately preceding paragraph.
considered to own and possess the agricultural In the event of such transfer to the LBP, the latter
lands in Hacienda Luisita. To be precise, these lands shall compensate the beneficiary in one lump sum
became subject of the agrarian reform coverage for the amounts the latter has already paid,
through the stock distribution scheme only upon the together with the value of improvements he has
approval of the SDP, that is, November 21, 1989. made on the land.
Thus, such approval is akin to a notice of coverage Without a doubt, under RA 6657 and DAO 1, the
ordinarily issued under compulsory acquisition. awarded lands may only be transferred or conveyed
Further, any doubt should be resolved in favor of the after ten (10) years from the issuance and
FWBs. registration of the emancipation patent (EP) or
certificate of land ownership award (CLOA).
Considering that the EPs or CLOAs have not yet
SALE TO THIRD PARTIES been issued to the qualified FWBs in the instant
There is a view that since the agricultural lands in case, the 10-year prohibitive period has not even
Hacienda Luisita were placed under CARP coverage started. Significantly, the reckoning point is the
through the SDOA scheme on May 11, 1989, then issuance of the EP or CLOA, and not the placing of
the 10-year period prohibition on the transfer of the agricultural lands under CARP coverage.
awarded lands under RA 6657 lapsed on May 10, if We maintain the position that the qualified FWBs
1999, and, consequently, the qualified FWBs should should be immediately allowed the option to sell or
already be allowed to sell these lands with respect convey the agricultural lands in Hacienda Luisita,
to their land interests to third parties, including HLI, then all efforts at agrarian reform would be
regardless of whether they have fully paid for the rendered nugatory by this Court, since, at the end
lands or not. of the day, these lands will just be transferred to
persons not entitled to land distribution under CARP.
The proposition is erroneous. If the land has not yet
been fully paid by the beneficiary, the right to the
land may be transferred or conveyed, with prior CONTROL OVER AGRICULTURAL LANDS
 16

SC realized that the FWBs will never have control

over these agricultural lands for as long as they
remain as stockholders of HLI.
bearing in mind that with the revocation of the
approval of the SDP, HLI will no longer be operating
under SDP and will only be treated as an ordinary G.R. No. 171101 April 24, 2012
private corporation; the FWBs who remain as Before the Court are the Motion to Clarify and
stockholders of HLI will be treated as ordinary Reconsider Resolution of November 22, 2011 dated
stockholders and will no longer be under the December 16, 2011 filed by petitioner Hacienda
protective mantle of RA 6657. Luisita, Inc. (HLI) and the Motion for
In addition to the foregoing, in view of the operative Reconsideration/Clarification dated December 9,
fact doctrine, all the benefits and homelots80 2011 filed by private respondents Noel Mallari, Julio
received by all the FWBs shall be respected with no Suniga, Supervisory Group of Hacienda Luisita, Inc.
obligation to refund or return them, since, as We and Windsor Andaya (collectively referred to as
have mentioned in our July 5, 2011 Decision, "the "Mallari, et al.").
benefits x x x were received by the FWBs as Basically, the issues raised by HLI and Mallari, et al.
farmhands in the agricultural enterprise of HLI and boil down to the following: (1) determination of the
other fringe benefits were granted to them pursuant date of "taking"; (2) propriety of the revocation of
to the existing collective bargaining agreement with the option on the part of the original FWBs to
Tadeco." remain as stockholders of HLI; (3) propriety of
One last point, the HLI land shall be distributed only distributing to the qualified FWBs the proceeds from
to the 6,296 original FWBs. The remaining 4,206 the sale of the converted land and of the 80.51-
FWBs are not entitled to any portion of the HLI land, hectare Subic-Clark-Tarlac Expressway (SCTEX )
because the rights to said land were vested only in land; and (4) just compensation for the homelots
the 6,296 original FWBs pursuant to Sec. 22 of RA given to the FWBs.
6657. With these, PARC/DAR’s, AMBALA’s, and
FARM’s Motions – GRANTED.
PAYMENT OF JUST COMPENSATION
The order giving option to the FWBs to choose HLI contends that since the SDP is a modality which
whether or not to stay as shareholders was thereby the agrarian reform law gives the landowner as
recalled.
 alternative to compulsory coverage, then the FWBs
cannot be considered as owners and possessors of
the agricultural lands of Hacienda Luisita at the time
 17

the SDP was approved by PARC. It further claims distinct legal personalities. Ownership by one cannot
that the approval of the SDP is not akin to a Notice be considered as ownership by the other.
of Coverage in compulsory coverage situations Corollarily, it is the official act by the government,
because stock distribution option and compulsory that is, the PARC’s approval of the SDP, which
acquisition are two (2) different modalities with should be considered as the reckoning point for the
independent and separate rules and mechanisms. "taking" of the agricultural lands of Hacienda Luisita.
Concomitantly, HLI maintains that the Notice of Although the transfer of ownership over the
Coverage issued on January 2, 2006 may, at the agricultural lands was made prior to the SDP’s
very least, be considered as the date of "taking" as approval, it is this Court’s consistent view that these
this was the only time that the agricultural lands of lands officially became subject of the agrarian
Hacienda Luisita were placed under compulsory reform coverage through the stock distribution
acquisition in view of its failure to perform certain scheme only upon the approval of the SDP. And as
obligations under the SDP. We have mentioned in Our November 22, 2011
UPHELD PREVIOUS DECISION: taking was effected Resolution, such approval is akin to a notice of
on November 21, 1989 coverage ordinarily issued under compulsory
acquisition.
What is 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 FWBS ENTITLED TO PROCEEDS OF SALE
nothing but an enticement or incentive for the FWBs HLI reiterates its claim over the proceeds of the
to agree with the stock distribution option scheme sales of the 500 hectares and 80.51 hectares of the
and not further push for land distribution. And the land as corporate owner and argues that the return
stubborn fact is that the "man days" scheme of HLI of said proceeds to the FWBs is unfair and violative
impelled the FWBs to work in the hacienda in of the Corporation Code.
exchange for such shares of stock. This claim is bereft of merit.
When the agricultural lands of Hacienda Luisita were UPHELD PREVIOUS RULING - were it not for the
transferred by Tadeco to HLI in order to comply with approval of the SDP by PARC, these large parcels of
CARP through the stock distribution option scheme, land would have been distributed and ownership
sealed with the imprimatur of PARC under PARC transferred to the FWBs, subject to payment of just
Resolution No. 89-12-2 dated November 21, 1989, compensation, given that, as of 1989, the subject
Tadeco was consequently dispossessed of the afore- 4,915 hectares of Hacienda Luisita were already
mentioned attributes of ownership. Notably, Tadeco covered by CARP.
and HLI are two different entities with separate and
 18

Sec. 4, Article XIII of the 1987 Constitution that the

HOMELOTS taking of land for use in the agrarian reform
In the present recourse, HLI also harps on the fact program is "subject to the payment of just
that since the homelots given to the FWBs do not compensation."
form part of the 4,915.75 hectares covered by the
SDP, then the value of these homelots should, with To recapitulate, the Court voted on the following
the revocation of the SDP, be paid to Tadeco as the issues in this manner:
landowner. 1)In determining the date of "taking," the Court
We disagree. As We have explained in Our July 5, voted 8-6 to maintain the ruling fixing November
2011 Decision, the distribution of homelots is 21, 1989 as the date of "taking," the value of the
required under RA 6657 only for corporations or affected lands to be determined by the LBP and
business associations owning or operating farms the DAR;
which opted for land distribution. This is provided 2)On the propriety of the revocation of the option of
under Sec. 30 of RA 6657. the FWBs to remain as HLI stockholders, the
Since none of the provisions made reference to Court, by unanimous vote, agreed to reiterate its
corporations which opted for stock distribution ruling in its November 22, 2011 Resolution that
under Sec. 31 of RA 6657, then it is apparent that the option granted to the FWBs stays revoked;
said corporations are not obliged to provide for 3)On the propriety of returning to the FWBs the
homelots. Nonetheless, HLI undertook to "subdivide proceeds of the sale of the 500-hectare converted
and allocate for free and without charge among the land and of the 80.51-hectare SCTEX land, the
qualified family-beneficiaries x x x residential or Court unanimously voted to maintain its ruling to
homelots of not more than 240 sq. m. each, with order the payment of the proceeds of the sale of
each family beneficiary being assured of receiving the said land to the FWBs less the 3% share,
and owning a homelot in the barrio or barangay taxes and expenses specified in the fallo of the
where it actually resides." In fact, HLI was able to November 22, 2011 Resolution;
distribute homelots to some if not all of the FWBs. 4)On the payment of just compensation for the
Thus, in our November 22, 2011 Resolution, We homelots to HLI, the Court, by unanimous vote,
declared that the homelots already received by the resolved to amend its July 5, 2011 Decision and
FWBs shall be respected with no obligation to refund November 22, 2011 Resolution by ordering the
or to return them. However, since the SDP was government, through the DAR, to pay to HLI the
already revoked with finality, the Court directs the just compensation for the homelots thus
government through the DAR to pay HLI the just distributed to the FWBS.
compensation for said homelots in consonance with
 19

the government, through DAR, is ordered to pay

Hacienda Luisita, Inc. the just compensation for the
240-square meter homelots distributed to the
FWBs.