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Hacienda Luisita Inc. (HLI) v.

Presidential Agrarian Reform Council


(PARC), et al., G.R. No. 171101, July 5, 2011

DECISION
VELASCO, JR., J.:
I.

THE FACTS
In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas (Tabacalera)
sold Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of the hacienda, to the
Tarlac Development Corporation (Tadeco), then owned and controlled by the Jose Cojuangco Sr.
Group. The Central Bank of the Philippines assisted Tadeco in obtaining a dollar loan from
a US bank. Also, the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the peso
price component of the sale, with the condition that the lots comprising the Hacienda Luisita 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. Tadeco however did not comply with this condition.
On May 7, 1980, the martial law administration filed a suit before the Manila RTC against
Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR)
so that the land can be distributed to farmers at cost. Responding, Tadeco alleged that Hacienda
Luisita does not have tenants, besides which sugar lands of which the hacienda consisted are
not covered by existing agrarian reform legislations. The Manila RTC rendered judgment ordering
Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the CA.
On March 17, 1988, during the administration of President Corazon Cojuangco Aquino, the
Office of the Solicitor General moved to withdraw the governments case against Tadeco, et al. The
CA dismissed the case, subject to the PARCs approval of Tadecos proposed stock distribution plan
(SDP) in favor of its farmworkers. [Under EO 229 and later RA 6657, Tadeco had the option of
availing stock distribution as an alternative modality to actual land transfer to the farmworkers.] On
August 23, 1988, Tadeco organized a spin-off corporation, herein petitioner HLI, as vehicle to
facilitate stock acquisition by the farmworkers. For this purpose, Tadeco conveyed to HLI the
agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of
Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock Distribution
Option Plan (SODP). On May 11, 1989, the SDOA was formally entered into by Tadeco, HLI, and
the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip Juico. The SDOA embodied
the basis and mechanics of HLIs SDP, which was eventually approved by the PARC after a followup referendum conducted by the DAR on October 14, 1989, in which 5,117 FWBs, out of 5,315 who
participated, opted to receive shares in HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda
from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved the
application on August 14, 1996, subject to payment of three percent (3%) of the gross selling price to
the FWBs and to HLIs continued compliance with its undertakings under the SDP, among other
conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of
Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the latter.

Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial Park
Corporation (LIPCO), which used it in developing an industrial complex. From this area was carved
out 2 parcels, for which 2 separate titles were issued in the name of LIPCO. Later, LIPCO
transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in payment of
LIPCOs PhP431,695,732.10 loan obligations to RCBC. LIPCOs titles were cancelled and new
ones were issued to RCBC. Apart from the 500 hectares, another 80.51 hectares were later
detached from Hacienda Luisita and acquired by the government as part of the Subic-Clark-Tarlac
Expressway (SCTEX) complex. Thus, 4,335.75 hectares remained of the original 4,915 hectares
Tadeco ceded to HLI.
Such, was the state of things when two separate petitions reached the DAR in the latter part
of 2003. The first was filed by the Supervisory Group of HLI (Supervisory Group), praying for a
renegotiation of the SDOA, or, in the alternative, its revocation. The second petition, praying for the
revocation and nullification of the SDOA and the distribution of the lands in the hacienda, was filed
by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA). The DAR then
constituted a Special Task Force (STF) to attend to issues relating to the SDP of HLI. After
investigation and evaluation, the STF found that HLI has not complied with its obligations under RA
6657 despite the implementation of the SDP. On December 22, 2005, the PARC issued the assailed
Resolution No. 2005-32-01, recalling/revoking the SDO plan of Tadeco/HLI. It further resolved that
the subject lands be forthwith placed under the compulsory coverage or mandated land acquisition
scheme of the CARP.
From the foregoing resolution, HLI sought reconsideration. Its motion notwithstanding, HLI
also filed a petition before the Supreme Court in light of what it considers as the DARs hasty placing
of Hacienda Luisita under CARP even before PARC could rule or even read the motion for
reconsideration. PARC would eventually deny HLIs motion for reconsideration via Resolution No.
2006-34-01 dated May 3, 2006.

II. THE ISSUES


(1) Does the PARC possess jurisdiction to recall or revoke HLIs SDP?
(2) [Issue raised by intervenor FARM (group of farmworkers)] Is Sec. 31 of RA 6657, which allows stock
transfer in lieu of outright land transfer, unconstitutional?
(3) Is the revocation of the HLIs SDP valid? [Did PARC gravely abuse its discretion in revoking the
subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution
scheme?]
(4) Should those portions of the converted land within Hacienda Luisita that RCBC and LIPCO acquired
by purchase be excluded from the coverage of the assailed PARC resolution? [Did the PARC
gravely abuse its discretion when it included LIPCOs and RCBCs respective properties that once
formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed
Notice of Coverage?]

III. THE RULING


[The Court DENIED the petition of HLI and AFFIRMED the PARC resolution placing the
lands subject of HLIs SDP under compulsory coverage on mandated land acquisition scheme of the
CARP, with the MODIFICATION that the original 6,296 qualified FWBs were given the option to

remain as stockholders of HLI. It also excluded from the mandatory CARP coverage that part of
Hacienda Luisita that had been acquired by RCBC and LIPCO.]
(1) YES, the PARC has jurisdiction to revoke HLIs SDP under the doctrine of necessary
implication.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for
stock distribution of the corporate landowner belongs to PARC. Contrary to petitioner HLIs posture,
PARC also has the power to revoke the SDP which it previously approved. It may be, as urged, that
RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC with the
power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed
by PARC 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.
Following the doctrine of necessary implication, it may be stated that the conferment of
express power to approve a plan for stock distribution of the agricultural land of corporate owners
necessarily includes the power to revoke or recall the approval of the plan. To deny PARC such
revocatory power would reduce it into a toothless agency of CARP, because the very same agency
tasked to ensure compliance by the corporate landowner with the approved SDP would be without
authority to impose sanctions for non-compliance with it.

(2) NO, Sec. 31 of RA 6657 is not unconstitutional. [The Court actually refused to pass upon
the constitutional question because it was not raised at the earliest opportunity and because 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.]
When the Court is called upon to exercise its power of judicial review over, and pass upon
the constitutionality of, acts of the executive or legislative departments, it does so only when the
following essential requirements are first met, to wit: (1) there is an actual case or controversy; (2)
that the constitutional question is raised at the earliest possible opportunity by a proper party or one
with locus standi; and (3) the issue of constitutionality must be the very lis mota of the case.
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of a small
minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 31 of RA
6657 as early as November 21, 1989 when PARC approved the SDP of Hacienda Luisita or at least
within a reasonable time thereafter, and why its members received benefits from the SDP without so
much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP that said
plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the
constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the
subsequent implementation of the SDP. Even the public respondents, as represented by the
Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM,
whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on
May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some
eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of
RA 6657 which is quite too late in the day. The FARM members slept on their rights and even
accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31
upon which the benefits were derived. The Court cannot now be goaded into resolving a
constitutional issue that FARM failed to assail after the lapse of a long period of time and the

occurrence of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.
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 not present, the constitutional issue
tendered not being critical to the resolution of the case. The unyielding rule has been to avoid,
whenever plausible, an issue assailing the constitutionality of a statute or governmental act. If some
other grounds exist by which judgment can be made without touching the constitutionality of a law,
such recourse is favored.
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to
which the FARM members previously belonged) and the Supervisory Group, is the alleged noncompliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the
Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the
recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented,
offends certain constitutional and statutory provisions. To be sure, any of these key issues may be
resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply
into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but
rather it is the alleged application of the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657,
has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec.
31. In its pertinent part, Sec. 5 of RA 9700 provides: [T]hat after June 30, 2009, the modes of
acquisition shall be limited to voluntary offer to sell and compulsory acquisition. Thus, for all
intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an
available option under existing law. The question of whether or not it is unconstitutional should be a
moot issue.
(3) YES, the revocation of the HLIs SDP valid. [NO, the PARC did NOT gravely abuse its
discretion in revoking the subject SDP and placing the hacienda under CARPs compulsory
acquisition and distribution scheme.]
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of HLIs
stock distribution violate DAO 10 because the minimum individual allocation of each original FWB of
18,804.32 shares was diluted as a result of the use of man days and the hiring of additional
farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is contrary to what Sec. 11 of
DAO 10 prescribes.
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock
distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall
arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on
the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85
shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST
PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired
and distributed to the THIRD PARTY.

[I]t is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time
of the approval of the SDP, suffered from watering down of 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 per beneficiary, because the acquisition and distribution of the HLI shares

were based on man days or number of days worked by the FWB in a years time. As explained
by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes
entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any 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. Worse, HLI hired farmworkers in addition to the original 6,296
FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as of said date stood at 10,502. All these
farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85
HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the
minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of
the use of man days and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year
timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10
prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan
within three (3) months from receipt by the corporate landowner of the approval of the plan by
PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the
qualified FWBs should be recorded in the stock and transfer books and must be submitted to the
SEC within sixty (60) days from implementation.
To the Court, there is a purpose, which is at once discernible as it is practical, for the threemonth threshold. Remove this timeline and the corporate landowner can veritably evade compliance
with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution
scheme.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the
cost of the land thus awarded them to make it less cumbersome for them to pay the government. To
be sure, the reason underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued
in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be
upheld [because of violations of] DAO 10. It bears stressing that under Sec. 49 of RA 6657, the
PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being
a product of such rule-making power, DAO 10 has the force and effect of law and must be duly
complied with. The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC
Resolution No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided.

(4) YES, those portions of the converted land within Hacienda Luisita that RCBC and
LIPCO acquired by purchase should be excluded from the coverage of the assailed PARC
resolution.
[T]here are two (2) requirements before one may be considered a purchaser in good faith,
namely: (1) that the purchaser buys the property of another without notice that some other person
has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above requirements
and with respect to the adverted transactions of the converted land in questionpurchasers in good
faith for value entitled to the benefits arising from such status.

First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land,
there was no notice of any supposed defect in the title of its transferor, Centennary, or that any other
person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of
land, only the following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in favor of Shintaro
Murai, and the conversion of the property from agricultural to industrial and residential use.
The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita,
only the following general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions,
limiting its use solely as an industrial estate; the Secretarys Certificate in favor of Koji Komai and
Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300
million.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to
CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated
at the back of the titles of the lots they acquired. However, they are of the honest belief that the
subject lots were validly converted to commercial or industrial purposes and for which said lots were
taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally
and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and
disposition of agricultural lands previously covered by CARP land acquisition after the lapse of five
(5) years from its award when the land ceases to be economically feasible and sound for agricultural
purposes or the locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes. Moreover, DAR notified all the affected parties, more
particularly the FWBs, and gave them the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary processes, granted the conversion of 500
hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to
determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all
matters involving the implementation of agrarian reform. The DAR conversion order became final
and executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC
and LIPCO purchased the lots in question on their honest and well-founded belief that the previous
registered owners could legally sell and convey the lots though these were previously subject of
CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP750 million
pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a Deed of Absolute
Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of
RCBC by way of dacion en pago to pay for a loan of PhP431,695,732.10.
In relying upon the above-mentioned approvals, proclamation and conversion order, both
RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda
Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and
consequently DAR, gravely abused its discretion when it placed LIPCOs and RCBCs
property which once formed part of Hacienda Luisita under the CARP compulsory acquisition
scheme via the assailed Notice of Coverage.
[The Court went on to apply the operative fact doctrine to determine what should be done in
the aftermath of its disposition of the above-enumerated issues:
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution
Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain operative facts that
had occurred in the interim. Pertinently, the operative fact doctrine realizes that, in declaring
a law or executive action null and void, or, by extension, no longer without force and effect, undue

harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights
might have accrued in favor of natural or juridical persons and obligations justly incurred in the
meantime. 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.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are
upheld, the revocation must, by application of the operative fact principle, give way to the
right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI
stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs
agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have
received from HLI salaries and cash benefits, hospital and medical benefits, 240-square meter
homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005. On August 6, 20l0, HLI and private
respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of
acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most
FWBs indicated their choice of remaining as stockholders. These facts and circumstances tend to
indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A
matter best left to their own discretion.]
[WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated
December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of
HLIs SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are
hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the
option to remain as stockholders of HLI. DAR shall 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 Hacienda Luisita Case Part I : How the Supreme Court Decided
on July 15, 2011
In its Decision in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform Council
(PARC), G.R. No. 171101, promulgated last July 5, 2011, the Supreme Court en banc DENIED the
petition filed by HLI andAFFIRMED the resolutions of the PARC revoking HLIs Stock Distribution
Plan (SDP) and placing the subject lands under compulsory coverage of the Comprehensive
Agrarian Reform Program (CARP) of the government.
[To read the FACTS of the case and a digest of the main opinion, please click here.]
The Court however MODIFIED the PARCs resolutions and did not order outright land
distribution. Noting that there are operative facts that occurred in the interim and which the Court
cannot validly ignore, 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]. The Court said it cannot turn a blind eye to the fact that in 1989, 93% of the FWBs
agreed to the Stock Distribution Option Agreement (SDOA), which became the basis of the SDP
approved by PARC. 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 Court refused to pass upon the question on the constitutionality of Sec. 31 of RA 6657,
the legal basis for the stock distribution option exercised by Tadeco/HLI, because it was not raised
at the earliest opportunity and because 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 Court also held that those portions 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) should be
excluded from the coverage of the assailed PARC resolution since the said intervenors are innocent
purchasers for value. Finally, the Court held that in determining the just compensation to be paid to
HLI, the date of the taking was November 21, 1989, the time when PARC approved HLIs SDP.
Justice Presbitero Velasco wrote the majority opinion. Fully concurring with him were
Justices Teresita Leonardo-De Castro, Lucas Bersamin, Mariano Del Castillo, Roberto Abad, and
Jose Portugal Perez. Chief Justice Renato Corona wrote what he styled as Dissenting
Opinion.Justice Arturo Brion, with whom Justice Martin Villarama fully concurred, wrote
a Separate Concurring and Dissenting Opinion. Justice Jose Mendoza wrote a Separate
Opinion. Finally, Justice Sereno wrote her ownDissenting Opinion.
The dissents in the July 5, 2011 decision
The dissents of the minority justices were on the other fine points of the decision.
Chief Justice Corona dissented insofar as the majority refused to declare Sec. 31 of RA 6657
unconstitutional. The provision grants to corporate landowners the option to give qualified FWBs the
right to own capital stock of the corporation in lieu of actual land distribution. The Chief Justice was
of the view that by allowing the distribution of capital stock, and not land, as compliance with
agrarian reform, Sec. 31 of RA 6657 contravenes Sec. 4, Article XIII of the Constitution, which, he
argued, requires that the law implementing the agrarian reform program should employ [actual] land
redistribution mechanism. Under Sec. 31 of RA 6657, he noted, the corporate landowner remains to
be the owner of the agricultural land. Qualified beneficiaries are given ownership only of shares of
stock, not [of] the lands they till. He concluded that since an unconstitutional provision cannot be the
basis of a constitutional act, the SDP of petitioner HLI based on Section 31 of RA 6657 is also
unconstitutional.
Justice Mendoza fully concurred with Chief Justice Coronas position that Sec. 31 of RA
6657 is unconstitutional. He however agreed with the majority that the FWBs be given the option to
remain as shareholders of HLI. He also joined Justice Brions proposal that that the reckoning date
for purposes of just compensation should be May 11, 1989, when the SDOA was executed by
Tadeco, HLI and the FWBs. Finally, he averred that considering that more than 10 years have
elapsed from May 11, 1989, the qualified FWBs, who can validly dispose of their due shares, may do
so, in favor of LBP or other qualified beneficiaries. The 10-year period need not be counted from the
issuance of the Emancipation Title (EP) or Certificate of Land Ownership Award CLOA) because,
under the SDOA, shares, not land, were to be awarded and distributed.
Justice Brions dissent centered on the consequences of the revocation of HLIs SDP/SDOA.
He argued that that the operative fact doctrine only applies in considering the effects of a declaration
of unconstitutionality of a statute or a rule issued by the Executive Department that is accorded the
status of a statute. The SDOA/SDP is neither a statute nor an executive issuance but a contract

between the FWBs and the landowners; hence, the operative fact doctrine is not applicable. A
contract stands on a different plane than a statute or an executive issuance. When a contract is
contrary to law, it is deemed void ab initio. It produces no legal effects whatsoever. Thus, Justice
Brion questioned the option given by the majority to the FWBs to remain as stockholders in an
almost-bankrupt corporation like HLI. He argued that the nullity of HLIs SDP/SDOA goes into its
very existence, and the parties to it must generally revert to their respective situations prior to its
execution. Restitution, he said, is therefore in order. With the SDP being void, the FWBs should
return everything they are proven to have received pursuant to the terms of the SDOA/SDP. Justice
Brion then proposed that all aspects of the implementation of the mandatory CARP coverage be
determined by the DAR by starting with a clean slate from [May 11,] 1989, the point in time when the
compulsory CARP coverage should start, and proceeding to adjust the relations of the parties with
due regard to the events that intervened [thereafter]. He also held that the time of the taking (when
the computation of just compensation shall be reckoned) shall be May 11, 1989, when the SDOA
was executed by Tadeco, HLI and the FWBs.
Justice Sereno dissented with respect to how the majority modified the questioned PARC
Resolutions (i.e., no immediate land distribution, give first the original qualified FWBs the option to
either remain as stockholders of HLI or choose actual land distribution) and the applicability of the
operative fact doctrine. She would instead order the DAR to forthwith determine the area of
Hacienda Luisita that must be covered by the compulsory coverage and monitor the land distribution
to the qualified FWBs.
Erroneous interpretation of the Courts decision
The High Tribunal actually voted unanimously (11-0) to DISMISS/DENY the petition of HLI
and to AFFIRM the PARC resolutions. This is contrary to media reports that the Court voted 6-4 to
dismiss the HLI petition. The five (not four) minority justices (Chief Justice Corona, and Justices
Brion, Villarama, Mendoza, and Sereno) only partially dissentedfrom the decision of the majority of
six (Justice Velasco Jr., Leonardo-De Castro, Bersamin, Del Castillo, Abad, and Perez). Justice
Antonio Carpio took no part in the deliberations and in the voting, while Justice Diosdado Peralta
was on official leave. The 14th and 15th seats in the Court were earlier vacated by the retirements of
Justices Eduardo Antonio Nachura (June 13, 2011) and Conchita Carpio-Morales (June 19, 2011).
Another misinterpretation came from no less than the Supreme Court administrator and
spokesperson, Atty. Midas Marquez. In a press conference called after the promulgation of the
Courts decision, Marquez initially used the term referendum in explaining the High Courts ruling.
This created confusion among the parties and the interested public since a referendum implies that
the FWBs will have to vote on a common mode by which to pursue their claims over Hacienda
Luisita. The decision was thus met with cries of condemnation by the misinformed farmers and the
various peoples organizations and militant groups supportive of their cause.
Marquez would later correct himself in a subsequent press briefing. But since by then the
parties had already filed their respective motions for reconsideration, he called upon everyone to just
wait for the final resolution of the motion[s], which is forthcoming anyway. The resolution of the
consolidated motions for reconsideration came relatively early on November 22, 2011, or less than
five months from the promulgation of the decision.

The Hacienda Luisita Case Part II : The November 22, 2011 Supreme
Court Resolution
Less than five months from the promulgation of its July 5, 2011Decision, the Court en banc
promulgated on November 22, 2011 itsResolution on the various motions for reconsideration filed

in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform Council (PARC), G.R.
No. 171101.
[To read the FACTS of the case and the digest of the decision, please click here. To read
a summary of the opinions in the July 5, 2011 decision, please click here.]
In its Resolution, 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, 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.
Thus, the Court unanimously this time directed immediate land distribution to the
qualified FWBs. On the fine points, however, again the Court failed to have one voice.
The majority maintained its argument that the operative fact doctrine applies 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.
The majority also 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. On the other hand, the majority
likewise reiterated its holding that those portions 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) should be excluded from the
coverage of the assailed PARC resolution since the said intervenors are innocent purchasers for
value.
Finally, the majority maintained that for the purpose of determining just compensation, the
date of taking is November 21, 1989 (the date when PARC approved HLIs SDP) since this is the
time that the FWBs were considered to own and possess the agricultural lands in Hacienda Luisita.
To be precise, these lands became subject of the agrarian reform coverage through the stock

distribution scheme only upon the approval of the SDP, that is, on November 21, 1989. Such
approval is akin to a notice of coverage ordinarily issued under compulsory acquisition. On the
contention of the minority (Justice Sereno) that the date of the notice of coverage [after PARCs
revocation of the SDP], that is, January 2, 2006, is determinative of the just compensation that HLI is
entitled to receive, the 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.
The separate opinions in the resolution
While the Court is unanimous on the matter of the distribution of Hacienda Luisita to the
FWBs, the minority still disagreed with several aspects of the resolution of the majority.
Thus, Chief Justice Corona reiterated in his Dissenting Opinionthat Section 31 of RA 6657
is invalid and unconstitutional. Agrarian reforms underlying principle is the recognition of the rights
of farmers who are landless to own, directly or collectively, the lands they till. Under the Constitution,
actual land distribution to qualified agrarian reform beneficiaries is mandatory. Anything that
promises something other than land, such the stock distribution option in Sec. 31, must be struck
down for being unconstitutional.
Justice Bersamin, who fully concurred in the July 15, 2011 decision, wrote a Concurring and
Dissenting Opinion. He opined that (1) the reckoning date for purposes of determining just
compensation should be left to the DAR and Land Bank, and, ultimately, to the Special Agrarian
Court (SAC) to determine; and (2) the landowner should be compensated for the value of the
homelots granted to the farmworkers-beneficiaries (FWBs) pursuant to the discredited stock
distribution plan (SDP). According to Justice Bersamin, the determination of when the taking
occurred is an integral part of the determinationof just compensation. The nature and character of
land at the time of its taking are the principal criteria to determine just compensation to the
landowner; thus, the factual issue of when the taking had taken place should not be separated from
the determination of just compensation by DAR, Land Bank and SAC. On the other hand, it
appeared that the homelots granted to the FWBs under the SDP do not form part of the total area of
the agricultural lands to be turned over to DAR for distribution to the qualified FWBs for which the
landowner will be justly compensated. Should the landowner not be justly compensated for the value
of the homelots, the taking will be confiscatory and unconstitutional.
Justice Sereno this time wrote a Concurring and Dissenting Opinion. She disagreed
with the majoritys choice of November 21, 1989 as the reckoning date of the taking of the lands
ordered to be distributed for the purpose of eventually determining just compensation. Her thesis:
The taking of private lands under the agrarian reform program partakes of the nature of an
expropriation proceeding. For purposes of taking under the agrarian reform program, the owners of
the land should not receive less than the market value for their expropriated properties. There is
taking of private property by the State in expropriation proceedings when the owner is ousted from
his property and deprived of his beneficial enjoyment thereof. The time of taking is the moment
when landowners are deprived of the use and benefit of the property. No taking of agricultural lands
can thus be considered either at the time the SDOA was signed (May 11, 1989, as proposed by
Justice Brion) or at the time PARC approved it (November 21, 1989, as held by the majority) since
petitioner HLI retained full ownership and use of the lands thereafter. Despite the change in
stockholders, petitioner was never ousted from or deprived of the beneficial enjoyment of the
agricultural lands in Hacienda Luisita. Citing the rulings of the Court in agrarian reform cases,
Justice Sereno noted that the notice of coverage commences the process of acquiring private

agricultural lands covered by the CARP. The date of the notice of coverage January 2, 2006 is
therefore determinative of the just compensation that petitioner HLI is entitled to.

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
HLIs 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) Cant the Court order that DARs compulsory acquisition of Hacienda Lusita cover the full 6,443
hectares allegedly covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco), and not just the 4,915.75 hectares covered by HLIs SDP?
(4) Is the date of the taking (for purposes of determining the just compensation payable to HLI)
November 21, 1989, when PARC approved HLIs SDP?
(5) Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May
10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on
May 11, 1989), and thus the qualified FWBs should now be allowed to sell their land interests in
Hacienda Luisita to third parties, whether they have fully paid for the lands or not?
(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs be
given an option to remain as stockholders of HLI be reconsidered?
III. THE RULING

[The Court PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et
al. with respect to the option granted to the original 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 DARs compulsory acquisition of Hacienda Lusita cover the
full 6,443 hectares and not just the 4,915.75 hectares covered by HLIs SDP.
[Since what is put in issue before the Court is the propriety of the revocation of the SDP,
which only involves 4,915.75 has. of agricultural land and not 6,443 has., then the Court is
constrained to rule only as regards the 4,915.75 has. of agricultural land.Nonetheless, this should
not prevent the DAR, under its mandate under the agrarian reform law, from subsequently subjecting
to agrarian reform other agricultural lands originally held by Tadeco that were allegedly not
transferred to HLI but were supposedly covered by RA 6657.
However since the area to be awarded to each FWB in the July 5, 2011 Decision appears
too restrictive considering that there are roads, irrigation canals, and other portions of the land that
are considered commonly-owned by farmworkers, and these may necessarily result in the decrease
of the area size that may be awarded per FWB the Court reconsiders its Decision and resolves to
give the DAR leeway in adjusting the area that may be awarded per FWB in case the number of
actual qualified FWBs decreases. In order to ensure the proper distribution of the agricultural lands
of Hacienda Luisita per qualified FWB, and considering that matters involving strictly the
administrative implementation and enforcement of agrarian reform laws are within the jurisdiction of
the DAR, it is the latter which shall determine the area with which each qualified FWB will be
awarded.

On the other hand, the majority likewise reiterated its holding that the 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 80.51hectare land used for the SCTEX be distributed to the FWBs.]
4. YES, the date of taking is November 21, 1989, when PARC approved HLIs SDP.
[For the purpose of determining just compensation, the date of taking is November 21,
1989 (the date when PARC approved HLIs SDP) since this is the time that the FWBs were
considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands
became subject of the agrarian reform coverage through the stock distribution scheme only upon the
approval of the SDP, that is, on November 21, 1989. Such approval is akin to a notice of coverage
ordinarily issued under compulsory acquisition. On the contention of the minority (Justice Sereno)
that the date of the notice of coverage [after PARCs revocation of the SDP], that is, January 2,
2006, is determinative of the just compensation that HLI is entitled to receive, the Court majority
noted that none of the cases cited to justify this position involved the stock distribution scheme.
Thus, said cases do not squarely apply to the instant case. The foregoing notwithstanding, it bears
stressing that the DAR's land valuation is only preliminary and is not, by any means, final and
conclusive upon the landowner. The landowner can file an original action with the RTC acting as a
special agrarian court to determine just compensation. The court has the right to review with finality
the determination in the exercise of what is admittedly a judicial function.]
5. NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has NOT
lapsed on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell their land
interests in Hacienda Luisita to third parties.
[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after
10 years from the issuance and registration of the emancipation patent (EP) or certificate of land
ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued to the
qualified FWBs in the instant case, the 10-year prohibitive period has not even started. Significantly,
the reckoning point is the issuance of the EP or CLOA, and not the placing of the agricultural lands
under CARP coverage. Moreover, should the FWBs be immediately allowed the option to sell or
convey their interest in the subject lands, then all efforts at agrarian reform would be rendered
nugatory, since, at the end of the day, these lands will just be transferred to persons not entitled to
land distribution under CARP.]
6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to
remain as stockholders of HLI should be reconsidered.
[The Court reconsidered its earlier decision that the qualified FWBs should be given an
option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control
[over the subject lands] given the present proportion of shareholdings in HLI. The Court noted that
the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the holders of this
33.296% unanimously vote to remain as HLI stockholders, which is unlikely, control will never be in
the hands of the FWBs. Control means the majority of [sic] 50% plus at least one share of the
common shares and other voting shares. Applying the formula to the HLI stockholdings, the number
of shares that will constitute the majority is 295,112,101 shares (590,554,220 total HLI capital shares
divided by 2 plus one [1] HLI share). The 118,391,976.85 shares subject to the SDP approved by
PARC substantially fall short of the 295,112,101 shares needed by the FWBs to acquire control over
HLI.]