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CASE TITLE:

Hacienda Luisita, Inc. (HLI), petitioner,

Luisita Industrial Park Corp. (LIPCO) and Rizal Commercial Banking Corporation (RCBC), petitioners-in-
intervention,

-versus-

Presidential Agrarian Reform Council (PARC); Secretary Nasser Pangandaman of the Department of Agrarian
Reform (DAR); Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), Rene Galang, Noel
Mallari, and Julio Suniga and his Supervisory Group of the HLI and Windsor Andaya, respondents.

G.R. No. 171101. July 5, 2011

CASE:

This case is a SPECIAL CIVIL ACTION in the Supreme Court. This involves a Petition for Certiorari and
Prohibition under Rule 65 with prayer for preliminary injunctive relief, HLI seeking to question and reverse the PARC
Resolutions issued on December 22, 2005 and May 3, 2006, and the implementing Notice of Coverage dated January 2, 2006.

FACTS:

In 1955, Land Reform Act [RA 1400] was passed which set the expropriation of all tenanted estates.

In 1957, the Spanish owners of the Compañia General de Tabacos de Filipinas (Tabacalera) sold to Tarlac
Development Corporation (TADECO) Hacienda Luisita and their controlling interest in the sugar mill within the hacienda,
the Central Azucarera de Tarlac (CAT), to be paid in Philippine pesos and in US dollars.

The Philippine Government, through the Central Bank of the Philippines, aided the buyer to obtain a dollar loan from
a US bank. The GSIS Board of Trustees extended on November 27, 1957 a PhP 5.911M loan in favour of TADECO to pay
the peso price with a condition under GSIS Resolution No. 3203, later amended by Resolution No. 356, Series of 1958, which
states:

“…the lots comprising Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants,
should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure
Act.”

On March 31, 1958, TADECO had fully paid the purchase price for the acquisition of Hacienda Luisita.

On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, abolishing share tenancy and
converting it to leasehold tenancy. It also created the Land Band of the Philippines (LBP). However, the law’s application was
found to be limited to specific areas in the Central Luzon.

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform
area and automatically converting tenancy to leasehold tenancy in all areas and reducing the retention limit from 75 Ha to 7
Ha.

A month after the declaration of Martial Law in September of 1972, President Marcos issued Presidential Decree No.
27 which allows tenant-farmers to purchase the land they tilled or to change from shared-tenancy to fixed-rent leasehold
tenancy, as a way to go about the “emancipation of the tillers from the bondage of the soil”.

On May 7, 1980, the Martial Law Administration filed a suit before the RTC of Manila against TADECO to surrender
Hacienda Luisita to the Ministry of Agrarian Reform (now the DAR) for its distribution to farmers. The RTC ordered
TADECO to surrender the hacienda to the MAR.

Then during the time of President Corazon C. Aquino, after Marcos was ousted, Proclamation No. 131, Series of
1987, was issued instituting a CARP.

On July 22, 1987, EO 229 was issued to provide for mechanisms for CARP implementation. It also created the PARC
as its policy-making body.
On March 17, 1988, the OSG moved to withdraw the government’s case against TADECO, et al.

On May 18, 1988, the CA dismissed the case the Marcos administration initially instituted and won against TADECO,
et al. However, the dismissal was conditioned that there be an approval of a stock distribution plan (SDP) to be submitted,
approved by PARC, and implemented as an alternative mode of land distribution, and failure to comply will cause the revival
of previous decision.

On June 15, 1988, the Comprehensive Agrarian Reform Law of 1988 (RA 6657) took effect, providing a new process
of land classification, acquisition, and distribution. This tested the application of the law in the current case of Hacienda
Luisita.

On August 23, 1988, HLI was formed as a spin-off corporation to facilitate the SDP.

On March 22, 1989, a TADECO, via a Deed of Assignment and Conveyance, transferred and conveyed to HLI the
titles over the lot in question, valued at PhP 196.630,000.00 (33.296% of the total asset of PhP 590,554,220.00). In line with
accommodating such transfer, the HLI increased its capital share to PhP 400,000,000 at PhP1/share, PhP 150,000,000 of
which were to be issued only to qualified and registered beneficiaries of the CARP, and the remaining PhP250,000,000 to any
stockholder of the corporation. (Obviously, the controlling shares of FWBs are lower in this case.) HLI guaranteed to the
qualified beneficiaries of the SDP production-sharing that “every year they will receive, on top of their regular compensation, an amount
that approximates 3% of the total gross sale from the production of the agricultural land, whether it is in the form of cash dividends or incentive
bonuses or both.” The production sharing is payable irrespective of whether HLI makes money or not. HLI also assured each
family beneficiary to be guaranteed a homelot of not more than 240 sq. m. in the barrio or barangay where they reside.

On May 9, 1989, about 93% of the FWBs accepted and signed the proposed SDOP.

On May 11, 1989, SDOA was entered into by TADECO/HLI and 5,848 qualified FWBs.

On October 14, 1989, the referendum conducted by DAR showed that 5,177 FWBs out of 5,315 participants opted to
receive shares in the HLI (that’s about 97.403575% of the participants), and only 132 chose actual land distribution.

On November 6, 1989, the DAR Secretary Mirriam Defensor-Santiago (now deceased) proposed the revision of the
SDP. On November 14, 1989, TADECO told DAR Sec. MDS that the proposed revision were already in place in the SDP
and MOA. Hence, On November 21, 1989, a Resolution No. 89-12-2 approved the SDP of TADECO/HLI.

From 1989 to 2005, HLI claimed to have extended the following benefits to FWBs:

(a) PhP 3 Billion worth of salaries, wages and fringe benefits;


(b) 59 Million shares of stock distribution for free to FWBs;
(c) PhP 150M, PhP 37.5M, PhP 2.4M, all representing 3% of the gross produce, the sale of 500 Ha of converted
agricultural land of Hacienda Luisita, and the sale of 80 Ha at PhP 80M for SCTEX, respectively.
(d) 240 sq.m. homelots distributed for free;
(e) Social service benefits

On August 15, 1995, HLI applied for conversion of the 500 Ha land from agricultural to industrial, which was
approved by DAR Secretary Ernesto Garilao a year later, or on August 14, 1996, conditioned on the payment of 3% of gross
selling price to FWBs and HLI’s continued compliance with its undertakings under the SDP.

On December 13, 1996, HLI ceded 200 Ha to Luisita Realty Corp. (LRC) at PhP 250 Million each in 1997 and 1998,
and 300 Ha of its converted areas to Centennary Holdings, Inc. (Centennary), who later sold the same to LIPCO for PhP 750
Million, the latter acquiring it for purpose of developing an industrial complex.

On November 25, 2004, LIPCO transferred portion of the lands acquired to RCBC by way of dation en pago in
payment of LIPCO’s PhP 431,634,732.10 loan.

Another 80.51 Ha was later detached from Hacienda Luisita and acquired by the government as part of the SCTEX
complex. About 4,335.75 Ha out of the 4,915 Ha remained of the original area ceded by TADECO to HLI.

With the prevailing situation, earlier in 2003, DAR received two petitions seeking to renegotiate, and/or revoke the
SDOA for violation by the HLI of the SDOA’s terms.
In the first petition, Jose Julio Suniga and Windsor Andaya (Supervisory Group of HLI) and 60 other supervisors
alleged that HLI failed to give their dividends, and their share in the gross sales and proceeds of the sales of the converted area
500 Ha area. They claimed that their lives have not improved contrary to the guarantees of the SDOA.

In the second petition (Petisyon), they call for the revocation and nullification of the SDOA and the distribution of
the lands. The Petisyon was filed by the AMBALA (composing about 80% of the 5,339 FWBs of Hacienda Luisita).

DAR constituted a Special Task Force to attend to the issues relating to the SDP of HLI and the latter found that
HLI failed to comply with their undertakings.

On December 22, 2005, PARC affirmed the recommendation of DAR to recall/revoke the SDOP of TADECO/HLI
and the land be placed under compulsory coverage or mandated land acquisition.

On January 2, 2006, HLI sought reconsideration. On the same day, DAR issued a Notice of Coverage, which HLI
received 2 days after.

On May 3, 2006, PARC’s Resolution denied MR by HLI.

But on June 14, 2006, the Court, acting on HLI’s motion, issued a TRO, enjoining the implementation of PARC’s
Resolution and the notice of coverage.

On December 2, 2006, Mallari filed a manisfestation and motion, alleging that he broke up with AMBALA and
formed FARM with Renato Lalic, and thus prayed to be allowed to intervene. In this moment, two factions were created due
to shirt and re-shift of allegiance, as Mallari would later return to create an AMBALA-Noel Mallari faction, leaving Renato
Lalic with the rest of the members in FARM.

On October 30, 2007, RCBC and LIPCO intervened and alleged that the assailed resolution effectively nullified the
TCTs under their respective names as the properties covered in the TCTs were included in the January 2, 2006 Notice of
Coverage. They claim that the revocation of SDP cannot legally affect their rights as innocent purchasers for value. They both
asserted to have acquired vested and indefeasible rights over certain portions of the covered properties.

On August 31, 2010, the Court created a Mediation Panel in a bid to resolve the dispute but no acceptable agreement
was reached.

ISSUES:

(1) Whether or not petitioners for the revocation/nullification of SDOA (herein respondents) are real party-in-interests;
(2) Whether or not PARC has jurisdiction to recall or revoke HLI’s SDP;
(3) Whether or not Section 31 of RA 6657 is constitutional;
(4) Whether or not such recall or revocation is a valid or proper action; and
(5) Whether or not the terms and conditions of the SDP, as embodied in the SDOA is valid.
RULINGS:

FIRST ISSUE:

YES. The Supreme Court held that Supervisory Group, AMBALA and their respective leaders are real parties-in-
interest.

The SDOA identifies the “SDP qualified beneficiaries” as “the farmworkers who appears in the annual payroll,
inclusive of the permanent and seasonal employees, who are regularly or periodically employed by HLI.” Galang and
the Supervisory group who were admittedly employed by HLI comes within the definition of real party-in-interest under
Section 2, Rule 3 of the Rules of Court, as one benefited or injured by the judgment in a suit, and thus, entitled to sue.

Assuming arguendo that they are not regular farmworkers, Article XIII of the Constitution categorized them as “other
farmworkers” entitled to “receive a just share of the fruits” of the land.

SECOND ISSUE:

YES. Although E0 229 expressly vested PARC with such authority to approve plan for stock distribution, without
explicitly vesting it to revoke/recall an approved SDP, under the principle of necessary implication, a basic postulate that
what is implied in a statute is as much a part of it as that which is expressed. To simply state it, every statutory grant of
power, right or privilege is deemed to include all incidental power, right, or privilege. Following the said doctrine, it may be
stated that the conferment of express power to approve SDP of agricultural land of corporate owners necessarily includes the
power to revoke or recall the approval of the plan, for to deny PARC of such revocation power, as in this case, would reduce
it into a toothless agency of CARP.

On a related issue, HLI claimed that subjecting the landholding to compulsory distribution after the approval of its
SDP results in the impairment of obligation and contract, and as such, a breach of its terms and conditions is not a PARC
administrative matter, but one that gives rise to a cause of action cognizable by regular courts. The Supreme Court stressed
that SDOA is a special contract imbued with public interest, entered into pursuant to RA 6657 and subject to the approval and
administrative adjudication of its issuing authority—PARC.

Contrary to the view of HLI, the rights, obligations, and remedies of the parties to the SDOA embodying the SDP are
governed by RA 6657 and not by the Corporation Code. HLI, as pointed by the Court was made to comply with RA 6657,
and not to shield itself from the coverage of CARP and supplant or circumvent the agrarian reform program. Also as between
the Corporation Code, a general law and RA 6657, a special law, the latter prevails –generalia specialibus non derogant. What private
respondents questioned before the Dar was the proper implementation of SDP and HLI’s compliance with RA 6657.
Evidently, RA 6657 was the applicable law in this case.

Also, contrary to the view of HLI that the inclusion of the agricultural land of Hacienda Luisita under CARP coverage
and the eventual distribution of the land to FWBs amounts to the dissolution of all corporate assets of HLI, and thus the
Corporation Code apply, the Court was not persuaded. The Court said that such inclusion and eventual distribution will not
automatically trigger the dissolution of HLI since the value of agricultural lands in relation to the total assets transferred and
conveyed by TADECO to HLI comprises only 33.296% (meaning it does not hold the majority assets of the corporation to
trigger such dissolution).

THIRD ISSUE:

In this issue on constitutionality of Section 31 of RA 6657, FARM seeks to invalidate the said provision of the law
because it allows corporations to use stock distribution as its mode of distribution or transfer instead of an outright
agricultural land transfer, which they believe impairs the fundamental right of farmers and farmworkers envisioned under
Section 4, Article XIII of the Constitution. HLI counters this matter by saying that agrarian reform is not only about transfer
of land ownership to farmers and other qualified beneficiaries.

Accordingly, the challenge on the constitutionality of Section 31 of RA 6657 and its counterpart provision in EO 229
failed.

The essential requisites for the exercise of its power of judicial review include the following:

(1) There is an actual case or controversy


(2) That the constitutional question is raised at the earliest possible opportunity by the proper party or one with locus
standi; and
(3) The issue of constitutionality must be the very lis mota of the case. [Garcia vs. Executive Secretary, 415 SCRA 44
(2009)]

The Supreme Court reasoned that the reason it failed was because of failure of the intervenors to question its
constitutionality in the earliest opportunity, and instead, slept on their rights and received benefits derived from the same. As
early as November 21, 1989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter,
its members received benefits from the SDP without so much protest. It was only on December 4, 2003 or 14 years after
approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution was
sought to be revoked. Furthermore, AMBALA did NOT question the constitutionality of said provision but focused on the
flaws and gaps in the subsequent implementation of the SDP. Even the public respondent Sol. Gen. did not question it, and
such question was only raised on May 3, 2007 when it filed its Supplemental Comment with the Court.

It has been stressed by the Supreme Court that the question on constitutionality will not passed upon by the Court
unless it is raised at the first or earliest possible opportunity by the proper party.

In terms of the lis mota of the case, the invalidity of the provision was not alleged, but rather it is the alleged
application in the SDP that is flawed was raised.

The Supreme Court also noted that Section 5 of RA 9700 superseded Section 31 of RA 6657 vis-à-vis the stock
distribution component of said provision, where Section 5 of RA 9700 provides: “That after June 30, 2009, the mode of
acquisition shall be limited to voluntary offer to sell and compulsory acquisition.” Thus, stock distribution is no longer
an available option under existing law. The issue has become moot and academic.

The Supreme Court ruled that there appeared to have been no breach of the fundamental law. Section 4, Article XIII
of the 1987 Constitution reads:
“The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular
farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of
other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may
prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing.”

The law is clear – farmers and regular farmworkers have a right to OWN DIRECTLY OR COLLECTIVELY THE
LANDS THEY TILL. The basic law allows two modes of land distribution—direct and indirect ownership. No language is
found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal
entity through which collective ownership can be exercised. The term “collectively” is said to allow indirect ownership of land
and not just outright agricultural land transfer. This is in recognition of the fact that land reform may become successful even
if it is done through the medium of juridical entities composed of farmers.

Even in the definition of agrarian reform itself in RA 6657 allows stock distribution— “the redistribution of lands…
to farmers and regular farmworkers who are landless… to lift the economic status of the beneficiaries and all other
arrangements alternative to physical redistribution of land, such as production or profit sharing, labour management and
the distribution of shares of stock which allow beneficiaries to receive a just share of the fruits of the land they work.”

The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with the State’s commitment to farmers and
farmworkers to advance their interests under the policy of social justice. This is believed to be the modality of the legislature
for collective ownership by which the imperatives of social justice may be approximated, if not achieved.

Also as contended by FARM that stock certificates do not equate to land ownership, still, the Corporation Code is
clear that the FWB becomes a stockholder who acquires an equitable interest in the assets of the corporation, which includes
the agricultural lands. A share of stock typifies an aliquot part of the corporation’s property, or right to share in its proceeds to
the extent when distributed according to law and equity and that its holder is not the owner of any part of the capital of the
corporation. However, the FWBs will ultimately own the agricultural lands owned by the corporation when the latter is
eventually dissolved and liquidated.
The policy of agrarian reform is that control over the agricultural land must always be in the hands of the farmers.
The Court also reasoned that there can be no guarantee of a successful implementation of agrarian reform, whether there is
actual distribution or not. Accordingly, the principle of “land to the tiller and the old pastoral model of ownership were non-
human juridical persons were prohibited from owning agricultural lands are no longer realistic under existing conditions.
FOURTH ISSUE:

On the determination of the propriety of such revocation or recall of HLI’s SDP by PARC for violating the agrarian
reform policy under Sec. 2 of RA 6657, as said plan fail to enhance the dignity and improve the quality of lives of the FWBs
through greater productivity of agricultural lands, the SC disagreed.

The SC reasoned that Section 2 of RA 6657 states that improving the economic status of FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would
justify discarding the stock distribution option. Nothing in that option agreement, law or department order indicates
otherwise.

Also SC said that it’s a matter of common business sense that no corporation could guarantee a profitable run all the
time. As such being the case, SDP cannot also guarantee, as indeed the SDOA does not guarantee, a comfortable life for the
FWBs.

The onerous condition of the FWBs’ economic status and hardships can hardly be attributed to HLI and its SDP and
provide a valid ground for the plan’s revocation.

On the Conversion of Lands

In this issue of the conversion of 500 Ha to non-agricultural uses as an infringement of Sec. 5 (a) of DAO 10, which
reads: “a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability”, the SC said that the PARC is wrong.

Said Sec. 5 (a) of DAO 10 does not exact from the corporate landowner-applicant the undertaking to keep the farm
intact and unfragmented ad infinitum (forever). What is required is viability of the corporate operations with or without its
corporate land remaining intact or unfragmented.”

On the 3% Production Share

On the matter of whether HLI complied with its undertaking to give 3% shares of the gross production sales of the
land, the SC ruled that the Special Task Force was silent as to whether HLI has failed to comply with the 3% production-
sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX lot, since some FWBs admits to
have received their share in the gross production of the sales and in the sale of SCTEX lot while the others claimed otherwise.
The Court found this as a slight breach that would not justify rescission of the contract.

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations or other business associations owning
or operating farms which opted for land distribution, and not for corporations which opted for stock distribution under Sec.
31 of RA 6657. Concomitantly, said corporation are not obliged to provide it, EXCEPT by stipulation, as in this case.

Under the SDP, HLI subdivided and allocated for free to qualified family-beneficiaries 240 sq. m. homelots in the
barrio or barangay where they actually reside. The Court opined that 16 years have elapse from the time the SDP was
approved by PARC, and yet FWBs alleged that not all were afforded homelots. Hence, SC ruled that HLI has not yet fully
complied with its undertaking to distribute homelots to FWBs under the SDP.

On “Man Days” and the Mechanics of Stock Distribution

The SC found that the SDOA violated two provisions of DAO 10.

In Par. 3 of the SDOA, the distribution of the shares of stock to the FWBs is contigent on the number of days FWBs have
worked during the year. This deviates from Sec. 4, DAO 10, which decrees the distribution of equal number of shares to the
FWBs as the minimum ratio of shares of stock for purposes of compliance with Section 21 of RA 6657.
Accordingly, Section 4 of DAO 10 gives two sets of shares of stocks which a qualified beneficiary can acquire from
the corporation under the SDP. The first one is the mandatory ratio of equal number of shares of stocks to be distributed to
the FWBs which contemplates “proportion of the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the company’s total asset.”

The second partakes a gratuitous extra grant or an augmentation share/s that the corporate landowner may give under
an additional stock distribution scheme, taking into account the rank, seniority, salary, position, and like factors which the
management, in the exercise of its sound discretion, may deem desirable.

However, the Court found that by providing that number of shares of the original 1989 FWBs to depend on the
number of “man days”, HLI violated the rule on stock distribution and effectively deprived the FWBs of equal shares of stock
in the corporation notwithstanding the fact that these FWBs have given up their right to the land that could have been
distributed to them instead of suffering such dilution regarding their due share entitlement.

Each of the 6,296 original FWBs is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed
18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI share per beneficiary needs to work
at least 37 days in a fiscal year before the latter becomes entitled to HLI shares. If it falls below 37 days, the FWB gets no share
at year end. The number of HLI shares distributed varies depending on the number of days the FWBs were allowed to work
in one year. Worst is they even hired additional farmworkers which reached a number of 10,502 which eventually diluted the
18,804.32 shares as a result of the use of “man days” and hiring additional farmworkers (as ‘kahati’ in the share obviously).

Another sub-issue pointed is the reliance of HLI to Section 26 of RA 6657 which suggests that land awarded “shall be
paid to by the beneficiaries to the LBP in 30 annual amortizations.” To simply put it, the beneficiaries are the ones obliged to
pay the LBP (which would really make it impossible for them to own it) and it is the HLI who is obliged to distribute the
shares of stocks among FWBs.

Exclusion from the coverage of land purchased by RCBC and LIPCO (III)

On resolving the issue of whether the converted farm land (allegedly) innocently purchased for value by RCBC and
LIPCO should be excluded from the PARC Resolution 2005-32-01, as implemented by the DAR-issued Notice of Coverage
dated January 2, 2006, which called for a mandatory CARP acquisition of the lands subject of the SDP, the SC opined that
although Section 44 of PD 1529 gives the principle that one need not look at the four corners of the title and may rely on what
appears on it, the rule admits to some exceptions, as when the party had knowledge of the facts and circumstances that would
impel a reasonably cautious man to make inquiry, or when the purchaser has knowledge of the defect of lack of title, or
sufficient facts to make inquiry into the status of the title of the property in litigation. Obviously, a higher level of care and
diligence is expected from banks, their business being impressed with public interest.

But the Court ruled that facts prove that RCBC and LIPCO cannot be claimed to have acted in bad faith to have
acquired the lots that were previously covered by SDP. The Court said that RCBC and LIPCO honestly believed that the
subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP
coverage of PARC Resolution No. 89-12-2 and hence, can be legally and validly acquired by them, and since Section 65 of RA
6657 allows conversion and disposition of agricultural lands previously covered by CARP. Also DAR notified all affected
parties, especially the FWBs but the order became final and executory after failure to interpose an appeal. Since RCBC and
LIPCO believed in good faith that the previous registered owners could legally sell and convey the lot though these were
previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. This fact
cannot be disregarded by DAR, PARC, or even the SC.

As regards to the 80.51 ha land transferred to the government for use as part of SCTEX, this is excluded from the
compulsory coverage considering that the transfer was made via the government’s power of eminent domain.

As to the actual existence of a statute or executive act is, prior to such a determination, an operative fact and may have
consequences which cannot justly be ignored; the past cannot always be erased by a new judicial declaration.
In this case, it is not the SDOA dated May 11, 1989 which was revoked, but rather, it is the PARC’s approval of the
HLI’s Proposal for Stock Distribution under CARP which embodied the SDP that was nullified. It is the SDP that gave legal
force an effect to the stock distribution scheme under PARC Resolution No. 89-12-2 that gave it its validity, and not the
SDOA which merely gave its basis and mechanics.

On PARC’s Resolutions effectively nullifying the Hacienda Luisita’s SDP (IV)

The Court upheld the revocation of the questioned PARC resolutions. The Court also recognized the rights of the
original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court reasoned that it
cannot turn a blind eye to the fact that the FWBs were said to have received benefits from the said agreement. Also on August
6, 2010, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of
acquiring a piece of agricultural lands or remain as HLI stockholders, and which most FWBs chose the latter.

With regards to the homelots already awarded, the FWBs are not obliged to return it to HLI or pay for its value since
it is part of the SDP’s benefit granted to them. However, for those who did not receive the homelot as of the revocation of
the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. In
case of distribution, the homelots would then not be deducted.

In terms of the 3% proceeds of the 500-ha land and 80.51 ha SCTEX lot to FWBs, DAR will move for the auditing
of HLI’s books to determine if the proceeds where utilized fof legitimate corporate purpose and the remaining balance from
the proceeds of the sale shall be distributed to the qualified beneficiaries.

In view of HLI’s payment of rent to FWBs for the use of the land from 1989, the Court said that this cannot be done
as the FWBs are also stockholders of HLI (a seemingly elite title), and the benefits acquired by the corporation from its
possession and use of the land ultimately redounded to the FWBs benefit based on its business operations in the form of
salaries, and other fringe benefits under the CBA. To allow payment of rent would tantamount to double compensation.

HLI will continue to exist, not functioning under the SDP, as the same was revoked already, but pursuant to the
Corporation Code as a private stock corporation.

HLI shall also be paid just compensation for the remaining agricultural lands that will be transferred to DAR for land
distribution to the FWBs. The date of taking considered by the SC is November 21, 1989, when PARC approved the HLI’s
SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of just compensation, and
NOT May 11, 1989, when the SDOA was approved by PARC.

The petition is treated as pro hac vice (means for this case only) in view of the peculiar facts and circumstances of the
case.

THE INSTANT PETITION IS DENIED.

PARC Resolution No. 2005-32-01 dated December 22, 2005 (wherein PARC affirmed the recommendation of DAR
to recall/revoke the SDOP of TADECO/HLI and the land be placed under compulsory coverage or mandated land
acquisition) and May 3, 2006 (wherein PARC denied MR by HLI) are AFFIRMED with MODIFICATION that the original
6,296 qualified FWBs shall have the option to remain as stockholders of HLI. Other FWBs who do not belong to the said
original qualified beneficiaries are NOT entitled to land distribution and shall remain as HLI stockholders. HLI is directed to
pay the FWBs the cconsiderations received from the 500 Ha converted land sale and 80.51 ha SCTEX lot, wherein the 3%
gross sales from the production of agricultural land, including expenditures for legitimate corporate purpose, such as taxes and
title transfer payments, shall be deducted from the total amount of PhP 1,330,511,500 (3 comas!). Any unspent or unused
balance will be distributed to the original FWBs.

HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from
November 21, 1989 and LBP are ordered to determine the compensation due to HLI.

DAR’s compliance report is ordered to be submitted six months from finality of judgment. TRO is lifted.
DISSENTING OPINION

Corona, C.J.:

One of the nice points given by the late CJ Corona (ousted in the PNoy Administration) states, to wit:

“Agrarian reform is an essential element of social justice under the 1987 Constitution. It mandates that farmers and
farmworkers have the right to own the land they till, individually and collectively, through cooperative or similar organizations.
It aims to liberate farmers and farmworkers from bondage to the soil, to ensure that they do not remain slaves of the land but
stewards thereof.”

He also opined that “unless there is land distribution, there can be no agrarian reform. Any program that gives
farmers or farmworkers anything less than ownership of land fails to conform to the mandate of the Constitution. In other
words, a program that gives qualified beneficiaries stock certificates instead of land is not agrarian reform.”

He believed that “actual land distribution is the essential characteristic of a constitutional agrarian reform
program.” Accordingly, the “polar star” in land reform is that ‘the farmer has a right to the land he tills”.

In the APRIL 24, 2012 RESOLUTION involving the same Hacienda Luisita Case

On November 22, 2011, the Court recalled and set aside the option to remain as stockholders of HLI, while
maintaining that all benefits received shall be respected with no obligation to refund or return them.

On December 9, 2011, a Motion for Reconsideration/Clarification by private respondents Mallari, Suniga,


Supervisory Group of HLI, and Andaya (Mallari, et al.

On December 16, 2011, a Motion to Clarify and Reconsider Resolution of November 22, 2011 was filed by HLI.

HLI and Mallari, et al., invokes the following grounds:

A. WON SC erred in determining just compensation by considering the date of taking as November 21, 1989 when
PARC approved the SDP (already revoked) since the Notice of Coverage of January 2, 2006 may be considered as
time FWBs owned and possess the agricultural lands of Hacienda Luisita because it was the only time when the
latter was placed under Compulsory Acquisition in view of failure to perform their obligations under the SDP, or
SDOA, when the owner is ACTUALLY deprived or dispossessed of his property, and considering taking from
November 21, 1989 is a deprivation of landowner’s property WITHOUT due process of law; and HLI is entitled
to be paid interest on the just compensation.
B. WON SC erred in reversing the decision of giving the FWBs option to remain as stockholders or not since (1) it
has been decided; (2) that neither the Constitution nor the CARL requires that FWBs should have control over
the agricultural lands; and (3) that the option is not shown to be detrimental to FWBs, but rather found beneficial
by the SC.
C. The proprietary of distributing the proceeds from the sale of the 500ha and 80.51 SCTEX lot cannot be retained
by HLI but returned to the FWBs and that HLI is using the Corporation Code to avoid liability to the FWBs
because: (1) the proceeds belongs to the corporation and not to either the HLI/TADECO or FWBs; and (2) to
allow return or proceeds to FWBs.
D. Just Compensation for the Homelots given to FWBs as it does not form part of the 4,915.75 hectares covered by
the SDP, and hence, the value of these homelots should, with the revocation of the SDP, be paid to Tadeco as
the landowner.

ON JUST COMPENSATION:

The Court stressed that “just compensation has been defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain, but the owner’s loss. Hence, in determining just
compensation, the price or value of the property at the time it was taken from the owner and appropriated by the government
shall be the basis. If the government takes possession of the land before the institution of expropriation proceedings, the value
should be fixed as of the time of the taking of said possession, not of the filing of the complaint.”

The SC, citing Land Bank of the Philippines v. Livioc, said that taking is when the landowner was deprived of the use and
benefit of his property, such as when the title is transferred to the Republic. It also noted that taking also occurs when
agricultural lands are voluntarily offered by a landowner and approved by PARC for CARP coverage through the stock
distribution scheme, as in the case of HLI earlier decided. Thus, HLI submitting its SDP for approval is an acknowledgment
on its part that the agricultural lands of Hacienda Luisita are covered by CARP. However, the PARC approval should be
considered as the effective date of taking because it was only during that time that the government officially confirmed the
CARP coverage of these lands.

Accordingly, Stock distribution and compulsory acquisition are two modalities sharing the same end goal of having a
more equitable distribution of land ownership, without ignoring such right to just compensation. Also, since it is only upon
the approval of the SDP that the agricultural lands actually came under CARP coverage, such approval operates and takes the
place of a notice of coverage ordinarily issued under compulsory acquisition.

What the SC found notable, however, is that the divestment by Tadeco of the agricultural lands of Hacienda Luisita
and the giving of the shares of stock for free is nothing but an enticement or incentive for the FWBs to agree with the stock
distribution option scheme and not further push for land distribution. And the stubborn fact is that the “man days” scheme of
HLI impelled the FWBs to work in the hacienda in exchange for such shares of stock.

The Court ruled that taking only when the landowner is deprived of the use and benefit of his property is not
incompatible with the earlier conclusion that taking took place on November 21, 1989, and since even from the start,
TADECO seemed to already favour Stock Distribution Scheme when complying with the CARP when it organized the HLI
as its spin-off corporation which facilitated stock acquisition of FWBs. Tadeco assigned and conveyed 4,915.75 has to
HLI the agricultural lands of Hacienda Luisita. These agricultural lands constituted as the capital contribution of the FWBs in
HLI. This, in effect, deprived TADECO itself of the ownership over these lands when it transferred the same to HLI.

When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI in order to comply with CARP
through the stock distribution option scheme under PARC Resolution No. 89-12-2 dated November 21, 1989, Tadeco was
consequently dispossessed of the ownership of the same.

Furthermore, adherence to the suggestion of HLI that the Notice of Coverage issued on January 2, 2006 should be
considered as date of taking would in effect penalize the qualified FWBs twice for acceding to the Stock Distribution Scheme,
(1) depriving them of the agricultural lands they should have gotten earlier, if it were not for this SDP and (2) making them
pay higher amortization for the agricultural lands that should have been given to them decades ago.

The SC maintained that, as it has in fact already ruled on its reckoning date, that is, November 21, 1989, the date of
issuance of PARC Resolution No. 89-12-2, based on the above-mentioned disquisitions.

On side note, the SC added that “even though the compensation due to HLI will still be preliminarily determined by
DAR and LBP, subject to review by the RTC acting as a SAC, the fact that the reckoning point of taking is already fixed at a
certain date should already hasten the proceedings and not further cause undue hardship on the parties, especially the qualified
FWBs.”

Option will not ensure control over agricultural lands

The Court agreed that the option given to the qualified FWBs whether to remain as stockholders of HLI or opt for
land distribution is neither iniquitous nor prejudicial to the FWBs. However, the Court is noted the policy on agrarian reform
that control over the agricultural land must always be in the hands of the farmers. Contrary to the stance of HLI, both the
Constitution and RA 6657 intended the farmers, individually or collectively, to have control over the agricultural lands of HLI;
otherwise, all these rhetoric about agrarian reform will be rendered for naught.

Sec. 4, Art. XIII of the 1987 Constitution provides:


Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular
farmworkers who are landless, to own directly or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may
prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing. (Emphasis supplied.)

Sec. 2 of RA 6657 also states:


SECTION 2. Declaration of Principles and Policies. - It is the policy of the State to pursue a Comprehensive Agrarian Reform
Program (CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural development and industrialization, and the
establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture.

The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to
own directly or collectively the lands they till or, in the case of other farm workers, to receive a share of the
fruits thereof.

As discussed by the SC, there is collective ownership as long as there is a concerted group work by the farmers on the
land, regardless of whether the landowner is a cooperative, association or corporation composed of farmers. However, the
definition of collective ownership should be read in light of the clear policy of the law on agrarian reform, which is to
emancipate the tiller from the bondage of the soil and empower the common people.

“HLI’s insistent view that control need not be in the hands of the farmers translates to allowing it to run
roughshod against the very reason for the enactment of agrarian reform laws and leave the farmers in their shackles
with sheer lip service to look forward to.” (quotable phrase)

FWBs Entitled to Proceeds of Sale

The proceeds realized from the sale should accrue for the benefit of the FWBs, minus deductions of the 3% of the
proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes, as
prescribed in our November 22, 2011 Resolution.
HOMELOTS

The SC agreed to DISAGREE.

As reiterated in the earlier decision, the distribution of homelots is required under RA 6657 only for corporations or business
associations owning or operating farms which opted for land distribution. Corporations are not obliged to provide for
homelots. Nonetheless, HLI undertook to subdivide and allocate for free and without charge among the qualified family-
beneficiaries 240 sq. m. of homelots to some, if not all of the qualified beneficiaries.

The Supreme Court, by a unanimous vote, resolved to maintain its ruling that the FWBs shall retain ownership of the
homelots given to them with no obligation to pay for the value of said lots. Also, since the SDP was already revoked with
finality in th earlier discussion of the decision, the Court directs the government through the DAR to pay HLI the just
compensation for said homelots in consonance with Sec. 4, Article XIII of the 1987 Constitution that the taking of land for
use in the agrarian reform program is subject to the payment of just compensation.

The Motions of both parties were DENIED with qualification. The July 5, 2011, Decision was modified by the
November 21, 2011 Resolution which ordered the government, through the DAR, to pay just compensation for the 240 sq. m.
homelots distributed to FWBs. This RESOLUTION is now declared FINAL and EXECUTORY.