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up referendum conducted by the DAR on October 14, 1989, in which 5,117 FWBs,
Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC),
et al., G.R. No. 171101, July 5, 2011
VELASCO, JR., J.:
I. THE FACTS
In 1958, the Spanish owners of Compañia 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
government’s case against Tadeco, et al. The CA dismissed the case, subject to the
PARC’s approval of Tadeco’s 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 HLI’s 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 HLI’s SDP, which was eventually approved by the PARC after a follow-
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 HLI’s 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 LIPCO’s PhP431,695,732.10 loan obligations to RCBC. LIPCO’s 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 DAR’s hasty placing of Hacienda Luisita under CARP even before
PARC could rule or even read the motion for reconsideration. PARC would
eventually deny HLI’s 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 HLI’s 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 HLI’s SDP valid? [Did PARC gravely abuse its discretion
in revoking the subject SDP and placing the hacienda under CARP’s 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 LIPCO’s
and RCBC’s 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 HLI’s 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 HLI’s 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 HLI’s 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
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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 non-compliance 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-à-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 HLI’s SDP valid. [NO, the PARC did NOT gravely
abuse its discretion in revoking the subject SDP and placing the hacienda under
CARP’s compulsory acquisition and distribution scheme.]
The revocation of the approval of the SDP is valid: (1) the mechanics and
timelines of HLI’s 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:
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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 year’s 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 three-month 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 HLI’s 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 are––based on the above
requirements and with respect to the adverted transactions of the converted land
in question––purchasers 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 Secretary’s
Certificate in favor of Teresita Lopa, the Secretary’s 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
Secretary’s 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
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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 LIPCO’s and RCBC’s 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
 Page |5

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 HLI’s 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.]

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 Compañia 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(PD 27-rice and corn). 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 government’s
case against Tadeco, et al. The CA dismissed the case, subject to the PARC’s
approval of Tadeco’s proposed stock distribution plan (SDP) in favor of its
farmworkers. [Under EO 229 (Sec10) and later RA 6657(Sec31), 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 HLI’s 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 HLI’s SDP, which was eventually approved by the PARC after a
6
follow-up 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.
As may be gleaned from the SDOA, included as part of the distribution plan are:
(a) production-sharing equivalent to three percent (3%) of gross sales from the
production of the agricultural land payable to the FWBs in cash dividends or
incentive bonus; and (b) distribution of free homelots of not more than 240 square
meters each to family-beneficiaries. The production-sharing, as the SDP indicated,
is payable "irrespective of whether [HLI] makes money or not," implying that the
benefits do not partake the nature of dividends, as the term is ordinarily
understood under corporation law. (5,117 out of 5315 = shares; 132 = land
distribution)
Prior to approval, DAR Secretary Miriam Defensor-Santiago proposed that the
SDP be revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall
ensure that there will be no dilution in the shares of stocks of individual
[FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of
the percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings
of the [FWBs] will be maintained at any given time
November 21, 1989 - the PARC, under then Sec. Defensor-Santiago, issued
Resolution No. 89-12-2, approving the SDP of Tadeco/HLI.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe
benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500
hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and no
interest bearing salary/educational loans and rice sugar accounts.
Two separate groups subsequently contested this claim of HLI. (the
petitions/protets)
CONVERSION PROPER
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 HLI’s 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(180 has and 4 has), 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 LIPCO’s PhP431,695,732.10 loan obligations to
RCBC(dacion en pago). LIPCO’s titles were cancelled and new ones were issued
to RCBC.
The other 200 has was transferred to Luisita Realty Corporation (LRC) in two
separate transactions in 1997 and 1998, both uniformly involving 100 hectares
for PhP 250 million each.
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, AND RECOMMENDED. 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 DAR’s hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration. PARC would
eventually deny HLI’s 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 HLI’s 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 HLI’s SDP valid? [Did PARC gravely abuse its discretion
in revoking the subject SDP and placing the hacienda under CARP’s compulsory
acquisition and distribution scheme?]
7
(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 LIPCO’s and RCBC’s respective properties that once formed part of
Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed
Notice of Coverage?]
III. THE RULING
HLI: PARC has no authority to revoke the SDP; it has the power to disapprove, but
not to recall its previous approval of the SDP. It is the court which has jurisdiction
and authority to order the revocation or rescission of the PARC-approved SDP
(1) YES, the PARC has jurisdiction to revoke HLI’s 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 HLI’s 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.
HLI: the parties to the SDOA should now look to the Corporation Code, instead of
to RA 6657, in determining their rights, obligations and remedies. The Code
should be the applicable law on the disposition of the agricultural land of HLI.
SC: NO! the rights, obligations and remedies of the parties to the SDOA embodying
the SDP are primarily governed by RA 6657. It should abundantly be made clear
that HLI was precisely created in order to comply with RA 6657, which the OSG
aptly described as the "mother law" of the SDOA and the SDP. It is, thus,
paradoxical for HLI to shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under the guise of being a
corporate entity.
(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.]
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. 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 non-compliance 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.
8
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-à-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 HLI’s SDP valid. [NO, the PARC did NOT gravely
abuse its discretion in revoking the subject SDP and placing the hacienda
under CARP’s compulsory acquisition and distribution scheme.]
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines
of HLI’s 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 year’s 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 three-month 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. 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 HLI’s 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 are purchasers in good faith for
value entitled to the benefits arising from such status.
9
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 Secretary’s
Certificate in favor of Teresita Lopa, the Secretary’s 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 Secretary’s
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 LIPCO’s and RCBC’s 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.]
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
10
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 Corona’s 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
Brion’s 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 Brion’s dissent centered on the consequences of the revocation of HLI’s
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 HLI’s 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 Court’s 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 dissented from 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 Court’s decision, Marquez initially used the
term “referendum” in explaining the High Court’s 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 people’s 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.
G.R. No. 171101 November 22, 2011
(1) Motion for Clarification and Partial Reconsideration dated July 21, 2011 filed
by petitioner Hacienda Luisita, Inc. (HLI);
- it is not proper to distribute the proceeds of the conversion sale to the FWBs
the proceeds of the sale belong to the corporation for having sold its asset,
and the distribution would be considered dissolution of HLI
- the actual taking is NOT November 21, 1989, but should be reckoned from
finality of the Decision of this Court, or at the very least, the reckoning period
may be tacked to January 2, 2006, the date when the Notice of Coverage was
issued by the DAR
(2) Motion for Partial Reconsideration dated July 20, 2011 filed by PARC and DAR
- Doctrine of Operative fact does not apply because no law was declared void.
(3) Motion for Reconsideration dated July 19, 2011 filed by AMBALA
- RA 6657 is unconstitutional
- "operative fact doctrine" does not apply. the option given to the farmers to
remain as stockholders of HLI is equivalent to an option for HLI to retain
11
land in direct violation of the CARL, the SDP having been revoked. It should
not apply if it would result to inequity
- CA erred in holding that improving the economic status of FWBs is not
among the legal obligations of HLI under the SDP and an imperative
imposition by RA 6657 and DAO 10
- CA erred in holding that LIPCO and RCBC were purchasers for value
(4) Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor
Farmworkers Agrarian Reform Movement, Inc. (FARM);
- same with AMBALA
- issue of constitutionality is the lis mota of the case which must be decided
upon
(5) Motion for Reconsideration dated July 21, 2011 filed by private respondents
Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita, Inc.
(Supervisory Group) and Windsor Andaya (collectively referred to as "Mallari,
et al."); and
(6) Motion for Reconsideration dated July 22, 2011 filed by private respondents
Rene Galang and
ISSUES:
(1) applicability of the operative fact doctrine;
(2) constitutionality of Sec. 31 of RA 6657 or the Comprehensive Agrarian Reform
Law of 1988;
(3) coverage of compulsory acquisition;
(4) just compensation;
(5) sale to third parties;
(6) the violations of HLI; and
(7) control over agricultural lands (revocation of SDP)
OPERATIVE FACT DOCTRINE (not much related)
Bearing in mind that PARC Resolution No. 89-12-2 ––an executive act––was
declared invalid in the instant case, the operative fact doctrine is clearly
applicable.
it should be recognized that SC, in its July 5, 2011 Decision, affirmed the revocation
of Resolution No. 89-12-2 and ruled for the compulsory coverage of the
agricultural lands of Hacienda Luisita in view of HLI’s violation of the SDP and DAO
10. By applying the doctrine, this Court merely gave the qualified FWBs the option
to remain as stockholders of HLI and ruled that they will retain the homelots and
other benefits which they received from HLI by virtue of the SDP.
The application of the doctrine is favorable to the FWBs because not only were the
FWBs allowed to retain the benefits and homelots they received under the stock
 12

distribution scheme, they were also given the option to choose for themselves
whether they want to remain as stockholders of HLI or not. PROCEEDS OF SALE
Considering that the 500-hectare converted land, as well as the 80.51-hectare
SCTEX lot, should have been included in the compulsory coverage were it not for
CONSTITUTIONALITY
their conversion and valid transfers, then it is only but proper that the price
(Upheld previous ruling)
received for the sale of these lots should be given to the qualified FWBs. In effect,
FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31
the proceeds from the sale shall take the place of the lots.
of RA 6657. The second requirement that the constitutional question should be
raised at the earliest possible opportunity is clearly wanting.
JUST COMPENSATION - “TAKING”
The last but the most important requisite that the constitutional issue must be the
In Our July 5, 2011 Decision, We stated that "HLI shall be paid just compensation
very lis mota of the case does not likewise obtain. The lis mota aspect is not
for the remaining agricultural land that will be transferred to DAR for land
present, the constitutional issue tendered not being critical to the resolution of the
distribution to the FWBs." We also ruled that the date of the "taking" is November
case.
21, 1989, when PARC approved HLI’s SDP per PARC Resolution No. 89-12-2.
Mallari, et al. argued that the valuation of the land cannot be based on November
21, 1989. Instead, they aver that the date of "taking" for valuation purposes is a
COVERAGE OF COMPULSORY ACQUISITION
factual issue best left to the determination of the trial courts.
FARM argues that this Court ignored certain material facts when it limited the
AMBALA alleged that HLI should no longer be paid just compensation for the
maximum area to be covered to 4,915.75 hectares, whereas the area that should,
agricultural land that will be distributed to the FWBs, since the RTC already
at the least, be covered is 6,443 hectares, which is the agricultural land allegedly
rendered a decision ordering "the Cojuangcos to transfer the control of Hacienda
covered by RA 6657 and previously held by Tarlac Development Corporation
Luisita to the Ministry of Agrarian Reform, which will distribute the land to small
(Tadeco).
farmers after compensating the landowners P3.988 million." In the event,
We cannot subscribe to this view. Since what is put in issue before the Court is the
however, that this Court will rule that HLI is indeed entitled to compensation,
propriety of the revocation of the SDP, which only involves 4,915.75 has. of
AMBALA contended that it should be pegged at forty thousand pesos (PhP 40,000)
agricultural land and not 6,443 has., then We are constrained to rule only as
per hectare, since this was the same value that Tadeco declared in 1989 to make
regards the 4,915.75 has. of agricultural land.
sure that the farmers will not own the majority of its stocks.
DAR, however, contends that the declaration of the area to be awarded to each
SC: the date of "taking" is November 21, 1989, the date when PARC approved HLI’s
FWB is too restrictive. It stresses that in agricultural landholdings like Hacienda
SDP in view of the fact that this is the time that the FWBs were considered to own
Luisita, there are roads, irrigation canals, and other portions of the land that are
and possess the agricultural lands in Hacienda Luisita. To be precise, these lands
considered commonly-owned by farmworkers, and this may necessarily result in
became subject of the agrarian reform coverage through the stock distribution
the decrease of the area size that may be awarded per FWB. DAR also argues that
scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such
the July 5, 2011 Decision does not give it any leeway in adjusting the area that may
approval is akin to a notice of coverage ordinarily issued under compulsory
be awarded per FWB in case the number of actual qualified FWBs decreases.
acquisition. Further, any doubt should be resolved in favor of the FWBs.
The argument is meritorious. 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
SALE TO THIRD PARTIES
agrarian reform laws are within the jurisdiction of the DAR, it is the latter which
There is a view that since the agricultural lands in Hacienda Luisita were placed
shall determine the area with which each qualified FWB will be awarded.
under CARP coverage through the SDOA scheme on May 11, 1989, then the 10-
year period prohibition on the transfer of awarded lands under RA 6657 lapsed
500 HECTARES
on May 10, 1999, and, consequently, the qualified FWBs should already be allowed
RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage
to sell these lands with respect to their land interests to third parties, including
by means of a stock distribution plan, as the DAR conversion order was annotated
HLI, regardless of whether they have fully paid for the lands or not.
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
The proposition is erroneous. If the land has not yet been fully paid by the
purposes and for which said lots were taken out of the CARP coverage subject of
beneficiary, the right to the land may be transferred or conveyed, with prior
PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by
approval of the DAR, to any heir of the beneficiary or to any other beneficiary who,
them.
 13

as a condition for such transfer or conveyance, shall cultivate the land himself.
Failing compliance herewith, the land shall be transferred to the LBP which shall
give due notice of the availability of the land in the manner specified in the
immediately preceding paragraph.
In the event of such transfer to the LBP, the latter shall compensate the beneficiary
in one lump sum for the amounts the latter has already paid, together with the G.R. No. 171101 April 24, 2012
value of improvements he has made on the land. Before the Court are the Motion to Clarify and Reconsider Resolution of November
Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be 22, 2011 dated December 16, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI)
transferred or conveyed after ten (10) years from the issuance and registration of and the Motion for Reconsideration/Clarification dated December 9, 2011 filed by
the emancipation patent (EP) or certificate of land ownership award (CLOA). private respondents Noel Mallari, Julio Suniga, Supervisory Group of Hacienda
Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs Luisita, Inc. and Windsor Andaya (collectively referred to as "Mallari, et al.").
in the instant case, the 10-year prohibitive period has not even started.
Basically, the issues raised by HLI and Mallari, et al. boil down to the following: (1)
Significantly, the reckoning point is the issuance of the EP or CLOA, and not the
determination of the date of "taking"; (2) propriety of the revocation of the option
placing of the agricultural lands under CARP coverage.
on the part of the original FWBs to remain as stockholders of HLI; (3) propriety of
if We maintain the position that the qualified FWBs should be immediately
distributing to the qualified FWBs the proceeds from the sale of the converted land
allowed the option to sell or convey the agricultural lands in Hacienda Luisita, then
and of the 80.51-hectare Subic-Clark-Tarlac Expressway (SCTEX ) land; and (4)
all efforts at agrarian reform would be rendered nugatory by this Court, since, at
just compensation for the homelots given to the FWBs.
the end of the day, these lands will just be transferred to persons not entitled to
land distribution under CARP.
PAYMENT OF JUST COMPENSATION
HLI contends that since the SDP is a modality which the agrarian reform law gives
CONTROL OVER AGRICULTURAL LANDS
the landowner as alternative to compulsory coverage, then the FWBs cannot be
SC realized that the FWBs will never have control over these agricultural lands
considered as owners and possessors of the agricultural lands of Hacienda Luisita
for as long as they remain as stockholders of HLI.
at the time the SDP was approved by PARC. It further claims that the approval of
bearing in mind that with the revocation of the approval of the SDP, HLI will no
the SDP is not akin to a Notice of Coverage in compulsory coverage situations
longer be operating under SDP and will only be treated as an ordinary private
because stock distribution option and compulsory acquisition are two (2)
corporation; the FWBs who remain as stockholders of HLI will be treated as
different modalities with independent and separate rules and mechanisms.
ordinary stockholders and will no longer be under the protective mantle of RA
Concomitantly, HLI maintains that the Notice of Coverage issued on January 2,
6657.
2006 may, at the very least, be considered as the date of "taking" as this was the
In addition to the foregoing, in view of the operative fact doctrine, all the benefits only time that the agricultural lands of Hacienda Luisita were placed under
and homelots80 received by all the FWBs shall be respected with no obligation to compulsory acquisition in view of its failure to perform certain obligations under
refund or return them, since, as We have mentioned in our July 5, 2011 Decision, the SDP.
"the benefits x x x were received by the FWBs as farmhands in the agricultural
UPHELD PREVIOUS DECISION: taking was effected on November 21, 1989
enterprise of HLI and other fringe benefits were granted to them pursuant to the
existing collective bargaining agreement with Tadeco." What is notable, however, is that the divestment by Tadeco of the agricultural
lands of Hacienda Luisita and the giving of the shares of stock for free is nothing
One last point, the HLI land shall be distributed only to the 6,296 original FWBs.
but an enticement or incentive for the FWBs to agree with the stock distribution
The remaining 4,206 FWBs are not entitled to any portion of the HLI land, because
option scheme and not further push for land distribution. And the stubborn fact is
the rights to said land were vested only in the 6,296 original FWBs pursuant to
that the "man days" scheme of HLI impelled the FWBs to work in the hacienda in
Sec. 22 of RA 6657. With these, PARC/DAR’s, AMBALA’s, and FARM’s Motions –
exchange for such shares of stock.
GRANTED.
When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI
The order giving option to the FWBs to choose whether or not to stay as shareholders in order to comply with CARP through the stock distribution option scheme,
was thereby recalled. sealed with the imprimatur of PARC under PARC Resolution No. 89-12-2 dated
November 21, 1989, Tadeco was consequently dispossessed of the afore-
mentioned attributes of ownership. Notably, Tadeco and HLI are two different
 14

entities with separate and distinct legal personalities. Ownership by one cannot
be considered as ownership by the other.
Corollarily, it is the official act by the government, that is, the PARC’s approval of
the SDP, which should be considered as the reckoning point for the "taking" of the
agricultural lands of Hacienda Luisita. Although the transfer of ownership over the
agricultural lands was made prior to the SDP’s approval, it is this Court’s
consistent view that these lands officially became subject of the agrarian reform
coverage through the stock distribution scheme only upon the approval of the
SDP. And as We have mentioned in Our November 22, 2011 Resolution, such
approval is akin to a notice of coverage ordinarily issued under compulsory
acquisition.
FWBS ENTITLED TO PROCEEDS OF SALE
HLI reiterates its claim over the proceeds of the sales of the 500 hectares and
80.51 hectares of the land as corporate owner and argues that the return of said
proceeds to the FWBs is unfair and violative of the Corporation Code.
This claim is bereft of merit.
UPHELD PREVIOUS RULING - were it not for the approval of the SDP by PARC,
these large parcels of land would have been distributed and ownership
transferred to the FWBs, subject to payment of just compensation, given that, as
of 1989, the subject 4,915 hectares of Hacienda Luisita were already covered by
CARP.
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."
To recapitulate, the Court voted on the following issues in this manner:
1) In determining the date of "taking," the Court voted 8-6 to maintain the ruling
fixing November 21, 1989 as the date of "taking," the value of the affected lands
to be determined by the LBP and the DAR;
2) On the propriety of the revocation of the option of the FWBs to remain as HLI
stockholders, the Court, by unanimous vote, agreed to reiterate its ruling in its
November 22, 2011 Resolution that the option granted to the FWBs stays
revoked;
3) On the propriety of returning to the FWBs the proceeds of the sale of the 500-
hectare converted land and of the 80.51-hectare SCTEX land, the Court
unanimously voted to maintain its ruling to order the payment of the proceeds
of the sale of the said land to the FWBs less the 3% share, taxes and expenses
specified in the fallo of the November 22, 2011 Resolution;
4) On the payment of just compensation for the homelots to HLI, the Court, by
unanimous vote, resolved to amend its July 5, 2011 Decision and November 22,
2011 Resolution by ordering the government, through the DAR, to pay to HLI
the just compensation for the homelots thus distributed to the FWBS.
the government, through DAR, is ordered to pay Hacienda Luisita, Inc. the just
compensation for the 240-square meter homelots distributed to the FWBs.

HOMELOTS
In the present recourse, HLI also harps on the fact that since the homelots given
to the FWBs do not form part of the 4,915.75 hectares covered by the SDP, then
the value of these homelots should, with the revocation of the SDP, be paid to
Tadeco as the landowner.
We disagree. As We have explained in Our July 5, 2011 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. This is
provided under Sec. 30 of RA 6657.
Since none of the provisions made reference to corporations which opted for stock
distribution under Sec. 31 of RA 6657, then it is apparent that said 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
x x x residential or homelots of not more than 240 sq. m. each, with each family
beneficiary being assured of receiving and owning a homelot in the barrio or
barangay where it actually resides." In fact, HLI was able to distribute homelots to
some if not all of the FWBs.
Thus, in our November 22, 2011 Resolution, We declared that the homelots
already received by the FWBs shall be respected with no obligation to refund or
to return them. However, since the SDP was already revoked with finality, the
Court directs the government through the DAR to pay HLI the just compensation