DIANE ARCISO LLB 2-C

DINA RIMANDO MARZAN

ANNA MARIA LOPEZ

HACIENDA LUISITA, INCORPORATED

vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL;
SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF
AGRARIAN REFORM;
ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and
WINDSOR ANDAYA

G.R. No. 171101, November 22, 2011

FACTS:

Hacienda Luisita de Tarlac is a 6,443-hectare mixed agricultural-industrial-

residential expanse straddling several municipalities of Tarlac and owned by
Compañia General de Tabacos de Filipinas (Tabacalera). In 1957, Tabacalerao sold
Hacienda Luisita and its controlling interest in the sugar mill within the hacienda,
the Central Azucarera de Tarlac (CAT), to the Tarlac Development Corporation
(Tadeco), owned and/or controlled by the Jose Cojuangco, Sr. Group. Tadeco
obtained a dollar loan from a US Bank and a PhP 5.911 million loan from the
Government Service Insurance System (GSIS) Board of Trustees. One of the
conditions for the GSIS loan was that the lots comprising the Hacienda Luisita
shall be subdivided by Tadeco 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 May 7, 1980, the martial law administration filed a suit before the
Manila Regional Trial Court against Tadeco, et al., for them to surrender Hacienda
Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of
Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost.
Tadeco responded that Hacienda Luisita does not have tenants and the sugar lands
are not covered by existing agrarian reform legislations.

The Manila Regional Trial Court (RTC) rendered judgment ordering Tadeco
to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the
Court of Appeals (CA).

On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the government’s case against Tadeco. On May 18, 1988, the CA
dismissed the case filed by the Marcos government and granted the appeal of
Tadeco provided that the latter obtains a Stock Distribution Plan (SDP) duly
approved by the Presidential Agrarian Reform Council (PARC), which must be

Page 1 of 5
implemented after such approval. Failure to comply with the conditions will result
to the revival of the case.

On August 23, 1988, Tadeco organized a spin-off corporation, Hacienda

Luisita, Incorporated (HLI), as vehicle to facilitate stock acquisition by the
farmworkers. It appears that from the start, the stock distribution scheme is
Tadeco’s preferred option. For this purpose, Tadeco assigned and 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.

To accommodate the assets transfer from Tadeco to HLI, the latter, with the
approval of the Securities and Exchange Commission (SEC), increased its capital
stock from PhP150,000,000 to PhP400,000,000 divided into PhP400,000,000
shares with par value of PhP1/share, 150,000,000 of which were to be issued only
to qualified and registered beneficiaries of the Comprehensive Agrarian Reform
Program (CARP), and the remaining 250,000,000 to any stockholder of the
corporation. As appearing in its proposed SDP, the properties and assets of Tadeco,
with a net value of PhP355,531,462, contributed to the capital stock of HLI. This,
translated to 355,531,462 shares with a par value of PhP1/share.

On May 9, 1989, some 93% of the farmworker-beneficiaries (FWBs)

complement of Hacienda Luisita signified in a referendum their acceptance of the
proposed HLI’s Stock Distribution Option Plan.

On May 11, 1989, Tadeco, HLI, and the 5,848 qualified FWBs entered into a
Stock Distribution Option Agreement (SDOA) as attested to by the then DAR
Secretary Philip Juico. The SDOA included the following as part of the distribution
plan: (a) production-sharing equivalent to three percent 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 home lots 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. At this time, the FWBs has the 33%
of the outstanding capital stock of the HLI equivalent to 118,391,976.85 shares of
stock with par value of PhP1/share.

Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for

Stock Distribution under C.A.R.P.," which was based on the SDOA. DAR
conducted a follow-up referendum wherein they found out that 5,117 FWBs, out of
5,315 who participated, opted to receive shares in HLI. One hundred thirty-two
chose actual land distribution. After the review of the SDP, then DAR Secretary
Miriam Defensor-Santiago proposed some revisions to the SDP. Tadeco replied
that the proposed revisions are already embodied in both the SDP and MOA.
Consequently, the PARC approved the SDP. At this time, HLI had more or less
6,296 farmworkers.

From 1989 to 2005, HLI claimed to have extended the following benefits to
the FWBs: (a) PhP3,000,000,000 worth of salaries, wages and fringe benefits (b)
59 million shares of stock distributed for free to the FWBs; (c) PhP150,000,000

Page 2 of 5
representing 3% of the gross produce; (d) PhP37,500,000 representing 3% from the
sale of 500 hectares of converted agricultural land of Hacienda Luisita; (e) 240-
square meter home lots distributed for free; (f) PhP2,400,000 representing 3% from
the sale of 80 hectares at PhP80,000,000 for the SCTEX; and (g) Social service
benefits.

Two separate groups subsequently contested this claim of HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land
of the hacienda from agricultural to industrial, pursuant to Sec. 65 of RA 6657. The
application to convert the land was backed-up by more than 5,000 FWBs as
evidenced by the Manifesto of Support they signed and submitted to the DAR. The
DAR approved the application on August 14, 1996 subject to payment of 3% of the
gross selling price to the FWBs and to HLI’s continued compliance with its
undertakings under the SDP.

On December 13, 1996, HLI ceded 300 hectares of the converted area to
Centennary Holdings, Inc. (Centennary) in exchange for subscription of
12,000,000 shares of stock of the latter. The HLI also transferred the remaining 200
hectares to Luisita Realty Corporation (LRC) in two separate transactions in 1997
and 1998, both uniformly involving 100 hectares for PhP250 million each.

Subsequently, Centennary sold the entire 300 hectares to Luisita Industrial

Park Corporation (LIPCO) for PhP750 million. The latter acquired it for the
purpose of developing an industrial complex. Later on, LIPCO transferred the 300
hectares to the Rizal Commercial Banking Corporation (RCBC) by way of dacion
en pago in payment of LIPCO’s loan obligations.

Apart from the 500 hectares alluded to, another 80.51 hectares of Hacienda
Luisita had been acquired by the government as part of the Subic-Clark-Tarlac
Expressway (SCTEX) complex. Hence, 4,335.75 hectares remained of the original
4,915 hectares Tadeco ceded to HLI.

In 2003, two separate petitions revoking the SDOA reached DAR. In the
first petition, the head of the Supervisory Group of HLI (Supervisory Group), and
60 other supervisors sought to revoke the SDOA, alleging that HLI had failed to
give them their dividends, the 1% share in gross sales, and the 33% share in the
proceeds of the sale of the converted 500 hectares of land. They further claimed
that their lives have not improved contrary to the promise and rationale for the
adoption of the SDOA. The second petition was filed by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA) on behalf of its members
composing about 80% of the 5,339FWBs of Hacienda Luisita for the revocation
and nullification of the SDOA and the distribution of the lands in the hacienda.

The DAR constituted a Special Task Force to attend to issues relating to the
SDP of HLI. It found that HLI has not complied with its obligations under R.A.
6657 despite the implementation of the SDP. Thus, PARC ordered the recall or
revocation of the SDO plan of Tadeco/HLI and the lands subject of the recalled or

Page 3 of 5
revoked TDC/HLI SDO plan be placed under the compulsory coverage or
mandated land acquisition scheme of the CARP.

On January 2, 2006, HLI sought reconsideration. On the same day, the DAR
Tarlac issued the Notice of Coverage which HLI received on January 04, 2006.

To resolve the dispute through an amicable settlement, mediations were

conducted in September 2010. However, the mediation had to be discontinued
when no acceptable agreement could be reached.

On July 5, 2011, the Court denied the petition filed by HLI and affirming the
PARC Resolution placing the lands subject of HLI’s SDP under compulsory
coverage on mandated land acquisition scheme of the CARP, but with modification
that the original 6,296 qualified FWBs of Hacienda Luisita shall have the option to
remain as stockholders of HLI. HLI shall be paid just compensation for the
remaining agricultural land that will be transferred to DAR for land distribution to
the FWBs. Further, the Court ruled that the date of the taking is November 21,
1989, when PARC approved HLIs SDP per PARC Resolution No. 89-12-2.

Motions for Clarification and Partial Reconsideration were subsequently

filed.

ISSUE:

Whether in determining the just compensation, the date of “taking” is

November 21, 1989 when PARC approved HLI’s SDP.

HELD:

Yes, in determining the just compensation, the date of “taking” is November

21, 1989 when PARC approved HLI’s SDP.

In the November 22, 2011 Resolution, the Court maintained that the date of
“taking” is November 21, 1989, the date when PARC approved HLI’s SDP in view
of the fact that the FWBs were considered to own and possess the agricultural
lands in Hacienda Luisita. These lands became the subject of the agrarian reform
coverage through the stock distribution scheme only upon the approval of the SDP
on November 21, 1989. Thus, such approval is akin to a Notice of Coverage
ordinarily issued under compulsory acquisition. Further, any doubt should be
resolved in favor of the FWBs.

In the April 24, 2012 Resolution, the Court affirmed its ruling that the date
of “taking” in determining just compensation is November 21, 1989 when PARC
approved HLI’s stock option plan. The Court explained the following:

1. Sec. 4, Article XIII of the 1987 Constitution expressly provides that the
taking of land for use in the agrarian reform program of the government is
conditioned on the payment of just compensation.

Page 4 of 5
2. 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
taker’s gain, but the owner’s loss. 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
the filing of the complaint.

3. The “time of taking” is the time when the landowner was deprived of the use
and benefit of his property, such as when title is transferred to the Republic.
It should be noted, however, that “taking” does not only take place upon the
issuance of title either in the name of the Republic or the beneficiaries of the
CARP. “Taking” also occurs when agricultural lands are voluntarily offered
by a landowner and approved by PARC for CARP coverage through the
stock distribution scheme. Thus, HLI’s submitting its SDP for approval is an
acknowledgment on its part that the agricultural lands of Hacienda Luisita
are covered by CARP. However, it was the PARC approval which should be
considered as the effective date of “taking” as it was only during this time
that the government officially confirmed the CARP coverage of these lands.

4. There is “taking” only when the landowner is deprived of the use and benefit
of his property is compatible with the conclusion that “taking” took place on
November 21, 1989. As mentioned in the July 5, 2011 Resolution, even form
the start, the stock distribution scheme appeared to be Tadeco’s preferred
option in complying with the CARP when it organized HLI as its spin-off
corporation in order to facilitate stock acquisition by the FWBs. For this
purpose, Tadeco assigned and conveyed to HLI the agricultural lands of
Hacienda Luisita. These agricultural lands constituted as the capital
contribution of the FWBs in HLI. In effect, Tadeco deprived itself of the
ownership over these lands when it transferred the same to HLI.

5. 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,
these lands officially became subject of the agrarian reform coverage
through the stock distribution scheme only upon the approval of the SDP.
Such approval is akin to a notice of coverage ordinarily issued under
compulsory acquisition.

Page 5 of 5