HACIENDA LUISITA V.

PRESIDENTIAL AGRARIAN REFORM COUNCIL

July 5, 2011

FACTS:

In 1958, the Spanish owners of Compaia General de Tabacos de Filipinas (Tabacalera)
sold Hacienda Luisita and the Central Azucarera de Tarlac, the sugar mill of the hacienda, to the
Tarlac Development Corporation (Tadeco), then owned and controlled by the Jose Cojuangco Sr.
Group. The Central Bank of the Philippines assisted Tadeco in obtaining a dollar loan from
a US bank. Also, the GSIS extended a PhP5.911 million loan in favor of Tadeco to pay the peso
price component of the sale, with the condition that the lots comprising the Hacienda Luisita be
subdivided by the applicant-corporation and sold at cost to the tenants, should there be any, and
whenever conditions should exist warranting such action under the provisions of the Land
Tenure Act. Tadeco however did not comply with this condition.

On May 7, 1980, the martial law administration filed a suit before the Manila RTC
against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian
Reform (MAR) so that the land can be distributed to farmers at cost. Responding, Tadeco alleged
that Hacienda Luisita does not have tenants, besides which sugar lands of which the hacienda
consisted are not covered by existing agrarian reform legislations. The Manila RTC rendered
judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco
appealed to the CA.

On March 17, 1988, during the administration of President Corazon Cojuangco Aquino,
the Office of the Solicitor General moved to withdraw the governments case against Tadeco, et
al. The CA dismissed the case, subject to the PARCs approval of Tadecos proposed stock
distribution plan (SDP) in favor of its farmworkers. [Under EO 229 and later RA 6657, Tadeco
had the option of availing stock distribution as an alternative modality to actual land transfer to
the farmworkers.] On August 23, 1988, Tadeco organized a spin-off corporation, herein
petitioner HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose,
Tadeco conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related
properties of Hacienda Luisita in exchange for HLI shares of stock.

On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of
Hacienda Luisita signified in a referendum their acceptance of the proposed HLIs Stock
Distribution Option Plan (SODP). On May 11, 1989, the SDOA was formally entered into by
Tadeco, HLI, and the 5,848 qualified FWBs. This attested to by then DAR Secretary Philip
Juico. The SDOA embodied the basis and mechanics of HLIs SDP, which was eventually
approved by the PARC after a 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.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the
hacienda from agricultural to industrial use, pursuant to Sec. 65 of RA 6657. The DAR approved
the application on August 14, 1996, subject to payment of three percent (3%) of the gross selling
price to the FWBs and to HLIs continued compliance with its undertakings under the SDP,
among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks
of Centennary Holdings, Inc, ceded 300 hectares of the converted area to the latter.
Subsequently, Centennary sold the entire 300 hectares for PhP750 million to Luisita Industrial
Park Corporation (LIPCO), which used it in developing an industrial complex. From this area
was carved out 2 parcels, for which 2 separate titles were issued in the name of LIPCO. Later,
LIPCO transferred these 2 parcels to the Rizal Commercial Banking Corporation (RCBC) in
payment of LIPCOs PhP431,695,732.10 loan obligations to RCBC. LIPCOs titles were
cancelled and new ones were issued to RCBC. Apart from the 500 hectares, another 80.51
hectares were later detached from Hacienda Luisita and acquired by the government as part of
the Subic-Clark-Tarlac Expressway (SCTEX) complex. Thus, 4,335.75 hectares remained of the
original 4,915 hectares Tadeco ceded to HLI.

Such, was the state of things when two separate petitions reached the DAR in the latter
part of 2003. The first was filed by the Supervisory Group of HLI (Supervisory Group), praying
for a renegotiation of the SDOA, or, in the alternative, its revocation. The second petition,
praying for the revocation and nullification of the SDOA and the distribution of the lands in the
hacienda, was filed by 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. HLI also filed a petition
before the Supreme Court in light of what it considers as the DARs hasty placing of Hacienda
Luisita under CARP even before PARC could rule or even read the motion for reconsideration.
PARC eventually denied HLIs motion for reconsideration via Resolution No. 2006-34-01 dated
May 3, 2006.


ISSUES:

1. Whether PARC can revoke or recall HLIs SDP? Is it Valid?
2. Whether Sec. 31 of R.A. 6657 is unconstitutional?
3. Whether the Lands acquired by RCBC and LIPCO are covered by the revocation order of
PARC?

HELD:

1. Yes, PARC has jurisdiction to revoke HLIs SDP under the doctrine of necessary implication.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan
for stock distribution of the corporate landowner belongs to PARC. Contrary to petitioner HLIs
posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as
urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the
PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is
deemed possessed by PARC under the principle of necessary implication, a basic postulate that
what is implied in a statute is as much a part of it as that which is expressed.

Following the doctrine of necessary implication, it may be stated that the conferment of
express power to approve a plan for stock distribution of the agricultural land of corporate
owners necessarily includes the power to revoke or recall the approval of the plan. To deny
PARC such revocatory power would reduce it into a toothless agency of CARP, because the very
same agency tasked to ensure compliance by the corporate landowner with the approved SDP
would be without authority to impose sanctions for non-compliance with it.
The revocation of the approval of the SDP is valid: (1) the mechanics and timelines of
HLIs stock distribution violate DAO 10 because the minimum individual allocation of each
original FWB of 18,804.32 shares was diluted as a result of the use of man days and the hiring
of additional farmworkers; (2) the 30-year timeframe for HLI-to-FWBs stock transfer is contrary
to what Sec. 11 of DAO 10 prescribes.
Taking into account the above discussion, the revocation of the SDP by PARC should be
upheld [because of violations of] DAO 10. It bears stressing that under Sec. 49 of RA 6657, the
PARC and the DAR have the power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law
and must be duly complied with. The PARC is, therefore, correct in revoking the
SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the
HLIs SDP is nullified and voided.




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.

In order for the Court 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.

It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of
said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: That 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, those portions of the converted land within Hacienda Luisita that RCBC and LIPCO
acquired by purchase should be excluded from the coverage of the assailed PARC resolution.

[T]here are two (2) requirements before one may be considered a purchaser in good faith,
namely: (1) that the purchaser buys the property of another without notice that some other person
has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for
the property at the time of such purchase or before he or she has notice of the claim of another.

It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted land in 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 Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and
residential use.

The same is true with respect to RCBC. At the time it acquired portions of Hacienda
Luisita, only the following general annotations appeared on the TCTs of LIPCO: the Deed of
Restrictions, limiting its use solely as an industrial estate; the Secretarys Certificate in favor of
Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the
payment of PhP 300 million.

To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected
to CARP coverage by means of a stock distribution plan, as the DAR conversion order was
annotated at the back of the titles of the lots they acquired. However, they are of the honest
belief that the subject lots were validly converted to commercial or industrial purposes and for
which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2
and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly
allows conversion and disposition of agricultural lands previously covered by CARP land
acquisition after the lapse of five (5) years from its award when the land ceases to be
economically feasible and sound for agricultural purposes or the locality has become urbanized
and the land will have a greater economic value for residential, commercial or industrial
purposes. Moreover, DAR notified all the affected parties, more particularly the FWBs, and
gave them the opportunity to comment or oppose the proposed conversion. DAR, after going
through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita
pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate
agrarian reform matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and executory after
none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO
purchased the lots in question on their honest and well-founded belief that the previous registered
owners could legally sell and convey the lots though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots.

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP750
million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a Deed of Absolute
Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor
of RCBC by way of dacion en pago to pay for a loan of PhP431,695,732.10.

In relying upon the above-mentioned approvals, proclamation and conversion order, both
RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda
Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC,
and consequently DAR, gravely abused its discretion when it placed LIPCOs and RCBCs
property which once formed part of Hacienda Luisita under the CARP compulsory acquisition
scheme via the assailed Notice of Coverage.

While the Court affirms 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.



November 22, 2011

ISSUES:
1. Is the date of the taking (for purposes of determining the just compensation payable to
HLI) November 21, 1989, when PARC approved HLIs SDP?
2. Has the 10-year period prohibition on the transfer of awarded lands under RA 6657
lapsed on May 10, 1999?
3. Whether the ruling in the July 5, 2011 Decision that the qualified FWBs be given an
option to remain as stockholders of HLI be reconsidered?

HELD:

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

April 24, 2012

ISSUES:

1. Whether the homelots distributed to the FWBs require payment to HLI as the landowner?
2. Whether the payment of just compensation of DAR to HLI hinders the distribution of the
lands to the FWBs?
HELD:

1. The home lots already received by the FWBs shall be respected with no obligation to
refund or to return them. However, since the SDOA is revoked, the Court ordered DAR
to pay HLI just compensation as per the Constitution, that the taking of lands for agrarian
reform must be made through payment of just compensation.
2. With the nullification of the SDOA, lands should be immediately and without delay be
distributed to the farmworker beneficiaries. Hence, the remand of the determination of
the just compensation due to petitioner HLI should not in any way hinder the immediate
distribution of the farmlands in Hacienda Luisita. Legal processes regarding the
determination of the amount to be awarded to the corporate landowner in case of non-
acceptance, must not be used to deny the farmworker beneficiaries the legal victory they
have long fought for and successfully obtained.