Hacienda Luisita Vs PARC PDF

regulations issued by the executive department that are accorded the same status as that of a statute or
HACIENDA LUISITA, INCORPORATED, petitioner, LUISITA INDUSTRIAL PARK those which are quasi-legislative in nature.
CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION, petitioners-in- Same; Same; The operative fact doctrine is a rule of equity; It is applied only in the absence of statutory
intervention, vs. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER law and never in contravention of said law.—The operative fact doctrine is a rule of equity. As a complement
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA of legal jurisdiction, equity “seeks to reach and complete justice where courts of law, through the inflexibility
MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and of their rules and want of power to adapt their judgments to the special circumstances of cases, are
JULIO SUNIGA1and his SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and incompetent to do so. Equity regards the spirit and not the letter, the intent and not the form, the substance
WINDSOR ANDAYA, respondents. rather than the circumstance, as it is variously expressed by different courts.” Remarkably, it is applied only
in the absence of statutory law and never in contravention of said law.
Constitutional Law; Words and Phrases; “Operative Fact” Doctrine; The operative fact doctrine does not Corporation Law; Piercing the Veil of Corporate Fiction; Absent any allegation or proof of fraud or other
only apply to laws subsequently declared unconstitutional or unlawful as it also applies to executive acts public policy considerations,
subsequently declared as invalid.—Contrary to the stance of respondents, the operative fact doctrine does
not only apply to laws subsequently declared unconstitutional or unlawful, as it also applies to executive 527
acts subsequently declared as invalid. As We have discussed in Our July 5, 2011 Decision: That the
operative fact doctrine squarely applies to executive acts––in this case, the approval by PARC of the HLI
proposal for stock distribution––is well-settled in our jurisprudence. In Chavez v. National Housing VOL. 660, NOVEMBER 22, 2011 527
Authority, We held: Petitioner postulates that the “operative fact” doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an inequitable result that is Hacienda Luisita, Incorporated vs. Presidential
contrary to its proper office. On the other hand, the petitioner Solicitor General argues that the existence of
the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or
Agrarian Reform Council
simply ignored, citing Rieta v. People of the Philippines. The argument of the Solicitor General is
meritorious. The “operative fact” doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is
the existence of interlocking directors, officers and stockholders is not enough justification to pierce the
stated that a legislative or executive act,
veil of corporate fiction.—In the third place, by arguing that the companies involved in the transfers of the
300-hectare portion of Hacienda Luisita have interlocking directors and, thus, knowledge of one may already
_______________ be imputed upon all the other companies, AMBALA and Rene Galang, in effect, want this Court to pierce
* EN BANC. the veil of corporate fiction. However, piercing the veil of corporate fiction is warranted “only in cases when
1 “Jose Julio Zuniga” in some parts of the records. the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime,
such that in the case of two corporations, the law will regard the corporations as merged into one.” Absent
any allegation or proof of fraud or other public policy considerations, the existence of interlocking directors,
526 officers and stockholders is not enough justification to pierce the veil of corporate fiction as in the instant
case.
Agrarian Reform Law; Expropriation; Just Compensation; Department of Agrarian Reform’s (DAR’s)
526 SUPREME COURT REPORTS land valuation is only preliminary and is not, by any means, final and conclusive upon the landowner; The
ANNOTATED court has the right to review with finality the determination in the exercise of what is admittedly a judicial
function.—The foregoing notwithstanding, it bears stressing that the DAR’s land valuation is only
Hacienda Luisita, Incorporated vs. Presidential 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.
prior to its being declared as unconstitutional by the courts, is valid and must be complied with. Same; Same; Same; Comprehensive Agrarian Reform Program (CARP); The reckoning point is the
Same; Same; The term “executive act” is broad enough to encompass decisions of administrative bodies issuance of the emancipation patent (EP) or certificate of land ownership award (CLOA) and not the placing
and agencies under the executive department which are subsequently revoked by the agency in question or of the agricultural lands under the Comprehensive Agrarian Reform Program (CARP) coverage.—Under RA
nullified by the Court.—For one, neither the De Agbayani case nor the Municipality of Malabang case 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten (10) years from
elaborates what “executive act” mean. Moreover, while orders, rules and regulations issued by the President the issuanceand registration of the emancipation patent (EP) or certificate of land ownership award
or the executive branch have fixed definitions and meaning in the Administrative Code and jurisprudence, (CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in the instant
the phrase “executive act” does not have such specific definition under existing laws. It should be noted that case, the 10-year prohibitive period has not even started. Significantly, the reckoning point is the issuance
in the cases cited by the minority, nowhere can it be found that the term “executive act” is confined to the of
foregoing. Contrarily, the term “executive act” is broad enough to encompass decisions of administrative
528
bodies and agencies under the executive department which are subsequently revoked by the agency in
question or nullified by the Court.
Same; Operative Fact Doctrine; The operative fact doctrine is not confined to statutes and rules and 528 SUPREME COURT REPORTS
regulations issued by the executive department that are accorded the same status as that of a statute or those
which are quasi-legislative in nature.—The operative fact doctrine is not confined to statutes and rules and
ANNOTATED
Hacienda Luisita, Incorporated vs. Presidential underlying principle is the recognition of the rights of farmers and farmworkers who are landless to own,
Agrarian Reform Council directly or collectively, the lands they till. Under the Constitution, actual land distribution to
qualified agrarian reform beneficiaries is mandatory. Anything that promises something other than
land must be struck down for being unconstitutional.
the EP or CLOA, and not the placing of the agricultural lands under CARP coverage. Same; Under Section 31 of RA 6657, the corporate landowner retains ownership of the agricultural land
CORONA, C.J., Concurring and Dissenting Opinion: while the farmworker-beneficiaries become stockholders but remain landless.—Section 31 of RA 6657 as
implemented under the stock distribution option agreement merely entitles farmworker-beneficiaries of
Constitutional Law; Judicial Review; Where a provision of a statute goes against the fundamental law, petitioner HLI to certificates of stocks which represent equity or interest in the corporate landowner,
specially if it impairs basic rights and constitutional values, the Court should not hesitate to strike it down as petitioner HLI, not in the land itself. Under Section 31 of RA 6657, the corporate landowner retains
unconstitutional.—Where a provision of a statute goes against the fundamental law, specially if it impairs ownership of the agricultural land while the farmworker-beneficiaries become stockholders but remain
basic rights and constitutional values, the Court should not hesitate to strike it down as unconstitutional. In landless. While farmworker-beneficiaries hold a
such a case, refusal to address the issue of constitutionality squarely is neither prudence nor restraint but
evasion of judicial duty and abdication of the Court’s authority. 530
Same; Same; The requirement of lis mota does not apply where the question of constitutionality was
raised by the parties and addressing such question is unavoidable.—The Court should not decline to test the
constitutional validity of Section 31 of RA 6657 on the basis of either the requirement of lis mota or the 530 SUPREME COURT REPORTS
doctrine of mootness. The requirement of lis mota does not apply where the question of constitutionality was ANNOTATED
raised by the parties and addressing such question is unavoidable. It cannot be disputed that the parties-in-
interest to this case presented the question of constitutionality. Also, any discussion of the stock distribution
plan of petitioner Hacienda Luisita, Inc. (HLI) necessarily and inescapably involves a discussion of its legal Hacienda Luisita, Incorporated vs. Presidential
basis, Section 31 of RA 6657. While the said provision enjoys the presumption of constitutionality, that Agrarian Reform Council
presumption has precisely been challenged. Its inconsistency with the fundamental law was raised
specifically as an issue.
piece of paper that represents interest in the corporation that has owned and still owns the land, that
Same; Same; If the Court has the authority to promulgate rules that protect and enforce constitutional paper actually deprives them of their rightful claim which is ownership of the land they till. Thus, Section
rights, it also has the duty to render decisions that ensure constitutional rights are preserved and 31 unduly prevents the farmworker-beneficiaries from enjoying the promise of Section 4, Article XIII of the
safeguarded, not diminished or modified.—The Constitution recognizes the primacy of the right of farmers Constitution for them to own directly or collectively the lands they till.
and farmworkers to directly or collectively own the lands they till. Any artificial or superficial substitute
such as the stock distribution plan diminishes the right and debases the constitutional intent. If this Court Same; Collective ownership of land under the agrarian reform provisions of the Constitution must
has the authority to promulgate rules that protect and enforce constitutional rights, it operate on the concept of collective control of the land by the qualified farmer and farmworkers.—Corporate
ownership by the corporate landowner under Section 31 does not satisfy the collective ownership envisioned
529 under Section 4, Article XIII of the Constitution. Where the farmworker-beneficiaries are neither the
collective naked owners nor the collective beneficial owners of the land they till, there can be no valid
compliance with the Constitution’s objective of collective ownership by farmers and farmworkers. Collective
VOL. 660, NOVEMBER 22, 2011 529 ownership of land under the agrarian reform provisions of the Constitution must operate on the concept of
collective control of the land by the qualified farmer and farmworkers.
Hacienda Luisita, Incorporated vs. Presidential Same; Just Compensation; The just compensation shall be based on the market value as of November 21,
1989 of the entire portion that may be determined by the Department of Agrarian Reform (DAR) as subject to
Agrarian Reform Council coverage of land reform.—Section 4, Article XIII of the Constitution requires that the landowner be given
just compensation. For this purpose, the DAR shall determine the just compensation payable by each
farmworker-beneficiary to petitioner HLI as it has jurisdiction in matters involving the administrative
also has the duty to render decisions that ensure constitutional rights are preserved and safeguarded,
implementation and enforcement of agrarian reform laws. The just compensation shall be based on the
not diminished or modified.
market value as of November 21, 1989 of the entire portion that may be determined by the DAR as subject
Same; Same; The requirement of lis mota and the mootness doctrine are not constitutional requirements to the coverage of land reform. The portion of the proceeds of the portion sold to LIPCO and RCBC as well as
but simply prudential doctrines of justiciability fashioned by the Court in the exercise of judicial restraint.— the proceeds of the portion expropriated for the SCTEX may be the subject of legal compensation or set off
The requirement of lis mota and the mootness doctrine are not constitutional requirements but simply for purposes of the payment of just compensation.
prudential doctrines of justiciability fashioned by the Court in the exercise of judicial restraint. For if the
BRION, J., Separate Concurring and Dissenting Opinion:
said grounds have been imposed by the Constitution itself, no exception could have been carved by courts
(for either ground) as courts only apply and interpret the Constitution and do not modify it. Constitutional Law; Words and Phrases; Operative Fact Doctrine; The doctrine is applicable only in
considering the effects of a
Same; Same; The Court may not be hampered in the performance of its essential function to uphold the
Constitution by prudential doctrines of justiciability.—Judicial review is particularly important in enjoining
531
and redressing constitutional violations inflicted by all levels of government and government officers. Thus,
this Court may not be hampered in the performance of its essential function to uphold the Constitution by
prudential doctrines of justiciability.
VOL. 660, NOVEMBER 22, 2011 531
Agrarian Reform Law; Under the Constitution, actual land distribution to qualified agrarian reform
beneficiaries is mandatory.—I maintain my stance that Section 31 of RA 6657 is invalid. Agrarian reform’s
Hacienda Luisita, Incorporated vs. Presidential taking. In computing the just compensation for expropriation proceedings, it is the value of the land at the
Agrarian Reform Council time of the taking, not at the time of the rendition of judgment, which should be taken into consideration.
Hence, in determining the value of the land for the payment of just compensation, the time of taking should
be the basis. The concept of taking in both land reform and non-land reform expropriations is well-settled.
declaration of unconstitutionality of a law (a generic term that includes statutes, rules and regulations There is taking of private property by the State in expropriation proceedings when the owner is ousted from
issued by the executive department and are accorded the same status as a statute).— his property and deprived of his beneficial enjoyment thereof. The “time of taking” is the moment when
The ponencia misapplies the operative fact doctrine. I maintain the view that the doctrine is landowners are deprived of the use and benefit of the property.
applicable only in considering the effects of a declaration of unconstitutionality of a law (a generic term that Same; Same; Same; The valuation be made based on the current fair market value in accordance with
includes statutes, rules and regulations issued by the executive department and are accorded the same established laws, rules and jurisprudence, or more specifically at the time that petitioner Hacienda Luisita,
status as a statute). The doctrine’s limited application is apparent from a review of its origins. Incorporated (HLI) was issued a Notice of Coverage on 02 January 2006 (date of Notice of Coverage).—Three
Agrarian Reform Law; Just Compensation; In several cases, the Court awarded interests when there is reckoning periods are for consideration of the Court. First, Justice Velasco, who is now joined by Justice
delay in the payment of just compensation.—In several cases, the Court awarded interests when there is Brion, proposes that the amount of just compensation to be paid should be based on the date that the PARC
delay in the payment of just compensation. The underlying rationale for the award is to compensate the approved the SDOA, or on 21 November 1989 (date of the PARC
landowner not simply for the delay, but for the income the landowner would have received from the land had
533
there been no immediate taking thereof by the government.
BERSAMIN, J., Concurring and Dissenting Opinion:
Agrarian Reform Law; Just Compensation; The factual issue of when the taking had taken place as to VOL. 660, NOVEMBER 22, 2011 533
the affected agricultural lands should not be separated from the determination of just compensation by
Department of Agrarian Reform (DAR), Land Bank and Special Agrarian Court (SAC).—It is my humble Hacienda Luisita, Incorporated vs. Presidential
submission, therefore, that the factual issue of when the taking had taken place as to the affected
agricultural lands should not be separated from the determination of just compensation by DAR, Land Bank Agrarian Reform Council
and SAC. Accordingly, I urge that the Court should leave the matter of the reckoning date to be hereafter
determined by the DAR and Land Bank pursuant to Section 18 of Republic Act No. 6657. Should the parties
approval). Second, the date the SDOA was signed, 18 May 1989, (date of the SDOA) was also considered
disagree thereon, the proper SAC will then resolve their disagreement as an integral part of a petition for
as a reckoning point of the valuation period. Lastly, I submit that the valuation be made based on the
determination of just compensation made pursuant to Section 57 of Republic Act No. 6657
current fair market value in accordance with established laws, rules and jurisprudence; or more specifically,
SERENO, J., Concurring and Dissenting Opinion: at the time that petitioner HLI was issued a Notice of Coverage on 02 January 2006 (date of Notice of
Agrarian Reform; Expropriation; Just Compensation; The taking of private lands under the agrarian Coverage). With all due respect to my colleagues, the third reckoning period alone satisfies the
reform program partakes of the nature of an expropriation proceeding; The aim of just compensation in terms constitutional directive to give real, substantial, full and ample compensation to the landowner in
of expropriation, even in agrarian reform, should be just recognition of the latter’s right to property and of the express limitation on the State’s power of
expropriation.
532 Same; Same; Same; The notice of coverage commences the process of acquiring private agricultural lands
covered by the Comprehensive Agrarian Reform Program (CARP).—Under the uniform rulings of this Court,
the notice of coverage commences the process of acquiring private agricultural lands covered by the CARP.
532 SUPREME COURT REPORTS The date of the notice of coverage is therefore determinative of the just compensation petitioner HLI is
ANNOTATED entitled to for its expropriated lands. In computing capitalized net income under the DAR formula, one
should use the average gross production of the latest available 12 months immediately preceding the date of
notice of coverage, in case of compulsory acquisition, and the average selling price of the latest available 12
Hacienda Luisita, Incorporated vs. Presidential months prior to the date of receipt of the claim folder by the Land Bank of the Philippines for processing.
Constitutional Law; The pronouncement of unconstitutionality by the Court retroacts to all acts
undertaken between the effectivity of the law and the declaration of its invalidity.—The general rule is that
to the owner—that which approximates the market value.—The taking of private lands under the an unconstitutional law has no force and effect—it produces no rights, imposes no duties and affords no
agrarian reform program partakes of the nature of an expropriation proceeding. For purposes of taking protection. Hence, the pronouncement of unconstitutionality by the Court retroacts to all acts undertaken
under the agrarian reform program, the framers of the Constitution expressly made its intention between the effectivity of the law and the declaration of its invalidity.
known that the owners of the land should not receive less than the market value for their Same; Operative Facts Doctrine; The doctrine can only come into play as a rule of equity in cases where
expropriated properties and drew parallelisms with the ordinary understanding of just there is a vacuum in the law created by the subsequent declaration of nullity by the Court.—The operative
compensation in non-land reform expropriation. Indeed, the matter of just compensation was never facts doctrine can only come into play as a rule of equity in cases where there is a vacuum in the law
meant to involve a severe diminution of what the land owner gets. The aim of just compensation in terms of created by the subsequent declaration of nullity by the Court. In those instances where the operative facts
expropriation, even in agrarian reform, should be just to the owner—that which approximates the market doctrine was used (i.e., debt moratorium
value.
534
Same; Same; Same; In computing the just compensation for expropriation proceedings, it is the value of
the land at the time of the taking, not at the time of the rendition of judgment, which should be taken into
consideration; The “time of taking” is the moment when landowners are deprived of the use and benefit of the
property.—Just compensation in cases of expropriation is ordinarily to be ascertained as of the time of the 534 SUPREME COURT REPORTS
ANNOTATED On July 5, 2011, this Court promulgated a Decision3 in the above-captioned case, denying the
petition filed by HLI and affirming Presidential Agrarian Reform Council (PARC) Resolution No.
Hacienda Luisita, Incorporated vs. Presidential 2005-32-01 dated December 22, 2005 and PARC Resolution No. 2006-34-01 dated May 3, 2006
Agrarian Reform Council with the modification that the original 6,296 qualified farmworker-beneficiaries of Hacienda
Luisita (FWBs) shall have the option to remain as stockholders of HLI.
cases), the unraveling of the effects of the declaration of unconstitutionality resorted to a dearth in the _______________
law and the need for the courts to provide guidance as to its retroactive application. In this case, no such 2 The Motion for Reconsideration dated July 22, 2011 was filed by private respondents Rene Galang and AMBALA,
vacuum exists, as in fact the CARL itself provides for the ultimate consequence when a stock through Atty. Romeo T. Capulong of the Public Interest Law Center, as lead counsel for Rene Galang and as collaborating
distribution plan or option is eventually invalidated—direct land distribution. The Court therefore counsel of Atty. Jobert Pahilga of SENTRA for AMBALA.
need not exercise its equity jurisdiction. 3 G.R. No. 171101, July 5, 2011; hereinafter referred to as “July 5, 2011 Decision.”
MOTION for Clarification and Partial Reconsideration of a decision of the Supreme Court; 536
MOTION for Partial Reconsideration of a decision of the Supreme Court; and MOTIONS for
Reconsideration of a decision of the Supreme Court.
536 SUPREME COURT REPORTS ANNOTATED
The facts are stated in the resolution of the Court.
Gener E. Asuncion, Antonio A. Merelos and Maria Estelita B. Arles for petitioner. Hacienda Luisita, Incorporated vs. Presidential
Jorge Cesar M. Sandiego for petitioner-intervenor. Agrarian Reform Council
Romeo T. Capulong, Rachel F. Pastores, Amylyn B. Sato and Sandra Jill S. Santos lead
counsel for respondent R. Galang and collaborating counsel for respondent AMBALA.
Jorbert Ilarde Pahilga and David D. Erro for respondent AMBALA and Rene Galang. In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI raises the
Carmelito M. Santoyo for Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita/Noel following issues for Our consideration:
Mallari/United Luisita Workers/Eldifonso Pingol/Supervisory Group of the Hacienda Luisita, Inc. A
and Windsor Andaya. IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE ORIGINAL FWBs OF
Christian S. Monsod, Marlon J. Manuel, Magistrado A. Mendoza, Jr., Joeven D. Dellosa, 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF THE SALE OF THE 500
Edgar DL. Bernal and Mary Claire A. Demaisip for Farm Peace Foundation, Inc. HECTARES AND 80.51 HECTARES OF THE HLI LAND, BECAUSE:
Anacleto M. Diaz and Maria Rosario Z. Del Rosario collaborating counsel for petitioner- (1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION, HLI, AS CORPORATE
intervenor RCBC. CAPITAL AND ASSETS IN SUBSTITUTION FOR THE PORTIONS OF ITS LAND ASSET WHICH WERE
Mario Luza Bautista and Brigitte M. Da Costa for petitioner-intervenor Luisita Industrial SOLD TO THIRD PARTY;
(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS OF THE LAND ASSET TO
Park Corporation.
THE FWBs, WHO ARE STOCKHOLDERS OF HLI, IS TO DISSOLVE THE CORPORATION AND
535
DISTRIBUTE THE PROCEEDS AS LIQUIDATING DIVIDENDS WITHOUT EVEN PAYING THE
CREDITORS OF THE CORPORATION;
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT PROVISIONS OF THE
VOL. 660, NOVEMBER 22, 2011 535 CORPORATION CODE AND CORPORATE PRACTICE.
B
Hacienda Luisita, Incorporated vs. Presidential IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE PAYMENT OF JUST
Agrarian Reform Council COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE
CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR-SANTIAGO, APPROVED THE STOCK
DISTRIBUTION PLAN (SDP) PROPOSED BY TADECO/HLI, BECAUSE:
RESOLUTION (1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989 WAS NOT THE “ACTUAL
TAKING” OF THE TADECO’s/HLI’s AGRICULTURAL LAND;
VELASCO, JR., J.: (2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01 OF THAT SDP BY THE
For resolution are the (1) Motion for Clarification and Partial Reconsideration dated July 21, NEW PARC UNDER THE CHAIRMANSHIP OF DAR SECRETARY NASSER PANGANDA-
2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial Reconsideration dated 537
July 20, 2011 filed by public respondents Presidential Agrarian Reform Council (PARC) and
Department of Agrarian Reform (DAR); (3) Motion for Reconsideration dated July 19, 2011 filed
VOL. 660, NOVEMBER 22, 2011 537
by private respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA);
(4) Motion for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers Hacienda Luisita, Incorporated vs. Presidential
Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July 21, 2011 Agrarian Reform Council
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
MAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN THE SDP WAS APPROVED DID NOT
(6) Motion for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and RESULT IN “ACTUAL TAKING” ON NOVEMBER 21, 1989;
AMBALA.2
(3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR 22 YEARS BACK WOULD THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT LUISITA INDUSTRIAL
BE ARBITRARY, UNJUST, AND OPPRESSIVE, CONSIDERING THE IMPROVEMENTS, EXPENSES IN PARK CORP. (LIPCO) AND RIZAL COMMERCIAL BANKING CORPORATION (RCBC) ARE INNOCENT
THE MAINTENANCE AND PRESERVATION OF THE LAND, AND RISE IN LAND PRICES OR VALUE PURCHASERS FOR VALUE.
OF THE PROPERTY.
539
On the other hand, PARC and DAR, through the Office of the Solicitor General (OSG), raise
the following issues in their Motion for Partial Reconsideration dated July 20, 2011:
VOL. 660, NOVEMBER 22, 2011 539
THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR THE FOLLOWING
REASONS: Hacienda Luisita, Incorporated vs. Presidential
I Agrarian Reform Council
THERE IS NO LAW OR RULE WHICH HAS BEEN INVALIDATED ON THE GROUND OF
UNCONSTITUTIONALITY; AND
II
In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the following
THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE ABSENCE OF A issues:
LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH MANDATES THE DISTRIBUTION OF THE
I
LAND AS A RESULT OF THE REVOCATION OF THE STOCK DISTRIBUTION PLAN (SDP).
THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN SECTION 31 OF [RA 6657]
For its part, AMBALA poses the following issues in its Motion for Reconsideration dated July FOR BEING UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE THAT WAS RAISED BY THE
RESPONDENTS-INTERVENORS IS THE LIS MOTA OF THE CASE.
19, 2011:
II
I THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE DOCTRINE OF
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN “OPERATIVE FACT” TO THE CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN AS
HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS CONSTITUTIONAL. STOCKHOLDERS OF HACIENDA LUISITA IS EQUIVALENT TO AN OPTION FOR HACIENDA
II LUISITA TO RETAIN LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE AGRARIAN
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN REFORM LAW. THE DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK DISTRIBUTION PLAN
HOLDING THAT CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE SUPREME COURT HAS AFFIRMED
ITS REVOCATION.
538 III
THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED [LIPCO] AND [RCBC] AS
INNOCENT PURCHASERS FOR VALUE IN THE INSTANT CASE.
Mallari, et al., on the other hand, advance the following grounds in support of their Motion for
Hacienda Luisita, Incorporated vs. Presidential
Reconsiderationdated July 21, 2011:
(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN DISTRIBUTED
ONLY THE [PARC’S] APPROVAL OF HLI’s PROPOSAL FOR STOCK DISTRIBUTION UNDER CARP PURSUANT TO THE MEMORANDUM OF AGREEMENT. WHAT REMAINS MERELY IS THE RELEASE
AND THE [SDP] WERE REVOKED AND NOT THE STOCK DISTRIBUTION OPTION AGREEMENT OF TITLE FROM THE REGISTER OF DEEDS.
(SDOA). (2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE RECORDS WOULD SHOW THAT
III IF EVER NOT ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE ACTUAL ORIGINAL
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN FARMWORKER BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE IS THE NEXT OF KIN OR
APPLYING THE DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE [FWBs] CHOOSE TO OPT CHILDREN OF SAID
FOR ACTUAL LAND DISTRIBUTION OR TO REMAIN AS STOCKHOLDERS OF [HLI]. 540
IV
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN
HOLDING THAT IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT AMONG THE LEGAL 540 SUPREME COURT REPORTS ANNOTATED
OBLIGATIONS OF HLI UNDER THE SDP AND AN IMPERATIVE IMPOSITION BY [RA 6657] AND
DEPARTMENT OF AGRARIAN REFORM ADMINISTRATIVE ORDER NO. 10 (DAO 10). Hacienda Luisita, Incorporated vs. Presidential
V Agrarian Reform Council
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT THE CONVERSION OF
THE AGRICULTURAL LANDS DID NOT VIOLATE THE CONDITIONS OF RA 6657 AND DAO 10.
ORIGINAL [FWBs]. HENCE, WE RESPECTFULLY SUBMIT THAT SINCE THE SHARES WERE GIVEN
VI
TO THE SAME “FAMILY BENEFICIARY”, THIS SHOULD BE DEEMED AS SUBSTANTIAL
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT PETITIONER IS
COMPLIANCE WITH THE PROVISIONS OF SECTION 4 OF DAO 10.
ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD THE HONORABLE COURT AFFIRM
(3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO IMPLEMENT THE [SDP] AS
THE ENTITLEMENT OF THE PETITIONER TO JUST COMPENSATION, THE SAME SHOULD BE
PROVIDED FOR BY SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE READ IN LIGHT OF
PEGGED TO FORTY THOUSAND PESOS (PhP 40,000.00) PER HECTARE.
SECTION 10 OF EXECUTIVE ORDER NO. 229, THE PERTINENT PORTION OF WHICH READS, “THE
VII
APPROVAL BY THE PARC OF A PLAN FOR SUCH STOCK DISTRIBUTION, AND ITS INITIAL
IMPLEMENTATION, SHALL BE DEEMED COMPLIANCE WITH THE LAND DISTRIBUTION 542 SUPREME COURT REPORTS ANNOTATED
REQUIREMENT OF THE CARP.”
(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF NOVEMBER 21, 1989, THE DATE Hacienda Luisita, Incorporated vs. Presidential
OF APPROVAL OF THE STOCK DISTRIBUTION OPTION. INSTEAD, WE RESPECTFULLY SUBMIT Agrarian Reform Council
THAT THE “TIME OF TAKING” FOR VALUATION PURPOSES IS A FACTUAL ISSUE BEST LEFT FOR
THE TRIAL COURTS TO DECIDE.
(5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT WAS GIVEN TO THEM of the land as a result of the revocation of the stock distribution plan (SDP).5
UNDER THE SDP. IT WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE LAND AND AT THE Echoing the stance of DAR and PARC, AMBALA submits that the operative fact doctrine
SAME TIME HOLD ON TO THE BENEFITS THEY RECEIVED PURSUANT TO THE SDP IN THE SAME should only be made to apply in the extreme case in which equity demands it, which allegedly is
WAY AS THOSE WHO WILL CHOOSE TO STAY WITH THE SDO. not in the instant case.6 It further argues that there would be no undue harshness or injury to
HLI in case lands are actually distributed to the farmworkers, and that the decision which orders
Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC), submit
the farmworkers to choose whether to remain as stockholders of HLI or to opt for land
the following grounds in support of their Motion for Reconsideration dated July 22, 2011:
distribution would result in inequity and prejudice to the farmworkers.7 The foregoing views are
I also similarly shared by Rene Galang and AMBALA, through the PILC.8 In addition, FARM
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN ORDERING THE HOLDING posits that the option given to the FWBs is equivalent to an option for HLI to retain land in direct
OF A VOTING OPTION INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT LANDS TO [FWBs] violation of RA 6657.9
in [HLI]. (a) Operative Fact Doctrine Not Limited to
541
Invalid or Unconstitutional Laws
Contrary to the stance of respondents, the operative fact doctrine does not only apply to laws
subsequently declared unconstitutional or unlawful, as it also applies to executive acts
VOL. 660, NOVEMBER 22, 2011 541 subsequently declared as invalid. As We have discussed in Our July 5, 2011 Decision:
Hacienda Luisita, Incorporated vs. Presidential “That the operative fact doctrine squarely applies to executive acts––in this case, the approval by PARC
Agrarian Reform Council of the HLI proposal for stock distribution––is well-settled in our jurisprudence. In Chavez v. National
Housing Authority, We held:
Petitioner postulates that the “operative fact” doctrine is inapplicable to the present case because it
A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE REVOCATION OF THE [SDP]
is an equitable doc-
CARRIES WITH IT THE REVOCATION OF THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS OF HLI WITHOUT MAKING
THE NECESSARY CHANGES IN THE CORPORATE STRUCTURE WOULD ONLY SUBJECT THEM TO _______________
5 PARC/DAR MR, p. 16.
FURTHER MANIPULATION AND HARDSHIP. 6 AMBALA MR, p. 51.
C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND PERTINENT LAWS 7 AMBALA MR, pp. 55-60.
JUSTIFY TOTAL LAND REDISTRIBUTION OF HACIENDA LUISITA. 8 Rene Galang and AMBALA MR, pp. 11-13.
9 FARM MR, p. 47.
II
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN HOLDING THAT THE [RCBC] 543
AND [LIPCO] ARE INNOCENT PURCHASERS FOR VALUE OF THE 300-HECTARE PROPERTY IN
HACIENDA LUISITA THAT WAS SOLD TO THEM PRIOR TO THE INCEPTION OF THE PRESENT
CONTROVERSY. VOL. 660, NOVEMBER 22, 2011 543
Ultimately, the issues for Our consideration are the following: (1) applicability of the operative Hacienda Luisita, Incorporated vs. Presidential
fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the Comprehensive Agrarian Reform Agrarian Reform Council
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. trine which could not be used to countenance an inequitable result that is contrary to its proper office.
We shall discuss these issues accordingly. On the other hand, the petitioner Solicitor General argues that the existence of the various
I. Applicability of the Operative Fact Doctrine agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply
In their motion for partial reconsideration, DAR and PARC argue that the doctrine of ignored, citing Rieta v. People of the Philippines.
operative fact does not apply to the instant case since: (1) there is no law or rule which has been The argument of the Solicitor General is meritorious.
The “operative fact” doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated
invalidated on the ground of unconstitutionality;4 (2) the doctrine of operative fact is a rule of that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is
equity which may be applied only in the absence of a law, and in this case, they maintain that valid and must be complied with, thus:
there is a positive law which mandates the distribution xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission,
_______________ wherein we ruled that:
4 PARC/DAR Motion for Reconsideration (MR), p. 7. Moreover, we certainly cannot nullify the City Government’s order of suspension, as we have no
reason to do so, much less retroactively apply such nullification to deprive private respondent of a
542 compelling and valid reason for not filing the leave application. For as we have held, a void act
though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or arrest of petitioner—is an operative fact that can no longer be disturbed or simply
omissions done in reliance thereof. Consequently, the existence of a statute or executive ignored.” (Citations omitted; emphasis in the original.)
order prior to its being adjudged void is an operative fact to which legal consequences are attached. It
would indeed be ghastly unfair to prevent private respondent from relying upon the order of Bearing in mind that PARC Resolution No. 89-12-210—an executive act—was declared invalid
suspension in lieu of a formal leave application. in the instant case, the operative fact doctrine is clearly applicable.
The applicability of the operative fact doctrine to executive acts was further explicated by this Court Nonetheless, the minority is of the persistent view that the applicability of the operative fact
in Rieta v. People, thus: doctrine should be limited to statutes and rules and regulations issued by the executive
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 department that are accorded the same status as that of a statute or those which are quasi-
was invalid, as the law upon which it was predicated—General Order No. 60, issued by then President
Ferdinand E. Marcos—was subsequently declared by the Court, in Tañada v. Tuvera, 33 to have no
legislative in nature. Thus, the minority concludes that the phrase “executive act” used in the
force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. case of De Agbayani v. Philippine National Bank11 refers only to acts, orders, and rules and
regulations that have the force and effect of law. The minority also made mention of the
544 Concurring Opinion of Justice Enrique Fernando in Municipality of Malabang v. Benito,12 where
it was supposedly made explicit that the operative fact doctrine applies to executive acts, which
544 SUPREME COURT REPORTS ANNOTATED are ultimately quasi-legislative in nature.

_______________
Agrarian Reform Council 10 Under PARC Resolution No. 89-12-2 dated November 21, 1989, then Secretary Miriam Defensor-Santiago approved
the SDP of HLI/Tarlac Development Corporation (Tadeco).
11 G.R. No. L-23127, April 29, 1971, 38 SCRA 429.
We do not agree. In Tañada, the Court addressed the possible effects of its declaration of the invalidity of
12 G.R. No. L-28113, March 28, 1969, 27 SCRA 533.
various presidential issuances. Discussing therein how such a declaration might affect acts done on a
presumption of their validity, the Court said: 546
“. . . . In similar situations in the past this Court had taken the pragmatic and realistic course set
forth in Chicot County Drainage District vs. Baxter Bank to wit:
‘The courts below have proceeded on the theory that the Act of Congress, having been found to be 546 SUPREME COURT REPORTS ANNOTATED
unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties,
and hence affording no basis for the challenged decree. . . . It is quite clear, however, that such broad Hacienda Luisita, Incorporated vs. Presidential
statements as to the effect of a determination of unconstitutionality must be taken with qualifications. Agrarian Reform Council
The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case
various aspects—with respect to particular conduct, private and official. Questions of rights claimed to elaborates what “executive act” mean. Moreover, while orders, rules and regulations issued by
have become vested, of status, of prior determinations deemed to have finality and acted upon the President or the executive branch have fixed definitions and meaning in the Administrative
accordingly, of public policy in the light of the nature both of the statute and of its previous Code and jurisprudence, the phrase “executive act” does not have such specific definition under
application, demand examination. These questions are among the most difficult of those which have existing laws. It should be noted that in the cases cited by the minority, nowhere can it be found
engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’
that the term “executive act” is confined to the foregoing. Contrarily, the term “executive act” is
xxx xxx xxx broad enough to encompass decisions of administrative bodies and agencies under the executive
“Similarly, the implementation/enforcement of presidential decrees prior to their publication in the department which are subsequently revoked by the agency in question or nullified by the Court.
Official Gazette is ‘an operative fact which may have consequences which cannot be justly ignored. A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of
The past cannot always be erased by a new judicial declaration . . . that the Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal
545
Counsel (CPLC) which was declared unconstitutional by this Court in Public Interest Center, Inc.
v. Elma.13 In said case, this Court ruled that the concurrent appointment of Elma to these offices
is in violation of Section 7, par. 2, Article IX-B of the 1987 Constitution, since these are
VOL. 660, NOVEMBER 22, 2011 545 incompatible offices. Notably, the appointment of Elma as Chairman of the PCGG and as CPLC
Hacienda Luisita, Incorporated vs. Presidential is, without a question, an executive act. Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in good faith and in reliance of the
appointment of Elma which cannot just be set aside or invalidated by its subsequent invalidation.
In Tan v. Barrios,14 this Court, in applying the operative fact doctrine, held that despite the
an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’ ” invalidity of the jurisdiction of the military courts over civilians, certain operative facts must be
The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a statute, there is an acknowledged to have existed so as not to trample upon the rights of the accused therein.
imperative necessity of taking into account its actual existence as an operative fact negating the acceptance
Relevant thereto,
of “a principle of absolute retroactive invalidity.” Whatever was done while the legislative or the executive
act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that
was issued in 1979 under General Order No. 60—long before our Decision in Tañada and the _______________
13 G.R. No. 138965, June 30, 2006, 494 SCRA 53.
14 G.R. Nos. 85481-82, October 18, 1990, 190 SCRA 686. stockholders. Respondents are definitely mistaken. The fallo of Our July 5, 2011 Decision is
547
unequivocal that only those FWBs who signified their desire to remain as HLI stockholders are
entitled to 18,804.32 shares each, while those who opted not to remain as HLI stockholders will
be given land by DAR. Thus, referendum was not required but only individual options were
VOL. 660, NOVEMBER 22, 2011 547 granted to each FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the FWBs is not iniquitous and prejudicial to
Hacienda Luisita, Incorporated vs. Presidential their interests but is actually beneficial and fair to them. First, they are granted the right to
Agrarian Reform Council remain in HLI as stockholders and they acquired said shares without paying their value to the
corporation. On the other hand, the qualified FWBs are required to pay the value of the land to
in Olaguer v. Military Commission No. 34,15 it was ruled that “military tribunals pertain to the the Land Bank of the Philippines (LBP) if land is awarded to them by DAR pursuant to RA 6657.
Executive Department of the Government and are simply instrumentalities of the executive If the qualified FWBs really want agricultural land, then they can simply say no to the option.
power, provided by the legislature for the President as Commander-in-Chief to aid him in And second, if the operative fact doctrine is not applied to them, then the FWBs will be required
properly commanding the army and navy and enforcing discipline therein, and utilized under his to return to HLI the 3% production share, the 3% share in the proceeds of the sale of the 500-
orders or those of his authorized military representatives.”16 hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac Expressway (SCTEX) lot, the
Evidently, the operative fact doctrine is not confined to statutes and rules and regulations homelots and other benefits received by the FWBs from HLI. With the application of the
issued by the executive department that are accorded the same status as that of a statute or operative fact doctrine, said benefits, homelots and the 3% production share and 3% share
those which are quasi-legislative in nature. 549
Even assuming that De Agbayani initially applied the operative fact doctrine only to executive
issuances like orders and rules and regulations, said principle can nonetheless be applied, by
analogy, to decisions made by the President or the agencies under the executive department. This VOL. 660, NOVEMBER 22, 2011 549
doctrine, in the interest of justice and equity, can be applied liberally and in a broad sense to
encompass said decisions of the executive branch. In keeping with the demands of equity, the Hacienda Luisita, Incorporated vs. Presidential
Court can apply the operative fact doctrine to acts and consequences that resulted from the Agrarian Reform Council
reliance not only on a law or executive act which is quasi-legislative in nature but also on
decisions or orders of the executive branch which were later nullified. This Court is not from the sale of the 500-hectare and SCTEX lots shall be respected with no obligation to refund
unmindful that such acts and consequences must be recognized in the higher interest of justice, or return them. The receipt of these things is an operative fact “that can no longer be disturbed or
equity and fairness. simply ignored.”
Significantly, a decision made by the President or the administrative agencies has to be (b) The Operative Fact Doctrine as Recourse in
complied with because it has the force and effect of law, springing from the powers of the Equity
President under the Constitution and existing laws. Prior to the nullification or recall of said As mentioned above, respondents contend that the operative fact doctrine is a rule of equity
decision, it may have pro- which may be applied only in the absence of a law, and that in the instant case, there is a positive
law which mandates the distribution of the land as a result of the revocation of the SDP.
_______________ Undeniably, the operative fact doctrine is a rule of equity.17 As a complement of legal
15 G.R. Nos. L-54558 and L-69882, May 22, 1987, 150 SCRA 144. jurisdiction, equity “seeks to reach and complete justice where courts of law, through the
16 Id., at p. 159. inflexibility of their rules and want of power to adapt their judgments to the special
548 circumstances of cases, are incompetent to do so. Equity regards the spirit and not the letter, the
intent and not the form, the substance rather than the circumstance, as it is variously expressed
by different courts.”18 Remarkably, it is applied only in the absence of statutory law and never in
548 SUPREME COURT REPORTS ANNOTATED contravention of said law.19
In the instant case, respondents argue that the operative fact doctrine should not be applied
Hacienda Luisita, Incorporated vs. Presidential since there is a positive law, particularly, Sec. 31 of RA 6657, which directs the distri-
_______________
duced acts and consequences in conformity to and in reliance of said decision, which must be 17 League of Cities of the Phils. v. Commission on Elections, G.R. Nos. 176951, 177499 and 178056, August 24, 2010,
respected. It is on this score that the operative fact doctrine should be applied to acts and 628 SCRA 819, 833.
18 LCK Industries, Inc. v. Planters Development Bank, G.R. No. 170606, November 23, 2007, 538 SCRA 634, 652; cited
consequences that resulted from the implementation of the PARC Resolution approving the SDP
in Land Bank of the Philippines v. Ong, G.R. No. 190755, November 24, 2010, 636 SCRA 266, 280.
of HLI. 19 Brito, Sr. v. Dianala, G.R. No. 171717, December 15, 2010, 638 SCRA 529.
More importantly, respondents, and even the minority, failed to clearly explain how the option
to remain in HLI granted to individual farmers would result in inequity and prejudice. We can 550
only surmise that respondents misinterpreted the option as a referendum where all the FWBs
will be bound by a majority vote favoring the retention of all the 6,296 FWBs as HLI
550 SUPREME COURT REPORTS ANNOTATED Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed the
revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of the agricultural
Hacienda Luisita, Incorporated vs. Presidential lands of Hacienda Luisita in view of HLI’s violation of the SDP and DAO 10. By applying the
Agrarian Reform Council operative fact 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
bution of the land as a result of the revocation of the SDP. Pertinently, the last paragraph of Sec. received from HLI by virtue of the SDP.
31 of RA 6657 states: It bears stressing that the application of the operative fact doctrine by the Court in its July 5,
2011 Decision is favorable
“If within two (2) years from the approval of this Act, the land or stock transfer envisioned above is not
made or realized or the plan for such stock distribution approved by the PARC within the same period, the
_______________
agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this
22 Citing Pimentel v. Commission on Elections, G.R. No. 126394, April 24, 1998, 289 SCRA 586, 597.
Act.” (Emphasis supplied.) 23 Citing Centeno v. Villalon-Pornillos, G.R. No. 113092, September 1, 1994, 236 SCRA 197, 206.
24 Citing Castillo-Co v. Barbers, G.R. No. 129952, June 16, 1998, 290 SCRA 717, 723.
Markedly, the use of the word “or” under the last paragraph of Sec. 31 of RA 6657 connotes
that the law gives the corporate landowner an “option” to avail of the stock distribution option or 552
to have the SDP approved within two (2) years from the approval of RA 6657. This interpretation
is consistent with the well-established principle in statutory construction that “[t]he word or is a
disjunctive term signifying disassociation and independence of one thing from the other things
enumerated; it should, as a rule, be construed in the sense in which it ordinarily implies, as a Hacienda Luisita, Incorporated vs. Presidential
disjunctive word.”20 In PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc.,21 this Agrarian Reform Council
Court held:
“Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the to the FWBs because not only were the FWBs allowed to retain the benefits and homelots they
equipment; only either one of the two was required. The demand letter was prepared and signed by Atty. received under the stock distribution scheme, they were also given the option to choose for
Florecita R. Gonzales, presumably petitioner’s counsel. As such, the use of “or” instead of “and” in the themselves whether they want to remain as stockholders of HLI or not. This is in recognition of
letter could hardly be treated as a simple typographical error, bearing in mind the nature of the demand, the fact that despite the claims of certain farmer groups that they represent the qualified FWBs
the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would have known
that a world of difference exists between “and” and “or” in the manner that the word was employed in the
in Hacienda Luisita, none of them can show that they are duly authorized to speak on their
letter. behalf. As We have mentioned, “To date, such authorization document, which would logically
include a list of the names of the authorizing FWBs, has yet to be submitted to be part of the
_______________ records.”
20 Saludaga v. Sandiganbayan, G.R. No. 184537, April 23, 2010, 619 SCRA 364, 374; citing Agpalo, Statutory Construction, 2003 p. II. Constitutionality of Sec. 31, RA 6657
204 and The Heirs of George Poe v. Malayan Insurance Company, Inc., G.R. No. 156302, April 7, 2009, 584 SCRA 152 .
21 G.R. No. 142618, July 12, 2007, 527 SCRA 405, 422.
FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota of the
case, raised at the earliest opportunity, and not to be considered as moot and academic.25
551
This contention is unmeritorious. As We have succinctly discussed in Our July 5, 2011
Decision:
VOL. 660, NOVEMBER 22, 2011 551
“While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of
Hacienda Luisita, Incorporated vs. Presidential 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as
Agrarian Reform Council early as November 21, l989 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 via PARC Resolution No. 89-
A rule in statutory construction is that the word “or” is a disjunctive term signifying dissociation 12-2 dated November 21, 1989 that said plan and approving resolution were sought to be revoked, but not,
and independence of one thing from other things enumerated unless the context requires a different to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition
interpretation.22 did NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and
In its elementary sense, “or”, as used in a statute, is a disjunctive article indicating an gaps in the subsequent implementation of the SDP. Even the public respondents, as represented by the
alternative. It often connects a series of words or propositions indicating a choice of either. Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose
When “or” is used, the various members of the enumeration are to be taken separately.23 27 members
The word “or” is a disjunctive term signifying disassociation and independence of one thing from
each of the other things enumerated.”24 (Emphasis in the original.) _______________
25 FARM MR, pp. 6-11, 30-36.
Given that HLI secured approval of its SDP in November 1989, well within the two-year
553
period reckoned from June 1988 when RA 6657 took effect, then HLI did not violate the last
paragraph of Sec. 31 of RA 6657. Pertinently, said provision does not bar Us from applying the
operative fact doctrine. VOL. 660, NOVEMBER 22, 2011 553
Hacienda Luisita, Incorporated vs. Presidential Based on the foregoing disquisitions, We maintain that this Court is NOT compelled to rule on
Agrarian Reform Council the constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that this Court, in its July 5,
2011 Decision, made no ruling in favor of the constitutionality of Sec. 31 of RA 6657. There was,
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its however, a determination of the existence of an apparent grave violation of the Constitution that
Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, may justify the resolution of the issue of constitutionality, to which this Court ruled in the
1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The negative. Having clarified this matter, all other points raised by both FARM and AMBALA
FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the concerning the constitutionality of RA 6657 deserve scant consideration.
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 555
time and the occurrence of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality will not be passed VOL. 660, NOVEMBER 22, 2011 555
upon by the Court unless it is properly raised and presented in an appropriate case at the first opportunity. Hacienda Luisita, Incorporated vs. Presidential
FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second
requirement that the constitutional question should be raised at the earliest possible opportunity is clearly Agrarian Reform Council
wanting.
The last but the most important requisite that the constitutional issue must be the very lis mota of the III. Coverage of Compulsory Acquisition
case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being FARM argues that this Court ignored certain material facts when it limited the maximum
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
area to be covered to 4,915.75 hectares, whereas the area that should, at the least, be covered is
judgment can be made without touching the constitutionality of a law, such recourse is favored. Garcia v. 6,443 hectares,26 which is the agricultural land allegedly covered by RA 6657 and previously held
Executive Secretary explains why: by Tarlac Development Corporation (Tadeco).27
Lis Mota—the fourth requirement to satisfy before this Court will undertake judicial review— We cannot subscribe to this view. Since what is put in issue before the Court is the propriety of
means that the Court will not pass upon a question of unconstitutionality, although properly the revocation of the SDP, which only involves 4,915.75 has. of agricultural land and not 6,443
presented, if the case can be disposed of on some other ground, such as the application of the statute or has., then We are constrained to rule only as regards the 4,915.75 has. of agricultural land.
the general law. The petitioner must be able to show that the case cannot be legally resolved unless Moreover, as admitted by FARM itself, this issue was raised for the first time by FARM in its
the constitutional question raised is determined. This requirement is based on the rule that every law Memorandum dated September 24, 2010 filed before this Court.28 In this regard, it should be
has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear
noted that “[a]s a legal recourse, the special civil action of certiorari is a limited form of
and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or
argumentative. review.”29 The certiorari jurisdiction of this Court is narrow in scope as it is restricted to resolving
errors of jurisdiction and grave abuse of discretion, and not errors of judgment.30To allow
554 additional issues at this stage of the proceedings is violative of fair play, justice and due
process.31
554 SUPREME COURT REPORTS ANNOTATED Nonetheless, it should be taken into account that this should not prevent the DAR, under its
mandate under the
Agrarian Reform Council _______________
26 Id., at p. 52.
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the 27 Id.
28 Id.
FARM members previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with
29 Apostol v. Court of Appeals, G.R. No. 141854, October 15, 2008, 569 SCRA 80, 92; citing Almuete v. Andres, 421 Phil
the conditions of the SDP to support a plea for its revocation. And before the Court, the lis mota is whether
522, 531; 369 SCRA 619, 628 (2001).
or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non- 30 Id.; citing Tolentino v. People, G.R. No. 170396, August 31, 2006, 500 SCRA 721, 724 and Suyat, Jr. v. Torres, G.R.
compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and No. 133530, October 25, 2004, 441 SCRA 265, 274-275.
statutory provisions. To be sure, any of these key issues may be resolved without plunging into the 31 See C.F. Sharp Crew Management, Inc. v. Espanol, Jr., G.R. No. 155903, September 14, 2007, 533 SCRA 424, 438-
constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of 439.
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. 556
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 556 SUPREME COURT REPORTS ANNOTATED
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 Hacienda Luisita, Incorporated vs. Presidential
question of whether or not it is unconstitutional should be a moot issue.” (Citations omitted; emphasis in the Agrarian Reform Council
original.)
agrarian reform law, from subsequently subjecting to agrarian reform other agricultural lands to keep the farm intact and unfragmented ad infinitum. And there is logic to HLI’s stated observation that
originally held by Tadeco that were allegedly not transferred to HLI but were supposedly covered the key phrase in the provision of Sec. 5(a) is “viability of corporate operations”: “[w]hat is thus required is
by RA 6657. not the agricultural land remaining intact x x x but the viability of the corporate operations with its
agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate
DAR, however, contends that the declaration of the area32 to be awarded to each FWB is too
agricultural land does not remain intact or [un]fragmented.”38
restrictive. It stresses that in agricultural landholdings like Hacienda Luisita, there are roads,
irrigation canals, and other portions of the land that are considered commonly-owned by
_______________
farmworkers, and this may necessarily result in the decrease of the area size that may be 37 Id.
awarded per FWB.33DAR also argues that the July 5, 2011 Decision of this Court does not give it 38 HLI Consolidated Reply and Opposition, p. 65.
any leeway in adjusting the area that may be awarded per FWB in case the number of actual 558
qualified FWBs decreases.34
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 agrarian reform laws are within the Hacienda Luisita, Incorporated vs. Presidential
jurisdiction of the DAR,35 it is the latter which shall determine the area with which each Agrarian Reform Council
qualified FWB will be awarded.
(a) Conversion of Agricultural Lands
It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let
AMBALA insists that the conversion of the agricultural lands violated the conditions of RA
alone undermining the viability of Hacienda Luisita’s operation, as the DAR Secretary approved the land
6657 and DAO 10, stating that “keeping the land intact and unfragmented is one of the essential conversion applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec.
conditions of [the] SD[P], RA 6657 and DAO 10.”36 It 65 of RA 6657 which reads:
Sec. 65. Conversion of Lands.—After the lapse of five 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, the
32 We stated in Our July 5, 2011 Decision that if a qualified FWB will choose land distribution, he or she will get DAR upon application of the beneficiary or landowner with due notice to the affected parties, and
6,886.5 square meters of agricultural land in Hacienda Luisita. subject to existing laws, may authorize the x x x conversion of the land and its dispositions. x x x”
33 DAR MR, p. 37.
34 Id. Moreover, it is worth noting that the application for conversion had the backing of 5,000 or so
35 See Soriano v. Bravo, G.R. No. 152086, December 15, 2010, 638 SCRA 403, 420.
36 AMBALA MR, p. 67.
FWBs, including respondents Rene Galang, and Jose Julio Suniga, then leaders of the AMBALA
and the Supervisory Group, respectively, as evidenced by the Manifesto of Support they signed
557 and which was submitted to the DAR.39 If at all, this means that AMBALA should be estopped
from questioning the conversion of a portion of Hacienda Luisita, which its leader has fully
supported.
VOL. 660, NOVEMBER 22, 2011 557 (b) LIPCO and RCBC as Innocent Purchasers for Value
Hacienda Luisita, Incorporated vs. Presidential The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial Banking
Agrarian Reform Council Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not innocent
purchasers for value. The AMBALA, in particular, argues that LIPCO, being a wholly-owned
subsidiary of HLI, is conclusively presumed to have knowledge of the agrarian dispute
asserts that “this provision or conditionality is not mere decoration and is intended to ensure that
the farmers can continue with the tillage of the soil especially since it is the only occupation that
_______________
majority of them knows.”37 39 Id., at p. 80, Petition of HIL; id., at p. 944, Consolidated Reply of HLI; id., at pp. 1327-1328.
We disagree. As We amply discussed in Our July 5, 2011 Decision:
559
“Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is
also not among the imperative impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC VOL. 660, NOVEMBER 22, 2011 559
effectively assured the intended stock beneficiaries that the physical integrity of the farm shall remain
inviolate. Accordingly, the Terminal Report and the PARC-assailed resolution would take HLI to task for Hacienda Luisita, Incorporated vs. Presidential
securing approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many Agrarian Reform Council
words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which
reads: “a. that the continued operation of the corporation with its agricultural land intact and unfragmented
is viable with potential for growth and increased profitability.” on the subject land and could not feign ignorance of this fact, especially since they have the same
The PARC is wrong. directors and stockholders.40 This is seconded by Rene Galang and AMBALA, through the PILC,
In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater which intimate that a look at the General Information Sheets of the companies involved in the
benefits to qualified beneficiaries––is but one of the stated criteria to guide PARC in deciding on whether or transfers of the 300-hectare portion of Hacienda Luisita, specifically, Centennary Holdings, Inc.
not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking
(Centennary), LIPCO and RCBC, would readily reveal that their directors are interlocked and particularly the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR,
connected to Tadeco and HLI.41 Rene Galang and AMBALA, through the PILC, also allege that after going through the necessary processes, granted
“with the clear-cut involvement of the leadership of all the corporations concerned, LIPCO and
RCBC cannot feign ignorance that the parcels of land they bought are under the coverage of the _______________
44 FARM MR, p. 94.
comprehensive agrarian reform program [CARP] and that the conditions of the respective sales
are imbued with public interest where normal property relations in the Civil Law sense do not 561
apply.”42
Avowing that the land subject of conversion still remains undeveloped, Rene Galang and VOL. 660, NOVEMBER 22, 2011 561
AMBALA, through the PILC, further insist that the condition that “[t]he development of the land
should be completed within the period of five [5] years from the issuance of this Order” was not Hacienda Luisita, Incorporated vs. Presidential
complied with. AMBALA also argues that since RCBC and LIPCO merely stepped into the shoes Agrarian Reform Council
of HLI, then they must comply with the conditions imposed in the conversion order.43
In addition, FARM avers that among the conditions attached to the conversion order, which the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA
RCBC and LIPCO necessarily have knowledge of, are (a) that its approval shall in no way amend, 6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all
diminish, or alter the undertaking and obligations of HLI as contained in the [SDP] approved on matters involving the implementation of agrarian reform. The DAR conversion order became final and
November 21, 1989; and (b) that the benefits, wages and the like, re- 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.” (Emphasis supplied.)
40 AMBALA MR, p. 76.
41 Galang MR, p. 21.
In the second place, the allegation that the converted lands remain undeveloped is
42 Id., at p. 22.
43 AMBALA MR, p. 72. contradicted by the evidence on record, particularly, Annex “X” of LIPCO’s Memorandum dated
September 23, 2010,45 which has photographs showing that the land has been partly
560 developed.46 Certainly, it is a general rule that the factual findings of administrative agencies are
conclusive and binding on the Court when supported by substantial evidence.47 However, this
560 SUPREME COURT REPORTS ANNOTATED rule admits of certain exceptions, one of which is when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record.48
Hacienda Luisita, Incorporated vs. Presidential In the third place, by arguing that the companies involved in the transfers of the 300-hectare
Agrarian Reform Council portion of Hacienda Luisita have interlocking directors and, thus, knowledge of one may already
be imputed upon all the other companies, AMBALA and Rene Galang, in effect, want this Court
to pierce the veil of corporate fiction. However, piercing the veil of corporate fiction is warranted
ceived by the FWBs shall not in any way be reduced or adversely affected, among others.44
“only in cases when the separate legal entity is used to defeat public convenience, justify wrong,
The contentions of respondents are wanting. In the first place, there is no denying that RCBC
and LIPCO knew that the converted lands they bought were under the coverage of CARP.
_______________
Nevertheless, as We have mentioned in Our July 5, 2011 Decision, this does not necessarily mean
45 Rollo, Vol. 3, pp. 3280-3323.
that both LIPCO and RCBC already acted in bad faith in purchasing the converted lands. As this 46 Id., at pp. 3428-3468.
Court explained: 47 Nicolas v. Del-Nacia Corp. G.R. No. 158026, April 23, 2008, 552 SCRA 545, 556.
48 Bascos, Jr. v. Taganahan, G.R. No. 180666, February 18, 2009, 579 SCRA 653, 674-675.
“It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously
covered by the SDP. Good faith “consists in the possessor’s belief that the person from whom he received it 562
was the owner of the same and could convey his title. Good faith requires a well-founded belief that the
person from whom title was received was himself the owner of the land, with the right to convey it. There is
good faith where there is an honest intention to abstain from taking any unconscientious advantage from 562 SUPREME COURT REPORTS ANNOTATED
another.” It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to Hacienda Luisita, Incorporated vs. Presidential
CARP coverage by means of a stock distribution plan, as the DAR conversion order was Agrarian Reform Council
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 protect fraud, or defend crime, such that in the case of two corporations, the law will regard the
and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows corporations as merged into one.”49 As succinctly discussed by the Court in Velarde v. Lopez,
conversion and disposition of agricultural lands previously covered by CARP land acquisition “after the Inc.:50
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 “Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by piercing the veil of
for residential, commercial or industrial purposes.” Moreover, DAR notified all the affected parties, more corporate fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the
separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such
that in the case of two corporations, the law will regard the corporations as merged into one. The rationale _______________
behind piercing a corporation’s identity is to remove the barrier between the corporation from the persons 51 G.R. No. 141593-94, July 12, 2006, 494 SCRA 583, 602.
comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a
564
shield for undertaking certain proscribed activities.
In applying the doctrine of piercing the veil of corporate fiction, the following requisites must be
established: (1) control, not merely majority or complete stock control; (2) such control must have been used
by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal
duty, or dishonest acts in contravention of plaintiff’s legal rights; and (3) the aforesaid control and breach of Hacienda Luisita, Incorporated vs. Presidential
duty must proximately cause the injury or unjust loss complained of. (Citations omitted.)
Nowhere, however, in the pleadings and other records of the case can it be gathered that respondent has Agrarian Reform Council
complete control over Sky Vision, not only of finances but of policy and business practice in respect to the
transaction attacked, so that Sky Vision had at the time of the transaction no separate mind, will or Besides, to disregard the Conversion Order through the revocation of the approval of the SDP
existence of its own. The existence of interlocking directors, corporate officers and shareholders is not would create undue prejudice to LRC, which is not even a party to the proceedings below, and
enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy
considerations.”
would be tantamount to deprivation of property without due process of law.
Nonethess, the minority is of the adamant view that since LRC failed to intervene in the
instant case and was, therefore, unable to present evidence supporting its good faith purchase of
_______________
the 200-hectare converted land, then LRC should be given full opportunity to present its case
49 Velarde v. Lopez, Inc., G.R. No. 153886, January 14, 2004, 419 SCRA 422, 431-432; citing Tan Boon Bee & Co., Inc.
v. Jarencio, 163 SCRA 205 (1988) and Yutivo Sons Hardware Co. v. CTA, 1 SCRA 160 (1961). before the DAR. This minority view is a contradiction in itself. Given that LRC did not intervene
50 Id. and is, therefore, not a party to the instant case, then it would be incongruous to order them to
present evidence before the DAR. Such an order, if issued by this Court, would not be binding
563
upon the LRC.
Moreover, LRC may be considered to have waived its right to participate in the instant
VOL. 660, NOVEMBER 22, 2011 563 petition since it did not intervene in the DAR proceedings for the nullification of the PARC
Resolution No. 89-12-2 which approved the SDP.
Hacienda Luisita, Incorporated vs. Presidential (c) Proceeds of the sale of the 500-hectare converted land and of the 80.51-hectare
Agrarian Reform Council land used for the SCTEX
As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court excluded
the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare
Absent any allegation or proof of fraud or other public policy considerations, the existence of
SCTEX lot acquired by the government from compulsory coverage, then HLI and its subsidiary,
interlocking directors, officers and stockholders is not enough justification to pierce the veil of
Centennary, should be liable to the FWBs for the price received for said lots. Thus:
corporate fiction as in the instant case.
And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered the “There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14,
payment of the proceeds of the sale of the converted land, and even of the 80.51-hectare land sold 1996 Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place,
to the government, through the Bases Conversion Development Authority, to the qualified FWBs, the FWBs should have their corresponding share of the land’s value. There is merit in the claim. Since the
effectively fulfils the conditions in the conversion order, to wit: (1) that its approval shall in no SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the
way amend, diminish, or alter the undertaking and obligations of HLI as contained in the SDP 565
approved on November 21, 1989; and (2) that the benefits, wages and the like, received by the
FWBs shall not in any way be reduced or adversely affected, among others.
A view has also been advanced that the 200-hectare lot transferred to Luisita Realty VOL. 660, NOVEMBER 22, 2011 565
Corporation (LRC) should be included in the compulsory coverage because the corporation did not Hacienda Luisita, Incorporated vs. Presidential
intervene. Agrarian Reform Council
We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by PARC
Resolution 2005-32-01, this Court is constrained to make a ruling on the rights of LRC over the
lands subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657.
said lot. Moreover, the 500-hectare portion of Hacienda Luisita, of which the 200-hectare portion
Since the Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-
sold to LRC and the 300-hectare portion subsequently acquired by LIPCO and RCBC were part hectare SCTEX lot acquired by the government from the area covered by SDP, then HLI and its subsidiary,
of, was already the subject of the August 14, 1996 DAR Conversion Order. By virtue of the said Centennary, shall be liable to the FWBs for the price received for said lots. HLI shall be liable for the value
conversion order, the land was already reclassified as industrial/commercial land not subject to received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent
compulsory coverage. Thus, if We place the 200-hectare lot sold to LRC under compulsory value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the
coverage, this Court would, in effect, be disregarding the DAR Conversion Order, which has long consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the
attained its finality. And as this Court held in Berboso v. CA,51 “Once final and executory, the sale of the 80.51-hectare SCTEX lot.
Conversion Order can no longer be questioned.” We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and
80.51-hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses relating
to the transfer of the land and HLI’s statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the proceeds were properly Hacienda Luisita, Incorporated vs. Presidential
utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm Agrarian Reform Council
to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-
hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling
expenses and in compliance with the August 14, 1996 Conversion Order. The cost of the audit will be itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code
shouldered by HLI. If after such audit, it is determined that there remains a balance from the proceeds of under the guise of being a corporate entity.
the sale, then the balance shall be distributed to the qualified FWBs.” Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI
are also stockholders, its applicability is limited as the rights of the parties arising from the SDP
HLI, however, takes exception to the above-mentioned ruling and contends that it is not should not be made to supplant or circumvent the agrarian reform program.
proper to distribute the unspent or unused balance of the proceeds of the sale of the 500-hectare Without doubt, the Corporation Code is the general law providing for the formation, organization and
converted land and 80.51-hectare SCTEX lot to the qualified FWBs for the following reasons: (1) regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As
the proceeds of the sale belong to the corporation, HLI, as corporate capital and assets in between a general and special law, the latter shall prevail—generalia specialibus non derogant.54Besides,
the present impasse between HLI and the private respondents is not an intra-corporate dispute which
substitution for the portions of its land asset which were sold to third parties; (2) to distribute the
necessitates the application of the Corporation Code. What private respondents questioned before the DAR
cash sales proceeds of the portions of the land asset to the FWBs, who are stockholders of HLI, is is the proper implementation of the SDP and HLI’s compliance with RA 6657. Evidently, RA 6657 should be
to dissolve the corporation and distribute the proceeds as liquidating dividends without the applicable law to the instant case.” (Emphasis supplied.)
566
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 their conversion and valid
566 SUPREME COURT REPORTS ANNOTATED transfers, then it is only but proper that the price received for the sale of these lots should be
given to the qualified FWBs. In effect, the proceeds from the sale shall take the place of the lots.
Hacienda Luisita, Incorporated vs. Presidential The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the payment of
Agrarian Reform Council taxes and expenses relating to the transfer of the land, as well as HLI’s statement that most, if
not all, of the proceeds were used for legitimate corporate purposes. Accordingly, We ordered the
even paying the creditors of the corporation; and (3) the doing of said acts would violate the deduction of the
stringent provisions of the Corporation Code and corporate practice.52
Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability to the _______________
FWBs for the price received for the 500-hectare converted lot and the 80.51-hectare SCTEX lot. 54 Koruga v. Arcenas, G.R. Nos. 168332 and 169053, June 19, 2009, 590 SCRA 49, 68; citing In Re: Petition for
Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., PDIC v. Bureau of Internal Revenue, G.R. No.
However, as We have established in Our July 5, 2011 Decision, the rights, obligations and 158261, December 18, 2006, 511 SCRA 123, 141.
remedies of the parties in the instant case are primarily governed by RA 6657 and HLI cannot
shield itself from the CARP coverage merely under the convenience of being a corporate entity. In 568
this regard, it should be underscored that the agricultural lands held by HLI by virtue of the SDP
are no ordinary assets. These are special assets, because, originally, these should have been
distributed to the FWBs were it not for the approval of the SDP by PARC. Thus, the government
cannot renege on its responsibility over these assets. Likewise, HLI is no ordinary corporation as Hacienda Luisita, Incorporated vs. Presidential
it was formed and organized precisely to make use of these agricultural lands actually intended Agrarian Reform Council
for distribution to the FWBs. Thus, it cannot shield itself from the coverage of CARP by invoking
the Corporation Code. As explained by the Court:
taxes and expenses relating to the transfer of titles to the transferees, and the expenditures
“HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, incurred by HLI and Centennary for legitimate corporate purposes, among others.
instead of to RA 6657, in determining their rights, obligations and remedies. The Code, it adds, should be On this note, DAR claims that the “[l]egitimate corporate expenses should not be deducted as
the applicable law on the disposition of the agricultural land of HLI. there is no basis for it, especially since only the auditing to be conducted on the financial records
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA of HLI will reveal the amounts to be offset between HLI and the FWBs.”55
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”
The contention is unmeritorious. The possibility of an offsetting should not prevent Us from
of the SDOA and the SDP.53 It is, thus, paradoxical for HLI to shield deducting the legitimate corporate expenses incurred by HLI and Centennary. After all, the
Court has ordered for a proper auditing “[i]n order to determine once and for all whether or not
_______________ all the proceeds were properly utilized by HLI and its subsidiary, Centennary.” In this regard,
52 HLI MR, pp. 3-4. DAR is tasked to “engage the services of a reputable accounting firm to be approved by the
53 TSN, August 24, 2010, p. 13.
parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land
567 and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling
expenses and in compliance with the August 14, 1996 Conversion Order.” Also, it should be noted
VOL. 660, NOVEMBER 22, 2011 567 that it is HLI which shall shoulder the cost of audit to reduce the burden on the part of the
FWBs. Concomitantly, the legitimate corporate expenses incurred by HLI and Centennary, as
will be determined by a reputable accounting firm to be engaged by DAR, shall be among the compensation as farmhands in the agricultural enterprise and the fringe benefits granted to them by their
allowable deductions from the proceeds of the sale of the 500-hectare land and the 80.51-hectare collective bargaining agreement with management.”58
SCTEX lot.
Also, PARC Resolution No. 89-12-2 reads as follows:
We, however, find that the 3% production share should not be deducted from the proceeds of
the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot. The 3% production RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF TARLAC DEVELOPMENT
share, like the homelots, was among the benefits received by the FWBs as farmhands in the COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)
agricultural enterprise of HLI and, thus, should not be taken away from the FWBs. NOW THEREFORE, on motion duly seconded,
RESOLVED, as it is hereby resolved, to approve the stock distribution plan of TDC/HLI.
UNANIMOUSLY APPROVED.”59 (Emphasis supplied)
_______________
55 DAR MR, p. 33.
Clearly, what was approved by PARC is the SDP and not the SDOA. There is, therefore, no
569 basis for this Court to apply the law on contracts to the revocation of the said PARC Resolution.
IV. Just Compensation
In Our July 5, 2011 Decision, We stated that “HLI shall be paid just compensation for the
VOL. 660, NOVEMBER 22, 2011 569 remaining agricultural land that will be transferred to DAR for land distribution to the FWBs.”
Hacienda Luisita, Incorporated vs. Presidential We also ruled that the date of the “taking” is November 21, 1989, when PARC approved HLI’s
Agrarian Reform Council SDP per PARC Resolution No. 89-12-2.
In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the foregoing
ruling and contends that the “taking” should be reckoned from finality of the Decision of this
Contrarily, the minority is of the view that as a consequence of the revocation of the SDP, the Court, or at the very least, the reckoning period may be
parties should be restored to their respective conditions prior to its execution and approval,
subject to the application of the principle of set-off or compensation. Such view is patently _______________
misplaced. 58 Id., at pp. 3747-3748.
The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To reiterate, 59 Id., at pp. 151.
what was actually revoked by this Court, in its July 5, 2011 Decision, is PARC Resolution No. 89-
571
12-2 approving the SDP. To elucidate, it was the SDP, not the SDOA, which was presented for
approval by Tadeco to DAR.56 The SDP explained the mechanics of the stock distribution but did
not make any reference nor correlation to the SDOA. The pertinent portions of the proposal read: VOL. 660, NOVEMBER 22, 2011 571
MECHANICS OF STOCK DISTRIBUTION PLAN Hacienda Luisita, Incorporated vs. Presidential
Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land may distribute among Agrarian Reform Council
the qualified beneficiaries such proportion or percentage of its capital stock that the value of the agricultural
land actually devoted to agricultural activities, bears in relation to the corporation’s total
assets. Conformably with this legal provision, Tarlac Development Corporation hereby submits tacked to January 2, 2006, the date when the Notice of Coverage was issued by the DAR
for approval a stock distribution plan that envisions the following:57(Terms and conditions omitted; pursuant to PARC Resolution No. 2006-34-01 recalling/revoking the approval of the SDP.60
emphasis supplied) For their part, Mallari, et al. argue that the valuation of the land cannot be based on
xxxx November 21, 1989, the date of approval of the SDP. Instead, they aver that the date of “taking”
for valuation purposes is a factual issue best left to the determination of the trial courts.61
_______________
56 As stated in the SDP: At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid just
“Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land may distribute among the qualified beneficiaries compensation for the agricultural land that will be distributed to the FWBs, since the Manila
such proportion or percentage of its capital stock that the value of the agricultural land actually devoted to agricultural activities, bears
in relation to the corporation’s total assets. Conformably with this legal provision, Tarlac Development Corporation hereby submits for
Regional Trial Court (RTC) already rendered a decision ordering “the Cojuangcos to transfer the
approval a stock distribution plan that envisions the following: x x x” (Rollo, p. 1322) control of Hacienda Luisita to the Ministry of Agrarian Reform, which will distribute the land to
57 Rollo, p. 1322; Annex “AA.”
small farmers after compensating the landowners P3.988 million.”62 In the event, however, that
570 this Court will rule that HLI is indeed entitled to compensation, AMBALA contends that it
should be pegged at forty thousand pesos (PhP 40,000) per hectare, since this was the same value
570 SUPREME COURT REPORTS ANNOTATED that Tadeco declared in 1989 to make sure that the farmers will not own the majority of its
stocks.63
Hacienda Luisita, Incorporated vs. Presidential Despite the above propositions, We maintain that the date of “taking” is November 21, 1989,
Agrarian Reform Council the date when PARC approved HLI’s SDP per PARC Resolution No. 89-12-2, in view of the fact
that this is the time that the FWBs were considered to own and possess the agricultural lands in
The above stock distribution plan is hereby submittedon the basis of all these benefits that the Hacienda Luisita. To be precise, these lands became subject of the agrarian reform coverage
farmworker-beneficiaries of Hacienda Luisita will receive under its provisions in addition to their regular through the stock distribution scheme only upon the approval of the SDP, that is, November 21,
1989. Thus, such approval is akin to a notice of coverage ordinarily issued under compulsory Moreover, it should be noted that it is precisely because the stock distribution option is a
acquisition. Further, any distinctive mechanism under RA 6657 that it cannot be treated similarly with that of compulsory
land acquisition as these are two (2) different modalities under the agrarian reform program. As
_______________ We have stated in Our July 5, 2011 Decision, RA 6657 “provides two (2) alternative
60 HLI MR, pp. 18-21. modalities, i.e., land or stock transfer, pursuant to either of which the corporate landowner can
61 Mallari, et al. MR, pp. 3-4. comply with CARP.”
62 AMBALA MR, p. 70. In this regard, it should be noted that when HLI submitted the SDP to DAR for approval, it
63 Id., at p. 71.
cannot be gainsaid that the stock distribution scheme is clearly HLI’s preferred modality in order
572 to comply with CARP. And when the SDP was approved, stocks were given to the FWBs in lieu of
land distribution. As aptly observed by the minority itself, “[i]nstead of expropriating lands, what
the government took and distributed to the FWBs were shares of stock of petitioner HLI in
572 SUPREME COURT REPORTS ANNOTATED proportion to the value of the agricultural lands that should have been expropriated and turned
Hacienda Luisita, Incorporated vs. Presidential over to the FWBs.” It cannot, therefore, be denied that upon the approval of the SDP submitted
Agrarian Reform Council by HLI, the agricultural lands of Hacienda Luisita became subject of CARP coverage. Evidently,
the approval of the SDP took the place of a notice of coverage issued under compulsory
acquisition.
doubt should be resolved in favor of the FWBs. As this Court held in Perez-Rosario v. CA:64 Also, it is surprising that while the minority opines that under the stock distribution option,
“title to the property remains with the corporate landowner, which should presumably be
“It is an established social and economic fact that the escalation of poverty is the driving force behind the
political disturbances that have in the past compromised the peace and security of the people as well as the
dominated by farmers with majority stockholdings in the corporation,” it still insists that
continuity of the national order. To subdue these acute disturbances, the legislature over the course of the the just compensation that should be given to HLI is to be reckoned on January 2, 2006, the date
history of the nation passed a series of laws calculated to accelerate agrarian reform, ultimately to raise the of the issuance of the notice of coverage, even after it found that the FWBs did not have the
material standards of living and eliminate discontent. Agrarian reform is a perceived solution to social majority stockholdings in HLI contrary to the supposed avowed policy of the law. In effect, what
instability. The edicts of social justice found in the Constitution and the public policies that the minority wants is
underwrite them, the extraordinary national experience, and the prevailing national
consciousness, all command the great departments of government to tilt the balance in favor of 574
the poor and underprivileged whenever reasonable doubt arises in the interpretation of the
law. But annexed to the great and sacred charge of protecting the weak is the diametric function to put
every effort to arrive at an equitable solution for all parties concerned: the jural postulates of social justice 574 SUPREME COURT REPORTS ANNOTATED
cannot shield illegal acts, nor do they sanction false sympathy towards a certain class, nor yet should they
deny justice to the landowner whenever truth and justice happen to be on her side. In the occupation of the
legal questions in all agrarian disputes whose outcomes can significantly affect societal harmony, the Agrarian Reform Council
considerations of social advantage must be weighed, an inquiry into the prevailing social interests is
necessary in the adjustment of conflicting demands and expectations of the people, and the social to prejudice the FWBs twice. Given that the FWBs should have had majority stockholdings in
interdependence of these interests, recognized.” (Emphasis supplied.)
HLI but did not, the minority still wants the government to pay higher just compensation to HLI.
The minority contends that it is the date of the notice of coverage, that is, January 2, 2006, Even if it is the government which will pay the just compensation to HLI, this will also affect the
which is determinative of the just compensation HLI is entitled to for its expropriated lands. To FWBs as they will be paying higher amortizations to the government if the “taking” will be
support its contention, it cited numerous cases where the time of the taking was reckoned on the considered to have taken place only on January 2, 2006.
date of the issuance of the notice of coverage. 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
_______________
64 G.R. No. 140796, June 30, 2006, 494 SCRA 66, 92-93. compensation. The court has the right to review with finality the determination in the exercise of
what is admittedly a judicial function.65
573 A view has also been advanced that HLI should pay the qualified FWBs rental for the use and
possession of the land up to the time it surrenders possession and control over these lands. What
VOL. 660, NOVEMBER 22, 2011 573 this view fails to consider is the fact that the FWBs are also stockholders of HLI prior to the
revocation of PARC Resolution No. 89-12-2. Also, the income earned by the corporation from its
Hacienda Luisita, Incorporated vs. Presidential possession and use of the land ultimately redounded to the benefit of the FWBs based on its
Agrarian Reform Council business operations in the form of salaries, benefits voluntarily granted by HLI and other fringe
benefits under their Collective Bargaining Agreement. That being so, there would be unjust
enrichment on the part of the FWBs if HLI will still be required to pay rent for the use of the land
However, a perusal of the cases cited by the minority would reveal that none of them involved
in question.
the stock distribution scheme. Thus, said cases do not squarely apply to the instant case. V. Sale to Third Parties
There is a view that since the agricultural lands in Hacienda Luisita were placed under CARP landholdings inclusive of the land to be acquired do not exceed five (5) hectares; subject, however, to the right of pre-
emption and/or redemption of tenant/lessee under Section 11 and 12 of R.A. 3844, as amended.
coverage through the SDOA scheme on May 11, 1989, then the 10-year period pro- xxxx
4. Those executed by beneficiaries covering lands acquired under any agrarian reform law in favor of the government,
_______________ DAR, LBP or other qualified beneficiaries certified by DAR.
65 Heirs of Lorenzo and Carmen Vidad v. Land Bank of the Philippines, G.R. No. 166461, April 30, 2010, 619 SCRA 5. Those executed after ten (10) years from the issuance and registration of the Emancipation Patent or
Certificate of Land Ownership Award.
609.
B. The following transactions are not valid:
575 1. Sale, disposition, lease management contract or transfer of possession of private lands executed by the original
landowner prior to June 15, 1988, which are registered on or before September 13, 1988, or those executed after June
15, 1988, covering an area in excess of the five-hectare retention limit in violation of R.A. 6657.
2. Those covering lands acquired by the beneficiary under R.A. 6657 and executed within ten (10) years from the issuance
VOL. 660, NOVEMBER 22, 2011 575 and registration of an Emancipation Patent or Certificate of Land Ownership Award.
3. Those executed in favor of a person or persons not qualified to acquire land under R.A. 6657.
577
VOL. 660, NOVEMBER 22, 2011 577
hibition on the transfer of awarded lands under RA 6657 lapsed on May 10, 1999, and,
consequently, the qualified FWBs should already be allowed to sell these lands with respect to Hacienda Luisita, Incorporated vs. Presidential
their land interests to third parties, including HLI, regardless of whether they have fully paid for Agrarian Reform Council
the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657 states: 4. Sale, transfer, conveyance or change of nature of the land outside of urban centers and city limits either in whole or in
part as of June 15, 1988, when R.A. 6657 took effect, except as provided for under DAR Administrative Order No. 15,
“SEC. 27. Transferability of Awarded Lands.—Lands acquired by beneficiaries under this Act may series of 1988.
not be sold, transferred or conveyed except through hereditary succession, or to the 5. Sale, transfer or conveyance by beneficiary of the right to use or any other usufructuary right over the land he acquired
government, or to the LBP, or to other qualified beneficiaries for a period of ten (10) by virtue of being a beneficiary, in order to circumvent the law.
x x x x (Emphasis supplied.)
years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase
the land from the government or LBP within a period of two (2) years. Due notice of the availability of the Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be transferred or
land shall be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay where
conveyed after ten (10) years from the issuance and registration of the emancipation patent
the land is situated. The Provincial Agrarian Coordinating Committee (PARCCOM), as herein provided,
shall, in turn, be given due notice thereof by the BARC. (EP) or certificate of land ownership award (CLOA). Considering that the EPs or CLOAs have not
If the land has not yet been fully paid by the beneficiary, the right to the land may be transferred yet been issued to the qualified FWBs in the instant case, the 10-year prohibitive period has not
or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary even started. Significantly, the reckoning point is the issuance of the EP or CLOA, and not
who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing the placing of the agricultural lands under CARP coverage.
compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability Moreover, if We maintain the position that the qualified FWBs should be immediately allowed
of the land in the manner specified in the immediately preceding paragraph. the option to sell or convey the agricultural lands in Hacienda Luisita, then all efforts at agrarian
In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum for reform would be rendered nugatory by this Court, since, at the end of the day, these lands will
the amounts the latter has already paid, together with the value of improvements he has made on the land.” just be transferred to persons not entitled to land distribution under CARP. As aptly noted by the
(Emphasis supplied.)
late Senator Neptali Gonzales during the Joint Congressional Conference Committee on the
To implement the above-quoted provision, inter alia, DAR issued Administrative Order No. 1, Comprehensive Agrarian Reform Program Bills:
Series of 1989 (DAO 1) entitled Rules and Procedures Governing Land Transactions. Said Rules
SEN. GONZALES. My point is, as much as possible let the said lands be distributed under
set forth the rules on validity of land transactions, to wit: CARP remain with the beneficiaries and their heirs because that is the lesson that we have to learn
576 from PD No. 27. If you will talk with the Congressmen representing Nueva Ecija, Pampanga and Central
Luzon provinces, law or no law, you will find out that more than one-third of the original, of the
lands distributed under PD 27 are no longer
576 SUPREME COURT REPORTS ANNOTATED 578

Agrarian Reform Council 578 SUPREME COURT REPORTS ANNOTATED
II. RULES ON VALIDITY OF LAND TRANSACTIONS
A. The following transactions are valid:
1. Those executed by the original landowner in favor of the qualified beneficiary from among those certified by DAR.
2. Those in favor of the government, DAR or the Land Bank of the Philippines. owned, possessed or being worked by the grantees or the awardees of the same, something
3. Those covering lands retained by the landowner under Section 6 of R.A. 6657 duly certified by the designated DAR
which we ought to avoid under the CARP bill that we are going to enact.66 (Emphasis supplied.)
Provincial Agrarian Reform Officer (PARO) as a retention area, executed in favor of transferees whose total
Worse, by raising that the qualified beneficiaries may sell their interest back to HLI, this executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3)
smacks of outright indifference to the provision on retention limits67 under RA 6657, as months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the DAR within thirty (30) days of
any transaction involving agricultural lands in excess of five (5) hectares.
_______________ 580
66 Joint Congressional Conference Committee on the Comprehensive Agrarian Reform Program Bills, May 26, 1988,
pp. 45-46.
67 SEC. 6. Retention Limits.—Except as otherwise provided in this Act, no person may own or retain, directly, any 580 SUPREME COURT REPORTS ANNOTATED
public or private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm,
such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Hacienda Luisita, Incorporated vs. Presidential
Council (PARC) created hereunder, but in no case shall the retention by the landowner exceed five (5) hectares. Three (3) Agrarian Reform Council
hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least
fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm: Provided, That
landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance
retained by them thereunder; Provided, further, That original homestead grantees or direct compulsory heirs who still herewith, the land shall be transferred to the LBP x x x.” When the words and phrases in the
own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to
statute are clear and unequivocal, the law is applied according to its express terms.68 Verba legis
cultivate said homestead.
The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the non est recedendum, or from the words of a statute there should be no departure.69
landowner: Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall The minority, however, posits that “[t]o insist that the FWBs’ rights sleep for a period of ten
have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with years is unrealistic, and may seriously deprive them of real opportunities to capitalize and
similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a maximize the victory of direct land distribution.” By insisting that We disregard the ten-year
leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in restriction under the law in the case at bar, the minority, in effect, wants this Court to engage in
another agricultural land, he loses his right as a leaseholder to the land retained by the landowner. The tenant must
exercise this option within a period
judicial legislation, which is violative of the principle of separation of powers.70The discourse by
Ruben E. Agpalo, in his book on statutory construction, is enlightening:
579
“Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court
has no choice but to see to it that its mandate is obeyed. Where the law is clear and free from doubt or
VOL. 660, NOVEMBER 22, 2011 579 ambiguity, there is no room for construction or interpretation. Thus, where what is not clearly provided
in the law is read into the law by construction because it is more logical and wise, it would be to
Hacienda Luisita, Incorporated vs. Presidential encroach upon legislative prerogative to define the wisdom of the law, which is judicial
Agrarian Reform Council legislation. For whether a statute is wise or expedient is not for the courts to determine. Courts
must administer the law, not as
this Court, in effect, would be allowing HLI, the previous landowner, to own more than five (5) _______________
hectares of agricultural land, which We cannot countenance. There is a big difference between 68 Commissioner of Internal Revenue v. Central Luzon Drug Corp., G.R. No. 148512, June 26, 2006, 492 SCRA 575, 581.
69 Philippine Amusement & Gaming Corp. v. Philippine Gaming Jurisdiction, Inc., et al., G.R. No. 177333, April 24, 2009, 586 SCRA
the ownership of agricultural lands by HLI under the stock distribution scheme and its eventual 658, 664-665.
acquisition of the agricultural lands from the qualified FWBs under the proposed buy-back 70 Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, G.R. Nos. 158885 & 170680, October 2, 2009, 602
scheme. The rule on retention limits does not apply to the former but only to the latter in view of SCRA 159, 169.
the fact that the stock distribution scheme is sanctioned by Sec. 31 of RA 6657, which specifically 581
allows corporations to divest a proportion of their capital stock that “the agricultural land,
actually devoted to agricultural activities, bears in relation to the company’s total assets.” On the
VOL. 660, NOVEMBER 22, 2011 581
other hand, no special rules exist under RA 6657 concerning the proposed buy-back scheme;
hence, the general rules on retention limits should apply. Hacienda Luisita, Incorporated vs. Presidential
Further, the position that the qualified FWBs are now free to transact with third parties Agrarian Reform Council
concerning their land interests, regardless of whether they have fully paid for the lands or not,
also transgresses the second paragraph of Sec. 27 of RA 6657, which plainly states that “[i]f the
they think it ought to be but as they find it and without regard to consequences.”71 (Emphasis
land has not yet been fully paid by the beneficiary, the right to the land may be transferred or supplied.)
conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other
beneficiary who, as And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang Ladlad
LGBT Party v. COMELEC:72
_______________
of one (1) year from the time the landowner manifests his choice of the area for retention. “Regardless of the personal beliefs and biases of its individual members, this Court can only apply and
In all cases, the security of tenure of the farmers or farm workers on the land prior to the approval of this Act shall be interpret the Constitution and the laws. Its power is not to create policy but to recognize, review or reverse
respected. the policy crafted by the political departments if and when a proper case is brought before it. Otherwise, it
Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private will tread on the dangerous grounds of judicial legislation.”
lands executed by the original landowner in violation of this Act shall be null and void: Provided, however, That those
Considerably, this Court is left with no other recourse but to respect and apply the law. VOL. 660, NOVEMBER 22, 2011 583
VI. Grounds for Revocation of the SDP
AMBALA and FARM reiterate that improving the economic status of the FWBs is among the Hacienda Luisita, Incorporated vs. Presidential
legal obligations of HLI under the SDP and is an imperative imposition by RA 6657 and DAO Agrarian Reform Council
10.73 FARM further asserts that “[i]f that minimum threshold is not met, why allow [stock
distribution option] at all, unless the purpose is not social justice but a political accommodation to their lives through greater productivity of agricultural lands.” Of note is the term “opportunity” which is
the powerful.”74 defined as a favorable chance or opening offered by circumstances. Considering this, by no stretch of
Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657 and DAO 10 imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it
can it be inferred that improving the economic status of the FWBs is among the legal obligations merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs, which
of HLI under the SDP or is an imperative imposition by RA 6657 and DAO 10, a violation of may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI
which
under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify
discarding the stock distribution option. Nothing in that option agreement, law or department order
_______________ indicates otherwise.
71 R.E. Agpalo, STATUTORY CONSTRUCTIOn 125 (5th edition, 2003); citations omitted. Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP
72 G.R. No. 190582, April 8, 2010, 618 SCRA 33. (1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and
73 AMBALA MR, pp. 65-66; FARM MR, p. 60. medical benefits to their immediate family. And attached as Annex “G” to HLI’s Memorandum is the
74 FARM MR, p. 60. certified true report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations,
582
captioned as “HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos)
Since the Stock Option was Approved by PARC/CARP,” detailing what HLI gave their workers from 1989 to
2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out
582 SUPREME COURT REPORTS ANNOTATED (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits)
= PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150
Hacienda Luisita, Incorporated vs. Presidential million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing 3%
Agrarian Reform Council from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI
manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the
SCTEX. On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs
would justify discarding the stock distribution option. As We have painstakingly explained in Our for free. Verily, the FWBs have benefited from the SDP.
July 5, 2011 Decision: To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned
profits through the years, it cannot be over-emphasized that, as a matter of common business sense, no
“In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy corporation could guarantee a profitable run all the time. As has been suggested, one of the key features of
under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the an SDP of
FWBs through greater productivity of agricultural lands. We disagree.
584
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.—It is the policy of the State to pursue a
Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and farm 584 SUPREME COURT REPORTS ANNOTATED
workers will receive the highest consideration to promote social justice and to move the nation
towards sound rural development and industrialization, and the establishment of owner cultivatorship Hacienda Luisita, Incorporated vs. Presidential
of economic-sized farms as the basis of Philippine agriculture. Agrarian Reform Council
To this end, a more equitable distribution and ownership of land, with due regard to the rights of
landowners to just compensation and to the ecological needs of the nation, shall be undertaken to
provide farmers and farm workers with the opportunity to enhance their dignity and improve a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money.
the quality of their lives through greater productivity of agricultural lands. The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability
The agrarian reform program is founded on the right of farmers and regular farm workers, who are of approving a stock distribution plan is the likelihood that the plan “would result in increased income
landless, to own directly or collectively the lands they till or, in the case of other farm workers, to and greater benefits to [qualified beneficiaries] than if the lands were divided and distributed to
receive a share of the fruits thereof. To this end, the State shall encourage the just distribution of all them individually.” But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
agricultural lands, subject to the priorities and retention limits set forth in this Act, having taken into actually exact assurance of success on something that is subject to the will of man, the forces of nature or
account ecological, developmental, and equity considerations, and subject to the payment of just the inherent risky nature of business.75 Just like in actual land distribution, an SDP cannot guarantee, as
compensation. The State shall respect the right of small landowners and shall provide incentives for indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of
voluntary land-sharing. the fact that there were many instances wherein after a farmworker beneficiary has been awarded with an
Paragraph 2 of the above-quoted provision specifically mentions that “a more equitable distribution and agricultural land, he just subsequently sells it and is eventually left with nothing in the end.
ownership of land x x x shall be undertaken to provide farmers and farm workers with the opportunity to In all then, the onerous condition of the FWBs’ economic status, their life of hardship, if that really be the
enhance their dignity and improve the quality of case, can hardly be attributed to HLI and its SDP and provide a valid ground for the plan’s revocation.”
(Citations omitted; emphasis in the original.)
583
This Court, despite the above holding, still affirmed the revocation by PARC of its approval of
the SDP based on the following grounds: (1) failure of HLI to fully comply with its undertaking to
distribute homelots to the FWBs under the SDP; (2) distribution of shares of stock to the FWBs operated by corporations or other business associations, the following rules shall be observed by the
based on the number of “man days” or “number of days worked” by the FWB in a year’s time; and PARC.
(3) 30-year timeframe for the implementation or distribution of the shares of stock to the FWBs. In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned
Just the same, Mallari, et al. posit that the homelots required to be distributed have all been
collectively by the worker-beneficiaries who shall form a workers’ cooperative or association which will
distributed pursuant to the SDOA, and that what merely remains to be done is the release of title deal with the corporation or business association. Until a new agreement is entered into by and
from the Register of Deeds.76They further between the workers’ cooperative or association and the corporation or business association, any
agreement existing at the time this Act takes effect between the former and the previous landowner
_______________ shall be respected by both the workers’ cooperative or association and the corporation or business
75 TSN, August 24, 2010, p. 125. association.
76 Mallari, et al. MR, p. 3. Noticeably, the foregoing provisions do not make reference to corporations which opted for stock
distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it
585 except by stipulation, as in this case.
Under the SDP, 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
VOL. 660, NOVEMBER 22, 2011 585 family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it
actually resides,” “within a reasonable time.”
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is
Agrarian Reform Council still the contention of the FWBs that not all was given the 240-square meter homelots and, of those who
were already given, some still do not have the corresponding titles.
assert that there has been no dilution of shares as the corporate records would show that if ever During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting
proof that the FWBs were already given the said homelots:
not all of the 18,804.32 shares were given to the actual original FWB, the recipient of the
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family
difference is the next of kin or children of said original FWB.77 Thus, they submit that since the beneficiaries were not given the 240 square meters each. So, can you also [prove] that the qualified
shares were given to the same “family beneficiary,” this should be deemed as substantial family beneficiaries were already provided the 240 square meter homelots.
compliance with the provisions of Sec. 4 of DAO 10.78 Also, they argue that there has been no Atty. Asuncion: We will, your Honor please.
violation of the three-month period to implement the SDP as mandated by Sec. 11 of DAO, since
587
this provision must be read in light of Sec. 10 of Executive Order No. 229, the pertinent portion of
which reads, “The approval by the PARC of a plan for such stock distribution, and its initial
implementation, shall be deemed compliance with the land distribution requirement of the VOL. 660, NOVEMBER 22, 2011 587
CARP.”79
Again, the matters raised by Mallari, et al. have been extensively discussed by the Court in its
July 5, 2011 Decision. As stated: Agrarian Reform Council
On Titles to Homelots Other than the financial report, however, no other substantial proof showing that all the qualified
Under RA 6657, the distribution of homelots is required only for corporations or business associations beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that
owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 states: HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP.
SEC. 30. Homelots and Farmlots for Members of Cooperatives.—The individual members of the On “Man Days” and the Mechanics of Stock Distribution
cooperatives or corporations mentioned in the preceding section shall be provided with homelots and In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We
small farmlots for their family use, to be taken from the land owned by the cooperative or corporation. find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
The “preceding section” referred to in the above-quoted provision is as follows: 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall
SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.—In the case arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs]
of farms owned or 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
77 Id. acquired and distributed to the THIRD PARTY.
78 Id.
79 Id. Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not
entailing a cash out from them, is contingent on the number of “man days,” that is, the number of days that
586 the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees the
distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for purposes of
586 SUPREME COURT REPORTS ANNOTATED compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.—The [SDP] submitted by the corporate landowner-applicant
Hacienda Luisita, Incorporated vs. Presidential shall provide for the distribution of an equal number of shares of the same class and value,
with the same rights and features as all other shares, to each of the qualified
beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes
of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at
corporate landowner-applicant may adopt additional stock distribution schemes taking into that time that numbered x x x those who signed five thousand four hundred ninety eight (5,498)
account factors such as rank, sen- beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
588
Justice Abad: But later on, after assigning them their shares, some workers came in from 1989,
1990, 1991, 1992 and the rest of the years that you gave additional shares who were not in the original
588 SUPREME COURT REPORTS ANNOTATED list of owners?
Hacienda Luisita, Incorporated vs. Presidential Justice Abad: Did those new workers give up any right that would have belong to them in 1989
Agrarian Reform Council when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring… (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
iority, salary, position and other circumstances which may be deemed desirable as a Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
matter of sound company policy. Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they
The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can become workers later on.
acquire from the corporation under the SDP. The first pertains, as earlier explained, to the mandatory
minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This 590
minimum ratio contemplates of that “proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the company’s 590 SUPREME COURT REPORTS ANNOTATED
total assets.” It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated
“for the distribution of an equal number of shares of stock of the same class and value, with the same rights Hacienda Luisita, Incorporated vs. Presidential
and features as all other shares, to each of the qualified beneficiaries.”
On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning
that this set or category constitutes an augmentation share/s that the corporate landowner may give under
an additional stock distribution scheme, taking into account such variables as rank, seniority, salary, Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original… (interrupted)
position and like factors which the management, in the exercise of its sound discretion, may deem desirable. Justice Abad: So why is it that the rights of those who gave up their lands would be diluted,
Before anything else, it should be stressed that, at the time PARC approved HLI’s SDP, HLI because the company has chosen to use the shares as reward system for new workers who come in? It
recognized 6,296 individuals as qualified FWBs. And under the 30-year stock distribution program is not that the new workers, in effect, become just workers of the corporation whose stockholders were
envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as they already fixed. The TADECO who has shares there about sixty six percent (66%) and the five thousand
appear to have in fact been accommodated as evidenced by their receipt of HLI shares. four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you
Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number x x x what right or where did you get that right to use this shares, to water down the shares of those
of “man days,” HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of who should have been benefited, and to use it as a reward system decided by the company?
equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified
given up their rights to the land that could have been distributed to them, suffered a dilution of their due beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. As determined
share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the
earmarked for farmworkers as reward system chips to water down the shares of the original 6,296 FWBs. guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares
Particularly: 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
589
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.
VOL. 660, NOVEMBER 22, 2011 589 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
Hacienda Luisita, Incorporated vs. Presidential of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given
Agrarian Reform Council 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.
Justice Abad: If the SDOA did not take place, the other thing that would have happened is that Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for
there would be CARP? HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11
Atty. Dela Merced: Yes, Your Honor. provides for the implementation of the ap-
Justice Abad: That’s the only point I want to know
x x x. Now, but they chose to enter SDOA instead of placing the land under CARP. And for that reason 591
those who would have gotten their shares of the land actually gave up their rights to this land in place
of the shares of the stock, is that correct? VOL. 660, NOVEMBER 22, 2011 591
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the land because Hacienda Luisita, Incorporated vs. Presidential
that way the government takes own [sic] the land and distribute it to the farmers and pay for the land,
is that correct?
proved stock distribution plan within three (3) months from receipt by the corporate landowner of the After having discussed and considered the different contentions raised by the parties in their
approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the respective motions, We are now left to contend with one crucial issue in the case at bar,
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. As stated: 593
Section 11. Implementation/Monitoring of Plan.—The approved stock distribution plan shall
be implemented within three (3) months from receipt by the corporate landowner-
applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the VOL. 660, NOVEMBER 22, 2011 593
names of the qualified beneficiaries shall be recorded in stock and transfer books and submitted to
the Securities and Exchange Commission (SEC) within sixty (60) days from the said Hacienda Luisita, Incorporated vs. Presidential
implementation of the stock distribution plan. Agrarian Reform Council
It is evident from the foregoing provision that the implementation, that is, the distribution of the shares
of stock to the FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock
distribution plan by PARC. While neither of the clashing parties has made a compelling case of the thrust of that is, control over the agricultural lands by the qualified FWBs.
this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to Upon a review of the facts and circumstances, We realize that the FWBs will never have
complete, not merely initiate, the transfer process of shares within that three-month timeframe. Reinforcing control over these agricultural lands for as long as they remain as stockholders of HLI. In Our
this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the July 5, 2011 Decision, this Court made the following observations:
implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month “There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian
threshold. Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform is that control over the agricultural land must always be in the hands of the
reform by simply deferring to absurd limits the implementation of the stock distribution scheme. farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own
The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under majority of the common shares entitled to elect the members of the board of directors to ensure that the
Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30) farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed
annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock distribution SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural land
program. contributed to the corporation must always be more than 50% of the total assets of the corporation to ensure
HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision that the majority of the members of the board of directors are composed of the farmers. The PARC composed
clearly deals with land distribution. of the President of the Philippines and cabinet secretaries must see to it that control over the board of
directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the
592 majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct
application of the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said
592 SUPREME COURT REPORTS ANNOTATED provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo,
Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers.”
Hacienda Luisita, Incorporated vs. Presidential (Emphasis supplied.)
Agrarian Reform Council In line with Our finding that control over agricultural lands must always be in the hands of
the farmers, We reconsider our ruling that the qualified FWBs should be given an option to
SEC. 26. Payment by Beneficiaries.—Lands awarded pursuant to this Act shall be paid for by the remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control given
beneficiaries to the LBP in thirty (30) annual amortizations x x x. the present proportion of shareholdings in HLI.
Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other
hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the corporate 594
landowner who has the obligation to distribute the shares of stock among the FWBs.
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 594 SUPREME COURT REPORTS ANNOTATED
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. Hacienda Luisita, Incorporated vs. Presidential
Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for Agrarian Reform Council
violating 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 A revisit of HLI’s Proposal for Stock Distribution under CARP and the Stock Distribution
revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the Option Agreement (SDOA) upon which the proposal was based reveals that the total assets of
HLI’s SDP is nullified and voided. (Citations omitted; emphasis in the original.) HLI is PhP 590,554,220, while the value of the 4,915.7466 hectares is PhP 196,630,000.
Consequently, the share of the farmer-beneficiaries in the HLI capital stock is 33.296%
Based on the foregoing ruling, the contentions of Mallari, et al. are either not supported by the (196,630,000 divided by 590,554.220); 118,391,976.85 HLI shares represent 33.296%. Thus, even
evidence on record or are utterly misplaced. There is, therefore, no basis for the Court to reverse if all the holders of the 118,391,976.85 HLI shares unanimously vote to remain as HLI
its ruling affirming PARC Resolution No. 2005-32-01 and PARC Resolution No. 2006-34-01, stockholders, which is unlikely, control will never be placed in the hands of the farmer-
revoking the previous approval of the SDP by PARC. beneficiaries. Control, of course, means the majority of 50% plus at least one share of the common
VII. Control over Agricultural Lands 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 divided by 2 plus one
[1] HLI share). The 118,391,976.85 shares subject to the SDP approved by PARC substantially with Hacienda Luisita, Inc., which is hereby RECALLED and SET ASIDE. The Motion for
fall short of the 295,112,101 shares needed by the FWBs to acquire control over HLI. Hence, Clarification and Partial Reconsideration dated July 21, 2011 filed by petitioner HLI and
control can NEVER be attained by the FWBs. There is even no assurance that 100% of the the Motion for Reconsideration dated July 21, 2011 filed by private respondents Noel Mallari,
118,391,976.85 shares issued to the FWBs will all be voted in favor of staying in HLI, taking into Julio Suniga, Supervisory Group of Hacienda Luisita, Inc. and Windsor Andaya are DENIED.
account the previous referendum among the farmers where said shares were not voted The fallo of the Court’s July 5, 2011 Decision is hereby amended and shall read:
unanimously in favor of retaining the SDP. In light of the foregoing consideration, the option to PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01
remain in HLI granted to the individual FWBs will have to be recalled and revoked. dated May 3, 2006, placing the lands subject of HLI’s SDP under compulsory coverage on
Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI will no mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the following
longer be operating under SDP and will only be treated as an ordinary private corporation; the modifications:
FWBs who remain as stockholders of HLI will be treated as ordinary stockholders and will no All salaries, benefits, the 3% of the gross sales of the production of the agricultural lands, the
longer be under the protective mantle of RA 6657. 3% share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot and the homelots already received by the 10,502 FWBs composed of 6,296 original
595
FWBs and the 4,206 non-qualified FWBs shall be respected with no obligation to refund or return
them. The 6,296 original FWBs shall forfeit and relinquish their rights over the HLI shares of
VOL. 660, NOVEMBER 22, 2011 595 stock issued to them in favor of HLI. The HLI Corporate Secretary shall cancel the shares issued
to the said FWBs and transfer them to HLI in the stocks and transfer book, which transfers shall
Hacienda Luisita, Incorporated vs. Presidential be exempt from taxes, fees and charges. The 4,206 non-qualified FWBs shall remain as
Agrarian Reform Council stockholders of HLI.
DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares subject
In addition to the foregoing, in view of the operative fact doctrine, all the benefits and of PARC’s SDP-approving Resolution No. 89-12-2 the 500-hectare lot subject of the August 14,
homelots80 received by all the FWBs shall be respected with no obligation to refund or return l996 Conversion Order and the 80.51-hectare lot sold to, or acquired by, the government as part
them, since, as We have mentioned in our July 5, 2011 Decision, “the benefits x x x were received of the SCTEX complex. After the segregation process, as indicated, is done, the remaining area
by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were shall be turned over to DAR for immediate land distribution to the original 6,296 FWBs or their
granted to them pursuant to the existing collective bargaining agreement with Tadeco.” successors-in-interest which will be identified by the DAR. The
One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The 597
remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the rights to said
land were vested only in the 6,296 original FWBs pursuant to Sec. 22 of RA 6657.
In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent with its VOL. 660, NOVEMBER 22, 2011 597
administrative prerogative to identify and select the agrarian reform beneficiaries under RA
6657.81
WHEREFORE, the Motion for Partial Reconsiderationdated July 20, 2011 filed by public Agrarian Reform Council
respondents Presidential Agrarian Reform Council and Department of Agrarian Reform,
the Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa ng mga 4,206 non-qualified FWBs are not entitled to any share in the land to be distributed by DAR.
Manggagawang Bukid sa Hacienda Luisita, the Motion for Reconsideration dated July 21, 2011 HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000 received
filed by respondent-intervenor Farmworkers Agrarian Reform Movement, Inc., and the Motion by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of the 500 hectares
for Reconsideration dated July 22, 2011 filed by private respondents Rene Galang and AMBALA covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000 received
are PARTIALLY GRANTED with respect to the option granted to the original by its owned subsidiary, Centennary Holdings, Inc., for the sale of the remaining 300 hectares of
farmworker-beneficiaries of Hacienda Luisita to remain the aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases Conversion Development Authority for the
_______________ sale of the 80.51-hectare lot used for the construction of the SCTEX road network. From the total
80 Rollo, p. 3738. These homelots do not form part of the 4,915.75 hectares of agricultural land in Hacienda Luisita. amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP
These are part of the residential land with a total area of 120.9234 hectares, as indicated in the SDP. 1,330,511,500) shall be deducted the 3% of the proceeds of said transfers that were paid to the
81 See Concha v. Rubio, G.R. No. 162446, March 29, 2010, 617 SCRA 22, 31.
FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the
596 expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes.
For this purpose, DAR is ordered to engage the services of a reputable accounting firm approved
by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP
596 SUPREME COURT REPORTS ANNOTATED 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were actually used or spent
Hacienda Luisita, Incorporated vs. Presidential for legitimate corporate purposes. Any unspent or unused balance and any disallowed
expenditures as determined by the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to DAR
to be reckoned from November 21, 1989 which is the date of issuance of PARC Resolution No. 89-
12-2. DAR and LBP are ordered to determine the compensation due to HLI. “Section 4. The State shall, by law, undertake an agrarian reform program founded on the
DAR shall submit a compliance report after six (6) months from finality of this judgment. It right of farmers and regular farmworkers who are landless, to own directly or collectively the
shall also submit, after submission of the compliance report, quarterly reports on the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this
end, the State shall encourage and undertake the just distribution of all agricultural lands,
598 subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account
ecological, developmental, or equity considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small landowners. The State shall further
598 SUPREME COURT REPORTS ANNOTATED provide incentives for voluntary land-sharing.” (Emphasis supplied)
Hacienda Luisita, Incorporated vs. Presidential It is against this standard that the following provision of Section 31 of RA 6657
Agrarian Reform Council (Comprehensive Agrarian Reform Law of 1988) should be tested:
execution of this judgment within the first 15 days after the end of each quarter, until fully _______________
1 Hamilton, Alexander, The Federalist No. 78 at pp. 521-22, Carl Van Doren ed., 1945.
implemented.
The temporary restraining order is lifted. 600
SO ORDERED.
Peralta, Del Castillo, Abad and Perez, JJ., concur. 600 SUPREME COURT REPORTS ANNOTATED
Corona (C.J.), Please see concurring and dissenting opinion.
Carpio, J., No Part, prior inhibition. Hacienda Luisita, Incorporated vs. Presidential
Leonardo-De Castro, J., I concur with Justice Velasco and maintain my vehement Agrarian Reform Council
disagreement with Justice Sereno’s opinion which will put the land beyond the capacity of the
farmers to pay, based on her strained construction/interpretation of the law re: date of taking. “SEC. 31. Corporate Landowners.—Corporate landowners may voluntarily transfer ownership over
Brion, J., I certify that Mr. Justice Brion submitted a Concurring and Dissenting Opinion. their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to
Bersamin, J., With Concurring and Dissenting opinion. qualified beneficiaries, under such terms and conditions consistent with this Act, as they may agree upon,
Villarama, Jr., J., I join C.J. R.C. Corona’s opinion. subject to confirmation by the DAR.
Upon certification by the DAR, corporations owning agricultural lands may give their qualified
Sereno, J., See Concurring and Dissenting Opinion.
beneficiaries the right to purchase such proportion of the capital stock of the corporation that
Mendoza, J., I maintain my positions in my separate opinion except as to the reckoned date the agricultural land, actually devoted to agricultural activities, bears in relation to the
for just compensation. It should be from November 21, 1989. company’s total assets, under such terms and conditions as may be agreed upon by them. In no
Reyes, J., Subject to Dissenting Opinion of Justice Bersamin. case shall the compensation received by the workers at the time the shares of stocks are distributed be
Perlas-Bernabe, J., Subject to J. Bersamin’s dissenting opinion. reduced. The same principle shall be applied to associations, with respect to their equity or participation.
Corporations or associations which voluntarily divest a proportion of their capital stock,
599 equity or participation in favor of their workers or other qualified beneficiaries under this
section shall be deemed to have complied with the provisions of this Act: Provided, That the
following conditions are complied with:
VOL. 660, NOVEMBER 22, 2011 599 a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other
financial benefits, the books of the corporation or association shall be subject to periodic audit by certified
Hacienda Luisita, Incorporated vs. Presidential public accountants chosen by the beneficiaries;
Agrarian Reform Council b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be
assured of at least one (1) representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
CONCURRING AND DISSENTING OPINION
c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all
other shares; and
CORONA, C.J.:
d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said
The complete independence of the courts of justice is peculiarly essential to a limited Constitution. By transaction is in favor of a qualified and registered beneficiary within the same corporation.
a limited Constitution I understand one which contains certain specified exceptions to the legislative If within two (2) years from the approval of this Act, the land or stock transfer envisioned above is not
authority .... Limitations of this kind can be preserved in practice no other way than through the made or realized or the plan for such stock distribution approved by the PARC within the same
medium of the courts of justice, whose duty it must be to declare all acts contrary to the 601
manifest tenor of the Constitution void. Without this, all the reservations of particular rights or
privileges would amount to nothing.1
VOL. 660, NOVEMBER 22, 2011 601
The fundamental standard of agrarian reform is Section 4, Article XIII of the Constitution:
_______________
period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory 3 See Record of the Constitutional Commission, Vol. II, pp. 663-664.
coverage of this Act.” 4 Sec. 5(5), Article VIII, Constitution.
5 See Province of North Cotabato v. Government of the Republic of the Philippines, G.R. No. 183591, 14 October 2008,
COURT’S DUTY TO CONFRONT 568 SCRA 402. “[T]he “moot and academic” principle not being a magical formula that automatically dissuades courts in
THE CONSTITUTIONAL QUESTION resolving a case, it will decide cases, otherwise moot and academic, if it finds that (a) there is a grave violation of the
Constitution; (b) the situation is of exceptional character and paramount public interest is involved; (c) the constitutional
Where a provision of a statute goes against the fundamental law, specially if it impairs basic
issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and (d) the case is
rights and constitutional values, the Court should not hesitate to strike it down as capable of repetition yet evading review.”
unconstitutional. In such a case, refusal to address the issue of constitutionality squarely is
neither prudence nor restraint but evasion of judicial duty and abdication of the Court’s 603
authority.
With this in mind, I register my dissent to the ponencia’s resolution of the motions for
VOL. 660, NOVEMBER 22, 2011 603
reconsideration of the July 5, 2011 decision in this case.
The ponencia persists to reject an inquiry into the constitutionality of Section 31 of RA 6657 on Hacienda Luisita, Incorporated vs. Presidential
two grounds: the issue of constitutionality is not the lis mota of the case and the issue is already Agrarian Reform Council
moot.
The Court should not decline to test the constitutional validity of Section 31 of RA 6657 on the
basis of either the requirement of lis mota or the doctrine of mootness. the exceptions in my dissent to the July 5, 2011 decision in this case:
The requirement of lis mota does not apply where the question of constitutionality was raised “First, a grave violation of the Constitution exists. Section 31 of RA 6657 runs roughshod over the language and
by the parties and addressing such question is unavoidable.2 It cannot be disputed that the spirit of Section 4, Article XIII of the Constitution.
parties-in-interest to this case presented the question of constitutionality. Also, any discussion of The first sentence of Section 4 is plain and unmistakeable. It grounds the mandate for agrarian reform on the right
the stock distribution plan of petitioner Hacienda Luisita, Inc. (HLI) necessarily and inescapably of farmers and regular farmworkers, who are landless, to own directly or collectively the landthey till. The express
involves a discussion of its legal basis, Section 31 of RA 6657. While the said provision enjoys the language of the provision is clear and unequivocal – agrarian reform means that farmers and regular farmworkers who
are landless should be given direct or collective ownership of the land they till. That is their right.
presumption of constitutionality, that presumption has precisely been challenged. Its Unless there is land distribution, there can be no agrarian reform. Any program that gives farmers or
inconsistency with the fundamental law was raised specifically as an issue. farmworkers anything less than ownership of land fails to conform to the mandate of the Constitution. In other words,
a program that gives qualified beneficiaries stock certificates instead of land is not agrarian reform.
_______________ Actual land distribution is the essential characteristic of a constitutional agrarian reform program. The polar star,
2 Sotto v. Commission on Elections, 76 Phil. 516, 522 (1946). when we speak of land reform, is that the farmer has a right to the land he tills. Indeed, a reading of the framers’
intent clearly shows that the philosophy behind agrarian reform is the distribution of land to farmers, nothing less.
602 MR. NOLLEDO. And when we talk of the phrase “to own directly,” we mean the principle of direct ownership by
the tiller?
MR. MONSOD. Yes.
602 SUPREME COURT REPORTS ANNOTATED MR. NOLLEDO. And when we talk of “collectively,” we mean communal ownership, stewardship or State
ownership?
Hacienda Luisita, Incorporated vs. Presidential MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the land, not the
State.
Agrarian Reform Council MR. NOLLEDO. And when we talk of “collectively,” referring to farmers’ cooperatives, do the farmers own specific
areas of land where they only unite in their efforts?
More importantly, considerations of public interest render the issue of the constitutionality of MS. NIEVA. That is one way.
Section 31 of RA 6657 inevitable. Agriculture is historically significant in Philippine society and 604
economy and agrarian reform is historically imbued with public interest. Our constitutional
history and tradition show that agrarian reform has always been a pillar of social justice. 604 SUPREME COURT REPORTS ANNOTATED
Relevantly, the records of the Constitutional Commission show that Hacienda Luisita has
always been viewed as an acid test of genuine agrarian reform.3 Hacienda Luisita, Incorporated vs. Presidential
Furthermore, the Constitution recognizes the primacy of the right of farmers and farmworkers Agrarian Reform Council
to directly or collectively own the lands they till. Any artificial or superficial substitute such as
the stock distribution plan diminishes the right and debases the constitutional intent. If this MR. NOLLEDO. Because I understand that there are two basic systems involved: the “moshave” type of
Court has the authority to promulgate rules that protect and enforce constitutional rights,4 it also agriculture and the “kibbutz.” So are both contemplated in the report?
has the duty to render decisions that ensure constitutional rights are preserved and safeguarded, MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-
not diminished or modified. ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin
ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong “cooperative or
On the other hand, the invocation of the doctrine of mootness does not provide Section 31 of collective farm.” Ang ibig sabihin ay sama-sama nilang sasakahin.
RA 6657 an unpierceable veil that will prevent the Court from prying into its constitutionality. MR. BENNAGEN. Madam President, nais ko lang dagdagan iyong sagot ni Ginoong Tadeo. xxxx
Indeed, the mootness doctrine admits of several exceptions.5 I have amply discussed why this Kasi, doon sa “collective ownership,” kasali din iyong “communal ownership” ng mga minorya. Halimbawa sa
case falls under Tanay, noong gumawa kami ng isang pananaliksik doon, nagtaka sila kung bakit kailangan pang magkaroon ng
“land reform” na kung saan ay bibigyan sila ng tig-iisang titulo. At sila nga ay nagpunta sa Ministry of Agrarian unahan at pinakamahalagang prinsipyo at layunin ng isang tunay na reporma sa lupa – na ang
Reform at sinabi nila na hindi ito ang gusto nila; kasi sila naman ay magkakamag-anak. Ang gusto nila ay nagbubungkal ng lupa ay maging may-ari nito. xxx (695-696)
lupa at hindi na kailangan ang tig-iisang titulo. Maraming ganitong kaso mula sa Cordillera hanggang The essential thrust of agrarian reform is land-to-the-tiller. Thus, to satisfy the mandate of the constitution, any
Zambales, Mindoro at Mindanao, kayat kasali ito sa konsepto ng “collective ownership.” implementation of agrarian reform should always preserve the control over the land in the hands of its tiller or tillers,
xxx xxx xxx whether individually or collectively.
MR. VILLACORTA. xxx Section 5 gives the opportunity for tillers of the soil to own the land that they Consequently, any law that goes against this constitutional mandate of the actual grant of land to farmers and
till; xxx regular farmworkers must be nullified. If the Constitution, as it is now worded and as it was intended by the framers
xxx xxx xxx envisaged an alternative to actual land distribution (e.g., stock distribution) such option could have been easily and
MR. TADEO. xxx Ang dahilan ng kahirapan natin sa Pilipinas ngayon ay ang pagtitipon-tipon ng vast explicitly provided for in its text or even conceptualized in the intent of the framers. Absolutely no such alternative was
tracts of land sa kamay ng iilan. Lupa ang nagbibigay ng buhay sa magbubukid at sa iba pang manggagawa provided for. Section 4, Article XIII on agrarian reform, in no uncertain terms, speaks of land to be owned directly or
sa bukid. Kapag inalis sa kanila ang lupa, parang inalisan na rin sila ng buhay. Kaya kinakailangan talagang collectively by farmers and regular farm workers.
magkaroon ng tinatawag na just distribution. xxx By allowing the distribution of capital stock, not land, as “compliance” with agrarian reform, Section 31 of RA 6657
xxx xxx xxx directly and explicitly contravenes Section 4, Article XIII of the Constitution. The corporate landowner remains to be
the owner of the agricultural land. Qualified beneficiaries are given ownership only of shares of stock, not the lands they
605
till. Landless farmers and farmworkers become landlessstockholders but still tilling the land of the corporate owner,
thereby perpetuating their status as landless farmers and farmworkers.
VOL. 660, NOVEMBER 22, 2011 605 Second, this case is of exceptional character and involves paramount public interest. In La Bugal-B’Laan Tribal
Association, Inc., the Court reminded itself of the need to recognize the extraor-
Hacienda Luisita, Incorporated vs. Presidential 607
VOL. 660, NOVEMBER 22, 2011 607
MR. TADEO. Kasi ganito iyan. Dapat muna nating makita ang prinsipyo ng agrarian reform, iyong
maging may-ari siya ng lupa na kaniyang binubungkal. Iyon ang kauna-unahang prinsipyo nito. xxx Hacienda Luisita, Incorporated vs. Presidential
xxx xxx xxx Agrarian Reform Council
MR. TINGSON. xxx When we speak here of “to own directly or collectively the lands they till,” is this land for the
tillers rather than land for the landless? Before, we used to hear “land for the landless,” but now the slogan is
“land for the tillers.” Is that right? dinary character of the situation and the overriding public interest involved in a case. Here, there
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng “directly” ay tulad sa is a necessity for a categorical ruling to end the uncertainties plaguing agrarian reform caused by
implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal
nila. Ang ibig sabihin naman ng “collectively” ay sama-samang paggawa sa isang lupain o isang bukid,
serious constitutional doubts on Section 31 of RA 6657. While the ponencia would have the
katulad ng sitwasyon sa Negros. doubts linger, strong reasons of fundamental public policy demand that the issue of
xxx xxx xxx constitutionality be resolved now, before the stormy cloud of doubt can cause a social cataclysm.
MR. BENNAGEN. Maaari kayang magdagdag sa pagpapaliwanag ng “primacy”? Kasi may cultural background ito. At the risk of being repetitive, agrarian reform is fundamentally imbued with public interest and the
Dahil agrarian society pa ang lipunang Pilipino, maigting talaga ang ugnayan ng mga magsasaka sa kanilang implementation of agrarian reform at Hacienda Luisita has always been of paramount interest. Indeed, it was
lupa. Halimbawa, sinasabi nila na ang lupa ay pinagbuhusan na ng dugo, pawis at luha. So land acquires a specifically and unequivocally targeted when agrarian reform was being discussed in the Constitutional
symbolic content that is not simply negated by growth, by productivity, etc. The primacy should be seen in Commission. Moreover, the Court should take judicial cognizance of the violent incidents that intermittently occur at
relation to an agrarian program that leads to a later stage of social development which at some point in time may Hacienda Luisita, solely because of the agrarian problem there. Indeed, Hacienda Luisita proves that, for landless
already negate this kind of attachment. The assumption is that there are already certain options available to the farmers and farmworkers, the land they till is their life.
farmers. Marahil ang primacy ay ang pagkilala sa pangangailangan ng magsasaka – ang pag-aari ng The Constitution does not only bestow the landless farmers and farmworkers the right to own the land they till but
lupa. Ang assumption ay ang pag-aari mismo ng lupa becomes the basis for the farmers to enjoy the also concedes that right to them and makes it a duty of the State to respect that right through genuine and authentic
benefits, the fruits of labor. xxx (678) agrarian reform. To subvert this right through a mechanism that allows stock distribution in lieu of land distribution as
xxx xxx xxx mandated by the Constitution strikes at the very heart of social justice. As a grave injustice, it must be struck down
MR. TADEO. xxx Kung sinasabi nating si Kristo ay liberating dahil ang api ay lalaya at ang mga bihag ay through the invalidation of the statutory provision that permits it.
mangalilig- To leave this issue unresolved is to allow the further creation of laws, rules or orders that permit policies creating,
unintentionally or otherwise, means to avoid compliance with the foremost objective of agrarian reform—to give the
606
humble farmer and farmworker the right to own the land he tills. To leave this matter unsettled is to encourage future
subversion or frustration of agrarian reform, social justice and the Constitution.
606 SUPREME COURT REPORTS ANNOTATED Third, the constitutional issue raised requires the formulation of controlling principles to guide the bench, the bar
and the public. Fundamental principles of agrarian reform must be established in order that its aim may be truly
Hacienda Luisita, Incorporated vs. Presidential attained.
One such principle that must be etched in stone is that no law, rule or policy can subvert the ultimate goal of
Agrarian Reform Council agrarian reform, the
608
tas, sinabi rin ni Commissioner Felicitas Aquino na kung ang history ay liberating, dapat ding
maging liberating ang Saligang Batas. Ang magpapalaya sa atin ay ang agrarian and natural
resources reform.
The primary, foremost and paramount principles and objectives are contained [i]n lines 19 to 22: “primacy of Hacienda Luisita, Incorporated vs. Presidential
the rights and of farmers and farmworkers to own directly or collectively the lands they till.” Ito ang kauna-
actual distribution of land to farmers and farmworkers who are landless. Agrarian reform enjoying the promise of Section 4, Article XIII of the Constitution for them to own directly or
requires that such landless farmers and farmworkers be given direct or collective ownership of collectively the lands they till.
the land they till, subject only to the retention limits and the payment of just compensation.
610
There is no valid substitute to actual distribution of land because the right of landless farmers
and farmworkers expressly and specifically refers to a right to own the land they till.
Fourth, this case is capable of repetition, yet evading review. As previously mentioned, if the subject provision is not 610 SUPREME COURT REPORTS ANNOTATED
struck down today as unconstitutional, the possibility of passing future laws providing for a similar option is ominously
present. Indeed, what will stop our legislators from providing artificial alternatives to actual land distribution if this Hacienda Luisita, Incorporated vs. Presidential
Court, in the face of an opportunity to do so, does not declare that such alternatives are completely against the
Constitution?” Agrarian Reform Council
Moreover, the requirement of lis mota and the mootness doctrine are not constitutional Corporate ownership by the corporate landowner under Section 31 does not satisfy the
requirements but simply prudential doctrines of justiciability fashioned by the Court in the collective ownership envisioned under Section 4, Article XIII of the Constitution. Where the
exercise of judicial restraint. For if the said grounds have been imposed by the Constitution itself, farmworker-beneficiaries are neither the collective naked owners nor the collective beneficial
no exception could have been carved by courts (for either ground) as courts only apply and owners of the land they till, there can be no valid compliance with the Constitution’s objective of
interpret the Constitution and do not modify it. collective ownership by farmers and farmworkers. Collective ownership of land under the
Judicial review is particularly important in enjoining and redressing constitutional violations agrarian reform provisions of the Constitution must operate on the concept of collective control of
inflicted by all levels of government and government officers.6 Thus, this Court may not be the land by the qualified farmer and farmworkers.
hampered in the performance of its essential function to uphold the Constitution by prudential Here, Section 31 of RA 6657 deprives the farmworker-beneficiaries not only of either naked
doctrines of justiciability. title to or beneficial ownership of the lands they till. It also prevents them from exercising
Indeed, in this case, to avoid the constitutional question would be to ignore a violation of the effective control both of the land and of the corporate vehicle as it simply assures beneficiaries “of
Constitution and to disregard the trampling of basic rights and constitutional values. at least one (1) representative in the board of directors, or in a management or executive
609 committee, if one exists, of the corporation or association,” “irrespective of the value of their
equity in the corporation or association.” Thus, while they are given voice in the decision-making
process of the corporate landowner with respect to the land, the beneficiaries have no guarantee
VOL. 660, NOVEMBER 22, 2011 609 of control of the lands as they are relegated to the status of minority shareholders.
CONCOMITANT RIGHTS OF THE FARM-
Hacienda Luisita, Incorporated vs. Presidential WORKERS AND THE LANDOWNER
Agrarian Reform Council In view of the unconstitutionality of Section 31 of RA 6657 and the consequent invalidity of the
stock distribution option agreement which was based on the said provision, how should the
CONSTITUTIONAL INFIRMITY respective rights of the parties be addressed?
OF SECTION 31 OF RA 6657 Previously, I grudgingly and qualifiedly joined the majority in applying the operative fact
I maintain my stance that Section 31 of RA 6657 is invalid. Agrarian reform’s underlying doctrine in this case. On further reflection, however, I believe that the operative fact doctrine
principle is the recognition of the rights of farmers and farmworkers who are landless to own, should not be applied. The operative fact doctrine is a principle fundamentally based on equity.
directly or collectively, the lands they till. Under the Constitution, actual land distribution The basis of the applica-
to qualified agrarian reform beneficiaries is mandatory. Anything that promises
611
something other than land must be struck down for being unconstitutional.
By allowing corporate landholders to continue owning the land by the mere expedient of
divesting a proportion of their capital stock, equity or participation in favor of their workers or VOL. 660, NOVEMBER 22, 2011 611
other qualified beneficiaries, Section 31 defeats the right of farmers and regular farmworkers
who are landless, under Section 4, Article XIII of the Constitution, to own directly or collectively Hacienda Luisita, Incorporated vs. Presidential
the lands they till. Section 31 of RA 6657 does not therefore serve the ends of social justice as Agrarian Reform Council
envisioned under the agrarian reform provisions of the Constitution.
Section 31 of RA 6657 as implemented under the stock distribution option agreement merely tion of the said doctrine in this case was the supposed status of the stock distribution option
entitles farmworker-beneficiaries of petitioner HLI to certificates of stocks which represent equity agreement as having been already implemented. However, equity is extended only to one who
or interest in the corporate landowner, petitioner HLI, not in the land itself. Under Section 31 of comes to court with clean hands. Equity should be refused to the iniquitous and guilty of
RA 6657, the corporate landowner retains ownership of the agricultural land while the inequity. For this reason, petitioner HLI may not benefit on the ground of equity from its invalid
farmworker-beneficiaries become stockholders but remain landless. While farmworker- stock distribution option agreement with the farmworker-beneficiaries as it was found guilty of
beneficiaries hold a piece of paper that represents interest in the corporation that has owned and breach of several material terms and conditions of the said agreement.
still owns the land, that paper actually deprives them of their rightful claim which is ownership As Section 31 of RA 6657 is unconstitutional, the stock distribution agreement between
of the land they till. Thus, Section 31 unduly prevents the farmworker-beneficiaries from petitioner HLI and its farmworker-beneficiaries has no leg to stand on and must perforce be
annulled. This means that the agricultural land of petitioner HLI should be deemed placed under
compulsory coverage of land reform on November 21, 1989, the date the stock distribution option VOL. 660, NOVEMBER 22, 2011 613
agreement between petitioner HLI and the farmworker-beneficiaries was approved by the
Presidential Agrarian Reform Council (PARC). While PARC could not have validly approved the Hacienda Luisita, Incorporated vs. Presidential
stock distribution option agreement for lack of legal basis (Section 31 of RA 6657 being Agrarian Reform Council
unconstitutional), the action of PARC manifested the intent of the government to subject
petitioner HLI’s land to the land reform program. In other words, the agricultural land of such term or condition should be deemed imposed on the coverage of land reform as of November
petitioner HLI was subjected to land reform with respect to petitioner HLI, the farmworker- 21, 1989. The limitation of the coverage shall be determined subject only to such priorities and
beneficiaries and the government through PARC on November 21, 1989. reasonable retention limits prescribed by law, “taking into account ecological, developmental, or
While there could have been no valid approval of the stock distribution agreement, the equity considerations.”9 The Department of Agrarian Reform (DAR) shall therefore determine the
government’s intent to bring the land under the coverage of land reform could nonetheless be area properly covered by land reform, guided by the retention limits set by law and taking into
deemed implemented by its action as the subject matter of land reform is basically the account ecological, developmental or equity considerations. Upon determination of the area
redistribution of land. The stock distribution option agreement as an invalid means to implement properly covered by land reform, the DAR should immediately and actually distribute the same to
land reform may be considered as simply an accessory to achieving the principal objective of land the farmworker-beneficiaries. This shall, however, exclude the portion of converted land
reform to transfer ownership of land to the farmworker-beneficiaries. transferred to LIPCO and RCBC which shall remain with the said transferees as they were
612 transferees (buyers) in good faith. The land distribution shall also exclude the portion
expropriated by the government for the SCTEX.
For the excluded portions, however, the farmworker-beneficiaries shall be entitled to the
612 SUPREME COURT REPORTS ANNOTATED portion of the proceeds of the sale to LIPCO and RCBC corresponding to the market value thereof
as of November 21, 1989. It would be unfair to rule otherwise as any increase in value of the land
Hacienda Luisita, Incorporated vs. Presidential may reasonably be attributed to the improvements thereon made by petitioner HLI and
Agrarian Reform Council petitioner HLI’s efforts to have the said portion reclassified to industrial land. Moreover, this
would be in consonance with the rule that “the possessor in good faith is entitled to the fruits
The principal objective and the manifestation of the government’s intent to act thereon subsist received before the possession is legally interrupted.”10
despite the invalidity of the accessory. Thus, on November 21, 1989, the government should The amount accruing to the farmworker-beneficiaries shall also be less the 3% of the proceeds
rightly be considered to have pursued the objective of land reform and transferred the ownership already given to them. On the other hand, the proceeds of the portion expropriated for the SCTEX
of the land to the farmworker-beneficiaries. November 21, 1989 should therefore be deemed as shall accrue to the farmworker-beneficiaries.
the time of taking of the land from petitioner HLI, as well as the date from which to reckon the
just compensation payable to petitioner HLI. _______________
It may, however, be argued that there could have been no taking (in the sense of transferring 9 Section 4, Article XIII, Constitution.
ownership to the farmworker-beneficiaries) on November 21, 1989 as the land was actually in the 10 Article 544, New Civil Code.
possession and control of petitioner HLI. True, petitioner HLI may have continued to possess the 614
land but this did not negate taking and transferring of ownership to the farmworker-beneficiaries
on November 21, 1989. From that date, petitioner HLI’s status became that of a lawful possessor
or one who held the “thing or right to keep or enjoy it, the ownership pertaining to another 614 SUPREME COURT REPORTS ANNOTATED
person,”7 particularly the farmworker-beneficiaries. Moreover, petitioner HLI should be deemed
as a possessor in good faith, or one that is not aware of any flaw in his title or mode of acquisition
thereof.8 Its reliance on the validity of Section 31 of RA 6657 and, concomitantly, of its stock Agrarian Reform Council
distribution option agreement could be considered as a mistake on a difficult question of law, a
fact which supports its possession in good faith. Indeed, Section 4, Article XIII of the Constitution requires that the landowner be given just
While the stock distribution option agreement was supposed to cover only 4,195 hectares of compensation. For this purpose, the DAR shall determine the just compensation payable by each
petitioner HLI’s land, no farmworker-beneficiary to petitioner HLI as it has jurisdiction in matters involving the
administrative implementation and enforcement of agrarian reform laws.11 The just
_______________ compensation shall be based on the market value as of November 21, 1989 of the entire portion
6 Chemerinsky, Erwin, Constitutional Law: Principles and Policies, 3rd Edition (2006), p. 52. that may be determined by the DAR as subject to the coverage of land reform. The portion of the
7 Article 525, New Civil Code: The possession or things or rights may be had in one of two concepts: either in the proceeds of the portion sold to LIPCO and RCBC as well as the proceeds of the portion
concept of an owner, or that of the holder of the thing or right to keep or enjoy it, the ownership pertaining to another
expropriated for the SCTEX may be the subject of legal compensation or set off for purposes of
person.”
8 Article 526, New Civil Code: “He is deemed a possessor in good faith who is not aware that there exists in his title or the payment of just compensation.
mode of acquisition any flaw which invalidates it. x x x Mistake upon a doubtful or difficult question of law may be the Finally, the farmworker-beneficiaries shall return the shares of stock which they received to
basis of good faith.” petitioner HLI under the invalid stock distribution option agreement.
WHEREFORE, I vote that the Court’s July 5, 2011 decision be RECONSIDERED. Section 31
613
of RA 6657 should be declared NULL and VOID for being unconstitutional. Consequently, the
stock distribution plan of petitioner HLI should likewise be declared NULL and VOID for being Hacienda Luisita, Incorporated vs. Presidential
unconstitutional. Agrarian Reform Council
The land of petitioner HLI subject to agrarian reform, as determined by the DAR, should be
immediately and actually distributed to the farmworker-beneficiaries, except the (a) portion of
In view of this ruling, the corollary issue of the effects of the revocation arose, and it was
converted land transferred to LIPCO and RCBC which shall remain with the said transferees as
at this point that I diverged from the majority’s position. The majority—speaking through
they were transferees (buyers) in good faith and the (b) portion of land expropriated by the
Justice Velasco—found it equitable to recognize the existence of certain “operative facts,”
government for the SCTEX.
notwithstanding the revocation of the SDP. Hence, the majority gave the qualified FWBs the
The farmworker-beneficiaries should return the shares of stock which they received to
option of choosing whether or not to remain as HLI stockholders. On the same principle, the
petitioner HLI under the invalid stock distribution option agreement. Each of them should also
majority authorized the FWBs to retain all benefits received under the SDP. The dispositive of
be liable to pay petitioner HLI just compensation in the amount to be determined by the DAR
the July 5, 2011 Decision, thus, decreed that:
based on the fair market value of the land as of November 21, 1989. This may be subject to set-off
1. the qualified FWBs, totaling 6,296, are given the option to choose whether to remain as
or legal compensation with the
stockholders of HLI or not. Should they choose to remain, they are entitled to 18,804.32
shares each; otherwise, they are entitled to land distribution. The non-qualified FWBs
_______________ totaling 4,206, however, are not given this option, but are allowed to retain the shares
11 See Soriano v. Bravo, G.R. No. 152086, 15 December 2010, 638 SCRA 403.
already received;
615 2. all the 10,502 FWBs are entitled to retain the following items they received on account of
the SDP:
a. salaries and benefits,
VOL. 660, NOVEMBER 22, 2011 615 b. 3% production share,
Hacienda Luisita, Incorporated vs. Presidential c. 3% share of the proceeds of the sale of the 500 hectares of converted land and the 80-
Agrarian Reform Council hectare Subic-Clark-Tarlac Expressway (SCTEX) lot, and
d. 6,886.5-square meter homelots that each FWB received;
3. From the 4,915.75 hectares of agricultural land shall be segregated:
amounts accruing to the farmworker-beneficiaries, namely, (a) the portion of the proceeds of the a. the 500 hectares of converted land acquired by Luisita Industrial Park Corporation
sale to LIPCO and RCBC corresponding to the market value thereof as of November 21, 1989 and (LIPCO)/
(b) the proceeds of the portion expropriated for the SCTEX shall accrue to the farmworker- Rizal Commercial Banking Corporation
beneficiaries.
SEPARATE CONCURRING 617
AND DISSENTING OPINION
BRION, J.: VOL. 660, NOVEMBER 22, 2011 617
In the Court’s Decision dated July 5, 2011, the crucial questions that the Court resolved were:
(1) whether the Presidential Agrarian Reform Council (PARC) has the power to revoke or recall Hacienda Luisita, Incorporated vs. Presidential
its approval of a stock distribution option entered into between a corporate landowner and its Agrarian Reform Council
farmworkers-beneficiaries (FWBs), under Section 31 of Republic Act No. 6657 or the
Comprehensive Agrarian Reform Law (CARL); and (2) whether the PARC has a ground to revoke
(RCBC) and Luisita Realty Corporation (LRC);
or recall the stock distribution plan (SDP) between petitioner Hacienda Luisita, Incorporated
b. the 80 hectares of land expropriated by the government for the SCTEX; and
(HLI) and its FWBs.
c. the aggregate area of homelots of FWBs who choose to remain as HLI stockholders.2
The Court was unanimous in declaring that the PARC’s express power to approve the plan for
After segregation, the remaining areas shall be turned over by HLI to the Department of
stock distribution of corporate landowners, under Section 31 of the CARL, includes the implied
Agrarian Reform (DAR) for land distribution to qualified FWBs who prefer land distribution
power to revoke its approval. In the case of HLI, the majority of the Court, myself included, found
over stock ownership.
that the PARC has solid bases to revoke its approval of HLI’s SDP.1
4. HLI is directed to turn over the consideration of
a. P500 million from the sale of the 200 hectares of converted land to LRC,
_______________ b. P750 million from the sale of the 300 hectares of converted land to Centennary
1 The majority ruled that the SDP/Stock Distribution Option Agreement is contrary to law due to the “man days”
method it adopted in computing the number of shares that each FWB shall be entitled to, and the extended period of 30
Holdings, Inc. (Centennary), and
years to complete the distribution of shares; see July 5, 2011 Decision, pp. 67-72. c. P80 million from the expropriation of 80 hectares for the SCTEX.
From the sum total of P1.33 billion shall be deducted
616 a. the 3% production share,
616 SUPREME COURT REPORTS ANNOTATED _______________

2 The July 5, 2011 Decision, pp. 88-89 referred to the “aggregate area of 6,886.5 square meters of individual lots that US Supreme Court reversed the decision and ordered the remand of the case, rejecting the broad
each FWB is entitled to under the CARP had he or she not opted to stay in HLI as stockholder” as among those to be application of the void ab initio doctrine through this rationalization:
segregated from the 4,915.75 hectares of land (and thus not subject to compulsory land distribution). I believe that
the ponencia was referring instead to the homelots of FWBs who opted to remain as stockholders of HLI, as may be “[T]he effect of a determination of unconstitutionality must be taken with qualifications. The
apparent from its subsequent statement that “the aforementioned area composed of 6,886.5-square meter lots allotted to actual existence of a statute, prior to such a determination, is an operative fact and may have
the FWBs who stayed with the corporation shall form part of the HLI assets.”
consequences which cannot justly be ignored. The past cannot always be erased by a new
618 judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects—with respect to particular relations, individual and corporate, and particular conduct,
private and official. Questions of rights claimed to have become vested, of status, of prior determinations
618 SUPREME COURT REPORTS ANNOTATED deemed to have finality and acted upon accord-
Hacienda Luisita, Incorporated vs. Presidential _______________

3 308 US 317, 318-319, 60 S. Ct. 317.
Agrarian Reform Council 4 In particular, the Act of May 24, 1934 (48 Stat. 798), amending the Bankruptcy Act of July 1, 1898, see Ashton v. Cameron County
Water Imp. Dist. No. 1, 298 U.S. 513 (1936).
5 The void ab initio doctrine declares that an “unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no
b. the 3% share in the proceeds of the sale of the 500-hectare converted land and protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed”; infra note 6.
6 118 US 425, 442.
expropriation of the 80-hectare land,
c. the taxes and expenses relating to the transfer of titles, and 620
d. the expenditures incurred by HLI for legitimate corporate purposes.
The remaining balance shall be distributed among the qualified FWBs, and
5. HLI shall be paid just compensation for the agricultural land that will be subject to land
distribution, the amount of which shall be determined by the DAR. Hacienda Luisita, Incorporated vs. Presidential
I dissented from the majority’s determination of the effects of the revocation, objecting Agrarian Reform Council
primarily to their application of the “operative fact doctrine” to justify the option given to the
FWBs on whether or not to remain as HLI stockholders. I opined that the revocation of the
ingly, of public policy in the light of the nature both of the statute and of its previous application, demand
PARC’s approval of the SDP carried with it the nullification of the Stock Distribution Option examination. These questions are among the most difficult of those which have engaged the attention of
Agreement (SDOA) between HLI and the qualified FWBs. As a consequence of the courts x x x and it is manifest from numerous decisions that an all-inclusive statement of a principle of
nullification, restitution should take place, and the parties are to account and restore absolute retroactive invalidity c
what they received from one another. Subject to certain adjustments, I maintain the
same view regarding the inapplicability of the operative fact doctrine to the present Notably, Chicot and the numerous cases that followed its lead applied the “operative fact
case. Based on this perspective, I propose to dispose of the case as discussed below. doctrine” only in considering the effects of a declaration of unconstitutionality of a
The application of the Operative statute.
Fact Doctrine to “Executive Acts” De Agbayani v. Philippine National Bank (PNB),7promulgated in this jurisdiction in 1971, was
The ponencia misapplies the operative fact doctrine. I maintain the view that the the first instance when the “operative fact doctrine” was extended to consider the effects of a
doctrine is applicable only in considering the effects of a declaration of unconstitutionality of declaration of unconstitutionality of an “executive act.” The ponencia cites De Agbayani (as well
a law (a generic term that includes statutes, rules and as subsequent cases that echoed the “operative fact” principle) to support its position, but this
619
reliance proceeds from a misreading of the context in which De Agbayani used the term
“executive act.”
The executive act referred to in De Agbayani was Executive Order No. 32 (EO 32) issued by
VOL. 660, NOVEMBER 22, 2011 619 then President Sergio Osmeña in March 10, 1945, which imposed a debt moratorium. Since the
Court (in the case of Rutter v. Esteban8) already declared EO 32 unconstitutional, Francisco de
Hacienda Luisita, Incorporated vs. Presidential Agbayani contended that the PNB’s action for foreclosure against him had already prescribed.
Agrarian Reform Council The Court was then confronted with the issue of whether to give effect to EO 32 prior to the
declaration of its unconstitutionality. The Court, per Justice Enrique Fernando, resolved the
regulations issued by the executive department and are accorded the same status as a statute). issue in this manner:
The doctrine’s limited application is apparent from a review of its origins.
“The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
The doctrine of operative fact is of American origin, first discussed in the 1940 case executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any
of Chicot County Drainage Dist. v. Baxter States Bank.3 Chicot Country sought to resist the legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental
Baxter States Bank’s claim by raising a debt readjustment decree issued by a district court law once judi-
pursuant to a law enacted by the US Congress.4 The Baxter States Bank countered that the
readjustment decree was no longer binding, as the law upon which the decree was based has been _______________
declared unconstitutional. The lower court sustained the Baxter States Bank’s argument, 7 No. L-23127, April 29, 1971, 38 SCRA 429.
8 93 Phil. 68 (1953).
following the void ab initio doctrine5 laid down in the 1886 case of Norton v. Shelby County.6 The
621 the present Resolution, the ponencia reconsidered and has now withdrawn the option given to the
qualified FWBs to remain as HLI stockholders, it still relied on the operative fact doctrine
VOL. 660, NOVEMBER 22, 2011 621 to justify the FWBs retention of certain benefits arising from the revoked SDP:
Hacienda Luisita, Incorporated vs. Presidential “With the application of the operative fact doctrine, said benefits, homelots and the 3% production
share and the 3% share from the sale of the 500-hectare and SCTEX lots shall be respected with
no obligation to refund or return them. The receipt of these things is an operative fact “that can no
longer be disturbed or simply ignored.”10 (emphasis ours)
cially declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code
[Article 7] puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall Because of this continued (and mistaken) reliance on the operative fact doctrine, I regretfully
be void and the latter shall govern.[”] Administrative or executive acts, orders and regulations shall have to register my continued objection to the manner by which the ponenciaproposes to dispose
be valid only when they are not contrary to the laws of the Constitution. It is understandable why it should of this case.
be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms Indeed, much of the confusion that arose in the disposition of this case stemmed from the
cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
varying perspectives taken by the members of the Court on what are the effects of the
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is so as _______________
until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and 10 Resolution, p. 11.
respect. Parties may have acted under it and may have changed their positions. What could be more fitting
623
than that in a subsequent litigation regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to
its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the governmental organ which has the final say on whether or not a
VOL. 660, NOVEMBER 22, 2011 623
legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power Hacienda Luisita, Incorporated vs. Presidential
of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.”9 Agrarian Reform Council
When these paragraphs are read together, the phrase “such challenged legislative or executive revocation and when these effects should accrue. The revocation of the SDP amounts to the
act” quite obviously pertains to the “administrative or executive acts, orders and regulations” nullification of the SDOA, and the logical and legal consequence of this should be the restoration
mentioned in Article 7 of the Civil Code. Thus, the context in which the term “executive of the parties to their respective situations prior to the execution of the nullified agreement. There
act” was used in De Agbayani referred to only executive issuances (acts, orders, rules should be no question that the PARC’s revocation of the approval of the SDP carried with it the
and regulations) that have the force and effect of laws; it was not used to refer to any nullification of the SDOA because the PARC’s approval is necessary to the validity of the SDOA11;
act accordingly, the effects of the revocation should be deemed to have taken place on November 21,
1989, the date when PARC Resolution No. 89-12-2 approving the SDP was issued. To consider
_______________ any other date (either at the time PARC Resolution No. 2005-32-01, revoking its approval of the
9 Id., at pp. 434-435. SDP, was issued or at the time this Court’s decision becomes final) is not only iniquitous for the
622 parties but also preposterous under the law. Hence, to accomplish a complete, orderly, and fair
disposition of the case, we have to consider the effects of the revocation to accrue from November
21, 1989. The Court should decree that compulsory Comprehensive Agrarian Reform Program
622 SUPREME COURT REPORTS ANNOTATED coverage should start at this point in time, and then proceed to adjust the relations of the parties
with due regard to the intervening events that transpired.12
_______________
11 This is inferable from Section 31 of the CARL, the relevant portion of which declares, “If within two (2) years from
performed by the Executive Department. De Agbayani’s extension of the operative fact the approval of this Act, the land or stock transfer envisioned above is not made or realized or the plan for such stock
doctrine, therefore, more properly refers only to the recognition of the effects of a declaration of distribution approved by the PARC within the same period, the agricultural land of the corporate owners or
corporation shall be subject to the compulsory coverage of this Act.”
unconstitutionality of executive issuances, and not to all executive acts as the ponencia loosely 12 I have previously declared May 11, 1989 (the date when HLI, TADECO and the qualified FWBs executed the SDOA)
construes the term. The limited construction of an “executive act,” i.e., executive issuances, is as the starting point to reckon the effects of the revocation of the SDP (Separate Concurring and Dissenting Opinion, pp.
actually more consistent with the rationale behind the operative fact doctrine: the 38-39). Upon closer study of the CARL and the relevant DAR issuances, I have reconsidered my position and propose that
presumption of constitutionality of laws. Accordingly, it is only to this kind of executive the starting point should be November 21, 1989.
action that the operative fact doctrine can apply. 624
In my separate opinion to the July 5, 2011 Decision, I raised the propriety of applying the
operative fact doctrine to the present case, primarily to object to the option granted by
the ponencia to the qualified FWBs of whether to remain as HLI stockholders or not. Although in 624 SUPREME COURT REPORTS ANNOTATED
The ponencia itself recognizes this legal reality by citing the “valid transfers” of the land as
basis for exclusion. Yet, this is precisely what is lacking in LRC’s case. By failing to intervene in
Agrarian Reform Council this case, LRC was unable to present evidence supporting its good faith purchase of the 200-
hectare con-
Treatment of the Sale of the Converted Land
Since the effects of the revocation are deemed to have taken place on November 21, 1989, the _______________
entire 4,915.75 hectares of agricultural land should be considered as placed under compulsory 15 Supra note 10, at pp. 27, 29.
coverage as of this time. To declare (as the ponencia does13) that 500 hectares of the subject land 16 Sec. 22. Qualified Beneficiaries.—The lands covered by the CARP shall be distributed as much as possible to
can no longer be included under the CARL’s compulsory coverage because it had already been landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality[.]
converted into industrial land14 is erroneous, as this implies that the land was placed under 626
compulsory coverage only when revocation of the SDP was declared, not in 1989. If this was the
case then, the FWBs should not be entitled to any of the proceeds of the sale of the 500 hectares
of converted land because their right to these proceeds stems from their right to own the land 626 SUPREME COURT REPORTS ANNOTATED
which accrues only when the land is placed under compulsory coverage. Oddly enough,
the ponencia takes an inconsistent position by subsequently declaring that—
“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 their conversion and verted land. The ponencia’s conclusion that there was a valid transfer to LRC of the 200 hectares
valid transfers, then it is only but proper that the price received for the sale of these lots should be given to
the qualified FWBs. In effect, the proceeds from the sale shall take the place of the lots.
of converted land, therefore, lacks both factual and basis.
Thus, I propose, as I did in my separate opinion to the July 5, 2011 Decision, that LRC be given
_______________
“full opportunity to present its case before the DAR x x x the failure of [LRC] to actively intervene
13 The ponencia (p. 24) said: at the PARC level and before this Court does not really affect the intrinsic validity of the transfer
“the 500-hectare portion of Hacienda Luisita, of which the 200-hectare portion sold to LRC and the 300-hectare portion subsequently made in its favor if indeed it is similarly situated as LIPCO and RCBC. x x x [A] definitive ruling
acquired by LIPCO and RCBC were part of, was already subject of the August 14, 1996 DAR Conversion Order. By virtue of the said
conversion order, the land was already reclassified as industrial/commercial land not subject to compulsory coverage.” on the transfer of the 200 hectares to [LRC] is premature to make.” The FWBs’ right to the 200-
(emphasis ours) hectare converted land itself or only to the proceeds of the sale (amounting to P500 million17) can
14 Conversion from agricultural to industrial land took place on August 14, 1996 through DAR Conversion Order No. 03060174-764-
(95). be determined only after LRC has presented its case before the DAR.
On the other hand, LIPCO/RCBC’s acquisition in good faith has been adequately proven. Thus,
625
although the 300-hectare converted land should belong to the FWBs on account of the revocation
of the SDP, the valid transfer to LIPCO/RCBC entitles them only to the proceeds of the sale.
VOL. 660, NOVEMBER 22, 2011 625 The ponencia, however, decrees that the entire P750 million paid for the 200-hectare converted
land should be paid to the FWBs.
I disagree with this position, as it fails to take into account that it was HLI which invested in
Agrarian Reform Council and caused the conversion of the land from agricultural to commercial/industrial:
xxxx Since the sale and transfer of these acquired lands came after the compulsory CARP coverage had taken
x x x. We maintain that the date of “taking” is November 21, 1989, the date when PARC approved place, the FWBs are entitled to be paid for the 300 hectares of land transferred to LIPCO based on its value
HLI’s SDP per PARC Resolution No. 89-12-2, in view of the fact that this is the time that the FWBs were in 1989, not on the P750 million selling price paid by LIPCO to HLI [through its subsidiary, Centennary] as
considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these proposed by the ponencia. This outcome recognizes the reality that the value of these lands increased due to
lands became subject of the agrarian reform coverage through the stock distribution scheme only upon the the improvements introduced by HLI, specifically HLI’s move to have these portions reclassified as
approval of the SDP, that is, November 21, 1989. Thus, such approval is akin to a notice of coverage industrial land while they were under its possession. Thus, unless it is proven that the P750 million is
ordinarily issued under compulsory acquisition.”15(emphases, italics, and underscoring ours) equivalent to the value of the land as
To reconcile these inconsistent positions, I venture to guess that what the ponencia perhaps _______________
17 Supra note 10, at p. 47.
meant was that, on account of the revocation, the entire 4,915.75 hectares were deemed placed
under compulsory coverage on November 21, 1989; however, despite the inclusion, portions of the 627
land (specifically, the 500 hectares of converted land and the 80 hectares of the SCTEX land) can
no longer be distributed among the qualified FWBs under Section 22 of the CARL16 because of
VOL. 660, NOVEMBER 22, 2011 627
the valid transfers made in favor of third parties. Thus, it was not the conversion of the 500-
hectare land that exclude it from compulsory coverage as it was already deemed included in Hacienda Luisita, Incorporated vs. Presidential
the compulsory coveragesince 1989; it was the recognition of the valid transfers of these lands to Agrarian Reform Council
third parties that excluded them from the actual land distribution among the qualified FWBs.
of [November 21, 1989] and excludes the value of any improvements that may have been introduced by HLI, The ponencia denies the applicability of Section 27 of the CARL, which states:
I maintain that the land’s 1989 value, as determined by the DAR, should be the price paid to the FWBs for
the lands transferred to LIPCO/RCBC.18 “Sec. 27. Transferability of Awarded Lands.—Lands acquired by beneficiaries under this Act may
not be sold, transferred or conveyed except through hereditary succession, or to the
In case the LRC is able to prove its good faith purchase of the 200-hectare converted land before government, or to the LBP, or to other qualified bene-
the DAR, the treatment of the proceeds of the sale of this land shall be the same as those of
LIPCO/RCBC’s 300-hectare converted land – the FWBs will be entitled only to the land’s value as _______________
19 Id., at p. 41.
of November 21, 1989, and the balance shall be for the HLI as compensation for any 20 Supra note 10, at p. 11.
improvements introduced.
629
With respect to the proceeds of the sale of the 80-hectare land to the government for the
SCTEX, “the FWBs are entitled to be paid the full amount of just compensation that HLI received
from the government for the 80 hectares of expropriated land forming the SCTEX highway. What VOL. 660, NOVEMBER 22, 2011 629
was transferred in this case was a portion of the HLI property that was not covered by any
conversion order. The transfer, too, came after compulsory CARP coverage had taken place and Hacienda Luisita, Incorporated vs. Presidential
without any significant intervention from HLI. Thus, the whole of the just compensation paid by Agrarian Reform Council
the government should accrue solely to the FWBs as owners.”19
Amounts to be Deducted from the ficiaries for a period of ten (10) years: Provided, however, That the children or the spouse of the
Proceeds of the Sale of the Lands transferor shall have a right to repurchase the land from the government or LBP within a period of two (2)
HLI claimed that it had already paid out 3% of the proceeds of the sale of the lands to the years. Due notice of the availability of the land shall be given by the LBP to the Barangay Agrarian Reform
FWBs. This amount should thus be deducted from the total proceeds that should be returned to Committee (BARC) of the barangay where the land is situated. The Provincial Agrarian Coordinating
the qualified FWBs. The taxes and expenses related to the transfer of titles should likewise be Committee (PARCCOM), as herein provided, shall, in turn, be given due notice thereof by the BARC.
If the land has not yet been fully paid by the beneficiary, the right to the land may be transferred or
deducted, since the same amounts will be incurred regardless of the seller (HLI or the FWBs).
conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a
The ponenciaproposes that the 3% 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.
18 Separate Concurring and Dissenting Opinion, pp. 40-41. 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 value of improvements he has made on the land.”
628
The ponencia opposes the application of the above provision by denying the FWBs the right to sell
the land to third parties, including HLI. Citing DAR Administrative Order No. 1, series of 1989
(DAR AO 1-89), it states that “the awarded lands may only be transferred or conveyed [to third
Hacienda Luisita, Incorporated vs. Presidential persons] after ten (10) years from the issuance and registration of the emancipation patent (EP)
Agrarian Reform Council or certificate of land ownership award (CLOA). Considering that the EPs or CLOAs have not yet
been issued to the qualified FWBs x x x, the 10-year prohibitive period has not even started.”22
I agree with the ponencia’s declaration, but only to the extent of prohibiting the qualified
production share and the expenditures incurred by HLI and Centennary for legitimate corporate FWBs from selling the land directly to HLI (or other non-qualified purchasers). Properly
purposes should also be deducted from the total proceeds of the sale. construed, the law means that, as a general rule, the FWBs are prohibited from
In proposing that the 3% production share be deducted from the total proceeds of sale to be transferring or conveying
returned to the FWBs, the ponencia has effectively reversed its own insistent declaration that all
the benefits received by the FWBs shall “be respected with no obligation to refund or return _______________
them.”20 Its reliance on the “operative fact doctrine” to authorize the FWBs’ retention of all the 22 Id., at p. 32.
benefits would thus be for naught; what the ponencia has given with its right hand, it takes away
with its left hand. 630
Also, I do not find any legitimate basis for allowing HLI to deduct from the proceeds of the sale
to be turned over to the FWBs the amounts it used for legitimate corporate purposes. It is 630 SUPREME COURT REPORTS ANNOTATED
irrelevant for the ponencia to order the DAR “to determine if the proceeds of the sale of the 500-
hectare land and the 80-hectare SCTEX lot were actually used for legitimate corporate Hacienda Luisita, Incorporated vs. Presidential
purposes.”21 The FWBs are entitled to the proceeds of the sale of the 300-hectare land in lieu of Agrarian Reform Council
the actual land which they are deemed to have acquired under the CARL since 1989.
The ponencia never explained why the FWBs should bear such portion of the proceeds of the sale
the lands within 10 years from the issuance of the EPs or CLOAs, except if the transfer
that HLI used to finance its operations.
or conveyance is made in favor of (a) a hereditary successor, (b) the government, (c)
Transferability of Awarded Lands the Land Bank of the Philippines (LBP), or (d) other qualified beneficiaries; transfers
or conveyances made in favor of any of those enumerated, even within the 10 years The concept of just compensation embraces not only the correct determination of the amount to be paid to the
period, are not prohibited by law. A contrary interpretation would prevent the beneficiary’s owners of the land, but also payment within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered “just” inasmuch as the property owner is made to suffer the consequences of
heir from inheriting the land in the event that the beneficiary dies within the 10-year period, and
being immediately deprived of his land while being made to wait for a decade or more before actually receiving the
put the land’s ownership in limbo. Thus, under Section 27 of the CARL, the FWBs who are no amount necessary to cope with his loss.
longer interested in owning their proportionate share of the land may opt to sell it to the
government or the LBP, which in turn can sell it to HLI or the LRC (if it is unable to prove its 632
good faith purchase of the 200-hectare converted land), in order not to disrupt their existing
operations.
Distribution of land to FWBs and payment
of just compensation to HLI Hacienda Luisita, Incorporated vs. Presidential
As a consequence of the revocation of the SDP, the 4,915.75 hectares of agricultural land Agrarian Reform Council
subject of the SDP are deemed placed under the CARL’s compulsory coverage since November 21,
1989. Corollary, the taking is deemed to have occurred at this time and HLI is entitled to just
compensation based on the value of the entire 4,915.75-hectare land in 1989.23 In light of this respective conditions prior to its execution and approval – thus, they are bound to restore
conclusion, the question that begs for a definitive response is: is HLI entitled to interest from whatever they received on account of the SDP. However, this does not prevent the application of
1989 up to the present on the amount of just compensation it should receive? the principle of set-off or compensation. The retention, either by the qualified FWBs or the HLI,
In several cases, the Court awarded interests when there is delay in the payment of just of some of the benefits received pursuant to the revoked SDP is based on the application of the
compensation. The underlying principle of compensation, not on the misapplication of the operative fact doctrine.
DISPOSITIVE PORTION
_______________
23 The value of the 300-hectare land conveyed to LIPCO/RCBC and the 80-hectare land for SCTEX should not be Accordingly, I maintain my vote to DENY HLI’s petition and AFFIRM the PARC’s Resolution
excluded if the Court is to rule that the FWBs are entitled to the proceeds of these conveyances.
Nos. 2005-32-01 and 2006-34-01 revoking the SDP.
631 The entire 4,915.75 hectares of land are deemed PLACED UNDER COMPULSORY
COVERAGE of the CARL AS OF NOVEMBER 21, 1989, and the 6,296 qualified FWBs shall be
deemed to have acquired rights over the land as of this date. The DAR shall DISTRIBUTE the
VOL. 660, NOVEMBER 22, 2011 631 land among the 6,296 qualified FWBs, EXCLUDING:
Hacienda Luisita, Incorporated vs. Presidential a. the 300 hectares of converted land acquired by LIPCO/RCBC; and
b. the 80 hectares of land expropriated by the government for the SCTEX.
The LRC shall be entitled to prove before the DAR that there was valid transfer of the 200
hectares of converted land. If the DAR finds that LRC is a purchaser in good faith and for value,
rationale for the award is to compensate the landowner not simply for the delay, but for the the 200 hectares of converted land shall likewise be excluded from the land to be distributed
income the landowner would have received from the land had there been no immediate taking among the qualified FWBs.
thereof by the government.24 The DAR is ORDERED to determine the amount of just compensation that HLI is entitled to
This principle, however, does not apply to the present case because HLI never lost possession for the entire 4,915.75 hectares of agricultural land, based on the value at the time of taking—
and control of the land; all the incomes that the land generated were appropriated by HLI. No November 21, 1989, and no interest shall be imposed on this amount. The DAR is FURTHER
loss of income from the land (that should be compensated by the imposition of interest on the just ORDERED to determine the amount of RENTALS that HLI must pay to the
compensation due) therefore resulted. On the contrary, it is the qualified FWBs who have been
633
denied of income due to HLI’s possession and control of the land since 1989. Thus, HLI should
pay the qualified FWBs rental for the use and possession of the land up to the time it surrenders
possession and control over these lands. The DAR, as the agency tasked to implement agrarian VOL. 660, NOVEMBER 22, 2011 633
reform laws, shall have the authority to determine the appropriate rental due from HLI to the
qualified FWBs. In recognition, however, of any improvements that HLI may have introduced on Hacienda Luisita, Incorporated vs. Presidential
these lands, HLI is entitled to offset their value from the rents due. Agrarian Reform Council
Application of the principle of set-off
The consequence of the revocation of the SDP, as I have repeatedly stated, is the restoration qualified FWBs for the use and possession of the land beginning November 21, 1989, until
of the parties to their possession is turned over to the DAR, for distribution (with due adjustment for the portions
conveyed to LIPCO/RCBC, the government for the SCTEX, and, if found by the DAR to be a valid
_______________ transfer, LRC). HLI, however, is entitled to DEDUCT from the rentals due the value of the
24 See Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No. 164195, October 12, 2010, 632 SCRA 727. See improvements it made over the land (excluding those sold to LIPCO/RCBC and LRC, if the DAR
also Land Bank of the Philippines (LBP) v. Soriano, G.R. Nos. 180772 and 180776, May 6, 2010, 620 SCRA 347, where the
Court declared that
finds that there was a valid transfer).
HLI shall PAY to the FWBs the value of the
a. 300 hectares of converted land conveyed to LIPCO/RCBC, based on its November 21, 1989
value, as determined by the DAR; and compensation to the landowner.1 In National Power Corporation v. Court of Appeals,2 the Court
b. if the DAR finds that there was a valid transfer, 200 hectares of converted land conveyed emphasized the importance of the time of taking in fixing the amount of just compensation, thus:
to LRC.
HLI shall also PAY the qualified FWBs just compensation received from the government for “xxx [T]he Court xxx invariably held that the time of taking is the critical date in determining lawful
or just compensation. Justifying this stance, Mr. Justice (later Chief Justice) Enrique Fernando, speaking
the 80 hectares of expropriated land for the SCTEX.
for the Court in Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, said, “xxx
From the total amount of the proceeds of the sale and the just compensation to be paid by HLI the owner as is the constitutional intent, is paid what he is entitled to according to the value of the property
to the qualified FWBs, the DAR shall DEDUCT the P150 million, representing the 3% production so devoted to public use as of the date of the taking. From that time, he had been deprived thereof. He had
share and the aggregate value of the homelots that the qualified FWBs received from HLI. The no choice but to submit. He is not, however, to be despoiled of such a right. No less than the fundamental
amount of the 3% production share shall depend on the amount actually received by the FWBs law guarantees just compensation. It would be an injustice to him certainly if from such a period, he could
from HLI, to be determined by the DAR. not recover the value of what was lost. There could be on the other hand, injustice to the expropriator if by a
All the FWBs shall return to HLI the 59 million shares of stock. They are, however, entitled to delay in the collection, the increment in price would accrue to the owner. The doctrine to which this Court
retain all the salaries, wages and other benefits received as employees of HLI. has been committed is intended precisely to avoid either contingency fraught with unfairness.”3(emphasis
supplied)
634
It is my humble submission, therefore, that the factual issue of when the taking had taken
place as to the affected agricultural lands should not be separated from the determination of just
634 SUPREME COURT REPORTS ANNOTATED compensation by DAR, Land Bank and SAC. Accordingly, I urge that the Court should leave the
Hacienda Luisita, Incorporated vs. Presidential matter of the reckoning date to be hereafter determined by the DAR and Land Bank pursuant to
Section 18 of Republic Act No. 6657.4 Should the parties disagree thereon, the proper SAC
_______________
CONCURRING AND DISSENTING OPINION 1 Republic v. Cancio, G.R. No. 170147, January 30, 2009, 577 SCRA 346; National Power Corporation v. Henson, G.R.
BERSAMIN, J.: No. 129998, December 29, 1998, 300 SCRA 751, 756.
I concur with the Resolution the Court issues today by way of resolving the various motions 2 G.R. No. 113194, March 11, 1996, 254 SCRA 577.
3 Id., at p. 589.
filed against the decision dated July 21, 2011.
4 Section 18. Valuation and Mode of Compensation.—The LBP shall compensate the landowner in such amount as
I respectfully dissent on two aspects, however, and I humbly opine that: one, the reckoning may be
date for purposes of determining just compensation should be left to the DAR and Land Bank,
and, ultimately, to the Special Agrarian Court (SAC) to determine; and two, the landowner 636
should be compensated for the value of the homelots granted to the farmworkers-beneficiaries
(FWBs) pursuant to the discredited stock distribution plan (SDP).
Let me explain my position.
I Hacienda Luisita, Incorporated vs. Presidential
In the decision of July 5, 2011, the Court upheld the PARC’s assailed resolutions placing the Agrarian Reform Council
agricultural lands subject of the SDP under compulsory coverage of the Comprehensive Agrarian
Reform Program (CARP), and declared HLI entitled to just compensation to be reckoned from
November 21, 1989. will then resolve their disagreement as an integral part of a petition for determination of just
Today’s Resolution continues to follow the same reckoning date of November 21, 1989 due to compensation made pursuant to Section 57 of Republic Act No. 6657, to wit:
its being the date when PARC approved HLI’s SDP and thereby placed the affected agricultural “Section 57. Special Jurisdiction.—The Special Agrarian Courts shall have original and exclusive
lands under the coverage of CARP. The Resolution explains that it was upon the approval of the jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution
SDP that the farmworker-beneficiaries (FWBs) had come to be considered to own and possess the of all criminal offenses under this Act.
affected agricultural lands. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by
The determination of when the taking occurred is an integral and vital part of the this Act.
determination and computation of just compensation. The nature and character of land at the The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within
time of its taking are the principal criteria to determine just thirty (30) days from submission of the case for decision.”
635 II
It appears to me that the homelots granted to the FWBs under the SDP do not form part of the
total area of the agricultural lands to be turned over to DAR for distribution to the qualified
VOL. 660, NOVEMBER 22, 2011 635 FWBs for which the landowner will be justly compensated. If my impression is correct, I fear that
Hacienda Luisita, Incorporated vs. Presidential the result will be unfair should the landowner not be justly compensated for the value of the
homelots. In such a situation, the taking will be confiscatory and unconstitutional.
I submit, therefore, that HLI as the landowner should be justly compensated also for the In my view, such an approach is partially confiscatory as it makes an unjustified exception to
homelots. the long line of jurisprudence that the Court has laid down regarding the time of “taking” of
agrarian reform lands for purposes of just compensation. It would have been preferable, from a
CONCURRING AND DISSENTING OPINION policy point of view, that at the time that the CARL was passed in 1989, Congress had chosen one
of two options: (a) either the State subsidize the difference between the fair market value at the
SERENO, J.: time of the taking and what the farmers can afford to pay, which some of the 1986 Constitutional
At the outset, I have maintained that the nullity of the Stock Distribution Option Agreement Commissioners said should happen; or (b) authorize the confiscation of a part of the price of the
(SDOA) in Hacienda Luisita should lead to the immediate distribution of the agricultural lands to fair market value under a radical but rational interpretation of the social justice clause of the
the 6,296 qualified farmer-beneficiaries 1987 Constitution. Congress chose neither option and opted for payment of the fair market value
at the time of the taking as just compensation to be amortized by the farmers for 30 years. This
_______________ Court has invariably sustained that policy choice. This in large part accounts for the confessed
agreed upon by the landowner and the DAR and LBP or as may be finally determined by the court as just lack of financial viability to make land reform a genuine success.
compensation for the land.
The choice having been thusly made, this Court has no alternative except to apply the rule
637 uniformly, otherwise, this will result in a discriminatory and partially confiscatory treatment of
the Hacienda Luisita lands. That is also why I was proposing that the lands to be distributed to
the qualified FWBs be declared to be immediately and freely transferable. After all, the 10-year
VOL. 660, NOVEMBER 22, 2011 637 prohibition against the transfer effectively lapsed on the tenth year of the effectivity of the CARL.
Hacienda Luisita, Incorporated vs. Presidential The FWBs can sell part and retain part of the lands, and can best determine how to make
Agrarian Reform Council optimal economic use of them.
My view resonates with the opinion of Justice Arturo D. Brion, who reckoned the value of the
lands to the time the SDOA was approved on 21 November 1989, but at the same time recognized
(FWBs). The first draft of the ponencia of the original Decision was circulated among the petitioner HLI’s entitlement to the value of the improvements to the land. He laments the fact
Members of the Court on 11 February 2011. The draft ponencia, which eventually became the that petitioner HLI will be uncompensated for all the improvements it
majority Decision, said that the nullity of the SDOA notwithstanding, effects of its approval have
taken place and cannot be undone under the operative facts doctrine and thus directed the 639
holding of a secret voting among the FWBs on whether they will opt to remain as stockholders of
petitioner Hacienda Luisita, Inc. (HLI). Shortly thereafter, on 25 March 2011, the first draft of VOL. 660, NOVEMBER 22, 2011 639
my opinion objecting to the grant of the secret voting option to the FWBs to stay with the SDOA
was circulated. Other draft dissenting opinions against the proposed ponenciawere subsequently Hacienda Luisita, Incorporated vs. Presidential
released. After the promulgation of the Decision dated 05 July 2011 and after carefully reviewing Agrarian Reform Council
the instant motions for reconsideration, my initial position remains the same—the SDOA is
illegal and land distribution should immediately be directed under Section 33 of Republic Act No.
has introduced as a builder in good faith from 21 November 1989 until now. I agree with him on
6657, or the Comprehensive Agrarian Reform Law (CARL).
this point.
I welcome the change in the position of the majority, and voting with them, this Court is now
unanimously directing immediate land distribution. However, I disagree with its identification of The Five Approaches to Resolving this Petition
the reckoning date of the “taking” of the lands ordered to be distributed for the purpose of
eventually determining “just compensation.” On the instant motions for reconsideration, There are before the Court five major approaches to resolving the agrarian legal problems
the ponencia talks of the possibility of rendering it impossible for the FWBs to pay for the lands if involving Hacienda Luisita. Each approach advances operative solutions to two standing issues:
the reckoning date were the date of Notice of Coverage, or on 02 January 2006. It holds that (a) whether to distribute the agricultural lands to the FWBs or allow them to secretly vote to
regardless of the uniform rulings of the Court I enumerated in this Opinion to the effect that the remain as stockholders; and (b) how much compensation, if any, is due to the corporate
“taking” is the date of the Notice of Coverage, it is creating a new rule—that for SDOAs that are landowner.
nullified, the compensation for the value of the lands that will be distributed are to be reckoned The first approach, which has now been abandoned, is that ordered by the Court’s
at their fair market value at the time of the approval of the nullified SDOA. questioned Decision dated 05 July 2011, and as suggested by Chief Justice Renato C. Corona in
638
his Dissenting Opinion of the same date. A secret voting will take place in which FWBs want to
indicate whether they will retain their stockholding in petitioner HLI in lieu of their individual
right to a direct share in the land, or whether they want direct land ownership. In cases where
638 SUPREME COURT REPORTS ANNOTATED direct land ownership is selected, petitioner HLI shall be paid the value of the lands as of 21
November 1989, which was the date when the PARC approved its SDOA with the FWBs.
Hacienda Luisita, Incorporated vs. Presidential The second approach is that proposed by Justice Arturo D. Brion in his earlier Separate
Agrarian Reform Council Concurring and Dissenting Opinion, which Justice Martin S. Villarama, Jr., joined in. The
approach is to order direct land distribution to all the FWBs of the 4,916 hectares of land. The
date of the taking will be pegged to 11 May 1989 (the date of the SDOA), and the just consistent, but requires much creative designing by public respondent DAR. The last three
compensation will also be pegged to that time. There will be no interest on the just compensation approaches would not work too great an injustice on either the FWBs or the landowners.
and petitioner HLI will be required to pay back rentals as of that date.
The third approach is like the first approach, but modified by the legal consequences of the Land Distribution v. Secret Voting
statement made by the majority in the body of the Decision that a stock option arrangement can
only be valid if majority control of the corpora- The Court has unanimously struck a lethal blow to the SDOA between petitioner Hacienda
Luisita, Inc., (HLI) and the signatory farmworker-beneficiaries (FWBs), since its provisions were
640 found to be in violation of the Comprehensive Agrarian Reform Law (CARL). Despite the
unequivocal invalidation of the SDOA, the Court was divided on the various approaches in
dealing with the aftermath of the declaration in accordance with the promises of agrarian reform
under the Constitution.
Hacienda Luisita, Incorporated vs. Presidential To my mind, no other option is permissible under the law other than the immediate and
Agrarian Reform Council direct land distribution to the FWBs as provided for under the CARL. The rejection of
the secret voting option by the ponente, Justice Presbitero J. Velasco, Jr., in his Resolution of the
various Motions for Clarification/Reconsideration by the main concerned parties, as well as by
tion is in the hands of the FWBs. Thus, the Court must categorically direct (a) a revaluation of Chief Justice Corona in his Separate Opinion, is a very positive turn of events.
the assets of HLI; (b) this revaluation must result in at least 51% control of the voting stock and As the new ponencia points out, the distribution of the stocks under the SDOA is evidently
the beneficial interest; and (c) this restructuring must be completed before the referendum for the iniquitous because the FWBs will continue to be relegated as minority stockholders
FWBs is undertaken by public respondent Department of Agrarian Reform (DAR).
The fourth approach is a suggested modification of the second approach. The “taking” and 642
the value of the just compensation is pegged to 11 May 1989, but the Tarlac Development
Corporation (TADECO) and/or petitioner HLI (a) must be compensated for (i) interest on the
value of the just compensation at that time onwards; (ii) and improvements that have been
introduced to the lands with interest on the value of the improvements since these improvements Hacienda Luisita, Incorporated vs. Presidential
were utilized; (b) may be required to pay rentals for the use of the land in their state as of 11 May Agrarian Reform Council
1989 adjudicated by a reasonable annual rate applicable to the lands in such state; and (c) cannot
be made to return the entire P750,000,000 paid by Luisita Industrial Park Corporation (LIPCO)
to petitioner HLI for the 300 hectare lands, the P80,000,000 paid by the national government for holding, at best, 33.29% of the votes in the corporation.1Under the first approach, the secret
the 84 hectares expropriated for the Subic-Clark-Tarlac-Expressway (SCTEX), but only the value voting option would, in fact, further aggravate the minority position of the FWBs in petitioner
of the 300 hectares and the 84 hectares as of 11 May 1989, plus interest on the same at the same HLI since those who opt for direct land distribution would have to surrender their stockholdings.
rate that will be given in favor of petitioner HLI under item (a) above. Should petitioner HLI’s current corporate structure of lands-to-total-assets ratio be maintained,
The fifth approach requires direct land distribution. The “taking” and the value of the just FWBs who will opt to remain as stockholders will find themselves with a decreased voting power
compensation is pegged according to law and prevailing jurisprudence. The just compensation is base and placed at an even greater disadvantage with the exodus of other FWBs who will opt for
pegged to the date of actual taking, and its value is approximately at fair market value. individual distribution of land.
The first approach is contrary to law and unjust to the farmers. The second approach is The outcome of the SDOA in Hacienda Luisita may have been different had the FWBs been
contrary to prevailing jurisprudence on just compensation and is confiscatory of the right of the given majority or even full control of petitioner HLI at the outset, which is the rationale of
landowners. It would have been legally supportable under the initial interpretation of “just the third approach. The secret voting option would have been less unjust, if majority control of
compensation” in the corporation is first handed to the FWBs, before they decide whether to remain as stockholders
or opt for land distribution. The third approach recognizes the constitutional mandate to hand
641 over ownership and control of agricultural lands to the farmers or farmworkers, whether directly
through individual ownership or indirectly through collective ownership. Considering that stock
VOL. 660, NOVEMBER 22, 2011 641 distribution options per se have not been declared as unconstitutional mechanisms in agrarian
reform, the Court must at present give life to the intention of the legislature in opening up that
Hacienda Luisita, Incorporated vs. Presidential option to corporate landowners, but not at the expense of relegating the FWBs to minority status.
Agrarian Reform Council The presence of this solution also avoids having to pronounce Section 28 of the CARL void, a
preferred
agrarian reform cases when “socialized taking” was contemplated, but since 1989, law and
_______________
jurisprudence prevents this approach from being adopted. The third approach, while still legally
1 Under the SDOA, the FWBs are entitled to the equivalent of the value of the agricultural lands compared with the
wrong, mitigates much of the injustice that will be perpetrated by the first approach. The fourth total assets of petitioner HLI. In this case, the value of petitioner HLI’s agricultural land is pegged at P196,630,000; while
approach will contradict jurisprudence on “just compensation” and require a lot of accounting its claimed total assets are worth P590,554,220. Thus, the FWBs would be able to hold at maximum 33.296% of petitioner
exercises, but is less harsh to the farmers and the landowners. The fifth approach is logically HLI’s shares.
643 land reform expropriation.7Indeed, the matter of just compensation was never meant to
involve a severe diminution of what the land owner gets.8 The aim of just compensation in terms
of expropriation, even in agrarian reform, should be
VOL. 660, NOVEMBER 22, 2011 643
Hacienda Luisita, Incorporated vs. Presidential _______________
Agrarian Reform Council 3 “No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied
the equal protection of the laws.” (CONSTITUTION, Art. III, Sec. 1)
4 CONSTITUTION, Art. III, Sec. 9.
approach to statutory construction that this Court is bound to observe by judicial review 5 Dissenting Opinion of Chief Justice Renato C. Corona, in Republic of the Philippines v. Gingoyon, G.R. No. 166429,
doctrines. 19 December 2005, 478 SCRA 474, citing State by Department of Highways v. McGuckin, 242 Mont 81, 788 P2d 926.
6 Gabatin v. Land Bank of the Philippines, G.R. No. 148223, 25 November 2004, 444 SCRA 176.
7 “FR. BERNAS: But is it the intention of the Committee that the owner should receive less than the market value?
Just Compensation v. Modified Compensation
“MR. MONSOD: It is not the intention of the Committee that the owner should receive less than the just
compensation.” (Minutes of the Deliberations of the Constitutional Commission, [17 August 1986], p. 17)
Since there is now unanimity in ordering the distribution of the agricultural lands to the 8 Minutes of the Deliberations of the Constitutional Commission, Fr. Joaquin Bernas, S. J. (04 August 1986), p. 648.
FWBs in this case, the Court now contends with the quantum of compensation due to petitioner
HLI with respect to its expropriated farm lands. It is not surprising that the issue of just 645
compensation that has plagued the members of the Constitutional Commission and Congress has
again reared its head in the present legal controversy, involving the peculiar mechanism of a
VOL. 660, NOVEMBER 22, 2011 645
stock distribution option under the CARL. Fortunately, the wealth of jurisprudence in the years
following the passage of the landmark law up to the present offers some guidance in arriving at a Hacienda Luisita, Incorporated vs. Presidential
solution that conforms with the constitutional mandate of agrarian reform and social justice. Agrarian Reform Council
While distribution of land was the prevailing ideology in crafting our agrarian reform policies
in the Constitution, the other side of the spectrum is the recognition of the rights of the
landowner specifically the right of just compensation.2 The aim of redistributing agricultural just to the owner—that which approximates the market value.9 Hence, the Court acknowledged
lands under the Constitution was primarily to correct the unjust social structures then prevailing the other side of the agrarian reform coin and ruled:
in order to achieve an equitable distribution of wealth from the landed few in favor of the landless “The Comprehensive Agrarian Reform Program was undertaken primarily for the benefit of our landless
majority. Yet, in recognizing the social function of the lands and the demands of social justice, the farmers. However, the undertaking should not result in the oppression of landowners by pegging
framers never lost sight of the property rights of landowners, as an inherent limitation to the the cheapest value for their lands. Indeed, the taking of properties for agrarian reform purposes
exercise of the State’s power of eminent domain or expro- is a revolutionary kind of expropriation, but not at the undue expense of landowners who are
also entitled to protection under the Constitution and agrarian reform laws. …”10 (Emphasis
supplied)
_______________
2 “… To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or
In the seminal case Association of Small Landowners in the Philippines v. Secretary of
equity considerations, and subject to the payment of just compensation. …” (CONSTITUTION, Art. XIII, Sec. 4) Agrarian Reform,11 the Court, speaking through retired Justice Isagani Cruz, eloquently
expounded on the inherent right of landowners to just compensation, in this wise:
644
“Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. It has been repeatedly stressed by this Court that the measure is not the taker’s gain
644 SUPREME COURT REPORTS ANNOTATED but the owner’s loss. The word “just” is used to intensify the meaning of the word “compensation” to
convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial,
Hacienda Luisita, Incorporated vs. Presidential full, ample.
Agrarian Reform Council It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private
priation, even in cases of agrarian reform. Concomitant with the fundamental right not to be
_______________
deprived of property without due process of law3 is the constitutional provision that “[p]rivate 9 “FR. BERNAS. The sense is, it must be just to the owner.
property shall not be taken for public use without just compensation.”4 Hence, the policy MR. TREÑAS. Precisely.
FR. BERNAS. The owner should get the full market value. But then we have to make a provision as to where the payment will come
underlying the provision for eminent domain is to make the private owner “whole” after his from.” (Minutes of the Deliberations of the Constitutional Commission, [17 August 1986], p. 18)
property is taken by the State.5 10 LBP v. Chico, G.R. No. 168453, 13 March 2009, 581 SCRA 226.
11 G.R. Nos. 78742, 79310, 79744, and 79777, 14 July 1989, 175 SCRA 343.
The taking of private lands under the agrarian reform program partakes of the nature of an
expropriation proceeding.6 For purposes of taking under the agrarian reform program, the 646
framers of the Constitution expressly made its intention known that the owners of the
land should not receive less than the market value for their expropriated properties
and drew parallelisms with the ordinary understanding of just compensation in non-
Hacienda Luisita, Incorporated vs. Presidential SCRA 343 (1989).
15 B. H. Berkenkotter & Co. v. Court of Appeals, id.
Agrarian Reform Council 16 “ ‘Taking’ under the power of eminent domain may be defined generally as entering upon private property for more
than a momentary period, and, under the warrant or color of legal authority, devoting it to a public use, or otherwise
lands under the police power. We deal here with an actual taking of private agricultural lands that has informally appropriating or injuriously affecting it in such a way as substantially to oust the owner and deprive him
dispossessed the owners of their property and deprived them of all its beneficial use and enjoyment, to of all beneficial enjoyment thereof.” (Republic of the Philippines v. vda. de Castellvi, G.R. No. L-20620, 15 August
entitle them to the just compensation mandated by the Constitution. 1974, 157 Phil. 329, citing 26 Am. Jur. 2nd ed., Sec. 157)
As held in Republic of the Philippines v. Castellvi, there is compensable taking when the following 17 “It is reminded to adhere strictly to the doctrine that just compensation must be valued at the time of taking. 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
conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more than a
transferred to the Republic.” (Land Bank of the Philippines v. Livioco, G.R. No. 170685, 22 September 2010,
momentary period; (3) the entry must be under warrant or color of legal authority; (4) the property must be
citing Eusebio v. Luis, 603 SCRA 576, 586-587 [2009])
devoted to public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of
the property for public use must be in such a way as to oust the owner and deprive him of 648
beneficial enjoyment of the property. All these requisites are envisioned in the measures before us.”
Since the farm lands in Hacienda Luisita are to be the subject of distribution, petitioner HLI 648 SUPREME COURT REPORTS ANNOTATED
or Tarlac Development Corporation (TADECO), as landowners, are entitled to just compensation,
which is an indispensible legal requirement in agrarian reform expropriations.12The issue now Hacienda Luisita, Incorporated vs. Presidential
lies in the reckoning period in which the just compensation shall be computed, as illustrated by Agrarian Reform Council
the second, fourth and fifth approaches. Crucial to the Court’s resolution of this matter is
the time of the taking by the government of the farm lands in Hacienda Luisita. SDOA, or on 21 November 1989 (date of the PARC approval). Second, the date the SDOA was
Just compensation in cases of expropriation is ordinarily to be ascertained as of the time of the signed, 18 May 1989, (date of the SDOA) was also considered as a reckoning point of the
taking.13 In computing the valuation period. Lastly, I submit that the valuation be made based on the current fair market
value in accordance with established laws, rules and jurisprudence; or more specifically, at the
_______________ time that petitioner HLI was issued a Notice of Coverage on 02 January 2006 (date of Notice of
12 “Agrarian reform is a revolutionary kind of expropriation. The recognized rule in expropriation is that title to the Coverage). With all due respect to my colleagues, the third reckoning period alone satisfies the
expropriated property shall pass from the owner to the expropriator only upon full payment of the just
compensation. Thus, payment of just compensation to the landowner is indispensable.” (Land Bank of the
constitutional directive to give real, substantial, full and ample compensation to the landowner in
Philippines v. Dumlao, G.R. No. 167809, 27 November 2008, 572 SCRA 108) recognition of the latter’s right to property and of the express limitation on the State’s power of
13 B. H. Berkenkotter & Co. v. Court of Appeals, G.R. No. 89980, 14 December 1992, 216 SCRA 584, citing Land Bank expropriation.
of the Philippines v. Court of Appeals, 258 SCRA 404 (1996) and Association of The period of valuation of the property cannot be reckoned by considering the first two dates
as the time that the agricultural lands were taken, precisely because petitioner HLI and the
647
FWBs resorted to the mechanism of a stock distribution option. This was a distinctive mechanism
under the agrarian reform scheme, by which shares of stock of the corporate landowner, instead
VOL. 660, NOVEMBER 22, 2011 647 of agricultural lands, were distributed to the farmers. The singular advantage of the said scheme,
unlike a direct land transfer to individual farmers or cooperatives, is that title to the property
Hacienda Luisita, Incorporated vs. Presidential remains with the corporate landowner, which should presumably be dominated by farmers with
Agrarian Reform Council majority stockholdings in the corporation.
The reason behind the 1989 reckoning periods (the date of SDOA or the date of PARC
just compensation for expropriation proceedings, it is the value of the land at the time of the approval) is that the agricultural lands are made the subject of the CARL, and are thus
taking, not at the time of the rendition of judgment, which should be taken into considered to have been expropriated private property under the agrarian reform program.
consideration.14 Hence, in determining the value of the land for the payment of just However, the use of these periods ignores the fact that petitioner HLI, as the corporate
compensation, the time of taking should be the basis.15 The concept of taking in both land reform landowner, exactly availed itself of the stock distribution option under the CARL, which resulted
and non-land reform expropriations is well-settled. There is taking of private property by the in the title remaining in the hands of private persons. Instead of expropriating lands, what the
State in expropriation proceedings when the owner is ousted from his property and deprived of government took and distributed to the FWBs were shares of stock of petitioner HLI in
his beneficial enjoyment thereof.16 The “time of taking” is the moment when landowners are proportion to the value of
deprived of the use and benefit of the property.17 649
Three reckoning periods are for consideration of the Court. First, Justice Velasco, who is now
joined by Justice Brion, proposes that the amount of just compensation to be paid should be based
on the date that the PARC approved the VOL. 660, NOVEMBER 22, 2011 649
_______________
Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343 (1989).
14 B. H. Berkenkotter & Co. v. Court of Appeals, id., citing Republic of the Philippines v. Ker and Company Limited,
383 SCRA 584 (2002) and Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175
the agricultural lands that should have been expropriated and turned over to the FWBs. and 178097, 25 June 2009, 591 SCRA 1; LBP v. Rufino, G.R. No. 175644 and 175702, 02 October
Hence, no taking of agricultural lands can be considered either at the time the SDOA was 2009, 602
signed or at the time PARC approved it, since petitioner HLI retained full ownership and use of
the lands thereafter. Despite the change in stockholders, petitioner was never ousted from or _______________
deprived of the beneficial enjoyment of the agricultural lands in Hacienda Luisita. This was the 18 Republic Act No. 6657, Sec. 17, as amended by Republic Act No. 9700.
very reason why the stock distribution option was the mode specifically preferred by the 19 DAR Administrative Order No. 06-92 dated 30 October 1992, as amended by DAR Administrative Order No. 11-94
corporate landowner in this case. Indeed, petitioner freely exercised ownership of the property in dated 13 September 1994; see also DAR Administrative Order No. 05-98 dated 15 April 1998 and DAR Administrative
Order No. 02-09 dated 15 October 2009.
the interim, when it applied for the conversion of the lands and sold them to third parties. Even
Justice Brion acknowledged this fact in his earlier Separate Opinion, in which he said: “HLI 651
never lost possession and control of the land under the terms of the SDOA.” It appears iniquitous
to reckon the valuation of the now expropriated farm lands in Hacienda Luisita by their 1989
levels, when the property had not yet been actually taken or expropriated by the government at VOL. 660, NOVEMBER 22, 2011 651
that time. Hacienda Luisita, Incorporated vs. Presidential
The CARL, as amended, had expressly identified the factors in arriving at just compensation
for landowners whose properties have been subject to land reform expropriation:
“In determining just compensation, the cost of acquisition of the land, the value of the standing SCRA 399; LBP v. Luciano, G.R. No. 165428, 25 November 2009, 605 SCRA 426; LBP v. Dizon,
crop, the current value of like properties, its nature, actual use and income, the sworn valuation G.R. No. 160394, 27 November 2009, 606 SCRA 66; Heirs of Lorenzo and Carmen Vidad v. LBP,
by the owner, the tax declarations, the assessment made by government assessors, and seventy
G.R. No. 166461, 30 April 2010, 619 SCRA 609; LBP v. Soriano, G.R. No. 180772 and 180776, 06
percent (70%) of the zonal valuation of the Bureau of Internal Revenue (BIR), translated into a
basic formula by the DAR shall be considered, subject to the final decision of the proper court. The social May 2010, 620 SCRA 347; LBP v. Barrido, G.R. No. 183688, 18 August 2010, 628 SCRA 454; LBP
and economic benefits contributed by the farmers and the farmworkers and by the Government to the v. Colarina, G.R. No. 176410, 01 September 2010, 629 SCRA 614; LBP v. Livioco, G.R. No.
property as well as the nonpayment of taxes or loans secured from any government 170685, 22 September 2010, 631 SCRA 86; LBP v. Escandor, G.R. No. 171685, 11 October 2010,
632 SCRA 504; LBP v. Rivera, G.R. No. 182431, 17 November 2010, 635 SCRA 285; LBP v. DAR,
650
G.R. No. 171840, 04 April 2011. In all these cases, the formula approximately reflects the
fair market value of the property at the time of the Notice of Coverage to estimate the
650 SUPREME COURT REPORTS ANNOTATED loss suffered by the landowner, whose property was the subject of expropriation.
Thus, under the uniform rulings of this Court, the notice of coverage commences the
Hacienda Luisita, Incorporated vs. Presidential process of acquiring private agricultural lands covered by the CARP.20 The date of the
Agrarian Reform Council notice of coverage is therefore determinative of the just compensation petitioner HLI is entitled to
for its expropriated lands. In computing capitalized net income under the DAR formula, one
financing institution on the said land shall be considered as additional factors to determine its should use the average gross production of the latest available 12 months immediately
valuation.”18 preceding the date of notice of coverage, in case of compulsory acquisition, and the average
selling price of the latest available 12 months prior to the date of receipt of the claim folder by the
Pursuant to its rule-making powers, the Department of Agrarian Reform (DAR) reduced these Land Bank of the Philippines for processing.21
factors into a basic general formula that computes the value of the land subject of agrarian The rationale for pegging the period of computing the value so close or near the present
reform in this manner:19 market value at the time of the taking is to consider the appreciation of the property brought
Land Value = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) about by improvements therein and other factors. The nature
Where
CNI = Capitalized Net Income _______________
CS = Comparable Sales 20 DLR Administrative Order No. 04-05 dated 02 August 2005.
MV = Market Value per Tax Declaration 21 LBP v. Rufino, G.R. No. 175644 and 175702, 02 October 2009, 602 SCRA 399.
In a long line of cases, the Court has given judicial imprimatur to the above formulation made 652
by the DAR. The following cases demonstrate judicial fealty to this formula: LBP v. Spouses
Banal, G.R. No. 143276, 20 July 2004, 434 SCRA 543; LBP v. Celada, G.R. No. 164876, 23 652 SUPREME COURT REPORTS ANNOTATED
January 2006, 479 SCRA 495; Lubrica v. LBP, G.R. No. 170220, 20 November 2006, 507 SCRA
415; LBP v. Lim, G.R. No. 171941, 02 August 2007, 529 SCRA 129; LBP v. Suntay, G.R. No. Hacienda Luisita, Incorporated vs. Presidential
157903, 11 October 2007, 535 SCRA 605; Spouses Lee v. LBP, G.R. No. 170422, 07 March 2008, Agrarian Reform Council
548 SCRA 52; LBP v. Heirs of Eleuterio Cruz, G.R. No. 175175, 29 September 2008, 567 SCRA
31; LBP v. Dumlao, G.R. No. 167809, 27 November 2008, 572 SCRA 108; LBP v. Gallego, Jr.,
and character of the land at the time of its taking is the principal criterion for determining how
G.R. No. 173226, 20 January 2009, 576 SCRA 680; LBP v. Kumassie Plantation, G.R. No. 177404
much just compensation should be given to the landowner.22 All the facts as to the condition of
the property and its surroundings, as well as its improvements and capabilities, should be on November 20, 1990 should be considered in determining the just compensation due the respondents. So
considered.23 For the compensation to be just to the owner of a commercial farm land, the it is that in National Power Corporation v. Court of Appeals, et al., we ruled:
facilities and improvements introduced by the landowner—not just the land—shall also be taken Normally, the time of the taking coincides with the filing of the complaint for
expropriation. Hence, many rulings of this Court have equated just compensation with the
into consideration.24 It is but equitable to extend to the landowner compensation arising from the
appreciation of the property due to the improvements introduced therein. To simply disregard the 654
changes, appreciation or improvements in the agricultural lands of Hacienda Luisita by pegging
the property to its 1989 value is to resort to expropriation that is confiscatory—considering that 654 SUPREME COURT REPORTS ANNOTATED
it will be the sole exception to a long line of jurisprudence—and not compensatory which is
prescribed under the Constitution as a fundamental right of a landowner. Hacienda Luisita, Incorporated vs. Presidential
Indeed, the previous decisions of this Court dealt with voluntary or compulsory coverage under Agrarian Reform Council
the CARL. It would appear that this is the first instance that the Court is confronted with the
question of determining just compensation for cases where the landowners and farmworker- value of the property as of the time of filing of the complaint consistent with the above provision of the
beneficiaries resorted to a stock distribution option that had failed and was nullified. Unlike Rules. So too, where the institution of the action precedes entry into the property, the just
voluntary or compulsory coverage where the compensation is to be ascertained as of the time of the filing of the complaint.
The trial court fixed the value of the property at its 1984 value, while the CA, at its 1993
_______________ worth. Neither of the two determinations is correct. For purposes of just compensation, the respondents
22 National Power Corporation v. Tiangco, G.R. No. 170846, 06 February 2007, 514 SCRA 674, citing National Power should be paid the value of the property as of the time of the filing of the complaint which is deemed to be
Corporation v. Chiong, 404 SCRA 527 (2003). the time of taking the property.
23 National Power Corporation v. Tiangco, id., citing Export Processing Zone Authority v. Dulay, 149 SCRA 305 (1987). It was certainly unfair for the trial court to have considered a property value several years
24 “Determination of just compensation for commercial farms shall include not only the land but also the facilities and behind its worth at the time the complaint in this case was filed on November 20, 1990. The
improvements introduced by the landowner. It may take into account the type of commercial crops planted (e.g. banana, landowners are necessarily shortchanged, considering that, as a rule, land values enjoy steady upward
pineapple, rubber) and such other relevant factors consistent with agrarian laws, rules and regulations;” (DAR movement. It was likewise erroneous for the appellate court to have fixed the value of the property on the
Administrative Order No. 09-98 dated 23 December 1998, Art. 1, Sec. 2 [f]) basis of a 1993 assessment. NPC would be paying too much. Petitioner corporation is correct in arguing that
the respondents should not profit from an assessment made years after the taking.
653
The expropriation proceedings in this case having been initiated by NPC on November 20, 1990, property
values on such month and year should lay the basis for the proper determination of just compensation.
In Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, the Court ruled
VOL. 660, NOVEMBER 22, 2011 653
that the equivalent to be rendered for the property to be taken shall be substantial, full, ample and, as must
Hacienda Luisita, Incorporated vs. Presidential apply to this case, real. This must be taken to mean, among others, that the value as of the time of taking
should be the price to be paid the property owner.
Agrarian Reform Council Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. In this case, this simply means the property’s fair market value at the time of the filing of the
payment of just compensation was roughly speaking executed together with the taking, the stock complaint, or “that sum of money which a person desirous but not compelled to buy, and an owner willing
distribution option in the present scenario has “time” complication. Although the lands were but not compelled to sell, would agree on as a price to be given and received therefor.” The measure is not
the taker’s gain, but the owner’s loss.
subjected the stock distribution mechanism in 1989, the PARC’s decision to nullify the SDOA and
its Notice of Coverage ordering immediate land distribution came about only in 2006. The Court 655
is confronted with the judicial task of determining standards to reconcile the various legal
contentions on this time difference, considering other existing stock distribution schemes across VOL. 660, NOVEMBER 22, 2011 655
the country that are also subject of similar legal challenges.
I believe there is no reason why those same principles and standards in determining just Hacienda Luisita, Incorporated vs. Presidential
compensation in voluntary or compulsory acquisition should not be equally applicable to a stock Agrarian Reform Council
distribution scheme. The Constitution, the CARL and even our own jurisprudence have been
consistent in approximating a fair valuation of the properties expropriated by the State under its In the determination of such value, the court is not limited to the assessed value of the property or to the
agrarian reform program, and must continue to do so in the case of a failed stock distribution schedule of market values determined by the provincial or city appraisal committee; these values consist but
scheme. one factor in the judicial valuation of the property. The nature and character of the land at the time of
With the equal protection clause in mind, it is simply wrong for landowners to have their real its taking is the principal criterion for determining how much just compensation should be
properties, subject of expropriation, valued several years or even decades behind, considering the given to the landowner. All the facts as to the condition of the property and its surroundings, as
upward trend in property values. The Court explained this inherent unfairness when it was well as its improvements and capabilities, should be considered.
confronted by a non-land reform expropriation case, in which the trial court and the appellate Neither of the two determinations made by the courts below is therefore correct. A new one
court fixed the valuation of the property at its 1984 and 1993 values, respectively, in this wise: must be arrived at, taking into consideration the foregoing pronouncements.”25(Emphasis supplied)
“In eminent domain cases, the time of taking is the filing of the complaint, if there was no actual taking In Apo Fruits Corporation, et al., v. Land Bank of the Philippines,26 the Court en banc awarded
prior thereto. Hence, in this case, the value of the property at the time of the filing of the complaint 12% interest to petitioners Apo Fruits Corporation and Hijo Plantation, Inc., for prime
agricultural farmlands voluntarily offered to the farmers way back in 1995. We underscored then Hacienda Luisita, Incorporated vs. Presidential
the value-for-value exchange dictated by just compensation in land reform expropriations, so that Agrarian Reform Council
the landowner would not be short-changed:
“Under the circumstances of the present case, we see no compelling reason to depart from the rule that that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect
Republic firmly established. Let it be remembered that shorn of its eminent domain and social on the payment of just compensation.
justice aspects, what the agrarian land reform program involves is the purchase by the Under the factual circumstances of this case, the agrarian reform process is still incomplete
government, through the LBP, of agricultural lands for sale and distribution to farmers. As a as the just compensation to be paid private respondents has yet to be settled. Considering the
purchase, it involves an exchange of values—the landholdings in exchange for the LBP's payment. In passage of Republic Act No. 6657 (RA 6657) before the completion of this process, the just compensation
determining the just compensation for this exchange, however, the measure to be borne in mind is not the should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law,
taker’s gain but the owner’s loss since what is involved is the takeover of private property under the State’s with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.
Section 17 of RA 6657 which is particularly relevant, providing as it does the guideposts for the
determination of just compensation, reads as follows:
_______________
25 National Power Corporation v. Tiangco, G.R. No. 170846, 06 February 2007, 514 SCRA 674. Sec. 17. Determination of Just Compensation.—In determining just compensation, the cost of
26 G.R. No. 164195, 12 October 2010, 632 SCRA 727. acquisition of the land, the current value of like properties, its nature, actual use and income, the
sworn valuation by the owner, the tax declarations, and the assessment made by government
656
assessors shall be considered. The social and economic benefits contributed by the farmers and the
farm-workers and by the Government to the property as well as the non-payment of taxes or loans
656 SUPREME COURT REPORTS ANNOTATED secured from any government financing institution on the said land shall be considered as additional
factors to determine its valuation.
Hacienda Luisita, Incorporated vs. Presidential It would certainly be inequitable to determine just compensation based on the guideline provided by PD
Agrarian Reform Council 27 and EO 228 considering the DAR’s failure to determine the just compensation for a considerable length of
time. That just compensation should be determined in accordance with RA 6657, and not PD 27
or EO 228, is especially imperative considering that just compensation should be the full and
coercive power. As mentioned above, in the value-for-value exchange in an eminent domain fair equivalent of the property taken from its owner by the expropriator, the equivalent being
situation, the State must ensure that the individual whose property is taken is not shortchanged real, substantial, full and ample.
and must hence carry the burden of showing that the “just compensation” requirement of the In this case, the trial court arrived at the just compensation due private respondents for their property,
Bill of Rights is satisfied. taking into account its nature as irrigated land, location along the highway, market value, assessor’s value
The owner’s loss, of course, is not only his property but also its income-generating potential. Thus, when and the volume and value of its produce. This Court is convinced that the trial court correctly determined
property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for the the amount of
property and the potential income lost. The just compensation is made available to the property owner so
that he may derive income from this compensation, in the same manner that he would have derived income 658
from his expropriated property. If full compensation is not paid for property taken, then the State must
make up for the shortfall in the earning potential immediately lost due to the taking, and the absence of
replacement property from which income can be derived; interest on the unpaid compensation becomes due
as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness.” Hacienda Luisita, Incorporated vs. Presidential
(Emphasis supplied)
In the seminal case Land Bank of the Philippines v. Natividad,27 the Court rejected
outright the contention of Land Bank of the Philippines that the compensation for just compensation due private respondents in accordance with, and guided by, RA 6657 and existing
property, subject of agrarian reform expropriation, should be based on the effectivity jurisprudence.”28 (Emphasis supplied)
of the previous law (Presidential Decree No. 27) on 21 October 1972. The Court ruled that the
compensation should be pegged to the time the property was taken in possession in Applied to the instant case, the more just and equitable solution is to reckon the period of the
1993 under the new CARL: taking from the date of the notice of coverage under the fifth approach, since this was the time
that petitioner HLI was put on notice that its stock distribution option was defective and that its
“Land Bank’s contention that the property was acquired for purposes of agrarian reform on agricultural lands therein would be subject to compulsory coverage and direct land distribution
October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on under the CARL. It is argued that the time the SDOA was signed and/or the PARC Resolution
the value of the property as of that time and not at the time of possession in 1993, is likewise was issued could be considered as the time petitioner HLI was given due notice that its
erroneous. In Office of the President, Malacañang, Manila v. Court of Appeals, we ruled agricultural lands would be subject of agrarian reform. This argument is undeniably unfair and
contrary to uniform jurisprudence interpreting the constitutional dictum that just compensation
_______________
27 G.R. No. 127198, 16 May 2005, 458 SCRA 411.
in expropriations should approximate equivalent value that is real, substantial, full and ample.
Landowners would be shortchanged if their real properties are taken by the State in exchange for
657
compensation that is pegged at values two decades prior. In this case, unwarranted
discrimination would be committed against
VOL. 660, NOVEMBER 22, 2011 657
_______________
28 See also Land Bank v. Livioco, G.R. No. 170685, 22 September 2010, 631 SCRA 86; Land Bank v. J. L. Jocson and the government, there is a need for compensation for the introduction of the improvements
Sons, G.R. No. 180803, 23 October 2009, 604 SCRA 373; Land Bank v. Heirs of Asuncion Añonuevo vda. de Santos, et actually installed by petitioner HLI, such as roads and other infrastructure, which have evidently
al., G.R. No. 179862, 03 September 2009, 598 SCRA 115; DAR v. Tongson, G.R. No. 171674, 04 August 2009, 595 SCRA
181; Land Bank v. Carolina B. vda. de Abello, et al., G.R. No. 168631, 07 April 2009, 584 SCRA 342; Land Bank v. Chico,
improved the value of the property, aside from its appreciation over time. In recognizing the
G.R. No. 168453, 13 March 2009, 581 SCRA 226; Land Bank v. Pacita Agricultural Multi-Purpose Cooperative, Inc., G.R. necessity for compensating petitioner HLI for their improve-
No. 177607, 19 January 2009, 576 SCRA 291; Land Bank v. Dumlao, G.R. No. 167809, 27 November 2008, 572 SCRA
108; Land Bank v. Heirs of Eleuterio Cruz, G.R. No. 175175, 29 September 2008, 567 SCRA 31; Land Bank v. Heirs of _______________
Angel Domingo, G.R. No. 168533, 04 February 2008, 543 SCRA 627; Land Bank v. Spouses Hermosa, G.R. No. 166777, 10 the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than
July 2007, 527 SCRA 181; Lubrica v. Land Bank, G.R. No. 170220, 20 November 2006, 507 SCRA 415. that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and, in case
659
of disagreement, the court shall fix the terms thereof.” (Civil Code, Art. 448)
“Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing
until he has been reimbursed therefor.” (Civil Code, Art. 546)
VOL. 660, NOVEMBER 22, 2011 659 “Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who
has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in
Hacienda Luisita, Incorporated vs. Presidential value which the thing may have acquired by reason thereof.” (Civil Code, Art. 546)
Agrarian Reform Council 31 “Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of
the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner
petitioner HLI if the agricultural lands to be distributed to the FWBs are to be valued at their of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the
1989 levels. builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the
To be sure, the fourth approach explained above may approximate the value of the property at owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of
the date of the Notice of Coverage, but would unnecessarily call for meticulous accounting and accession, he is entitled to the ownership of the accessory thing.” (Heirs of the Late Joaquin Limense, v. Vda. De Ramos,
G.R. No. 152319, 28 October 2009, 604 SCRA 599 citing Rosales v. Castelltort, 472 SCRA 144, 161 [2005]).
valuation of improvements. Although the fourth approach would continue to peg the value of the
agricultural land to its 1989 level, it recognizes the passage of an inordinate length of time and 661
hopes to mitigate its unjust effects by adding the payment of interest. The award of interest may
alleviate the hardship caused by depriving petitioner HLI of the current and fair market value of
the property under the prevailing laws and rules, but the order for it to pay rentals for the lands VOL. 660, NOVEMBER 22, 2011 661
from 198929 would negate the benefit of any interest, if not possibly saddle it with a heavier Hacienda Luisita, Incorporated vs. Presidential
financial burden.
Although Justice Brion reckoned the period for the valuation of the land to 21 November 1989,
he recognized petitioner HLI’s entitlement to the value of the improvements that it has
introduced into the agricultural lands for the past twenty years. The proposition is akin to the ments, pegging the values to its 1989 levels will not be as severely confiscatory, if the value will
Civil Code30 situation be included as part of the just compensation to be paid. I would even be willing to accept the
formulation proposed by Justice Brion since it would, to a lesser amount, approximates a fair
_______________ market value of the property. But to simply evaluate the property’s worth to outdated levels and
29 “Since land reform coverage and the right to the transfer of the CARL-covered lands accrued to the FWBs as of May exclude entirely the improvements made and the market appreciation of the lands in all the 17
11, 1989, HLI—which continued to possess and to control the covered land—should pay the qualified FWBs yearly rental years that petitioner HLI invested in the lands is not even supportable by the Civil Code.
for the use and possession and control over these lands. As a detail of land reform implementation the authority to Furthermore, identifying and valuing the improvements in Hacienda Luisita introduced by
determine the appropriate rentals belongs to the DAR using established norms and standards for the purpose. Proper
petitioner HLI may pose another source of conflict that may protract the case further. In
adjustment, of course, should be made for the sale of the acquired lands to LIPCO and to the government as no rentals
can be due for these portions after their sale.” (Separate Opinion of Justice Brion) addition, their naked costs and book values may fail to account for the intangible effects and the
30 “The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appreciation of values that may result from improvements, such as roads. To obviate these
appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and possible deficiencies in approximating the fair value of the farm lands, their real value at the
548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, time of the notice of coverage, following the DAR’s formula, would render a better accounting
660
result and preclude complicated calculations.
The approximation of fair value of the expropriated lands as just compensation is not meant to
increase the burdens of payment by the qualified FWBs. When the framers of the
660 SUPREME COURT REPORTS ANNOTATED Constitution originally determined that just compensation, as understood in
prevailing jurisprudence, was to be given to landowners in agrarian reform
Hacienda Luisita, Incorporated vs. Presidential expropriation, the point was clarified that the amounts to be awarded to the
Agrarian Reform Council landowners were not the exact figures that would in turn be paid by the farmers, in
other words it should be subsidized:
where a landowner opts to acquire the improvements introduced by a builder in good faith and MR. RODRIGO: I was about to say what Commissioner Concepcion said. I just want to add that the phrase
must necessarily pay their value.31 Hence, although the land of petitioner HLI is expropriated by “just compensation” already has a definite meaning in jurisprudence. And, of course, I would like to reiterate
the fact that “just compensation” here is not the amount paid by the farmers. It is the amount the landowners to just compensation with the social justice demands of the poor farmworkers
paid to the with limited capabilities to simultaneously pursue agricultural enterprises and pay for the lands.
662 Petitioner HLI, as a corporate landowner, must undoubtedly share the costs and burdens of
the country’s type of agrarian reform scheme by surrendering the agricultural lands to the
government for distribution to the qualified FWBs. But in order to come within the constitutional
662 SUPREME COURT REPORTS ANNOTATED directives on eminent domain and just compensation, its sacrifice cannot be made to be overly
Hacienda Luisita, Incorporated vs. Presidential burdensome as to force them to receive but a small fraction of current market values for its
Agrarian Reform Council expropriated properties. In ruling for the payment of just compensation to petitioner HLI under
the fifth approach—which is pegged to the date of notice of coverage under the prevailing laws,
rules and jurisprudence—the Court will perform its obligation to uphold the dictates of social
owner, and this does not necessarily have to come from the farmer. The State should subsidize
justice in distributing the lands in Hacienda Luisita to the qualified FWBs, but not to the extent
this and pay a just compensation to the owner and let the tenant farmer pay the state in
accordance with the capacity of the farmer. If there is a difference let the State subsidize the of sacrificing the right of land-
difference.… (Emphasis supplied)32 664
Thus, the original intention was that there should be no strict correspondence between the
just compensation due to the landowner and the amounts to be paid by the farmworkers: 664 SUPREME COURT REPORTS ANNOTATED
MR. MONSOD: However, as far as the source of the repayment is concerned, it may be that the famer is Hacienda Luisita, Incorporated vs. Presidential
not able to afford the just compensation. This is a proper area where the State can come in, if it intends to Agrarian Reform Council
give support or subsidy. That may be called for in order that the farmer will get a chance to own a piece of
land. Besides, there might not be a strict correspondence between a just compensation for the
landowner and the capacity of the farmer to pay. owners and consigning them to accept the cheapest value for their lands. In Land Bank of the
MR. DAVIDE: As a matter of fact, the opening sentence of my proposal states: “It is the duty of the State.” Philippines v. Chico,34the Court, through retired Justice Eduardo Nachura, succinctly
This means that the State should first expropriate, distribute and then the government will deal with summarized this point in this wise:
the farmers or farmworkers as to the mode of reimbursement or refunding the amount that the
government had paid to the landowner, which should be a more just and equitable arrangement “The Comprehensive Agrarian Reform Program was undertaken primarily for the benefit of our
for the farmers and the farm workers. It is now a duty. landless farmers. However, the undertaking should not result in the oppression of landowners by
MR. MONSOD: That is why I believe that his is consistent with the comments of Commissioner Tadeo pegging the cheapest value for their lands. Indeed, the taking of properties for agrarian reform
because the objective of the agrarian reform is equity. It is really not efficiency or production, but the first purposes is a revolutionary kind of expropriation, but not at the undue expense of landowners who are also
objective is equity. In that sense, the State may have to step in to help the farmer pay for the land. entitled to protection under the Constitution and agrarian reform laws. Verily, to pay respondent only
(Emphasis supplied)33 P10,000.00 per hectare for his land today, after he was deprived of it since 1994, would be unjust and
inequitable.” (Emphasis supplied)
_______________
32 Minutes of the Deliberations of the Constitutional Commission, (07 August 1986), at pp. 17-18. Sale of Distributed Lands to Third Parties
33 Minutes of the Deliberations of the Constitutional Commission, (05 August 1986), p. 703.
In my earlier Dissenting Opinion, I forwarded the position that once the agricultural lands are
663 transferred and awarded to the qualified FWBs, they, as absolute landowners, should be able to
make full use of the properties, including the right to sell them, considering the lapse of the ten-
VOL. 660, NOVEMBER 22, 2011 663 year prohibition under the CARL:
Hacienda Luisita, Incorporated vs. Presidential “In addition, considering the lapse of the prohibitive period for the transfer of agricultural lands, nothing
prevents the FWBs, as direct owner-beneficiaries of the Hacienda Luisita lands, from selling their
Agrarian Reform Council ownership interest back to petitioner HLI, or to any other interested third-party, such as but not limited to
the government, LBP, or other qualified beneficiaries, among others. Considering that the Hacienda Luisita
Hence, there was an acknowledgement of the limited capacity of the farmers to pay for value of lands were placed under CARP coverage through the SDOA scheme of petitioner HLI on 11 May
the expropriated lands under a willing-buyer-willing seller formulation. Thus, the obligation was 1989 and the lapse of the two-year period for the approval of its compliance, the period
prohibiting the transfer of awarded lands under CARL has undeniably lapsed. As landowner-
imposed on the State to subsidize payments in order to support the financial arrangements of the
beneficiaries, the qualified FWBs are now free to transact with third
country’s agrarian reform program. The fair value paid to the landowner for the distributed lands
is to be shouldered by the State, in line with the right to just compensation and the limitations on _______________
the state power of expropriation. However, a different principle governs when it is the State that 34 G.R. No. 168453, 13 March 2009, 581 SCRA 226.
will receive amortization payments from the farmers for expropriated lands, namely the policy of
665
social justice. Hence, the State’s function is to subsidize the repayment schemes and offer terms
that are affordable to the farmers considering their limited capacity to pay. The burden is now on
the State to consider programs that are more financially viable in order to balance the rights of VOL. 660, NOVEMBER 22, 2011 665
Hacienda Luisita, Incorporated vs. Presidential for inchoate title over the same” and thus allow non-tillers of the soil to acquire title over
agricultural lands.36 Hence, lands acquired under the CARL were
_______________
parties with respect to their land interests, regardless of whether they have fully paid for the lands or not. 35 “The object of agrarian reform is to vest in the farmer-beneficiary, to the exclusion of others, the rights to possess,
To make the qualified FWBs of Hacienda Luisita wait another 10 years from the issuance of the cultivate and enjoy the landholding for himself; hence, to insure his continued possession and enjoyment thereof, he is
Certificate of Land Ownership Award (CLOA) or Emancipation Patent (EP) before being allowed to transfer prohibited by law to make any form of transfer except only to the government or by hereditary succession.” (Maylem v.
the land is unduly prohibitive in the instant case. The prohibitive period under the CARL was meant to Ellano, G.R. No. 162721, 13 July 2009, 592 SCRA 440, citing Torres v. Ventura, 187 SCRA 96 [1990])
provide CARP beneficiaries sufficient time to profit from the awarded lands in order to sustain their daily 36 Estate of the Late Encarnacio Vda. de Panlilio v. Dizon, G.R. Nos. 148777 & 157598, 18 October 2007, citing Torres
living, pay off the yearly amortization, and earn modest savings for other needs. This period protected them v. Ventura, 187 SCRA 96 (1990).
from being influenced by dire necessity and short-sightedness and consequently, selling their awarded lands
to a willing buyer (oftentimes the previous landowner) in exchange for quick money. This reasoning 667
ordinarily may have been availing during the first few years of the CARL, but becomes an unreasonable
obstruction for the qualified FWBs of Hacienda Luisita, who have been made to endure a null and void
SDOA for more than 20 years. VOL. 660, NOVEMBER 22, 2011 667
Undeniably, some of the lands under compulsory coverage have become more viable for non-agricultural
purposes, as seen from the converted lands of LIPCO and RCBC. In fact, the then Municipality of Tarlac had
unanimously approved the Luisita Land Use Plan covering 3,290 hectares of agricultural lands in Hacienda Agrarian Reform Council
Luisita, owned by, among others, petitioner HLI; and reclassifying them for residential, commercial,
industrial or institutional use. The development of these kinds of land in Hacienda Luisita would better
sought to be retained for a decade as properties for purposes of agricultural cultivation, even
serve the local communities through the increase in economic activities in the area and the creation of more
domestic employment. when they were transferred or sold to other owners. However, significant time has passed and
Similarly, qualified FWBs should be afforded the same freedom to have the lands awarded to them considerable developments have occurred in the neighboring areas of formerly exclusive
transferred, disposed of, or sold, if found to have substantially greater economic value as reclassified lands. agricultural lands, thus requiring a review of the initial assumptions. Are the acquired lands
The proceeds from the sale of reclassified lands in a free, competitive market may give the qualified FWBs more economically beneficial or feasible as agricultural lands? Will these properties become more
greater options to improve their lives. The funds sourced from the sale may open up greater and more financially viable for other economic uses? Do the FWBs want to remain as farmers forever, or do
diverse entrepreneurial opportunities for them as opposed to simply tying them to the awarded lands. they want to branch out to other profitable enterprises or interests? With these compelling
Severely restricting the options available to them with respect to the use or disposition of the awarded lands questions, the current realities confronting the FWBs require a careful and considerate study of
will only prolong their bondage to the land instead of freeing them from economic want. Hence, in the the application and interpretation of the laws that would extend their maximum benefit and
interest of equity, the ten-year prohibitive period for the transfer of the Hacienda Luisita lands covered
under the CARL shall be deemed
uphold their welfare.
The qualified FWBs in Hacienda Luisita should not only be confined to a ten-year license to
666 farm the distributed lands, but should be able to enjoy all the rights to the land and fruits
thereof. As full owners, the qualified FWBs who would be awarded lands must be afforded the
666 SUPREME COURT REPORTS ANNOTATED entire gamut of opportunities to make use of the land as their circumstances and capabilities see
fit. Nothing prevents them from continuing to till the agricultural land, whether individually or
Hacienda Luisita, Incorporated vs. Presidential as a collective, as in the case of a cooperative. However, the same freedom should be afforded to
Agrarian Reform Council them when they see that the best economically and financially advantageous use of the property
is to sell portions of the property, especially in this case in which developments in the
to have been lifted, and nothing shall prevent qualified FWBs from negotiating the sale of the lands neighboring lots have greatly enhanced the value thereof.
transferred to them.” (Emphasis supplied) To prolong for a decade the FWBs’ enjoyment of the right to transfer and dispose of portions of
the agricultural lands is to continue to bind them to the land. Without any assistance from the
Concerns have been expressed that such a reading of the provisions of the CARL shows an government or other civic organizations, FWBs may be awarded a possible pyrrhic legal victory,
indifference to the retention limits imposed, and that strict adherence to the law and the rules in which they own the land but without the financial means to till and cultivate it. Freeing them
would dictate that the ten-year period should commence only upon the issuance and registration from the strict application of the ten-year
of the emancipation patent or certificate of land ownership award. However, considering the
protracted litigation in this case and the years that the FWBs have been made to wait, I maintain 668
that absolute ownership be immediately transferred to them in this case, with the full freedom to
transfer or sell the properties, if they so choose. 668 SUPREME COURT REPORTS ANNOTATED
The rationale for the 10-year prohibition on the sale of the transferred land may have been
laudable at the starting point of the CARL but it comes close to oppressing agrarian reform Hacienda Luisita, Incorporated vs. Presidential
beneficiaries 20 years hence. The aim of the prohibition then was to ensure that agricultural Agrarian Reform Council
lands would be retained by those who were awarded by government and to ensure their continued
possession and enjoyment of the property for the purpose of cultivation.35It was to preclude
farmers from becoming “easy prey to those who would like to tempt [them] with cash in exchange
prohibition under the CARL, will allow them full discretion to dispose and transfer portions of the village members must be given the opportunity to acquire the land at the same price for some period. This
property as they see fit and as are suitable to their needs. This will release locked-up capital in has few adverse consequences and can help allay communities’ fears of being bought out by outsiders.
the soil and enable the qualified FWBs to use the proceeds thereof in other productive enterprises General imposition of restrictions on the transferability of land by sale is unlikely to be
enforceable or beneficial.In many situations such restrictions will have little impact in practice because
or in the procurement of other assets necessary for tilling the remaining land.
of the absence of land or credit markets. Where appropriate institutions for intragroup decisionmaking are
To insist that the rights of the FWB sleep for a period of ten years is unrealistic and may available, permitting
seriously deprive them of real opportunities to capitalize on and maximize the victory of direct
land distribution. The restriction will limit their access to credit markets, as studies in land 670
reform have shown. In a World Bank Policy Research Report,37 Klaus Deininger identified the
counterproductive effects of transferability restrictions: 670 SUPREME COURT REPORTS ANNOTATED
“Governments have frequently imposed restrictions on the transferability of land through the sales Hacienda Luisita, Incorporated vs. Presidential
market on beneficiaries of land reform or settlers on formerly state-owned land to prevent them from selling Agrarian Reform Council
or mortgaging their land. Such a restriction could be justified as a temporary measure to prevent the
beneficiaries of a land reform program from selling their land based on inadequate information or in
response to temporary imperfections in product and financial markets. Even temporary restrictions on the community to limit sales and giving it the right to decide whether to eventually allow sales to outsiders
land mortgages can be counterproductive, however, as they would deprive beneficiaries from may be an acceptable compromise between equity and efficiency concerns. Restrictions on the marketability
accessing credit during the establishment phase when they need it the most. The literature has of land are common in many developing countries, and many customary or communal systems prohibit the
reported cases where farmers were forced to resort to less efficient arrangements, such as sale of land to outsiders. Some countries, such as Bolivia, have a minimum holding size that cannot be
usufruct mortgaging and use of wage labor, to gain access to credit. Investigators have also noted mortgaged or alienated. While these regulations impose some losses in terms of foregone credit market
this problem in Korea and in the Philippines, where restrictions on land market activity have access, they can also help to reduce undesirable social externalities from driving some people into
limited investment. Land received under land reform in Chile was freely trans destitution. As long as they are the product of a conscious choice by the group and the group has clear and
transparent mechanisms for changing the land tenure regime, they are unlikely to be harmful. As
_______________ traditional social ties loosen or the efficiency loss from the sales restriction becomes too high, groups are
37 Klaus Deninger, Land Policies for Growth and Poverty Reduction (June 2003), pp. 122-124 available at http://www- likely to allow sales to outsiders in some form. The recent constitutional reform of the land rights system in
wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2003/08/08/000094946_0307250400474 Mexico allows for free sales and rental within all ejidos and for decisionmaking by majority vote on whether
/Rendered/PDF/multi0page.pdf last visited on 11 November 2011.
to eliminate the restriction on sales to outsiders. An initial evaluation of the reforms suggests that with
669 appropriate technical assistance communities are clearly able to make such decisions.” (Emphasis supplied;
citations omitted)
VOL. 660, NOVEMBER 22, 2011 669 Imposing a ten-year restriction will decrease the desirability of these farm lands as collateral
and will even increase the transaction costs for private creditors to extend farm loans to the small
qualified FWBs. In fact, in the experience of other countries like Venezuela, the government’s
Agrarian Reform Council imposition of transferability restrictions have compelled desperate farmers to resort to selling
their awarded farm lands in the black market way below their fair value and have made “poor
ferable, and Jarvis (1985) views this as one of the key ingredients of its success. Precluding land farmers even poorer”:
reform beneficiaries from sales in the medium term would reduce efficiency by preventing adjustments in
response to differential beneficiary abilities, and could, if combined with rental restrictions, cause large “For example, in an attempt to curb formerly-landless peasants selling their newly acquired lands back to
tracts of land to be underutilized. The danger of beneficiaries’ undervaluing their land could be the large landowners, the INTI [National Land Institute] will hold the land title in an escrow account for
reduced through other means, and the goal of preventing small landowners from selling out in three years. Once three years have passed, with the new landowner living and cultivating the land during
response to temporary shocks would be better served by ensuring that they have access to that time period, title will pass to the landowner free from any government enacted restrictions that initially
output and credit markets and to technical assistance, and by providing safety nets during made the land inalienable. According to critics of the Chavez administration, these government restrictions
disasters to avoid distress sales.
671
Restrictions on land sales markets can increase the costs associated with certain actions, but if the
rewards from circumventing them are high enough, will not eliminate them. For example, owners who have
no desire to farm tend to disregard the temporary prohibition of land sales in Nicaragua and circumvent it VOL. 660, NOVEMBER 22, 2011 671
by long-term rentals with the promise to sell, which because of the associated insecurity leads to much lower
land prices. Hacienda Luisita, Incorporated vs. Presidential
A number of countries have combined initial privatization of land with a moratorium on land sales to Agrarian Reform Council
prevent the possibility that, after decades of collectivism, new landowners’ exposure to land sales markets
may cause them to dispose of their assets without being aware of their true value, leading to negative social
consequences and concentration of land in the hands of speculators. The example of some CIS countries on land transfers are tantamount to providing only licenses to farm the land, rather than actual ownership
suggests that such concerns may not be completely unfounded. Moratoriums may be justified as a way of of it. Moreover, excessive restrictions on the alienability of land may actually burden the new farmers more,
allowing new landowners to acquire better knowledge of their assets and prevent quick sell-offs at especially since they will be deprived of access to credit to improve their land and expand its size when it is
unrealistic prices in an environment where markets work imperfectly. In Albania this restriction has been economically prudent. Desperate farmers will have to resort to selling their farmland at 40 to 60
combined with a right of first refusal, whereby before consummating a land sale to an outsider, neighbors or percent below its fair market value on the black market due to the government restrictions
currently in place. And with poor farmers having to sell their land at such a low level, such a
provision made to assist the destitute will unintentionally “lead to making poor farmers even In addition, grassroots support of the populace and threat of violent uprising can be an impetus for reform. The
poorer than they otherwise would be.”38 (Emphasis supplied; citations omitted) government must also have adequate financial resources or external support for the program. Successful land
Considering the perceived inadequacy of public funds to provide the qualified FWBs access to 673
farm credits and loans to finance the cultivation of the awarded lands, it is necessary to afford
them the prospect of soliciting private funds and loans to cultivate and develop their lands by VOL. 660, NOVEMBER 22, 2011 673
freeing them from the 10-year prohibition period. At this delayed stage in the agrarian reform
program covering Hacienda Luisita after the failed stock distribution mechanism, the protection Hacienda Luisita, Incorporated vs. Presidential
afforded by inflexible restriction on the alienability of the awarded lands is greatly outweighed by Agrarian Reform Council
the market opportunities available to the qualified FWBs if full ownership is given to them.
The agrarian reform policies placed in the Constitution and as implemented in the CARL were
administration enjoyed a strong mandate from the people, who desired change and would support
laudable efforts to address social injustice. However, Fr. Joaquin Bernas, S. J., a member of the
a sweeping agrarian reform measure to distribute lands. In this scenario, the State could have
Constitutional Commission, compared the previous attempts at agrarian reform and underscored
chosen a more revolutionary approach, introducing into its agrarian reform program a more
the crucial role of effective public financing in the success of the program.39 As
“confiscatory element.”42 Following the examples of other revolutionary governments, the State
could have resorted to simply confiscating agricultural lands under the claim of social justice and
_______________ the social function of lands, with little need of payment of full just compensation.43
38 Andy Mielnik, “Hugo Chavez: Venezuela’s New Bandit or Zorro,” 14 L. & Bus. Rev. Am. 591 (2008).
39 “FR. BERNAS: I do not see the possibility of massive land reform unless the government somehow gets involved in
However, the framers of the Constitution and the legislators at that time chose a different
the financings; and I think one of the reasons the past land reform program path and employed a traditional land reform program, where landowners are paid ap-
672
_______________
reforms, such as those in Japan, Taiwan, South Korea, Mexico, and certain states in India, have involved the
mandatory expropriation of land, but with reasonable (although not full market value) compensation to the landowner.”
672 SUPREME COURT REPORTS ANNOTATED (Kristen Mitchell, “Market-Assisted Land Reform in Brazil: A New Approach to Address an Old Problem,” 22 N.Y.L. SCh.
J. Int’l & Comp. L. 557 [2003])
Hacienda Luisita, Incorporated vs. Presidential 42 “The bank’s mission also called attention to the problem of ‘just compensation’ arguing that successful agrarian
Agrarian Reform Council reform programmes have always ‘included a confiscatory element.’ ” (James Putzel, A Captive Land: The Politics of
Agrarian Reform in the Philippines [Ateneo de Manila University Press 1992] p. 288)
43 “The most successful land reforms have been traditional programs that used a mandatory redistribution
aptly captured by then Senator Heherson Alvarez, funding became the defining line that would mechanism, and they often occurred during periods of political instability. In these situations, authoritarian governments
determine whether the promises of agrarian reform would remain a dream or become a reality: have been able to forcibly remove property from wealthy landowners. Based on this history, some scholars question the
feasibility of mandatory redistribution in a full democracy. In particular, scholars have begun to question the
“Where will the funding come from? Without going to an involved accounting let me say that funding for contemporary applicability of the traditional land reform model in many developing countries where governments cannot
this program will come from various sources already identified, among which are proceeds from the Assets afford expensive social programs, and where peace, industrialization, and foreign investment are seen as more important
Privatization Trust, the Presidential Commission on Good Government, the Economic Support Fund, than shifting the power balances within the country.” (Andre Sawchenko, “Choosing a Mechanism for Land Distribution
PAGCOR, Philippine Charity Sweepstakes Office, the sales of government properties in Tokyo and if need in the Philippines,” 9 Pac. Rim L. & Pol’y J. 681 [2000])
be, from foreign sources or foreign borrowings.
674
Funding and cost were thoroughly considered in this bill in weeks, even months, as it became
clear that implementability went hand in hand with cost, our Committee, in collaboration with
financing institutions of the Government, studiously pored over details that drew the line
between keeping agrarian reform a dream and making it a reality.”40 (Emphasis supplied)
After the fall of the martial law regime and at the start of the new democratic society, a
“window of opportunity” was presented to the State to determine and adopt the type of land and Agrarian Reform Council
agrarian reform to be implemented.41 The newly formed
proximately the full and fair market value of their expropriated properties. The competing
_______________ interests of the influential landowners and the peasant agrarian unrest posed serious dilemmas
did not have the success that it gave the impression of having was precisely the fact that there was no effective to the nation’s leaders and, in the end, resulted in an agrarian reform program that satisfied
financing system for it. neither group:
So all of these will have to be necessarily packaged into the land reform program.” (Minutes of the Deliberations of the
Constitutional Commission, [04 August 1986], p. 648) “This campaign against agrarian reform placed Aquino in a very difficult situation. If in the first three
40 Sponsorship speech of Sen. Heherson Alvarez, chairperson of the Committee on Land Reform, Records of the Senate months of the year Aquino had been forced to move more rapidly on land reform in response to peasant
dated 26 June 1988, pp. 2975-2977. demands, these recent events had forced her to hesitate. Aquino was thus faced with a dilemma: either she
41 “Successful land reforms in this century have had many common characteristics. Often there is a ‘window of decree agrarian reform and face the immediate threat of destabilization by those opposed to land reform, or
opportunity’ where land reform is possible. Land reform efforts necessitate significant political will to commit to change. she leave the task to Congress and perhaps forfeit legitimacy among the rural poor thereby precipitating the
long-term destabilization of her government by fueling insurgency.”44
The country thus bound itself to finance an ambitious and expensive land acquisition and
redistribution scheme without the necessary public resources to fund it. The policy choice was
made based on the examples of land reform in Japan, Taiwan, and South Korea,45 which had
adequate financial resources to fund a distributive land reform program.46 Unfortunately, the
country at that time was heavily burdened by foreign debt due to the excessive borrowings made property. To materially uplift the conditions of qualified FWBs who have been awarded
during the agricultural lands, at the expense of imposing upon petitioner HLI old and low valuation levels,
may have been permissible during those revolutionary times of 1987, but it has now become
_______________ unacceptable due to standards that Congress and this Court itself have uniformly applied.
44 Simeon Gilding, AGRARIAN REFORM AND COUNTER-REFORM UNDER THE AQUINO ADMINISTRATION: STUDY IN POST-MARCOS
POLITICS (1993), p.11. Inapplicability of the Operative Facts Doctrine
45 “MR. OPLE: … We all know, those who have taken a glance at the history of land reform in Japan, Taiwan and
Korea, that the economic miracles that have taken place in those countries and have compelled the admiration of the A brief disgression. The resort to the secret voting option under the first or third approach is
whole world, to a large extent, were rooted in the earlier land reform program pursued by their governments. …” (Minutes premised on a misapplication of the operative facts doctrine. The majority has now abandoned
of the Deliberations of the Constitutional Commission, [08 August 1986], p. 83)
the actual application of the operative facts doctrine to the HLI SDOA after realizing that indeed,
46 Kristen Mitchell, “Market-Assisted Land Reform in Brazil: A New Approach to Address an Old Problem,” 22 N.Y.L.
Sch. J. Int’l & Comp. L. 557 (2003). as I had earlier stated, the most that the FWBs can hope to control in HLI is a third of the
shares. Considering the outcome of the new voting, any discussion on the operative facts doctrine
675 would therefore be primarily academic. But the new ponencia continues to insist that its
description of the operative facts doctrine is correct. A clarification must be made to correctly
VOL. 660, NOVEMBER 22, 2011 675 place the application of the doctrine.
The general rule is that an unconstitutional law has no force and effect—it produces no rights,
Hacienda Luisita, Incorporated vs. Presidential imposes no duties and affords no protection.47 Hence, the pronouncement of unconstitutionality
Agrarian Reform Council by the Court retroacts to all acts undertaken between the effectivity of the law and the
declaration of its invalidity.
The doctrine of operative facts serves as an exceptionto this general rule.48 The declaration of
Marcos regime. Worse, legislators pinned their hopes of the financial sustainability of the
a law or an executive act as unconstitutional is given limited retroactive application in cases
program on the future proceeds of Marcos ill-gotten wealth to be recovered by the Presidential
in which acts or circumstances may have
Commission on Good Government. That the country is still in the process of identifying and fully
recovering these moneys from Marcos and his cronies only speak of the inadequate viability of the
_______________
agrarian reform program. The unrealistic and naïve expectations of financial self-sufficiency
47 Planters Products, Inc. v. Fertiphil Corp., G.R. No. 166006, 14 March 2008, 548 SCRA 485.
doomed the full implementation of a redistributive land reform. 48 Yap v. Thenamaris Ship’s Management and Intermare Maritime Agencies, Inc., G.R. No. 179532, 30 May 2011, 649
For the Court to suddenly shift the burden to landowners 20 years after the government has SCRA 369.
chosen market value compensation over partial or total confiscation is to treat petitioner HLI
677
with an uneven hand. The Court cannot simply reckon the valuation of the Hacienda Luisita
properties from its 1989 levels based on the unspoken premise that the government does not
possess sufficient public resources to pay the approximate fair market value of the expropriated VOL. 660, NOVEMBER 22, 2011 677
lands. The framers of the Constitution, the legislators, and even this Court have long defined the
concept of just compensation when the State exercises eminent domain that should apply Hacienda Luisita, Incorporated vs. Presidential
squarely in land reform expropriation. The only plausible justification for antedating the Agrarian Reform Council
valuation of the land to its 1989 levels would be the inability of the State to shoulder such
amount. Yet, neither the PARC nor the DAR has shown in their Motion for Reconsideration in
arisen in the operation of the invalidated law prior to the pronouncement of invalidity.
this case that the State has utter lack of available resources to shoulder such costs or is without
Considerations of equity would avert the injustice of nullifying the interim effects of a person’s
any available schemes that would permit a staggered and affordable payment of just
good faith reliance on the law’s provisions. The cases involving the unconstitutionality of the debt
compensation to the landowner. Let the Court not pre-judge the ability or willingness of the
moratorium laws and the non-payment of debts during the suspensive period prior to the
government to pay just compensation under the same formula the latter applied to other agrarian
declaration best exemplify the application of the exceptional doctrine of operative facts.49 In these
reform cases.
instances, equity interests of the parties surpass the concern over the retroactive application of
Without any exceptional reason or circumstance obtaining, aside from a supposed lack of
the law’s unconstitutionality.
government funds (which has not been alleged by government), there is no apparent justification
The application of the operative facts doctrine to the invalidated SDOA is being justified on the
for denying petitioner HLI the fair market value of its
ground that what is being nullified is the PARC’s prior approval of the SDOA, which is an
676 executive act. According to the argument, since petitioners HLI and the FWBs have relied for the
past two decades on the validity of the SDOA and accumulated benefits therefrom, it would be

prejudicial to their interests if their prior acts would be wiped clean by the nullification of the Hacienda Luisita, Incorporated vs. Presidential
SDOA. The reasoning is strained. Agrarian Reform Council
No law or executive act with respect to stock distribution options has been declared
unconstitutional by the Court. For the operative facts doctrine to have been applied, a law or an
executive act that was made effective for a temporary period should have been invalidated by the In his Concurring Opinion, then Justice Enrique Fernando made explicit the application of the
Court for being inherently in contravention of the Constitution and, thus, without force and effect doctrine of operative facts only to executive acts that are quasi-legislative in nature, specifically
from its very inception. Except for the previous Separate Opinions of Chief Justice Renato Corona in the creation of municipal corporations by the executive and the subsequent declaration of
and Justice Jose Mendoza, a majority of the Court generally refrained from making any unconstitutionality by the judiciary:
declaration as to the constitutional validity of a stock distribution option on the ground that it is
“Nothing can be clearer therefore in the light of the two above cases than that a previous declaration of
invalidity of legislative acts would not be bereft of legal results. Would that view hold true of
_______________ nullification of executive acts? There might have been doubts as to the correct answer before. There is
49 Manila Motor Co., Inc., v. Flores, G.R. No. L-9396, 16 August 1956, 99 Phil. 738; De Agbayani v. Philippine National none now.
Bank, G.R. No. L-23127, 29 April 1971, 38 SCRA 429; Republic v. Herida, G.R. No. L-34486, 27 December 1982, 119 A judicial decision annulling a presidential exercise of authority is not without its effect either. That
SCRA 411; Republic v. Court of First Instance, G.R. No. L-29725, 27 January 1983, 120 SCRA 154. much is evident from the holding now reached. The act stricken down, whether proceeding from the
678
legislature or the Executive, could in the language of the Chicot County case, be considered, prior to the
declaration of invalidity, as “an operative fact and may have consequences which cannot justly be ignored.”
Thus the frontiers of the law have been extended, a doctrine which to some may come into
678 SUPREME COURT REPORTS ANNOTATED play when a statute is voided is now considered equally applicable to a Presidential act that has
met a similar fate. Such a result should not occasion surprise. That is to be expected.
Hacienda Luisita, Incorporated vs. Presidential There would be unjustified deviation from the doctrine of separation of powers if a consequence attached
Agrarian Reform Council to the annulment of a statute is considered as not operative where an executive order is involved. The
doctrine of co-equal or coordinate departments would
not the lis mota of the present Petition, and that the challenge was not timely made, among _______________
others. reverses the process and does the exact opposite, by conferring upon him more power over municipal corporations than that which
he has over said executive departments, bureaus or offices
What the Court invalidated was the SDOA, which was simply an application of the law, and .… … …
not any statute or executive act, on the basis of its having violated the spirit and intent of the WHEREFORE, the Executive Orders in question are hereby declared null and void ab initio and the respondent permanently
restrained from passing in audit any expenditure of public funds in implementation of said Executive Orders or any disbursement by
existing law. The invalidated PARC Resolution that approved the SDOA of Hacienda Luisita did the municipalities above referred to. It is so ordered.” (Pelaez v. Auditor General, G.R. No. L-23825, 24 December 1965, 15 SCRA 569)
not rise to the level of a legislative statute or executive act, in which the operative facts doctrine
680
would become applicable.
In Municipality of Malabang v. Benito,50 the Court recognized the applicability of the operative
facts doctrine to an executive order (Executive Order No. 386) issued by then President Carlos P. 680 SUPREME COURT REPORTS ANNOTATED
Garcia, creating the municipality of Balabagan out of sitios and barrios of the municipality of
Malabang,51 based on earlier jurisprudence holding that the executive did not have authority to
create municipal corporations.52 Agrarian Reform Council
_______________ be meaningless if a discrimination of the above sort were considered permissible. The cognizance taken of
50 G.R. No. L-28113, 28 March 1969, 27 SCRA 533. the prior existence of an enactment subsequently declared unconstitutional applies as well to a Presidential
51 “Executive Order 386 ‘created no office.’ This is not to say, however, that the acts done by the municipality of act thereafter successfully assailed. There was a time when it too did exist and, as such, a fact to be
Balabagan in the exercise of its corporate powers are a nullity because the executive order ‘is, in legal contemplation, as reckoned with, though an infirm source of a legal right, if, as subsequently held, considered
inoperative as though it had never been passed.’ For the existence of Executive Order 386 is ‘an operative fact which violative of a constitutional command.” (Emphasis supplied)
cannot justly be ignored.’” (Id.)
52 “Then, also, the power of control of the President over executive departments, bureaus or offices implies no more The PARC Resolution, while an executive act, is not an exercise of a quasi-legislative power by
than the authority to assume directly the functions thereof or to interfere in the exercise of discretion by its officials. the executive, but a mere wrongful application of the law on stock distribution options under the
Manifestly, such control does not include the authority either to abolish an executive department or bureau, or to create a CARL. The CARL provided the norms used to evaluate any stock distribution option and this was
new one. As a consequence, the alleged power of the President to create municipal corporations would
necessarily connote the exercise by him of an authority even greater than that of control which he has over
applied by the PARC in deciding whether to approve the SDOA. Hence, it was the interpretation
the executive departments, bureaus or offices.In other words, Section 68 of the Revised Administrative Code does of the PARC when it mistakenly approved the SDOA of petitioner HLI and the FWBs that has
not merely fail to comply with the constitutional mandate above quoted. Instead of giving the President less power over been declared invalid, and not the enabling law itself. The source of infirmity in this case lies not
local governments than that vested in him over the executive departments, bureaus or offices, it in the provisions of the CARL allowing stock distribution options, but in the erroneous approval
679
previously granted by the PARC. The good faith reliance of petitioner HLI with respect to the
approval (albeit erroneous) of its SDOA does not justify the operation of the doctrine, since no less
than this Court has found that the SDOA and its approval were in utter violation of the intent of
VOL. 660, NOVEMBER 22, 2011 679 the CARL on stock distribution options.
Furthermore, it would be incongruous to avoid the constitutionality issue of the stock lands should have been excluded from the SDOA at the time of its execution on 11 May 1989, is
distribution mechanism under the CARP on the ground that it is not the lis mota of the case, yet best determined by the DAR.
at the same time, invoke the operative facts doctrine. There is simply no room for the application The lands determined by the DAR to be subject of compulsory coverage shall, nonetheless,
of operative facts doctrine, absent an unconstitutionally invalid legislative or executive act. exclude the following lands:
The operative facts doctrine can only come into play as a rule of equity in cases where there is
a vacuum in the law created by the subsequent declaration of nullity by the Court. In those _______________
instances where the operative facts doctrine was 54 “However, as pointed out by private respondent FARM, there were other lots in Hacienda Luisita that were not
included in the stock distribution scheme, but should have been covered under the CARP. TADECO, as the previous
681 agricultural landowner, preempted the determination of the lands to be covered under the CARP by selecting which of the
agricultural lands it would transfer to petitioner HLI and consequently, subject to the SDOA. The DAR never approved
the exclusion of the other lands that TADECO kept for itself. It seems incongruous to the intention of the CARP under a
VOL. 660, NOVEMBER 22, 2011 681 stock distribution agreement, to let the corporate landowner choose and select which of its agricultural lands would be
included and which ones it would retain for itself. Serious doubts are entertained with respect to the process of inclusion
Hacienda Luisita, Incorporated vs. Presidential and exclusion of agricultural lands for CARP coverage employed by the corporate landowner, especially since the excluded
Agrarian Reform Council land area (1,527 hectares) involves one-third the size of the land TADECO surrendered for the SDOA (4,916 hectares).
The exclusion of a substantial amount of land from the SDOA is highly suspicious and deserves a review by the DAR.
Whether these lands were properly excluded should have been subject to the DAR’s determination and validation. Thus,
used (i.e., debt moratorium cases), the unraveling of the effects of the declaration of the DAR is tasked to determine the breadth and scope of the portion of the agricultural landholdings of TADECO and
unconstitutionality resorted to a dearth in the law and the need for the courts to provide petitioner HLI that should have been the subject of CARP coverage at the time of the execution of the SDOA on 11 May
guidance as to its retroactive application. In this case, no such vacuum exists, as in fact the 1989.” (Dissenting Opinion)
CARL itself provides for the ultimate consequence when a stock distribution plan or 683
option is eventually invalidated—direct land distribution.53 The Court therefore need not
exercise its equity jurisdiction.
VOL. 660, NOVEMBER 22, 2011 683
Guiding Principles for the Operational Steps
I maintain that the outright distribution of the agricultural lands in Hacienda Luisita Agrarian Reform Council
to the qualified FWBs should be immediately ordered owing to the absolute nullification of the
SDOA. Considering the multilayered issues of implementation surrounding the case and imposed a. The 300 out of the 500 hectares of converted lands, which are now titled in the names of
on the DAR, it is best to offer some guiding principles and values when executing the Court’s LIPCO and RCBC, both of whom are considered innocent purchasers in good faith;
orders in this landmark case. b. The 80 hectares of land purchased and acquired by the Bases Conversion Development
1. Scope of Covered Lands Authority for the construction of a portion of the Subic-Clark-Tarlac Expressway; and
DAR shall first determine which of the lands in Hacienda Luisita previously owned by both c. All homelots already awarded to the qualified FWBs.
petitioner HLI and TADECO should be included in the compulsory coverage, including the 2. Preliminary Valuation of the Lands
identification of the improvements previously introduced by the corporate landowners. Based on its own rules and formula, DAR shall give a preliminary and objective valuation of
the covered lands, whose values shall be pegged to the time of the Notice of Coverage issued
_______________ on 02 January 2006. This valuation is, of course, subject to a determination of just compensation
53 “If within two (2) years from the approval of this Act, the land or stock transfer envisioned above is not made or by the proper court in case of disagreement.
realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the compulsory coverage of this Act.” (CARL, Sec. 31)
Accounting and Compensation
Thereafter, DAR shall also make a factual determination of the values and amounts of benefits
682 actually received by the qualified FWBs under the SDOA, including but not limited to the
following:
a. Three percent (3%) total gross sales from the production of the agricultural lands
b. Homelots actually awarded to qualified FWBs
Hacienda Luisita, Incorporated vs. Presidential c. Any dividends received by qualified FWBs
Agrarian Reform Council d. The proceeds of the sale of the 300-hectare converted land and SCTEX land, if any,
distributed to the FWBs
However, petitioner HLI shall have no claim over any salary, wage or benefit given to the
As previously discussed,54 the nullification of the SDOA brings into question the preliminary farmworker, and neither shall the latter, qualified or otherwise, be required to return the same,
arrangements made by petitioner HLI, TADECO and the qualified FWBs, specifically the since they received those benefits for services ren-
unilateral decision of TADECO to segregate and select which of its lands (totaling 6,443 hectares)
will be transferred to petitioner HLI for purposes of the SDOA (4,916 hectares), and which of 684
those it will keep for itself (1,527 hectares). Whether the sizeable area of 1,527 hectares of farm
684 SUPREME COURT REPORTS ANNOTATED True agrarian reform must not be limited to the equitable redistribution of lands, but shall
encompass the extension of supplemental public services that will enable the FWBs of Hacienda
Hacienda Luisita, Incorporated vs. Presidential Luisita to realize and capitalize on the full potential of the lands given to them.
EPILOGUE
dered in an employee-employer relationship, and not under the relationship established under
Twenty years after the CARL was issued and the hope of farmers and farmworkers across the
the SDOA. However, all FWBs shall surrender all their shareholdings in petitioner HLI to the
country was renewed, the fulfillment of the promise of a sweeping agrarian reform program in
corporation.
the country to spur agricultural and economic growth has remained elusive. Although there have
Thereafter, the DAR shall calculate the amounts due to each of the parties, namely, petitioner
been instances of a successful redistribution of land, they are too few to have had a positive and
HLI, Luisita Realty Corporation (LRC) and the qualified FWBs. These amounts shall be offset
appreciable impact in uplifting farmers across the nation. The main obstacles to the success of
one another for purposes of convenience in order to arrive at a single amount to be paid:
our agrarian reform program are its lack of financial viability and the lack of adequate public
Amounts due to petitioner Amounts due to resources to ensure full implementation.
qualified The wide gap between the just compensation due to the landowner and the ability of the farmer-
HLI/LRC
FWBs
beneficiaries to pay
a. The value of the total lands subject of 686
compulsory coverage, excluding the 300-
hectare converted lands of LIPCO and
RCBC and the 80 hectares of SCTEX lands; 686 SUPREME COURT REPORTS ANNOTATED
b. The value of the 200-hectare converted
lands, which shall be awarded to LRC; Hacienda Luisita, Incorporated vs. Presidential
c. The 3% of the purchase price of the 300- a. The purchase Agrarian Reform Council
hectare converted lands given to FWBs; price of the 300-
hectare converted
lands; and
was intended to be subsidized by the State.55 Despite the identification of the public resources
d. The 3% of the purchase price of the b. The price that would be used by the government under the CARL,56 these proved elusive or insuf-
SCTEX lands, and the cost of titling and paid by the
other expenses; government for _______________
the 80-hectare 55 “MR. RODRIGO: I was about to say what Commissioner Concepcion said. I just want to add that the phrase ‘just
SCTEX lands. compensation’ already has a definite meaning in jurisprudence. And, of course, I would like to reiterate the fact that ‘just
e. The 3% of total gross sales from the compensation’ here is not the amount paid by the farmers. It is the amount paid to the owner, and this does not
production of agricultural lands given to necessarily have to come from the farmer. The State should subsidize this and pay a just compensation to the
the FWBs; owner and let the tenant farmer pay the state in accordance with the capacity of the farmer. If there is a
f. The values of the homelots awarded to difference let the State subsidize the difference. …” (Minutes of the Deliberations of the Constitutional Commission,
[07 August 1986], at pp. 17-18)
the FWBs;
56 “The initial amount needed to implement this Act for the period of ten (10) years upon approval hereof shall be
g. Any dividend actually received by the
funded from the Agrarian Reform Fund created under Sections 20 and 21 of Executive Order No. 229.
FWBs. Additional amounts are hereby authorized to be appropriated as and when needed to augment the Agrarian Reform
Fund in order to fully implement the provisions of this Act.
685
Sources of funding or appropriations shall include the following:
a) Proceeds of the sales of the Assets Privatization Trust;
b) All receipts from assets recovered and from sales of ill-gotten wealth recovered through the Presidential
VOL. 660, NOVEMBER 22, 2011 685 Commission on Good Government;
c) Proceeds of the disposition of the properties of the Government in foreign countries;
Hacienda Luisita, Incorporated vs. Presidential d) Portion of amounts accruing to the Philippines from all sources of official foreign grants and concessional
Agrarian Reform Council financing from all countries, to be used for the specific purposes of financing production credits, infrastructures, and other
support services required by this Act;
e) Other government funds not otherwise appropriated.
After determining the just compensation due to petitioner HLI, TADECO and LRC, the DAR All funds appropriated to implement the provisions of this Act shall be considered continuing appropriations during the
shall settle the amount with the qualified FWBs under an affordable program or scheme that period of its implementation.” (CARL, Sec. 63)
takes cognizance of their ability to pay, under the existing rules and procedures.
687
3. Support Services
In order to ensure that the qualified FWBs can maximize the use of the lands awarded to
them, the DAR, in the performance of its mandate, shall provide support services to them, VOL. 660, NOVEMBER 22, 2011 687
including but not limited to adequate agricultural credit, technical assistance, and enhanced
market infrastructures to improve the delivery and sale of their agricultural produce. Hacienda Luisita, Incorporated vs. Presidential
Agrarian Reform Council b. 80 hectares of Subic-Clark-Tarlac Expressway (SCTEX) land; and
c. homelots already awarded to the qualified FWBs.
2. Petitioner HLI and Luisita Realty, Inc., shall be entitled to the payment of just
ficient to successfully finance the costly agrarian reform program in the entire country. The
compensation for the agricultural lands and the 200-hectare converted lands, which shall be
result was the stifling of crucial developments in agriculture in the rural areas, and continuing
based on their fair market value as of 02 January 2006, to be determined by the Department of
agrarian unrest among the farmer-beneficiaries, who have remained destitute and unable to
Agrarian Reform; petitioner HLI shall not be held liable for the payment of any rentals for
improve their families’ quality of life.
In doing right by the qualified FWBs in Hacienda Luisita by ordering the distribution of the 689
land in this case, the government must now face the current economic difficulties and devise
creative solutions and programs for moving forward. The legal victory that the qualified FWBs
have secured from this Court in awarding them the lands that they have tilled will only be felt if VOL. 660, NOVEMBER 22, 2011 689
the State, especially the DAR, extends all the necessary support that will allow them to maximize Hacienda Luisita, Incorporated vs. Presidential
the agricultural outputs of the lands. Long-term vision, responsive action plans and strong
political will are necessary to realize the social justice tenets of the Constitution in the country’s
agrarian reform program. These tenets are aimed at ending economic disparities in the rural
areas and affording Filipino farmer-beneficiaries the tools required to become more productive the use of the property with final turn-over of the lands to the qualified FWBs.
citizens. There is no better opportunity to start on this path than with full support for the 3. All shares of stock of petitioner HLI issued to the qualified FWBs, as beneficiaries of the
qualified FWBs of Hacienda Luisita. This support should include full freedom to make use of the direct land transfer, are nullified; and all such shares are restored to the name of TADECO,
land by allowing the qualified FWBs to deal with them as any property owner can, including the insofar as it transferred assets and liabilities to petitioner HLI as the spin-off corporation; but the
right to immediately transfer the same. shares issued to non-qualified FWBs shall be considered as additional and variable employee
benefits and shall remain in their names.
DISPOSITIVE PORTION 4. Petitioner HLI shall have no claim over any of the salaries, wages and benefits given to
farmworkers; and neither shall the farmworkers, qualified or not, be required to return the same,
Although I agree with the majority with respect to the revocation of the Stock Distribution having received them for services rendered in an employer-employee relationship.
Option Agreement, the immediate compulsory coverage of the agricultural lands in Hacienda 5. Petitioner HLI shall be liable to the qualified FWBs for the value received for the sale or
Luisita under the Comprehensive Agrarian Reform Law, and their immediate distribution to the transfer of the 300 out of the 500 hectares of converted lands, specifically the equivalent value of
qualified farmworker-beneficiaries, I maintain my dissent regarding the following: (a) the amount 12,000,000 shares of Centennary Holdings; for the 300-hectare land assigned, but not less than
of just compensation to be awarded to petitioner Hacienda Luisita, Inc., and Tarlac Development P750,000,000; and the money received from the sale of the SCTEX land, less taxes and other
688 legitimate expenses normally associated with the sale of land.
6. Petitioner HLI’s liability shall be offset by payments actually received by qualified FWBs
under the SDOA, namely:
688 SUPREME COURT REPORTS ANNOTATED a. Three percent (3%) total gross sales from the production of the agricultural lands;
b. The value of the homelots awarded to qualified FWBs;
c. Any dividend given to qualified FWBs; and
Agrarian Reform Council d. Proceeds of the sale of the 300-hectare converted land and SCTEX land, if any, distributed
to the FWBs.
Corporation should be reckoned from the fair market value under the law, rules and
690
jurisprudence, specifically as of the date of the issuance of the Notice of Coverage on 02 January
2006; (b) the 10-year limitation on the transferability of the awarded agricultural lands is no
longer applicable, and the qualified farmworker-beneficiaries should be allowed to sell or transfer 690 SUPREME COURT REPORTS ANNOTATED
the properties, if they so desire; and (c) that the benefits received by the qualified FWBs be offset
by the amount of just compensation due to petitioner Hacienda Luisita, Inc., Tarlac Development Hacienda Luisita, Incorporated vs. Presidential
Corp., and Luisita Realty, Corp. Agrarian Reform Council
Thus, I maintain my previous Opinion on the following points:
1. Agricultural lands covered by the Comprehensive Agrarian Reform Law and previously The DAR is DIRECTED to determine the scope of TADECO’s and/or petitioner HLI’s
held by the Tarlac Development Corp., including those transferred to petitioner Hacienda agricultural lands that should have been included under the compulsory coverage of CARL at the
Luisita, Inc., shall be subject to compulsory coverage and immediately distributed to the 6,296 time the SDOA was executed on 11 May 1989, but excluding those directed to be excluded as
original qualified farmworker-beneficiaries who signed the Stock Distribution Option Agreement; stated above. This means that the unilateral designation of those lands by TADECO, of which
or, if deceased, their heirs, subject to the disposition of the converted lands expressed in the only 4,916 hectares were counted as the farmers’ agricultural land contribution to the SDO is to
paragraph after the next, but shall necessarily exclude only the following: be disregarded and a new assessment is to be made by the DAR.
a. 300 out of the 500 hectares of converted lands, now in the name of Luisita Industrial Park
Corp., (LIPCO) and Rizal Commercial Banking, Corp., (RCBC);
The DAR is also ORDERED to monitor the land distribution and extend support services that
the qualified farmworker-beneficiaries may need in choosing the most appropriate and
economically viable option for land distribution, and is further REQUIRED to render a
compliance report on this matter one-hundred eighty (180) days after receipt of this Order. The
compliance report shall include a determination of Hacienda Luisita’s exact land area that shall
be subject to compulsory coverage in accordance with the Decision.
Petitioner HLI is REQUIRED to render a complete accounting and to submit evidentiary proof
of all the benefits given and extended to the qualified FWBs under the void SDOA—including but
not limited to the dividends received, homelots awarded, and proceeds of the sales of the lands,
which shall serve as bases for the offset of petitioner HLI’s liabilities to the qualified FWBs, and
its accounting shall be subject to confirmation and verification by the DAR.
All titles issued over the 300-hectare converted land, including those under the names of
petitioners-in-intervention Rizal Commercial Banking Corporation and Luisita Industrial Park
Corporation and those awarded as homelots, are hereby AFFIRMED and EXCLUDED from the
Notice of Compulsory coverage. The 200-hectare converted lands transferred to Luisita Realty,
Inc., by petitioner Hacienda Luisita, Inc. is deemed covered by the direct land transfer under the
CARP in favor of the qualified FWBs, subject to the payment of just compensation.
691
VOL. 660, NOVEMBER 22, 2011 691

Motion for Partial Reconsideration dated July 20, 2011, Motion for Reconsideration dated July
19, 2011, Motion for Reconsideration dated July 21, 2011, and Motion for Reconsideration dated
July 22, 2011 partially granted; while Motion for Clarification and Partial Reconsideration dated
July 21, 2011 and Motion for Reconsideration dated July 21, 2011 denied. PARC Resolution No.
2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006 affirmed
with modifications.
Note.—Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriation. (Land Bank of the Philippines vs. Orilla, 556 SCRA 102 [2006])
——o0o——

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regulations issued by the executive department that are accorded the same status as that of a statute or

Hacienda Luisita, Incorporated vs. Presidential

Hacienda Luisita, Incorporated vs. Presidential

616 SUPREME COURT REPORTS ANNOTATED _______________

Hacienda Luisita, Incorporated vs. Presidential _______________

676 SUPREME COURT REPORTS ANNOTATED

VOL. 660, NOVEMBER 22, 2011 691

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