Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R.

No. 171101, November 22, 2011

RESOLUTION

VELASCO, JR., J.:

I.      THE FACTS

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to

DISMISS/DENY the petition filed by HLI and AFFIRM with MODIFICATIONS the resolutions of
the PARC revoking HLI’s Stock Distribution Plan (SDP) and placing the subject lands in
Hacienda Luisita under compulsory coverage of the Comprehensive Agrarian Reform Program
(CARP) of the government.

The Court however did not order outright land distribution. Voting 6-5, the Court noted
that there are operative facts that occurred in the interim and which the Court cannot validly
ignore. Thus, the Court declared that the revocation of the SDP must, by application of the
operative fact principle, give way to the right of the original 6,296 qualified farmworkers-
beneficiaries (FWBs) to choose whether they want to remain as HLI stockholders or [choose
actual land distribution]. It thus ordered the Department of Agrarian Reform (DAR)
to “immediately schedule meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which the FWBs will be
asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing
their thumbmarks, as the case may be, over their printed names.”

       The parties thereafter filed their respective motions for reconsideration of the Court
decision.

II.    THE ISSUES

(1)  Is the operative fact doctrine available in this case?

(2)  Is Sec. 31 of RA 6657 unconstitutional?

(3)  Can’t the Court order that DAR’s compulsory acquisition of Hacienda Lusita cover the full 6,443
hectares allegedly covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco), and not just the 4,915.75 hectares covered by HLI’s SDP?
(4)  Is the date of the “taking” (for purposes of determining the just compensation payable to HLI)
November 21, 1989, when PARC approved HLI’s SDP?

(5)  Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on
May 10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA
scheme on May 11, 1989), and thus the qualified FWBs should now be allowed to sell their land
interests in Hacienda Luisita to third parties, whether they have fully paid for the lands or not?

(6)  THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs
be given an option to remain as stockholders of HLI be reconsidered?

III.   THE RULING

            [The Court PARTIALLY GRANTED the motions for reconsideration of respondents

PARC, et al. with respect to the option granted to the original farmworkers-beneficiaries (FWBs)
of Hacienda Luisita to remain with petitioner HLI, which option the Court
thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified
FWBs should be given an option to remain as stockholders of HLI, and UNANIMOUSLY
directed immediate land distribution to the qualified FWBs.]

1.    YES, the operative fact doctrine is applicable in this case.

[The Court maintained its stance that the operative fact doctrine is applicable in this
case since, contrary to the suggestion of the minority, the doctrine is not limited only to invalid
or unconstitutional laws but also applies to decisions made by the President or the
administrative agencies that have the force and effect of laws. Prior to the nullification or recall
of said decisions, they may have produced acts and consequences that must be respected. It is
on this score that the operative fact doctrine should be applied to acts and consequences that
resulted from the implementation of the PARC Resolution approving the SDP of HLI. The
majority stressed that the application of the operative fact doctrine by the Court in its July 5,
2011 decision was in fact favorable to the FWBs because not only were they allowed to retain
the benefits and homelots they received under the stock distribution scheme, they were also
given the option to choose for themselves whether they want to remain as stockholders of HLI
or not.]

2.    NO, Sec. 31 of RA 6657 NOT unconstitutional.

[The Court maintained that the Court is NOT compelled to rule on the constitutionality of
Sec. 31 of RA 6657, reiterating that it was not raised at the earliest opportunity and that the
resolution thereof is not the lis mota of the case. Moreover, the issue has been
 rendered moot and academic since SDO is no longer one of the modes of acquisition under
RA 9700. The majority clarified that in its July 5, 2011 decision, it made no ruling in favor of the
constitutionality of Sec. 31 of RA 6657, but found nonetheless that there was no apparent grave
violation of the Constitution that may justify the resolution of the issue of constitutionality.]

3.    NO, the Court CANNOT order that DAR’s compulsory acquisition of Hacienda Lusita
cover the full 6,443 hectares and not just the 4,915.75 hectares covered by HLI’s SDP.

[Since what is put in issue before the Court is the propriety of the revocation of the SDP,
which only involves 4,915.75 has. of agricultural land and not 6,443 has., then the Court is
constrained to rule only as regards the 4,915.75 has. of agricultural land.Nonetheless, this
should not prevent the DAR, under its mandate under the agrarian reform law, from
subsequently subjecting to agrarian reform other agricultural lands originally held by Tadeco
that were allegedly not transferred to HLI but were supposedly covered by RA 6657.

However since the area to be awarded to each FWB in the July 5, 2011 Decision
appears too restrictive – considering that there are roads, irrigation canals, and other portions of
the land that are considered commonly-owned by farmworkers, and these may necessarily
result in the decrease of the area size that may be awarded per FWB – the Court reconsiders
its Decision and resolves to give the DAR leeway in adjusting the area that may be awarded per
FWB in case the number of actual qualified FWBs decreases. 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 jurisdiction of the DAR, it is the latter which shall determine the area with
which each qualified FWB will be awarded.

On the other hand, the majority likewise reiterated its holding that the 500-hectare
portion of Hacienda Luisita that have been validly converted to industrial use and have been
acquired by intervenors Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial
Park Corporation (LIPCO), as well as the separate 80.51-hectare SCTEX lot acquired by the
government, should be excluded from the coverage of the assailed PARC resolution. The Court
however ordered that the unused balance of the proceeds of the sale of the 500-hectare
converted land and of the 80.51-hectare land used for the SCTEX be distributed to the FWBs.]

4.    YES, the date of “taking” is November 21, 1989, when PARC approved HLI’s SDP.

[For the purpose of determining just compensation, the date of “taking” is November 21,
1989 (the date when PARC approved HLI’s SDP) since this is the time that the FWBs were
considered to own and possess the agricultural lands in Hacienda Luisita. To be precise, these
lands became subject of the agrarian reform coverage through the stock distribution scheme
 only upon the approval of the SDP, that is, on November 21, 1989. Such approval is akin to a
notice of coverage ordinarily issued under compulsory acquisition. On the contention of the
minority (Justice Sereno) that the date of the notice of coverage [after PARC’s revocation of the
SDP], that is, January 2, 2006, is determinative of the just compensation that HLI is entitled to
receive, the Court majority noted that none of the cases cited to justify this position involved the
stock distribution scheme. Thus, said cases do not squarely apply to the instant case.  The
foregoing notwithstanding, it bears stressing that the DAR's land valuation is only preliminary
and is not, by any means, final and conclusive upon the landowner. The landowner can file an
original action with the RTC acting as a special agrarian court to determine just compensation.
The court has the right to review with finality the determination in the exercise of what is
admittedly a judicial function.]

5.    NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has
NOT lapsed on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell
their land interests in Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed
after 10 years from the issuance and registration of the emancipation patent (EP) or certificate
of land ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued
to the qualified FWBs in the instant case, the 10-year prohibitive period has not even started.
Significantly, the reckoning point is the issuance of the EP or CLOA, and not the placing of the
agricultural lands under CARP coverage. Moreover, should the FWBs be immediately allowed
the option to sell or convey their interest in the subject lands, then all efforts at agrarian reform
would be rendered nugatory, since, at the end of the day, these lands will just be transferred to
persons not entitled to land distribution under CARP.]

6.    YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to
remain as stockholders of HLI should be reconsidered.

[The Court reconsidered its earlier decision that the qualified FWBs should be given an
option to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain
control [over the subject lands] given the present proportion of shareholdings in HLI. The Court
noted that the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the
holders of this 33.296% unanimously vote to remain as HLI stockholders, which is unlikely,
control will never be in the hands of the FWBs.  Control means the majority of [sic] 50% plus at
least one share of the common shares and other voting shares.  Applying the formula to the
HLI stockholdings, the number of shares that will constitute the majority is 295,112,101 shares
(590,554,220 total HLI capital shares divided by 2 plus one [1] HLI share).  The 118,391,976.85
shares subject to the SDP approved by PARC substantially fall short of the 295,112,101 shares
needed by the FWBs to acquire control over HLI.]