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
HLIs 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) Cant the Court order that DARs 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 HLIs SDP?
(4) Is the date of the taking (for purposes of determining the just compensation payable to HLI)
November 21, 1989, when PARC approved HLIs 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, andUNANIMOUSLY 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 DARs compulsory acquisition of Hacienda Lusita cover the
full 6,443 hectares and not just the 4,915.75 hectares covered by HLIs 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 80.51hectare land used for the SCTEX be distributed to the FWBs.]

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