HACIENDA LUISITA, INCORPORATED, et. al. vs. PARC, et. al.

G.R. No. 171101

July 5, 2011

FACTS:
The Compaia General de Tabacos de Filipinas (Tabacalera) owned a
6,443-hectare mixed agricultural-industrial-residential in Tarlac. In 1957,
Tabacalera sold Hacienda Louisita and their controlling interest from Central
Azucarera de Tarlac (CAT) to Tarlac Development Company (TADECO)
owned by the Cojuancos. In order to buy the land, TADECO obtained a loan
from a U.S. Bank and from the Government Service Insurance System
(GSIS). But with the condition that TADECO shall subdivide the lots and sold
the tenants.
On May 7, 1980, the martial law administration filed a suit before the
Manila Regional Trial Court (RTC) against Tadeco, et al., for them to
surrender Hacienda Luisita to the then Ministry of Agrarian Reform so that
the land can be distributed to farmers at cost. Responding, Tadeco alleged
that Hacienda Luisita does not have tenants, besides which sugar landsof
which the hacienda consistedare not covered by existing agrarian reform
legislations. The Manila RTC rendered judgment ordering Tadeco to
surrender Hacienda Luisita to the MAR.
On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the governments case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially instituted
and won against Tadeco, et al. The dismissal action was, however, made
subject to the obtention by Tadeco of the PARCs approval of a stock
distribution plan (SDP) that must initially be implemented after such
approval shall have been secured. The condition provides that upon violation
of TADECO, the suit can be revived anytime.
TADECO chosed the stock distribution scheme as an alternative as
provided under E.O. 229, and R.A. 6657. It was facilitated by the Hacienda
Louiaita Inc. (HLI).
On May 9, 1989, the 5,848 Farmworker beneficiaries agreed to the Stock
Distribution Option Agreement (SDOA), and entered into a Memorandum of

Agreement (MOA). The MOA included the distribution of the 33% shares of
stock. It was larger subjected to further revisions upon investigation of the
DAR. From 1989 to 2005 the HLI claimed to have extended benefits to the
FWB's such as giving free shares of stock, million worth of salaries and the
like.
On December 13, 1996, a 300 hectare of the subject land was transfered
to Centenary Corporation. It was subdivided into two and later acquired by
the RCBC and some part was acquired by the government for the SCTEX.
In 2003, two petitions for the nullification of the SDOA were filed by the
supervisory group of the HLI and the Alyansa ng mga Manggagawang Bukid
ng Hacienda Luisita (AMBA). They both allege the noncompliance of HLI to
the SDOA.
The DAR constituted a Special Task Force to investigate on the isuue, they
further found that HLI failed to comply with its obligations under RA 6657.
The Secretary of DAR recommended to the PARC to recall its earlier
resolution in approving the SDP, and to acquire the hacienda luisita through
compulsory acquisition scheme. The PARC then issued a resolution affirming
the Secretary's recommendation, copies were sent to HLI as well as a Notice of
Coverage which was later subject to Temporary Restraining Order by the
court. Concerned parties filed for their motion for intervention. In 2010, oral
arguments were heard by the court, the case went on for years. In August 21,
2010, the court created a mediation panel for amicable settlement of the
dispute but it failed for there was no acceptable agreement that would bind
the parties.

ISSUE:
Whether the HLI as a cooperative representing the FWBs, be entitled just
compensation if the SDP be nullified and the remaining agricultural land be
subjected under Compulsory Acquisition by RA 6657.
RULING:
The SDP approved by PARC has been nullified, and all the lands subject of
the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA
6657. Since the Court excluded the 500-hectare lot subject of the August 14, 1996

Conversion Order and the 80.51-hectare SCTEX lot acquired by the government
from the area covered by SDP. Then HLI and its subsidiary, Centenary, shall be
liable to the FWBs for the price received for the lots. HLI shall be liable for the
value received for the sale of the land to LRC and the equivalent value of the
shares of its subsidiary, Centenary. For the lot sold to LIPCO shall likewise
produce liability as consideration for the sale of the SCTEX lot. The revocation
must give way to the right of the original qualified FWBs to choose whether they
want to remain as HLI stockholders. On August 6, 20l0, HLI and private
respondents submitted a Compromise Agreement, in which HLI gave the FWBs
the option of acquiring a piece of agricultural land or remain as HLI stockholders,
and most FWBs indicated their choice of remaining as stockholders.
The SC noted 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. The payment of
taxes and expenses relating to the transfer of the land and HLIs 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
utilized by HLI and its subsidiary, Centenary. DAR engaged the services of a
reputable accounting firm 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 80.51hectare 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 shouldered by HLI. After the audit, any remaining balance from
the proceeds of the sale will be distributed to the qualified FWBs.
HLI will still exist as a corporation even after the revocation of the SDP
although it will no longer be operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The non-agricultural assets shall
remain with HLI, while the agricultural lands with an original area of 4,915.75
hectares shall be turned over to DAR for distribution to the FWBs. To be deducted
from said area are the 500-hectare lot subject of the August 14, 1996 Conversion
Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of
individual lots that should have been distributed to FWBs by DAR had they not
opted to stay in HLI. DAR will inform through a meeting the 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 HLI is ordered to issue or distribute

additional shares to complete said prescribed number of shares at no cost to the

FWB within thirty (30) days from finality of this Decision. Other FWBs who do
not belong to the original 6,296 qualified beneficiaries are not entitled to land
distribution and shall remain as HLI shareholders. Within thirty (30) days after
determining who from among the original FWBs will stay as stockholders, DAR
shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARCs SDP. After the segregation process, the remaining area shall be
turned over to DAR for immediate land distribution to the original qualified FWBs
who opted not to remain as HLI stockholders. The aforementioned area composed
of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation
shall form part of the HLI assets.
HLI shall be paid just compensation for the remaining agricultural land that
will be transferred to DAR to be reckoned from November 21, 1989 per PARC
Resolution, for land distribution to the FWBs. DAR shall coordinate with LBP for
the determination of just compensation due to HLI. DAR shall submit a
compliance report after six (6) months from finality of this judgment. It shall also
submit, after submission of the compliance report, quarterly reports on the
execution of this judgment to be submitted within the first 15 days at the end of
each quarter, until fully implemented.