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G.R. No.


November 22, 2011


Significant Facts of the Case

Central Azucarera De Tarlac

Hacienda Luisita

This is a motion for clarification and reconsideration filed by both parties regarding similar subject matters discussed in a Decision promulgated by the Supreme Court (SC) dated July 5, 2011. In the said Decision, the SC ordered that the original 6,296 qualified farmworker-beneficiaries (FWBs) of Hacienda Luisita shall have the option to remain as stockholders of Hacienda Luisita, Inc. (HLI) or own a respective share of the land at contention.

Issues Brought Before the Supreme Court

1. Whether or not the operative fact doctrine is applicable in the case at bar 2. Whether or not Sec. 31 of R.A. No. 6657 (Comprehensive Agrarian Reform Law of 1988) is constitutional 3. Whether or not the Honorable Court erred in limiting the land area covered by compulsory acquisition 4. Whether or not the Honorable Court erred regarding the matters covering the payment of just compensation to HLI 5. Whether or not the qualified FWBs may sell their parcels of land to third persons 6. Whether or not the stock distribution program (SDP) should be revoked 7. Whether or not the FWBs will have control over the agricultural lands under the SDP

Ruling of the Supreme Court

As regards the first issue, the operative fact doctrine applies to both legislative and executive acts of whatever status and nature. The existence of various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored. Bearing in mind that PARC Resolution No. 89-12-2 was declared invalid in the instant case, the operative fact doctrine is clearly applicable. The application of the operative fact doctrine to the FWBs is not iniquitous and prejudicial to their interests but is actually beneficial and fair to them. Moreover, 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 to have the SDP approved within two (2) years from the approval of RA 6657. The word or is a disjunctive term signifying disassociation and independence of one thing from each of the other things enumerated. Given that HLI secured approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took effect, then HLI did not violate the last paragraph of Sec. 31 of RA 6657.

The Court meanwhile passed on the resolution of the issue of constitutionality of Sec. 31 of R.A. No. 6657 because the inquiry was not raised at the earliest possible opportunity. Furthermore, the resolution of the constitutional issue is not necessary in the determination of the case at bar. Besides, such issue is moot and academic in view of the amendment made by Sec. 5 of R.A. No. 9700 on the questioned provision vis--vis the latters stock distribution component.

The Court is likewise constrained to rule only on the 4,915.75 has. of agricultural land covered by the SDP because it is the only portion put in issue. Nonetheless, the declaration of the area to be awarded to each FWB is too restrictive so the Department of Agrarian Reform (DAR) is tasked to determine such division. In addition to this, what is required is not the agricultural land remaining intact but the viability of the corporate operations with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate agricultural land does not remain intact or unfragmented. Furthermore, It cannot be claimed that Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) acted in bad faith in acquiring the lots that were previously covered by the SDP. To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired.

However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. Moreover, the parties in the instant case are primarily governed by R.A. No. 6657 and HLI cannot shield itself from the CARP coverage merely under the convenience of being a corporate entity. The SC, in effect, upheld its ruling to order HLI and its subsidiary, Centennary, to pay the FWBs for the price received for the sale of the 500 ha. lot subject of the August 14, 1996 Conversion Order and the 80.51 ha. Subic-Clark-Tarlac Expressway (SCTEX) lot acquired by the government from compulsory coverage.

With regard to the fourth issue, there is no arguing that HLI is entitled to just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs. Additionally, the date of the taking remains to be November 21, 1989, the date when PARC approved HLIs 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 Hacienda Luisita. The edicts of social justice found in the Constitution and the public policies that 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 the poor and underprivileged whenever reasonable doubt arises in the interpretation of the law.

As for the fifth issue, it is beyond question that under R.A. No. 6657 and DAO 1, the awarded lands may only be transferred or conveyed after ten 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. To allow the FWBs to sell these lands will be to transgress the apparent intention of R.A. No. 6657.

Next, the improvement of the economic status of the FWBs is not among the legal obligations of the HLI under the SDP. What needs to be considered is the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands. However, the SDP shall still be revoked 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 based on the number of man days or number of days worked by the FWB in a years time; and (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 FWBs. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the FWBs who shall form a workers cooperative or association which will deal with the corporation or business association.

Last but not the least, the SC realized that the FWBs will never have control over these agricultural lands for as long as they remain as stockholders of HLI. The policy on agrarian reform is that control over the agricultural land must always be in the hands of the farmers. Even if all the holders of the 118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which is unlikely, control will never be placed in the hands of the farmer-beneficiaries. Control, of course, means the majority of 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 divided by 2 plus 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. Hence, control can never be attained by the FWBs.

However, the HLI land shall be distributed only to the 6,296 original FWBs. The 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.The DAR shall likewise verify the identities of the 6,296 original FWBs, consistent with its administrative prerogative to identify and select the agrarian reform beneficiaries under R.A. No. 6657.

Pop-Up Questions!!!

1. Who among the following is NOT a respondent in the case at bar? A. Noel Mallari B. Rene Galang C. Secretary Nasser Pangandaman of the Presidential Agrarian Reform Council D. Windsor Andaya

2. What is the decision of the Supreme Court with regard to the constitutionality of Sec. 31 of R.A. No. 6657? A. the SC upheld the provisions constitutionality B. the SC declared the provision unconstitutional C. the SC declared the whole law unconstitutional D. the SC passed on the resolution of the issue of unconstitutionality

3. What is the exact land area of the subject property decided upon by the Supreme Court? A. 4,915.65 hectares B. 4,915.75 hectares C. 4,916.65 hectares D. 4,916.75 hectares

Prepared By: TAN, Jose Lorenzo Cruz Bachelor of Laws 1-B 2011-105271

Sources of Information: november2011/171101.htm Philippine Daily Inquirer (11/25/11)