#1930

Hacienda Luisita v. PARC

GR 171101
July 5, 2011
Art. 13, Sec. 3 Agrarian Reform

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 t he 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 rec onsideration of the
Court decision.

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?

HELD:
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.
Prepared by: Franchesca Marie S. Seeres 1
#1930
2. NO, Sec. 31 of RA 6657 NOT unconstitutional.

Prepared by: Franchesca Marie S. Seeres 2

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 t he
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 ar e 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 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 ap proval 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 reckoni ng 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 r
eform would be rendered nugatory, since, at the end of the day, these lands will just be transferred to persons not
entitled t o land distribution under CARP.
6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to re main 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