G.R. No.

159108 June 18, 2012

GOLD LINE TOURS, INC., Petitioner,

vs.
HEIRS OF MARIA CONCEPCION LACSA, Respondents.

FACTS:

Ma. Concepcion Lacsa (Concepcion) boarded a Goldline passenger bus owned and operated by Travel
&Tours Advisers, Inc. Before reaching their destination, the Goldline bus collided with a passenger
jeepneys and as a result, a metal part of the jeepney was detached and struck Concepcion in the chest,
causing her instant death. Then, Concepcion’s heirs, represented by Teodoro Lacsa, instituted in the
RTC a suit against Travel & Tours Advisers Inc. to recover damages arising from breach of contract of
carriage. The RTC ruled in favor of the heirs of Concepcion and thereafter, Gold Line appealed the
decision to the CA but the CA dismissed the appeal for failure of the defendants to pay the docket and
other lawful fees within the required period as provided in Rule 41, Section 4 of the Rules of Court. The
dismissal became final.

Thereafter, the heirs of concepcion moved for the issuance of a writ of execution to implement the
decision and RTC granted their motion. Petitioner submitted a verified third party claim, claiming that
the tourist bus be returned to petitioner because it was the and that petitioner was a corporation entirely
different from Travel & Tours Advisers, Inc. then RTC dismissed petitioner’s verified third-party claim,
observing that the identity of Travel & Tours Adivsers, Inc. could not be divorced from that of petitioner
considering that Cheng had claimed to be the operator as well as the President/Manager/incorporator
of both entities; and that Travel & Tours Advisers, Inc. had been known in Sorsogon as Goldline. They
(Goldline) appealed the decision to CA but CA dismissed their petition and affirmed the decision of
RTC. Hence this appeal to the Supreme Court where petitioner seeks to reverse the decision of CA.

ISSUE:

Whether or not the proposition of the third party claimant by the petitioner where Travel & Tours
Advises, Inc. has an existence separate and/or distinct from Gold Line Tours, Inc.

RULING:

The Supreme Court the DENIED the petition for review on certiorari, and AFFIRMED the decision
promulgated by the Court of Appeals.

The two corporations are liable to the death of Ma. Concepcion Lacsa.

The Court was not persuaded by the proposition of the third party claimant that a corporation has an
existence separate and/or distinct from its members insofar as this case at bar is concerned, for the
reason that whenever necessary for the interest of the public or for the protection of enforcement of
their rights, the notion of legal entity should not and is not to be used to defeat public
convenience, justify wrong, protect fraud or defend crime.

In the case of Palacio vs. Fely Transportation Co., the Supreme Court held that:

"Where the main purpose in forming the corporation was to evade one’s subsidiary liability for damages
in a criminal case, the corporation may not be heard to say that it has a personality separate and
distinct from its members, because to allow it to do so would be to sanction the use of fiction of
corporate entity as a shield to further an end subversive of justice (La Campana Coffee Factory, et al.
v. Kaisahan ng mga Manggagawa, etc., et al., L-5677, May 25, 1953).

This is what the third party claimant wants to do including the defendant in this case, to use the
separate and distinct personality of the two corporation as a shield to further an end subversive of
justice by avoiding the execution of a final judgment of the court.

The RTC thus rightly ruled that petitioner might not be shielded from liability under the final judgment
through the use of the doctrine of separate corporate identity. Truly, this fiction of law could not be
employed to defeat the ends of justice.
Vivian R. v Mar Fishing
June 13, 2012
VIVIAN RAMIREZ, et al.
vs.
MAR FISHING CO., INC., MIRAMAR FISHING CO., INC., ROBERT BUEHS AND JEROME SPITZ.
SERENO, J.:

NATURE: Petition for Review on Certiorari under Rule 45

FACTS:
 June 28, 2001: Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of fishing and canning of tuna,
sold its principal assets to co-respondent Miramar Fishing Co., Inc. (Miramar) through public bidding. Proceeds
of the sale were paid to the Trade and Investment Corporation of the Philippines (TIDCORP) to cover Mar
Fishing’s outstanding obligation in the amount of ₱897,560,041.26
 In view of that transfer, Mar Fishing issued a Memorandum dated 23 October 2001 informing all its workers that
the company would cease to operate by the end of the month
 October 29, 2001: It notified the DOLE of the closure of its business operations
 Then, Mar Fishing’s labor union, Mar Fishing Workers Union – NFL – and Miramar entered into a
Memorandum of Agreement for the acquiring company, Miramar, to absorb Mar Fishing’s regular rank and file
employees whose performance was satisfactory, without loss of seniority rights and privileges previously
enjoyed
 Unfortunately, petitioners, who worked as rank and file employees, were not hired or given separation pay by
Miramar so they filed Complaints for illegal dismissal with money claims before the Arbitration Branch of the
National Labor Relations Commission (NLRC).
 Labor Arbiter (LA): Granted separation pay but not claims for illegal dismissal
o Ordering Mar Fishing to pay the complainants their respective separation pay, totaling
₱6,336,587.77;
o Dismissing the case as against Miramar Fishing Company, Inc., as well as against Robert Buehs and
Jerome Spitz, for lack of cause of action;
o Dismissing all other charges and claims of the complainants, for lack of merit.
o Reasons:
 Mar Fishing had necessarily closed its operations, considering that Miramar had already
bought the tuna canning plant. By reason of the closure, petitioners were legally dismissed for
authorized cause.
 Even if Mar Fishing reneged on notifying the DOLE within 30 days prior to its closure, that
failure did not make the dismissals void.
 However, Mar Fishing to give separation pay to its workers
 Petitioners pursued the action before the NLRC.
 NLRC: Modified the LA’s Decision. Ruled for petitioners.
o Mar Fishing notified the DOLE only 2 days before the business closed, the labor court considered
petitioners’ dismissal as ineffectual
o Awarded, apart from separation pay, full back wages to petitioners from the time they were terminated
on 31 October 2001 until the date when the LA upheld the validity of their dismissal on 30 July 2002
o NLRC pierced the veil of corporate fiction and ruled that Mar Fishing and Miramar were one and the
same entity, since their officers were the same. Hence, both companies were ordered to solidarily pay
the monetary claims.
 Respondents filed a MOR
 NLRC: Imposing liability only on Mar Fishing which was ordered to pay complainants their separation pay, and
full backwages from the date they were terminated from employment until 30 July 2002, subject to computation
during execution stage of proceedings at the appropriate Regional Arbitration Branch.
o Petitioners had no cause of action against Miramar, since labor contracts cannot be enforced against
the transferee of an enterprise in the absence of a stipulation in the contract that the transferee
assumes the obligation of the transferor
 Despite the award of separation pay and back wages, petitioners filed a Rule 65 Petition before the CA. They
argued that both Mar Fishing and Miramar should be made liable for their separation pay, and that their back
wages should be up to the time of their actual reinstatement.
 CA: Dismissed the action for certiorari against the 225 other petitioners without ruling on the substantive
aspects of the case in finding that only 3 of the 228 petitioners signed the Verification and Certification
against forum shopping
 By means of a Manifestation with Omnibus Motion, petitioners submitted a Verification and Certification against
forum shopping executed by 161 signatories.
o Petitioners asked the CA to reconsider by invoking the rule that technical rules do not strictly
apply to labor cases.
 CA: Still DENIED petitioners’ contentions
o Anent the liberality in application of the rules, as alleged by petitioners, the same deserves scant
consideration. While litigation is not a Game of technicalities, and that the rules of procedure
should not be enforced strictly at the cost of substantial justice, still it does not follow that the
Rules of Court may be ignored at will and at random to the prejudice of the orderly
presentation, assessment and just resolution of the issues.
 Petitioner’s Arguments:
o Invokes the substantial compliance with procedural rules when their Manifestation already contains a
Verification and Certification against forum shopping executed by 161 signatories.
o Jaro v. Court of Appeals, citing Piglas-Kamao v. National Labor Relations Commission and Cusi-
Hernandez v. Diaz: The subsequent submission of the missing documentary attachments with the
Motion for Reconsideration amounted to substantial compliance.
o Petitioners also assert that Miramar simply took over the operations of Mar Fishing and that these
companies are one and the same entity, given the commonality of their directors and the similarity of
their business venture in tuna canning plant operations.

PROCEDURAL ISSUE 1: Whether the CA gravely erred in dismissing their Petition for Review on the ground that
their pleading lacked a Verification and Certification against forum shopping? (NO)

RATIO 1:
 The Rules of Court provide that a petition for certiorari must be verified and accompanied by a sworn
certification of non-forum shopping. Failure to comply with these mandatory requirements shall be sufficient
ground for the dismissal of the petition. Considering that only 3 of the 228 named petitioners signed the
requirement, the CA dismissed the case against them, as they did not execute a Verification and Certification
against forum shopping.
 This very case does not involve a failure to attach the Annexes. Rather, the procedural infirmity consists of
omission – the failure to sign a Verification and Certification against forum shopping.
 Because of noncompliance with the requirements governing the certification of non-forum shopping, no error
could be validly attributed to the CA when it ordered the dismissal of the special civil action for certiorari.
 The lack of certification against forum shopping is not curable by mere amendment of a complaint, but shall be
a cause for the dismissal of the case without prejudice. Indeed, the general rule is that subsequent
compliance with the requirements will not excuse a party's failure to comply in the first instance. Thus,
on procedural aspects, the appellate court correctly dismissed the case.
 However, the merit of a case is a special circumstance or compelling reason that justifies the relaxation
of the rule requiring verification and certification of non-forum shopping. It is thus necessary to determine
whether technical rules were brushed aside at the expense of substantial justice.

ISSUE 2: Whether, in this case, technical rules can be brushed aside at the expense of substantial justice? NO.
a.Whether dismissal based on the closure of business is valid? YES.
o 3 requirements
 1) the cessation of or withdrawal from business operations must be bona fide in character.
 2) there must be payment to the employees of termination pay amounting to at least one-half
(1/2) month pay for each year of service, or one (1) month pay, whichever is higher.
 3) the company must serve a written notice on the employees and on the DOLE at least one
(1) month before the intended termination.
o Petitioners did not dispute the conclusion of the LA and the NLRC that Mar Fishing had an authorized
cause to dismiss its workers. Neither did petitioners challenge the computation of their separation pay.
Petitioners only questioned the holding that only Mar Fishing was liable for their monetary claims.

b. Whether there is solidary liability of Mar Fishing and Miramar to pay petitioners’ monetary claims? (NO,
Mar Fishing – and not Miramar – is required to compensate petitioners. Indeed, the back wages and retirement pay
earned from the former employer cannot be filed against the new owners or operators of an enterprise)
o Whether one corporation is merely an alter ego of another is purely one of fact generally beyond the
jurisdiction of this Court. The Court sustains the ruling of the LA as affirmed by the NLRC that Miramar
and Mar Fishing are separate and distinct entities, based on the marked differences in their stock
ownership.
o Also, the fact that Mar Fishing’s officers remained as such in Miramar does not by itself warrant a
conclusion that the two companies are one and the same. Sesbreño v. Court of Appeals: The mere
 showing that the corporations had a common director sitting in all the boards without more does not
authorize disregarding their separate juridical personalities.
o Neither can the veil of corporate fiction between the two companies be pierced by the rest of
petitioners’ submissions, namely, the alleged take-over by Miramar of Mar Fishing’s operations and the
evident similarity of their businesses. Since piercing the veil of corporate fiction is frowned upon, those
who seek to pierce the veil must clearly establish that the separate and distinct personalities of the
corporations are set up to justify a wrong, protect a fraud, or perpetrate a deception. This,
unfortunately, petitioners have failed to do.
o Indophil Textile Mill Workers Union vs. Calica: The fact that the businesses of private respondent and
Acrylic are related, that some of the employees of the private respondent are the same persons
manning and providing for auxiliary services to the units of Acrylic, and that the physical plants, offices
and facilities are situated in the same compound, it is our considered opinion that these facts are not
sufficient to justify the piercing of the corporate veil of Acrylic.
c. When is the reckoning period for the award of back wages?
o Court no longer dwelt on the exact computation of petitioners’ claims for back wages, which have been
sufficiently threshed out by the LA and the NLRC. Judicial review of labor cases does not go beyond an
evaluation of the sufficiency of the evidence upon which labor officials' findings rest.

RATIO 2: The assertions of petitioners fail on both procedural and substantive aspects. Therefore, no special
reasons exist to reverse the CA’s dismissal of the case due to their failure to abide by the mandatory procedure for
filing a petition for review on certiorari.
 While we sympathize with the situation of the workers in this case, we cannot disregard, absent compelling
reasons, the factual determinations and the legal doctrines that support the findings of the courts a quo.
 The Court reminds the parties seeking the ultimate relief of certiorari to observe the rules, since
nonobservance thereof cannot be brushed aside as a “mere technicality.” Procedural rules are not to
be belittled or simply disregarded, for these prescribed procedures ensure an orderly and speedy
administration of justice.
HELD: CA AFFIRMED. Petition denied for lack of merit.

CASE TITLE:

Hacienda Luisita, Inc. (HLI), petitioner,

Luisita Industrial Park Corp. (LIPCO) and Rizal Commercial Banking Corporation (RCBC), petitioners-in-
intervention,

-versus-

Presidential Agrarian Reform Council (PARC); Secretary Nasser Pangandaman of the Department of Agrarian
Reform (DAR); Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), Rene Galang, Noel
Mallari, and Julio Suniga and his Supervisory Group of the HLI and Windsor Andaya, respondents.

G.R. No. 171101. July 5, 2011

CASE:

This case is a SPECIAL CIVIL ACTION in the Supreme Court. This involves a Petition for Certiorari and
Prohibition under Rule 65 with prayer for preliminary injunctive relief, HLI seeking to question and reverse the
PARC Resolutions issued on December 22, 2005 and May 3, 2006, and the implementing Notice of Coverage
dated January 2, 2006.

FACTS:

In 1955, Land Reform Act [RA 1400] was passed which set the expropriation of all tenanted estates.

In 1957, the Spanish owners of the Compañia General de Tabacos de Filipinas (Tabacalera) sold to Tarlac
Development Corporation (TADECO) Hacienda Luisita and their controlling interest in the sugar mill within the
hacienda, the Central Azucarera de Tarlac (CAT), to be paid in Philippine pesos and in US dollars.

The Philippine Government, through the Central Bank of the Philippines, aided the buyer to obtain a
dollar loan from a US bank. The GSIS Board of Trustees extended on November 27, 1957 a PhP 5.911M loan in
favour of TADECO to pay the peso price with a condition under GSIS Resolution No. 3203, later amended by
Resolution No. 356, Series of 1958, which states:
 “…the lots comprising Hacienda Luisita shall be subdivided by the applicant-corporation and sold
at cost to the tenants, should there be any, and whenever conditions should exist warranting
such action under the provisions of the Land Tenure Act.”

On March 31, 1958, TADECO had fully paid the purchase price for the acquisition of Hacienda Luisita.

On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, abolishing share tenancy
and converting it to leasehold tenancy. It also created the Land Band of the Philippines (LBP). However, the law’s
application was found to be limited to specific areas in the Central Luzon.

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a
land reform area and automatically converting tenancy to leasehold tenancy in all areas and reducing the
retention limit from 75 Ha to 7 Ha.

A month after the declaration of Martial Law in September of 1972, President Marcos issued
Presidential Decree No. 27 which allows tenant-farmers to purchase the land they tilled or to change from
shared-tenancy to fixed-rent leasehold tenancy, as a way to go about the “emancipation of the tillers from the
bondage of the soil”.

On May 7, 1980, the Martial Law Administration filed a suit before the RTC of Manila against TADECO to
surrender Hacienda Luisita to the Ministry of Agrarian Reform (now the DAR) for its distribution to farmers. The
RTC ordered TADECO to surrender the hacienda to the MAR.

Then during the time of President Corazon C. Aquino, after Marcos was ousted, Proclamation No. 131,
Series of 1987, was issued instituting a CARP.

On July 22, 1987, EO 229 was issued to provide for mechanisms for CARP implementation. It also
created the PARC as its policy-making body.

On March 17, 1988, the OSG moved to withdraw the government’s case against TADECO, et al.

On May 18, 1988, the CA dismissed the case the Marcos administration initially instituted and won
against TADECO, et al. However, the dismissal was conditioned that there be an approval of a stock distribution
plan (SDP) to be submitted, approved by PARC, and implemented as an alternative mode of land distribution,
and failure to comply will cause the revival of previous decision.

On June 15, 1988, the Comprehensive Agrarian Reform Law of 1988 (RA 6657) took effect, providing a
new process of land classification, acquisition, and distribution. This tested the application of the law in the
current case of Hacienda Luisita.

On August 23, 1988, HLI was formed as a spin-off corporation to facilitate the SDP.

On March 22, 1989, a TADECO, via a Deed of Assignment and Conveyance, transferred and conveyed to
HLI the titles over the lot in question, valued at PhP 196.630,000.00 (33.296% of the total asset of PhP
590,554,220.00). In line with accommodating such transfer, the HLI increased its capital share to PhP
400,000,000 at PhP1/share, PhP 150,000,000 of which were to be issued only to qualified and registered
beneficiaries of the CARP, and the remaining PhP250,000,000 to any stockholder of the corporation. (Obviously,
the controlling shares of FWBs are lower in this case.) HLI guaranteed to the qualified beneficiaries of the SDP
production-sharing that “every year they will receive, on top of their regular compensation, an amount that
approximates 3% of the total gross sale from the production of the agricultural land, whether it is in the form of
cash dividends or incentive bonuses or both.” The production sharing is payable irrespective of whether HLI
makes money or not. HLI also assured each family beneficiary to be guaranteed a homelot of not more than 240
sq. m. in the barrio or barangay where they reside.

On May 9, 1989, about 93% of the FWBs accepted and signed the proposed SDOP.

On May 11, 1989, SDOA was entered into by TADECO/HLI and 5,848 qualified FWBs.

On October 14, 1989, the referendum conducted by DAR showed that 5,177 FWBs out of 5,315
participants opted to receive shares in the HLI (that’s about 97.403575% of the participants), and only 132 chose
actual land distribution.
 On November 6, 1989, the DAR Secretary Mirriam Defensor-Santiago (now deceased) proposed the
revision of the SDP. On November 14, 1989, TADECO told DAR Sec. MDS that the proposed revision were already
in place in the SDP and MOA. Hence, On November 21, 1989, a Resolution No. 89-12-2 approved the SDP of
TADECO/HLI.

From 1989 to 2005, HLI claimed to have extended the following benefits to FWBs:

(a) PhP 3 Billion worth of salaries, wages and fringe benefits;

(b) 59 Million shares of stock distribution for free to FWBs;
(c) PhP 150M, PhP 37.5M, PhP 2.4M, all representing 3% of the gross produce, the
sale of 500 Ha of converted agricultural land of Hacienda Luisita, and the sale of
80 Ha at PhP 80M for SCTEX, respectively.
(d) 240 sq.m. homelots distributed for free;
(e) Social service benefits
On August 15, 1995, HLI applied for conversion of the 500 Ha land from agricultural to industrial, which
was approved by DAR Secretary Ernesto Garilao a year later, or on August 14, 1996, conditioned on the payment
of 3% of gross selling price to FWBs and HLI’s continued compliance with its undertakings under the SDP.

On December 13, 1996, HLI ceded 200 Ha to Luisita Realty Corp. (LRC) at PhP 250 Million each in 1997
and 1998, and 300 Ha of its converted areas to Centennary Holdings, Inc. (Centennary), who later sold the same
to LIPCO for PhP 750 Million, the latter acquiring it for purpose of developing an industrial complex.

On November 25, 2004, LIPCO transferred portion of the lands acquired to RCBC by way of dation en
pago in payment of LIPCO’s PhP 431,634,732.10 loan.

Another 80.51 Ha was later detached from Hacienda Luisita and acquired by the government as part of
the SCTEX complex. About 4,335.75 Ha out of the 4,915 Ha remained of the original area ceded by TADECO to
HLI.

With the prevailing situation, earlier in 2003, DAR received two petitions seeking to renegotiate, and/or
revoke the SDOA for violation by the HLI of the SDOA’s terms.

In the first petition, Jose Julio Suniga and Windsor Andaya (Supervisory Group of HLI) and 60 other
supervisors alleged that HLI failed to give their dividends, and their share in the gross sales and proceeds of the
sales of the converted area 500 Ha area. They claimed that their lives have not improved contrary to the
guarantees of the SDOA.

In the second petition (Petisyon), they call for the revocation and nullification of the SDOA and the
distribution of the lands. The Petisyon was filed by the AMBALA (composing about 80% of the 5,339 FWBs of
Hacienda Luisita).

DAR constituted a Special Task Force to attend to the issues relating to the SDP of HLI and the latter
found that HLI failed to comply with their undertakings.

On December 22, 2005, PARC affirmed the recommendation of DAR to recall/revoke the SDOP of
TADECO/HLI and the land be placed under compulsory coverage or mandated land acquisition.

On January 2, 2006, HLI sought reconsideration. On the same day, DAR issued a Notice of Coverage,
which HLI received 2 days after.

On May 3, 2006, PARC’s Resolution denied MR by HLI.

But on June 14, 2006, the Court, acting on HLI’s motion, issued a TRO, enjoining the implementation of
PARC’s Resolution and the notice of coverage.

On December 2, 2006, Mallari filed a manisfestation and motion, alleging that he broke up with AMBALA
and formed FARM with Renato Lalic, and thus prayed to be allowed to intervene. In this moment, two factions
were created due to shirt and re-shift of allegiance, as Mallari would later return to create an AMBALA-Noel
Mallari faction, leaving Renato Lalic with the rest of the members in FARM.
 On October 30, 2007, RCBC and LIPCO intervened and alleged that the assailed resolution effectively
nullified the TCTs under their respective names as the properties covered in the TCTs were included in the
January 2, 2006 Notice of Coverage. They claim that the revocation of SDP cannot legally affect their rights as
innocent purchasers for value. They both asserted to have acquired vested and indefeasible rights over certain
portions of the covered properties.

On August 31, 2010, the Court created a Mediation Panel in a bid to resolve the dispute but no
acceptable agreement was reached.

ISSUES:

(1) Whether or not petitioners for the revocation/nullification of SDOA (herein

respondents) are real party-in-interests;
(2) Whether or not PARC has jurisdiction to recall or revoke HLI’s SDP;
(3) Whether or not Section 31 of RA 6657 is constitutional;
(4) Whether or not such recall or revocation is a valid or proper action; and
(5) Whether or not the terms and conditions of the SDP, as embodied in the SDOA is
valid.
RULINGS:

FIRST ISSUE:

YES. The Supreme Court held that Supervisory Group, AMBALA and their respective leaders are real
parties-in-interest.

The SDOA identifies the “SDP qualified beneficiaries” as “the farmworkers who appears in the annual
payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by
HLI.” Galang and the Supervisory group who were admittedly employed by HLI comes within the definition of
real party-in-interest under Section 2, Rule 3 of the Rules of Court, as one benefited or injured by the judgment
in a suit, and thus, entitled to sue.

Assuming arguendo that they are not regular farmworkers, Article XIII of the Constitution categorized
them as “other farmworkers” entitled to “receive a just share of the fruits” of the land.

SECOND ISSUE:

YES. Although E0 229 expressly vested PARC with such authority to approve plan for stock distribution,
without explicitly vesting it to revoke/recall an approved SDP, under the principle of necessary implication, a
basic postulate that what is implied in a statute is as much a part of it as that which is expressed. To simply
state it, every statutory grant of power, right or privilege is deemed to include all incidental power, right, or
privilege. Following the said doctrine, it may be stated that the conferment of express power to approve SDP of
agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan,
for to deny PARC of such revocation power, as in this case, would reduce it into a toothless agency of CARP.

On a related issue, HLI claimed that subjecting the landholding to compulsory distribution after the
approval of its SDP results in the impairment of obligation and contract, and as such, a breach of its terms and
conditions is not a PARC administrative matter, but one that gives rise to a cause of action cognizable by regular
courts. The Supreme Court stressed that SDOA is a special contract imbued with public interest, entered into
pursuant to RA 6657 and subject to the approval and administrative adjudication of its issuing authority—PARC.

Contrary to the view of HLI, the rights, obligations, and remedies of the parties to the SDOA embodying
the SDP are governed by RA 6657 and not by the Corporation Code. HLI, as pointed by the Court was made to
comply with RA 6657, and not to shield itself from the coverage of CARP and supplant or circumvent the
agrarian reform program. Also as between the Corporation Code, a general law and RA 6657, a special law, the
latter prevails –generalia specialibus non derogant. What private respondents questioned before the Dar was
the proper implementation of SDP and HLI’s compliance with RA 6657. Evidently, RA 6657 was the applicable
law in this case.

Also, contrary to the view of HLI that the inclusion of the agricultural land of Hacienda Luisita under
CARP coverage and the eventual distribution of the land to FWBs amounts to the dissolution of all corporate
assets of HLI, and thus the Corporation Code apply, the Court was not persuaded. The Court said that such
inclusion and eventual distribution will not automatically trigger the dissolution of HLI since the value of
agricultural lands in relation to the total assets transferred and conveyed by TADECO to HLI comprises only
33.296% (meaning it does not hold the majority assets of the corporation to trigger such dissolution).

THIRD ISSUE:

In this issue on constitutionality of Section 31 of RA 6657, FARM seeks to invalidate the said provision of
the law because it allows corporations to use stock distribution as its mode of distribution or transfer instead of
an outright agricultural land transfer, which they believe impairs the fundamental right of farmers and
farmworkers envisioned under Section 4, Article XIII of the Constitution. HLI counters this matter by saying that
agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries.

Accordingly, the challenge on the constitutionality of Section 31 of RA 6657 and its counterpart
provision in EO 229 failed.

The essential requisites for the exercise of its power of judicial review include the following:
 (1) There is an actual case or controversy
(2) That the constitutional question is raised at the earliest possible opportunity by the
proper party or one with locus standi; and
(3) The issue of constitutionality must be the very lis mota of the case. [Garcia vs.
Executive Secretary, 415 SCRA 44 (2009)]
The Supreme Court reasoned that the reason it failed was because of failure of the intervenors to
question its constitutionality in the earliest opportunity, and instead, slept on their rights and received benefits
derived from the same. As early as November 21, 1989 when PARC approved the SDP of Hacienda Luisita or at
least within a reasonable time thereafter, its members received benefits from the SDP without so much protest.
It was only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated
November 21, 1989 that said plan and approving resolution was sought to be revoked. Furthermore, AMBALA
did NOT question the constitutionality of said provision but focused on the flaws and gaps in the subsequent
implementation of the SDP. Even the public respondent Sol. Gen. did not question it, and such question was only
raised on May 3, 2007 when it filed its Supplemental Comment with the Court.

It has been stressed by the Supreme Court that the question on constitutionality will not passed upon by
the Court unless it is raised at the first or earliest possible opportunity by the proper party.

In terms of the lis mota of the case, the invalidity of the provision was not alleged, but rather it is the
alleged application in the SDP that is flawed was raised.

The Supreme Court also noted that Section 5 of RA 9700 superseded Section 31 of RA 6657 vis-à-vis the
stock distribution component of said provision, where Section 5 of RA 9700 provides: “That after June 30, 2009,
the mode of acquisition shall be limited to voluntary offer to sell and compulsory acquisition.” Thus, stock
distribution is no longer an available option under existing law. The issue has become moot and academic.

The Supreme Court ruled that there appeared to have been no breach of the fundamental law. Section
4, Article XIII of the 1987 Constitution reads:

“The State shall, by law, undertake an agrarian reform program founded on the right of
the farmers and regular farmworkers, who are landless, to OWN directly or
COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a
just share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-sharing.”

The law is clear – farmers and regular farmworkers have a right to OWN DIRECTLY OR COLLECTIVELY THE
LANDS THEY TILL. The basic law allows two modes of land distribution—direct and indirect ownership. No
language is found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers
from being the legal entity through which collective ownership can be exercised. The term “collectively” is said
to allow indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the
fact that land reform may become successful even if it is done through the medium of juridical entities
composed of farmers.

Even in the definition of agrarian reform itself in RA 6657 allows stock distribution— “the redistribution
of lands… to farmers and regular farmworkers who are landless… to lift the economic status of the beneficiaries
and all other arrangements alternative to physical redistribution of land, such as production or profit sharing,
labour management and the distribution of shares of stock which allow beneficiaries to receive a just share of
the fruits of the land they work.”

The SC believed that Sec. 31 of RA 6657 is NOT inconsistent with the State’s commitment to farmers and
farmworkers to advance their interests under the policy of social justice. This is believed to be the modality of
the legislature for collective ownership by which the imperatives of social justice may be approximated, if not
achieved.
 Also as contended by FARM that stock certificates do not equate to land ownership, still, the
Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in the assets
of the corporation, which includes the agricultural lands. A share of stock typifies an aliquot part of the
corporation’s property, or right to share in its proceeds to the extent when distributed according to law and
equity and that its holder is not the owner of any part of the capital of the corporation. However, the FWBs will
ultimately own the agricultural lands owned by the corporation when the latter is eventually dissolved and
liquidated.

The policy of agrarian reform is that control over the agricultural land must always be in the hands of
the farmers. The Court also reasoned that there can be no guarantee of a successful implementation of agrarian
reform, whether there is actual distribution or not. Accordingly, the principle of “land to the tiller and the old
pastoral model of ownership were non-human juridical persons were prohibited from owning agricultural lands
are no longer realistic under existing conditions.
FOURTH ISSUE:

On the determination of the propriety of such revocation or recall of HLI’s SDP by PARC for violating the
agrarian reform policy under Sec. 2 of RA 6657, as said plan fail to enhance the dignity and improve the quality
of lives of the FWBs through greater productivity of agricultural lands, the SC disagreed.

The SC reasoned that Section 2 of RA 6657 states that improving the economic status of FWBs is neither
among the legal obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a
violation of which would justify discarding the stock distribution option. Nothing in that option agreement, law
or department order indicates otherwise.

Also SC said that it’s a matter of common business sense that no corporation could guarantee a
profitable run all the time. As such being the case, SDP cannot also guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs.

The onerous condition of the FWBs’ economic status and hardships can hardly be attributed to HLI and
its SDP and provide a valid ground for the plan’s revocation.

On the Conversion of Lands

In this issue of the conversion of 500 Ha to non-agricultural uses as an infringement of Sec. 5 (a) of DAO
10, which reads: “a. that the continued operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased profitability”, the SC said that the PARC is
wrong.

Said Sec. 5 (a) of DAO 10 does not exact from the corporate landowner-applicant the undertaking to
keep the farm intact and unfragmented ad infinitum (forever). What is required is viability of the corporate
operations with or without its corporate land remaining intact or unfragmented.”

On the 3% Production Share

On the matter of whether HLI complied with its undertaking to give 3% shares of the gross production
sales of the land, the SC ruled that the Special Task Force was silent as to whether HLI has failed to comply with
the 3% production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX
lot, since some FWBs admits to have received their share in the gross production of the sales and in the sale of
SCTEX lot while the others claimed otherwise. The Court found this as a slight breach that would not justify
rescission of the contract.

On Titles to Homelots

Under RA 6657, the distribution of homelots is required only for corporations or other business
associations owning or operating farms which opted for land distribution, and not for corporations which opted
for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporation are not obliged to provide it,
EXCEPT by stipulation, as in this case.

Under the SDP, HLI subdivided and allocated for free to qualified family-beneficiaries 240 sq. m.
homelots in the barrio or barangay where they actually reside. The Court opined that 16 years have elapse from
the time the SDP was approved by PARC, and yet FWBs alleged that not all were afforded homelots. Hence, SC
ruled that HLI has not yet fully complied with its undertaking to distribute homelots to FWBs under the SDP.

On “Man Days” and the Mechanics of Stock Distribution

The SC found that the SDOA violated two provisions of DAO 10.

In Par. 3 of the SDOA, the distribution of the shares of stock to the FWBs is contigent on the number of days
FWBs have worked during the year. This deviates from Sec. 4, DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Section
21 of RA 6657.

Accordingly, Section 4 of DAO 10 gives two sets of shares of stocks which a qualified beneficiary can
acquire from the corporation under the SDP. The first one is the mandatory ratio of equal number of shares of
stocks to be distributed to the FWBs which contemplates “proportion of the capital stock of the corporation
that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total
asset.”

The second partakes a gratuitous extra grant or an augmentation share/s that the corporate landowner
may give under an additional stock distribution scheme, taking into account the rank, seniority, salary, position,
and like factors which the management, in the exercise of its sound discretion, may deem desirable.

However, the Court found that by providing that number of shares of the original 1989 FWBs to depend
on the number of “man days”, HLI violated the rule on stock distribution and effectively deprived the FWBs of
equal shares of stock in the corporation notwithstanding the fact that these FWBs have given up their right to
the land that could have been distributed to them instead of suffering such dilution regarding their due share
entitlement.

Each of the 6,296 original FWBs is entitled to 18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI share per
beneficiary needs to work at least 37 days in a fiscal year before the latter becomes entitled to HLI shares. If it
falls below 37 days, the FWB gets no share at year end. The number of HLI shares distributed varies depending
on the number of days the FWBs were allowed to work in one year. Worst is they even hired additional
farmworkers which reached a number of 10,502 which eventually diluted the 18,804.32 shares as a result of the
use of “man days” and hiring additional farmworkers (as ‘kahati’ in the share obviously).

Another sub-issue pointed is the reliance of HLI to Section 26 of RA 6657 which suggests that land
awarded “shall be paid to by the beneficiaries to the LBP in 30 annual amortizations.” To simply put it, the
beneficiaries are the ones obliged to pay the LBP (which would really make it impossible for them to own it) and
it is the HLI who is obliged to distribute the shares of stocks among FWBs.

Exclusion from the coverage of land purchased by RCBC and LIPCO (III)

On resolving the issue of whether the converted farm land (allegedly) innocently purchased for value by
RCBC and LIPCO should be excluded from the PARC Resolution 2005-32-01, as implemented by the DAR-issued
Notice of Coverage dated January 2, 2006, which called for a mandatory CARP acquisition of the lands subject of
the SDP, the SC opined that although Section 44 of PD 1529 gives the principle that one need not look at the
four corners of the title and may rely on what appears on it, the rule admits to some exceptions, as when the
party had knowledge of the facts and circumstances that would impel a reasonably cautious man to make
inquiry, or when the purchaser has knowledge of the defect of lack of title, or sufficient facts to make inquiry
into the status of the title of the property in litigation. Obviously, a higher level of care and diligence is expected
from banks, their business being impressed with public interest.

But the Court ruled that facts prove that RCBC and LIPCO cannot be claimed to have acted in bad faith to
have acquired the lots that were previously covered by SDP. The Court said that RCBC and LIPCO honestly
believed that the subject lots were validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage of PARC Resolution No. 89-12-2 and hence, can be legally and validly
acquired by them, and since Section 65 of RA 6657 allows conversion and disposition of agricultural lands
previously covered by CARP. Also DAR notified all affected parties, especially the FWBs but the order became
final and executory after failure to interpose an appeal. Since RCBC and LIPCO believed in good faith that the
previous registered owners could legally sell and convey the lot though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. This fact cannot be disregarded
by DAR, PARC, or even the SC.

As regards to the 80.51 ha land transferred to the government for use as part of SCTEX, this is excluded
from the compulsory coverage considering that the transfer was made via the government’s power of eminent
domain.

As to the actual existence of a statute or executive act is, prior to such a determination, an operative
fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a new
judicial declaration.
 In this case, it is not the SDOA dated May 11, 1989 which was revoked, but rather, it is the PARC’s
approval of the HLI’s Proposal for Stock Distribution under CARP which embodied the SDP that was nullified. It is
the SDP that gave legal force an effect to the stock distribution scheme under PARC Resolution No. 89-12-2 that
gave it its validity, and not the SDOA which merely gave its basis and mechanics.

On PARC’s Resolutions effectively nullifying the Hacienda Luisita’s SDP (IV)

The Court upheld the revocation of the questioned PARC resolutions. The Court also recognized the
rights of the original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not.
The Court reasoned that it cannot turn a blind eye to the fact that the FWBs were said to have received benefits
from the said agreement. Also on August 6, 2010, HLI and private respondents submitted a Compromise
Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural lands or remain as HLI
stockholders, and which most FWBs chose the latter.

With regards to the homelots already awarded, the FWBs are not obliged to return it to HLI or pay for its
value since it is part of the SDP’s benefit granted to them. However, for those who did not receive the homelot
as of the revocation of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no
longer be entitled to homelots. In case of distribution, the homelots would then not be deducted.

In terms of the 3% proceeds of the 500-ha land and 80.51 ha SCTEX lot to FWBs, DAR will move for the
auditing of HLI’s books to determine if the proceeds where utilized fof legitimate corporate purpose and the
remaining balance from the proceeds of the sale shall be distributed to the qualified beneficiaries.

In view of HLI’s payment of rent to FWBs for the use of the land from 1989, the Court said that this
cannot be done as the FWBs are also stockholders of HLI (a seemingly elite title), and the benefits acquired by
the corporation from its possession and use of the land ultimately redounded to the FWBs benefit based on its
business operations in the form of salaries, and other fringe benefits under the CBA. To allow payment of rent
would tantamount to double compensation.

HLI will continue to exist, not functioning under the SDP, as the same was revoked already, but pursuant
to the Corporation Code as a private stock corporation.

HLI shall also be paid just compensation for the remaining agricultural lands that will be transferred to
DAR for land distribution to the FWBs. The date of taking considered by the SC is November 21, 1989, when
PARC approved the HLI’s SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the
determination of just compensation, and NOT May 11, 1989, when the SDOA was approved by PARC.

The petition is treated as pro hac vice (means for this case only) in view of the peculiar facts and
circumstances of the case.

THE INSTANT PETITION IS DENIED.

PARC Resolution No. 2005-32-01 dated December 22, 2005 (wherein PARC affirmed the
recommendation of DAR to recall/revoke the SDOP of TADECO/HLI and the land be placed under compulsory
coverage or mandated land acquisition) and May 3, 2006 (wherein PARC denied MR by HLI) are AFFIRMED with
MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI.
Other FWBs who do not belong to the said original qualified beneficiaries are NOT entitled to land distribution
and shall remain as HLI stockholders. HLI is directed to pay the FWBs the cconsiderations received from the 500
Ha converted land sale and 80.51 ha SCTEX lot, wherein the 3% gross sales from the production of agricultural
land, including expenditures for legitimate corporate purpose, such as taxes and title transfer payments, shall be
deducted from the total amount of PhP 1,330,511,500 (3 comas!). Any unspent or unused balance will be
distributed to the original FWBs.

HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be
reckoned from November 21, 1989 and LBP are ordered to determine the compensation due to HLI.

DAR’s compliance report is ordered to be submitted six months from finality of judgment. TRO is lifted.

DISSENTING OPINION

Corona, C.J.:
 One of the nice points given by the late CJ Corona (ousted in the PNoy Administration) states, to wit:

“Agrarian reform is an essential element of social justice under the 1987 Constitution. It mandates that
farmers and farmworkers have the right to own the land they till, individually and collectively, through
cooperative or similar organizations. It aims to liberate farmers and farmworkers from bondage to the soil, to
ensure that they do not remain slaves of the land but stewards thereof.”

He also opined that “unless there is land distribution, there can be no agrarian reform. Any program that
gives farmers or farmworkers anything less than ownership of land fails to conform to the mandate of the
Constitution. In other words, a program that gives qualified beneficiaries stock certificates instead of land is not
agrarian reform.”

He believed that “actual land distribution is the essential characteristic of a constitutional agrarian
reform program.” Accordingly, the “polar star” in land reform is that ‘the farmer has a right to the land he tills”.

In the APRIL 24, 2012 RESOLUTION involving the same Hacienda Luisita Case

On November 22, 2011, the Court recalled and set aside the option to remain as stockholders of HLI,
while maintaining that all benefits received shall be respected with no obligation to refund or return them.

On December 9, 2011, a Motion for Reconsideration/Clarification by private respondents Mallari,

Suniga, Supervisory Group of HLI, and Andaya (Mallari, et al.

On December 16, 2011, a Motion to Clarify and Reconsider Resolution of November 22, 2011 was filed
by HLI.

HLI and Mallari, et al., invokes the following grounds:

A. WON SC erred in determining just compensation by considering the date of

taking as November 21, 1989 when PARC approved the SDP (already revoked)
since the Notice of Coverage of January 2, 2006 may be considered as time FWBs
owned and possess the agricultural lands of Hacienda Luisita because it was the
only time when the latter was placed under Compulsory Acquisition in view of
failure to perform their obligations under the SDP, or SDOA, when the owner is
ACTUALLY deprived or dispossessed of his property, and considering taking
from November 21, 1989 is a deprivation of landowner’s property WITHOUT
due process of law; and HLI is entitled to be paid interest on the just
compensation.
B. WON SC erred in reversing the decision of giving the FWBs option to remain as
stockholders or not since (1) it has been decided; (2) that neither the Constitution
nor the CARL requires that FWBs should have control over the agricultural lands;
and (3) that the option is not shown to be detrimental to FWBs, but rather found
beneficial by the SC.
C. The proprietary of distributing the proceeds from the sale of the 500ha and 80.51
SCTEX lot cannot be retained by HLI but returned to the FWBs and that HLI is
using the Corporation Code to avoid liability to the FWBs because: (1) the
proceeds belongs to the corporation and not to either the HLI/TADECO or
FWBs; and (2) to allow return or proceeds to FWBs.
D. Just Compensation for the Homelots given to FWBs as it does not form part of
the 4,915.75 hectares covered by the SDP, and hence, the value of these homelots
should, with the revocation of the SDP, be paid to Tadeco as the landowner.
ON JUST COMPENSATION:
 The Court stressed that “just compensation has been defined as the full and fair equivalent of the
property taken from its owner by the expropriator. The measure is not the takers gain, but the owner’s loss.
Hence, in determining just compensation, the price or value of the property at the time it was taken from the
owner and appropriated by the government shall be the basis. If the government takes possession of the land
before the institution of expropriation proceedings, the value should be fixed as of the time of the taking of said
possession, not of the filing of the complaint.”

The SC, citing Land Bank of the Philippines v. Livioc, said that taking is when the landowner was deprived
of the use and benefit of his property, such as when the title is transferred to the Republic. It also noted that
taking also occurs when agricultural lands are voluntarily offered by a landowner and approved by PARC
for CARP coverage through the stock distribution scheme, as in the case of HLI earlier decided. Thus, HLI
submitting its SDP for approval is an acknowledgment on its part that the agricultural lands of Hacienda Luisita
are covered by CARP. However, the PARC approval should be considered as the effective date of taking because
it was only during that time that the government officially confirmed the CARP coverage of these lands.

Accordingly, Stock distribution and compulsory acquisition are two modalities sharing the same end goal
of having a more equitable distribution of land ownership, without ignoring such right to just compensation.
Also, since it is only upon the approval of the SDP that the agricultural lands actually came under CARP coverage,
such approval operates and takes the place of a notice of coverage ordinarily issued under compulsory
acquisition.

What the SC found notable, however, is that the divestment by Tadeco of the agricultural lands of
Hacienda Luisita and the giving of the shares of stock for free is nothing but an enticement or incentive for the
FWBs to agree with the stock distribution option scheme and not further push for land distribution. And the
stubborn fact is that the “man days” scheme of HLI impelled the FWBs to work in the hacienda in exchange for
such shares of stock.

The Court ruled that taking only when the landowner is deprived of the use and benefit of his property is
not incompatible with the earlier conclusion that taking took place on November 21, 1989, and since even from
the start, TADECO seemed to already favour Stock Distribution Scheme when complying with the CARP when it
organized the HLI as its spin-off corporation which facilitated stock acquisition of FWBs. Tadeco assigned
and conveyed 4,915.75 has to HLI the agricultural lands of Hacienda Luisita. These agricultural lands constituted
as the capital contribution of the FWBs in HLI. This, in effect, deprived TADECO itself of the ownership over these
lands when it transferred the same to HLI.

When the agricultural lands of Hacienda Luisita were transferred by Tadeco to HLI in order to comply
with CARP through the stock distribution option scheme under PARC Resolution No. 89-12-2 dated November
21, 1989, Tadeco was consequently dispossessed of the ownership of the same.

Furthermore, adherence to the suggestion of HLI that the Notice of Coverage issued on January 2, 2006
should be considered as date of taking would in effect penalize the qualified FWBs twice for acceding to the
Stock Distribution Scheme, (1) depriving them of the agricultural lands they should have gotten earlier, if it were
not for this SDP and (2) making them pay higher amortization for the agricultural lands that should have been
given to them decades ago.

The SC maintained that, as it has in fact already ruled on its reckoning date, that is, November 21, 1989,
the date of issuance of PARC Resolution No. 89-12-2, based on the above-mentioned disquisitions.

On side note, the SC added that “even though the compensation due to HLI will still be preliminarily
determined by DAR and LBP, subject to review by the RTC acting as a SAC, the fact that the reckoning point of
taking is already fixed at a certain date should already hasten the proceedings and not further cause undue
hardship on the parties, especially the qualified FWBs.”

Option will not ensure control over agricultural lands

The Court agreed that the option given to the qualified FWBs whether to remain as stockholders of HLI
or opt for land distribution is neither iniquitous nor prejudicial to the FWBs. However, the Court is noted the
policy on agrarian reform that control over the agricultural land must always be in the hands of the farmers.
Contrary to the stance of HLI, both the Constitution and RA 6657 intended the farmers, individually or
collectively, to have control over the agricultural lands of HLI; otherwise, all these rhetoric about agrarian reform
will be rendered for naught.

Sec. 4, Art. XIII of the 1987 Constitution provides:

Section 4. The State shall, by law, undertake an agrarian reform program founded
on the right of farmers and regular farmworkers who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into account ecological, developmental, or
equity considerations, and subject to the payment of just compensation. In determining
retention limits, the State shall respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing. (Emphasis supplied.)

Sec. 2 of RA 6657 also states:

SECTION 2. Declaration of Principles and Policies. - It is the policy of the State to pursue
a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers
and farm workers will receive the highest consideration to promote social justice and to
move the nation towards sound rural development and industrialization, and the
establishment of owner cultivatorship of economic-sized farms as the basis of Philippine
agriculture.

The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof.

As discussed by the SC, there is collective ownership as long as there is a concerted group work by the
farmers on the land, regardless of whether the landowner is a cooperative, association or corporation composed
of farmers. However, the definition of collective ownership should be read in light of the clear policy of the law
on agrarian reform, which is to emancipate the tiller from the bondage of the soil and empower the common
people.

“HLI’s insistent view that control need not be in the hands of the farmers translates to allowing it to
run roughshod against the very reason for the enactment of agrarian reform laws and leave the farmers in
their shackles with sheer lip service to look forward to.” (quotable phrase)

FWBs Entitled to Proceeds of Sale

The proceeds realized from the sale should accrue for the benefit of the FWBs, minus deductions of the
3% of the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer
of titles to the transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate
corporate purposes, as prescribed in our November 22, 2011 Resolution.

HOMELOTS

The SC agreed to DISAGREE.

As reiterated in the earlier decision, the distribution of homelots is required under RA 6657 only for corporations
or business associations owning or operating farms which opted for land distribution. Corporations are not
obliged to provide for homelots. Nonetheless, HLI undertook to subdivide and allocate for free and without
charge among the qualified family-beneficiaries 240 sq. m. of homelots to some, if not all of the qualified
beneficiaries.

The Supreme Court, by a unanimous vote, resolved to maintain its ruling that the FWBs shall retain
ownership of the homelots given to them with no obligation to pay for the value of said lots. Also, since the SDP
was already revoked with finality in th earlier discussion of the decision, the Court directs the government
through the DAR to pay HLI the just compensation for said homelots in consonance with Sec. 4, Article XIII of the
1987 Constitution that the taking of land for use in the agrarian reform program is subject to the payment of just
compensation.

The Motions of both parties were DENIED with qualification. The July 5, 2011, Decision was modified by
the November 21, 2011 Resolution which ordered the government, through the DAR, to pay just compensation
for the 240 sq. m. homelots distributed to FWBs. This RESOLUTION is now declared FINAL and EXECUTORY.

Sarona vs NLRC 2012

Facts:

 Petitioner, a security guard in Sceptre since April 1976, was asked by Sceptre’s operations manager on June 2003, to submit a
resignation letter as a requirement for an application in Royale and to fill up an employment application form for the said company.
He was then assigned at Highlight Metal Craft Inc. from July 29 to August 8, 2003 and was later transferred to Wide Wide World
Express Inc. On September 2003, he was informed that his assignment at WWWE Inc. was withdrawn because Royale has been
allegedly replaced by another security agency which he later discovered to be untrue. Nevertheless, he was once again assigned at
Highlight Metal sometime in September 2003 and when he reported at Royale’s office on October 1, 2003, he was informed that he
would no longer be given any assignment as instructed by Sceptre’s general manager.
 He thus filed acomplaint for illegal dismissal. The LA ruled in petitioner’s favor as he found him illegally dismissed and was
not convinced by the respondent’s claim on petitioner’s abandonment.
 Respondents were ordered to pay back wages computed from the day he was dismissed up to the promulgation of his decision on
May 11, 2005.The LA also ordered for the payment of separation pay but refused to pierce Royale’s corporate veil.
 Respondents appealed to the NLRC claiming that the LA acted with grave abuse of discretion upon ruling on the illegal dismissal of
petitioner. NLRC partially affirmed the LA’s decision with regard to petitioner’s illegal dismissal and separation pay but modified the
amount of backwages and limited it to only 3 months of his last month salary reducing P95, 600 to P15, 600 since he worked for
Royale for only 1 month and 3 days.
 Petitioner did not appeal to LA but raised the validity of LA’s findings on piercing Royale’s corporate personality and computation of
his separation pay and such petition was dismissed by the NLRC. Petitioner elevated NLRC’s decision to the CA on a petition for
certiorari, and the CA disagreed with the NLRC’s decision of not proceeding to review the evidence for determining if Royale is
Sceptre’s alter ego that would warrant the piercing of its corporate veil.
Issue:
 Whether or not Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the petitioner’s length of
service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his employment with Sceptre.
 Whether or not petitioner’s back wages should be limited to his salary for 3 months

Ruling:
 The doctrine of piercing the corporate veil is applicable on alter ego cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
 The respondents’ scheme reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be merged as a
single entity, compelling Royale to credit and recognize the petitioner’s length of service with Sceptre. The respondents cannot use
the legal fiction of a separate corporate personality for ends subversive of the policy and purpose behind its creation or which could
not have been intended by law to which it owed its being.
 Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo became the
owners of the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they executed with
Roso. Royale, shortly after its incorporation, started to hold office in the same property. These, the respondents failed to dispute.
 Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre and Royale are
indeed separate entities, Sceptre should have released the petitioner’s cash bond when he resigned and Royale would have required
the petitioner to post a new cash bond in its favor.
 The way on how petitioner was made to resign from Sceptre then later on made an employee of Royale, reflects the use of the legal
fiction of the separate corporate personality and is an implication of continued employment. Royale is a continuation or successor or
Sceptre since the employees of Sceptre and of Royale are the same and said companies have the same principal place of business.
 Because petitioner’s rights were violated and his employer has not changed, he is entitled to separation pay which must be computed
from the time he was hired until the finality of this decision. Royale is also ordered to pay him backwages from his dismissal on
October 1, 2003 until the finality of this decision.
 However, the amount already received by petitioner from the respondents shall be deducted. He is also awarded moral and exemplary
damages amounting to P 25, 000.00 each for his dismissal which was tainted with bad faith and fraud. Petition is granted. CA’s
decision is reversed and set aside.
 CHILD LEARNING CENTER AND SPOUSES LIMON v. TAGORIO

November 25, 2005 | Azcuna, J. | Rebuttal of Presumption of Negligence

Digester: Santos, Ihna

SUMMARY: Timothy Tagorio, a student of Marymount School, operated by CLC, fell from the 3 rd floor of the school building,
after being locked inside the boy’s CR. Parents of Tagorio filed an action under Art. 2176 against the school, its Board of
Directors, and Administrative Officer. Trial court and CA held CLC and Sps. Limon liable. SC modified this ruling and held that
only CLC is liable.

DOCTRINE: Due diligence in the selection and supervision of employees is applicable where the employer is being held
responsible for the acts or omissions of others under Art. 2180 of the Civil Code, but not if the liability is under Art. 2176 of the
same code.

FACTS:

 During the school year 1990-1991, Timothy Tagorio was a Grade IV student at Marymount School, an academic institution
operated and maintained by Child Learning Center, Inc. (CLC).
 Between 1-2pm of March 5, 1991, Timothy entered the boy’s CR at the 3rd floor of the school to answer the call of nature.
However, he found himself locked inside and unable to get out. Timothy started to panic and so he banged and kicked the
door and yelled several times for help. When no helped arrived, he decided to open the window to call for help. In the
process of opening the window, Timothy went right through and fell down 3 stories. He was hospitalized and given medical
treatment for serious multiple physical injuries.
 Sps. Basilio and Herminia Tagorio, parents of Timothy, filed an action under Art. 2176 of CC against the CLC, the members
of its Board of Directors (Sps. Edgardo and Sylvia Limon, Alfonso Cruz, Carmelo Narciso, Luningning Salvador), and the
Administrative Officer of Marymount School, Ricardo Pilao.
 In its defense, CLC maintained that there was nothing defective about the locking mechanism of the door and that the fall of
Timothy was not due to its fault or negligence. It further maintained that it had exercised the due care and diligence of a good
father of a family to ensure the safety, wellbeing and convenience of its students.
 Court a quo found in favor of respondents and ordered petitioners CLC and Sps. Limon to pay respondents jointly and
severally actual, compensatory, moral, and exemplary damages, as well as attorney’s fee. The trial court disregarded the
corporate fiction of CLC and held the Spouses Limon personally liable because they were the ones who actually managed the
affairs of the CLC.
 CA affirmed the decision in toto. MR denied. Hence, this petition for certiorari.

RULING: Petition partly granted. CA decision modified in that Sps. Limon are absolved from personal liability. CLC still liable.

Whether the Court should reverse the factual findings of the trial court and CA– NO, case does not fall under the
exemptions to the general rule that factual findings of the trial court, affirmed by CA, are final and conclusive and may
not be reviewed on appeal

 Factual findings of the trial court, and affirmed by CA, were question by petitioners:
o that CLC failed to provide precautionary measures to avoid harm and injury to its students in 2 instances: (1) failure to
fix a defective door know despite having been notified of the problem, and (2) failure to install safety grills on the
window where Timothy fell from
 Court’s ruling:
(1) Petitioners are clearly answerable for failure to see to it that the doors of their school toilets are at all times in
working condition. The fact that a student had to go through the window, instead of the door, shows that something
was wrong with the door.

(2) As to the absence of grills on the window, petitioners contend that there was no such requirement under the Building
Code. Nevertheless, the fact is that such window, as petitioners themselves point out, was approximately 1.5 meters
from the floor, so that it was within reach of a student who finds the regular exit, the door, not functioning.

 Petitioners, with the due diligence of a good father of the family, should have anticipated that a student, locked in the
toilet by a nonworking door, would attempt to use the window to call for help or even to get out. Considering all the
circumstances, therefore, there is sufficient basis to sustain a finding of liability on petitioners’ part.
Whether the argument of petitioner that it exercised the due diligence of a good father in the selection and supervision
of employees is decisive in this case – NO

 Due diligence in the selection and supervision of employees is applicable where the employer is being held responsible for
the acts or omissions of others under Article 2180 of the Civil Code.
 In this case, CLC’s liability is under Article 2176 of the Civil Code, premised on the fact of its own negligence in
not ensuring that all its doors are properly maintained, hence, the defense of such due diligence is not applicable.

NOTES:

 Other points discussed, but not covered by the topic in syllabus:

o fault and negligence under 2176
o 8 exemptions to the general rule on finality of factual findings
o proximate cause of the accident
o piercing of separate corporate personality
 JARDINE DAVIES, INC vs JRB REALTY

 - JRB Realty ordered the installation of two aircons from Aircon and Refrigeration Industries, Inc. The
aircons were delivered and installed but they could not deliver the desired temperature. The aircon
company undertook to replace the aircons but it did not specify a date when.

 - JRB later learned that there was a new company that was licensed to manufacture, distribute and install
the same brand of aircons that were installed in their building. The name of the coporation was Maxim
Industrial and Merchandising Corp. The president of JRB requested Maxim to honor the obligation as
regards the aircon but Maxim refused. Subsequently, Maxim was impleaded as a subsidiary of the first
aircon company, which had ceased operations.

 - RTC and CA decided in favor of JRB.

 - SC said: It is an elementary and fundamental principle of corporation law that a corporation is an
artificial being invested by law with a personality separate and distinct from its stockholders and from
other corporations to which it may be connected. While a corporation is allowed to exist solely for a lawful
purpose, the law will regard it as an association of persons or in case of two corporations, merge them
into one, when this corporate legal entity is used as a cloak for fraud or illegality. This is the doctrine of
piercing the veil of corporate fiction which applies only when such corporate fiction is used to defeat
public convenience, justify wrong, protect fraud or defend crime. The rationale behind piercing a
corporation’s identity is to remove the barrier

 between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of
those who use the corporate personality as a shield for undertaking certain proscribed activities.

 - While it is true that Aircon is a subsidiary of the petitioner, it does not necessarily follow that Aircon’s
corporate legal existence can just be disregarded. In Velarde v. Lopez, Inc., the Court categorically held
that a subsidiary has an independent and separate juridical personality, distinct from that of its parent
company; hence, any claim or suit against the latter does not bind the former, and vice versa.

 - In applying the doctrine, the following requisites must be established: (1) control, not merely majority or
complete stock control; (2) such control must have been used by the defendant to commit fraud or wrong,
to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in contravention of
plaintiff’s legal rights; and (3) the aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of.

 - The records bear out that Aircon is a subsidiary of the petitioner only because the latter acquired
Aircon’s majority of capital stock. It, however, does not exercise complete control over Aircon; nowhere
can it be gathered that the petitioner manages the business affairs of Aircon. Indeed, no management
agreement exists between the petitioner and Aircon, and the latter is an entirely different entity from the
petitioner.

